This week, the U.K. government introduced the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024, which strengthen civil enforcement procedures and grant the U.K.’s Department of Business and Trade new powers through its Office of Trade Sanctions Implementation (OTSI). These regulations are expected to significantly impact U.K. businesses operating domestically and abroad.
Here are five key takeaways:
1. Strict Liability Offenses
Under the new regulations, OTSI can impose penalties for violations of certain trade sanctions on a strict liability basis. This means that a company or individual can be held accountable even if they were unaware of the violation. The standard for imposing penalties is the "balance of probabilities,” making this new enforcement mechanism more stringent.
2. Expanded Enforcement Power
OTSI now has civil enforcement authority over various activities, including providing sanctioned services, moving or acquiring sanctioned goods or technology, and offering ancillary services that support these activities. This applies to U.K. businesses and citizens operating globally, as well as branches of U.K. companies operating overseas. The global reach ensures that U.K. entities are fully accountable for their actions, no matter where they operate.
HM Revenue and Customs (HMRC) will continue to handle the criminal enforcement of all U.K. trade sanctions measures and the enforcement of sanctions on goods crossing the U.K. border, while OTSI’s new civil enforcement scope will cover:
- Providing or procuring sanctioned services.
- Moving, providing, or acquiring sanctioned goods outside the U.K.
- Transferring, providing, or obtaining approved technology outside the U.K.
- Offering support for the transportation and handling of sanctioned goods outside the U.K., including their availability and acquisition.
- Offering support for transferring, providing, or acquiring of sanctioned technology outside the U.K.
The regulations introduce hefty fines for violations, with penalties up to £1 million or 50% of the total value of the violation, whichever is greater. OTSI can also issue public warnings, refer cases to other regulators, and publish details of confirmed violations when it is in the public interest. These measures are designed to deter violations and encourage voluntary compliance with U.K. sanctions laws.
4. Referral and Collaboration for Severe Cases
In severe cases, OTSI may decide to refer violations to HMRC for criminal prosecution, especially if criminal enforcement is deemed more appropriate for the offense. Additionally, OTSI can collaborate with other government bodies, such as Companies House and the Insolvency Service, to take additional action. This multi-agency approach strengthens overall sanctions enforcement in the U.K.
5. Reporting and Compliance Requirements
The new rules also place significant emphasis on reporting and recordkeeping. Businesses must promptly report any suspected violations, keep detailed records of transactions, and comply with information requests from OTSI. Failure to meet these requirements can lead to penalties, or in extreme cases, criminal charges. This further underscores the need for robust internal compliance systems within affected organizations.
The establishment of OTSI as a robust enforcement body under these new regulations, is a crucial step in strengthening the U.K.’s sanctions framework. Like the Office of Financial Sanctions Implementation (OFSI), which handles financial sanctions implementation, OTSI adds new rigor to trade-related sanctions. Both agencies operate under a framework of strict liability, public disclosures, and collaboration with other government bodies, creating a more unified and comprehensive sanctions enforcement structure across sectors.
After a 28-day period for businesses to prepare, OTSI's new powers will take effect on October 10, 2024.
