On 12 September 2024, the UK Government published the new Trade, Aviation and Maritime Sanctions (Civil Enforcement) Regulations 2024 (the Regulations), which will come into force on 10 October 2024. The Regulations grant the Office of Trade Sanctions Implementation (OTSI) of new civil enforcement powers against trade sanctions violations. They aim to ensure compliance with wider UN obligations and to promote the UK’s foreign policy objectives by promoting respect for democracy, good governance and the rule of law.

The OTSI will have the authority to investigate alleged trade sanctions violations and take enforcement action regarding:

• The provision and purchase of sanctioned services;
• The movement, provision or acquisition of sanctioned goods and technology outside the United Kingdom; And
• The provision of ancillary services for the transfer, provision or acquisition of sanctioned goods and technology outside the United Kingdom.

The main powers of the OTSI in relation to the above are:

1. Civil monetary penalties;
2. Powers to request information; And
3. Impose reporting obligations on “data subjects”.

HM Revenue and Customs will remain responsible for enforcing trade sanctions that fall within its remit, while the Department for Transport will deal with non-compliance with sanctions against aircraft and ships.

Main powers of the OTSI

Civil monetary penalties

The OTSI will have the power to impose civil monetary penalties of up to £1 million or 50% of the estimated value of the breach, whichever is greater. Violations will be determined on the basis of strict liability, which means that in determining whether there has been a violation of sanctions, the fact that the person in violation did not know, reasonably suspect or believe that a offense had been committed would not constitute a defense. Sanctions will be imposed on the balance of probabilities.

OTSI may publish reports on cases in which civil monetary penalties have been imposed. These reports may include information on who the sanction was imposed on, an overview of the facts of the case, why the sanction was imposed, the overall value of the violating transactions, and the value of the penalty imposed to each person.

Power to request information

The OTSI will have the authority to request the disclosure of information in order to monitor compliance, detect fraud and investigate a suspected violation or failure to fulfill a duty.

In this context, the OTSI may require the production of specified documents. If the person or organization does not have the requested documents, it must take reasonable steps to obtain the documents and keep those documents under its control.

Failure to respond to a request for information constitutes an offense.

Reporting obligations

New reporting obligations will apply to those considered “data subjects”. Data subjects will be required to report as soon as possible any known or suspected violations that have become apparent during the course of their activity. Those affected include financial services companies, lawyers, notary service providers and money transmission companies.

Failure to comply with reporting obligations constitutes an offense for a data subject and may be punishable by a fine, imprisonment or both.

It should be noted that timely voluntary disclosure of an alleged violation could lead to a discretionary reduction in the civil monetary penalty of up to 50%. This provides an important incentive for data subjects to comply with their reporting obligations.

Mitigating factors

There are several mitigating factors that OTSI will consider when evaluating a violation:

1. Voluntary timely disclosure of the alleged violation by the company or person responsible;
2. Mandatory timely disclosure of alleged violation by a financial or legal service provider;
3. Cooperate with requests for information;
4. Compliance with record keeping obligations;
5. No previous cases of violation of sanctions legislation; And
6. Knowledge of sanctions and compliance systems commensurate with company size, resources and exposure to sanctions.

What this means for businesses

The regulations significantly expand the UK Government’s ability to respond to breaches of trade, aviation and maritime sanctions by strengthening its surveillance, detection and investigation capabilities. This is significant as it illustrates the UK government’s commitment to sanctioning compliance with the rules and its intention to step up enforcement efforts.

OTSI’s ability to impose civil penalties makes it essential for businesses to ensure compliance with UK trade sanctions. To minimize the risk of a breach, companies that fall under OTSI’s newly expanded mandate should consider conducting new risk assessments, implementing procedures to respond to potential requests for information, and preparing policies which help them meet relevant reporting obligations. If businesses or individuals suspect a trade sanctions violation, they should consider reporting it to OTSI as soon as possible to minimize the risk of civil penalties.