With civil penalties of up to £1 million or 50% of the value of the breach, Office of Trade Sanctions Implementation (OTSI) new powers don’t just affect UK companies. They apply to any organization with a footprint, partner or transaction in the UK.
Key Takeaways
- The Office of Trade Sanctions Implementation (OTSI) has taken over key responsibilities from HMRC and can impose civil penalties of up to £1 million or 50% of the transaction value.
- Non-UK companies may fall under UK jurisdiction if they use UK banks, trade through the UK, or partner with UK entities, even if indirectly.
- OTSI handles licences for sanctioned services, while the Export Control Joint Unit remains responsible for goods and technology.
- OTSI enforcement focuses on sectors like electronics, chemicals, aviation, and regions including Russia, Iran and Belarus.
- Companies with UK exposure should automate screening, keep audit ready records, and align their policies to cover UK, US and EU sanctions.
What is OTSI and What it Means for Sanctions Compliance?
OTSI is taking over partial responsibility for trade sanctions enforcement from HM Revenue & Customs (HMRC), which will retain an important investigation and enforcement role. OTSI is a recently-established body within the Department for Business and Trade, the Government department responsible for trade sanctions matters. OTSI’s enforcement remit covers the following activities by UK persons and anyone in the UK:
- The supply and procurement of sanctioned goods and technology outside the UK
- The supply and procurement of sanctioned services from within and outside the UK
- Providing ancillary services related to the supply and procurement of sanctioned goods and technology outside the UK.
This role was historically held by HMRC. They will remain responsible for enforcing trade sanctions to the extent they relate to:
- The import or export of goods and the transfer of technology to or from the UK
- The provision of ancillary services relating to transfers of goods and technology to and from the UK
- Goods and technology subject to strategic export controls (i.e., military and dual-use items)
- HMRC will also remain responsible for criminal enforcement of all trade sanctions measures.
OTSI investigates breaches, imposes penalties, and ensures compliance with export controls, import restrictions, and prohibitions on dealing with sanctioned entities or countries.
Recent announcements have expanded its powers significantly, including:
- Civil Penalties: Fines of up to £1M or 50% of transaction value for breaches
- Criminal Prosecutions: For intentional evasion or falsification of documents
- Investigative Authority: Broader powers to request documentation, collaborate with international partners, and pursue enforcement actions
- Personal Liability for Officers: If a sanctions breach occurs with the consent or neglect of a director or officer, a separate penalty on the individual can be imposed.
While OTSI’s focus is on the UK, its reach extends globally. Non-UK companies engaging in activities within the UK such as exporting goods through the UK or partnering with UK entities—are also subject to its jurisdiction.
OTSI Trade Sanctions Licensing: What Companies Need to Know
OTSI not only enforces sanctions but also administers certain licensing for exceptions. Specifically, it now manages a new “sanctioned trade service licence” system to permit otherwise prohibited services in special cases. The categories include professional services (accounting, legal, consulting, etc.), energy services, shipping or aircraft services, and others that are restricted under various sanctions.
Companies can apply to OTSI for a license to engage in these activities if they meet criteria (for example, for winding down contracts or humanitarian needs). Meanwhile, the Export Control Joint Unit (ECJU) continues to issue licenses for exporting sanctioned goods or technology. In practice, this means UK businesses must interface with multiple authorities for sanctions licenses, OTSI for services and ECJU for goods.
Sanctions Enforcement for UK and Non-UK Companies
OTSI Sanctions Compliance Requirements for UK-Based Companies
UK-based companies are directly subject to OTSI’s enforcement powers and must comply with UK sanctions regimes. UK organizations are legally required to report suspected breaches of trade sanctions to OTSI within 30 days, even if they are not directly involved in the breach.
OTSI expects UK businesses to implement “reasonable precautions” to prevent breaches, including using technology such as denied party screening to screen all business partners, customers, and intermediaries against UK sanctions lists. UK companies must maintain robust documentation to demonstrate compliance, such as screening logs classification records, and export/import documentation.
As trade sanctions enforcement becomes a growing priority for the UK, OTSI is focusing on two key areas: geographic risk and sector-specific restrictions. Current priorities include regions such as Russia, Belarus, and Iran, and high-risk sectors such as dual-use goods, aviation, and advanced technologies. In addition, OTSI is increasing its scrutiny of transactions involving sanctioned ownership of both individuals and entities.
Businesses must also be aware that certain goods, technologies, and services require a valid trade sanctions licence prior to import or export. Failing to comply can result in significant legal, financial, and reputational consequences even for inadvertent breaches.
OTSI will prioritize enforcement in high-risk areas where sanctions evasion is most prevalent particularly dual-use goods (e.g. electronics, chemicals, and advanced manufacturing equipment), aviation and shipping (e.g. oil tankers), luxury goods exports (e.g. high-end fashion and luxury vehicles) and third-country sanctions circumvention (e.g. sanctions circumvention tactics, such as transhipment through third countries).
Trade Compliance Risks for Non-UK Companies Under OTSI
OTSI’s powers don’t necessarily stop at the UK borders. If a business touches the UK in anyway non-UK companies need to assess their exposure.
A business may fall under UK trade sanctions rules if you are:
- Exporting goods through the UK – If your goods or services pass through the UK, or involve UK-based intermediaries, you’re responsible for screening your downstream partners. This applies even if the goods aren’t made in the UK, your business isn’t registered in the UK, or the end destination is outside the UK.
- Use of UK services – Using UK-based banks, payment processors, or insurers creates a financial connection that OTSI can act on. This includes things like settling payments through UK bank accounts, using UK-based trade finance, insurance, or credit services or involving UK intermediaries in cross-border deals.
- UK-Based Partner – Working with a UK company such as a supplier, distributor, or service provider can trigger UK sanctions rules. This includes scenarios like supplying goods or services to UK-based entities, receiving goods or services from the UK or collaborating on joint ventures or licensing deals with UK companies
- Licensing requirements – If your goods include UK-origin components or pass through UK territory, you may need a UK trade sanctions licence, even if you’re not based in the UK.
- Mandatory Reporting for UK Operations – Non-UK companies with a presence in the UK (e.g., subsidiaries, branches) must comply with mandatory reporting requirements for suspected breaches.
Trade Compliance Actions to Prepare for OTSI Sanctions Enforcement
If You’re UK-Based (or have a UK Legal Presence)
- Use screening and classification tools. Manual checks don’t scale. Automate denied party screening, licence flagging, and export/import classification.
- Train your staff. They should know what a red flag looks like—unclear end-users, transhipment through high risk regions, vague service descriptions—and when to escalate.
- Keep your records audit-ready. Document screening results, licence decisions, and due diligence checks. OTSI expects to see evidence of “reasonable precautions.”
- Licensing requirements – If your goods include UK-origin components or pass through UK territory, you may need a UK trade sanctions licence even if you’re not based in the UK.
- Report breaches. If you suspect a violation, you may have a legal duty to report it to OTSI. Not reporting could make matters worse.
If You’re Outside the UK but Have UK Exposure
- Map your exposure. Review your supply chain and partnerships. If any part of a transaction links to the UK, OTSI may have jurisdiction.
- Screen upstream and downstream. It’s not just your immediate customer. You’re also responsible for where goods and services end up especially if the UK is involved.
- Don’t rely on Office of Foreign Assets Control (OFAC) compliance alone. The UK sanctions lists and licensing rules differ. Align your systems to cover all applicable regimes.
- Don’t rely on OFAC compliance alone. The Office of Foreign Assets Control’s rules are just one piece. The UK sanctions lists and licensing rules differ. Align your systems to cover all applicable regimes
- Get legal input where needed. Especially when dealing with dual-use goods, complex service contracts, or high-risk geographies.
- Review your contracts. UK partners may include clauses that shift sanctions liability onto you or terminate deals if you’re not compliant.
The UK is moving towards active enforcement. The companies that stay ahead of this are those that treat sanctions as a live operational risk, not a box to tick. If your organization is exposed to UK trade sanctions, now’s the time to act. Learn more about how we support sanctions compliance.
