How suspected breaches of trade sanctions are assessed by the Office of Trade Sanctions Implementation (OTSI)

Which

This breachesguidance OTSIrelates canto investigatethe and enforce

The Office of Trade Sanctions Implementation (OTSI),(OTSI). OTSI’s enforcement powers are set out in The Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 (the Regulations). The Regulations entered into force on 10 October 2024.

1. Which breaches OTSI can investigate and enforce

OTSI, which is part of the Department for Business and Trade (DBT),(DBT), has powers to enforce certain trade sanctions.  sanctions.

They have the power to investigate suspected breaches of trade sanctions and take enforcement action in relation to:

• providing or procuring sanctioned services 

  services

• moving, making available, or acquiring sanctioned goods outside the UK 

  the UK

• transferring, making available or acquiring sanctioned technology outside the UK 

  the UK

• providing ancillary services to the movement, making available or acquisition of sanctioned goods outside the UK 

  the UK

• providing ancillary services to the transfer, making available or acquisition of sanctioned technology outside the UK 

  the UK

OTSIOTSI also also has powers to investigate and enforce breaches related to the trade sanctions measures set out above, regarding:  regarding:

• circumvention, such as intentionally facilitating the contravention of sanctions 

  sanctions

• exceptions, such as failing to comply with the notification requirement of an exception 

  exception

• information requests, such as intentionally obstructing an information request from OTSI 

  from OTSI

• licensing, such as failing to comply with the conditions of a licence 

  licence

• recordkeeping, such as failing to comply with recordkeeping requirements of a general licence 

  licence

• reporting obligations, such as a relevant person failing to comply with their obligations to report suspected breaches 

  breaches

OTSI can issue warnings and use their powers to publish information about breaches, impose civil monetary penalties and refer cases to HM Revenue and Customs (HMRC) for criminal investigation. OTSI can also report individuals and businesses to their regulator, if they have one, and share information with organisations such as Companies House or the Insolvency Service. 

OTSI’s enforcement powers are set out in the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024. 

There are other types of trade sanctions which are implemented and enforced byby HMRC, HMRC, HM Treasury or Ofcom: these are therefore not subject toto OTSI’s OTSI’s powers. 

Who2. OTSIWho OTSI can can investigate

Trade sanctions apply to: 

• all individuals or businesses within the territory and territorial sea of the UK 

  the UK

• allall UK nationals UKor UK businesses nationals or UK businesses established underunder UK law, UK law, wherever they are in the world 

  world

This meansmeans OTSI can OTSI can investigate suspected breaches committed by: 

• individuals and legal entities who are within, or undertake activities within, thethe UK’s UK’s territory 

  territory

• UKUK individuals individuals and legal entities established underunder UK law, UK law, regardless of where in the world the breach takes place place

In the case of a corporate breach, OTSI can hold officers of the corporation personally liable and impose a monetary penalty on them as well as the corporate body if the breach is either: 

• committed with the officer’s consent or involvement
• attributable to the officer’s neglect

This also applies to: 

• partners in a partnership
• members of unincorporated bodies that are managed by members
• members of governing bodies

This means OTSI can impose separate monetary penalties on the legal entity and the officers who run it.

Case3. assessmentEstablishing whether a breach has occurred

When OTSI assesses a suspected breach of trade sanctions, they will first seek to establish whether there’sthere has been a breach of a prohibition, or a failure to comply with an obligation under trade sanctions regulations.  obligation.

If there has not been a breach of a prohibition or a failure to comply,comply they’llwith an obligation, OTSI will close the case.  case.

MostIf OTSI believe that a suspected breach sits outside of its enforcement powers, or if a case involves breaches across multiple types of tradesanctions, sanctionsthey will disclose the suspected breach to the relevant organisation responsible for enforcement.

4. Determining the severity of the breach

Once OTSI is satisfied that there has been a breach, they will then determine the severity of the breach. A breach may be assesseddetermined as ‘strictbeing liability’of offences.Lesser ThisSeverity, meansMedium Severity, or High Severity. OTSI doesdraws notthis needdistinction to proveensure that youthe actedenforcement knowingly,outcome is proportionate to the severity of the breach. Where non-compliance has been identified, the aim of the enforcement outcome is to change behaviour and to improve future compliance.

Indicators of a lesser severity breach may include but are not limited to: 

• Low or withno intent.culpability
• Lower Ifharm youto usethe aspurposes of the sanctions regime
• Lower financial value, where there are no other relevant indicators

Indicators of a defencemedium thatseverity youbreach didmay include but are not knowlimited you’dto: 

• Failure committedto prevent a breach,breach through behaviours such as negligence or recklessness
• Significant or moderate harm to the purposes of the sanctions regime
• Moderate financial value, where there are no other relevant indicators

Indicators of a high severity breach may include but are not limited to: 

• A significant level of culpability. This could include intentional actions or significant negligence
• Extensive or sophisticated planning, such as efforts being taken to conceal the breach
• Serious harm to the purposes of the sanctions regime
• High financial value, where there are no other relevant indicators

This is not an exhaustive list and OTSI will consider indicators in totality when assessing the severity of a given breach.

Determining whether the breach was intentional

Most breaches of trade sanctions will be treated as strict liability breaches. Regulation 6 of the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024 requires OTSI to ignore any defence that a person did not know and had no reasonable cause to suspect,suspect theythat canan disregardoffence thishad whenbeen they’recommitted decidingunder whethertrade sanctions regulations. This means that OTSI does not need to issuebe satisfied that you acted knowingly or with intent to breach sanctions to impose a penalty. monetary penalty.

Some offences,trade suchsanctions asmeasures therequire circumventingyou prohibitions,to stillhave requireknowledge or intent for an offence to have taken place. This means that OTSI will need to provebe satisfied that you acted knowingly or with intent.  intent before imposing a monetary penalty.

Case5. outcomesEnforcement outcomes 

Once OTSI has determined thatthe aseverity breachof hasthe occurred,breach, there are one or more potential outcomes. outcomes.

Warning letter

OTSI canmay issue a warning letters.letter. TheseThis may include requiring you to comply with a continuing obligation to keep themus informed about certain information,information as circumstances change, such as the improvement of due diligence processes. 

Referral to your regulator

If you are a regulated professional or your business is in the regulated sectorsector, and has committed a breach, OTSI may refer the case to your regulator.  regulator.

Referral to other organisations

If a UK registered company is involved in the breach, OTSIor mayif referyou theare case to Companies House, which has the powerdirector toof remove a personUK asregistered companycompany, director, if warranted.  

OTSI may refer athe case to Companies House or the Insolvency Service. Service.

Public disclosure

Where OTSI judgesdecides that it would be in the public interest to share information about a breach, for example, to assist the work of compliance officers, they may publicise details about a breach.  breach.

CivilMonetary monetary penalty

Some breaches may result in OTSI imposing a civil monetary penalty to the value of 50% of the estimated value of the breach, or £1 million, whichever is greater. 

Read more about civil monetary penalties. 

Referral to HMRC

OTSI may refer casesyour case to HMRC where they feeldetermine that HMRC’sthe breach merits criminal enforcement. HMRC, as a criminal enforcement powers,authority, includingcan referralrefer fora prosecution,matter areto morethe appropriate. Crown Prosecution Service to consider a prosecution.

OTSI will determine what enforcement action is appropriate and proportionate on a case-by-case basis. Once OTSI has decided what enforcement outcomes to take, they will inform you.

6. Mitigating factors

Once OTSI has established that there has been a breach,breach they’lland determined the severity of the case, they will consider a range of case factors in determining the enforcement action.  outcome.

Where a monetary penalty is being considered, the presence of mitigating factors may lead us to reduce the monetary penalty or not impose a monetary penalty altogether. The presence of aggravating factors may lead OTSI to increase the monetary penalty.

Mitigating factors may include (butbut are not limited to): 

to: 

• timely voluntary disclosure of the suspected breach by the personindividual or business responsible,responsible. whichThis could lead to a reduction inof civilup to 50% of a monetary penalty ofimposed upfor tothe 50% breach

• timelycompliance mandatorywith disclosurerequests offor theinformation suspectedyou breachreceive byfrom OTSI during athe providerinvestigation

• no record of legalpreviously orhaving financialbreached services  UK sanctions

• compliancegood withstandards requestsof forcustomer informationdue thatdiligence OTSIand mayother sendrelevant outcompliance systems proportionate to reportersthe ofsize, suspectedexposure breachesto duringsanctions theirand investigations resources of the business

• demonstration of steps taken to address causes of the breach

Aggravating factors may include but are not limited to: 

• failure to respond to previous warning letters
• poor compliance with anythe relevantinvestigation
• withholding recordkeepingor obligationsobstructing underaccess sanctionsto regulations 
  information during an investigation, such as attempting to conceal or destroy evidence
• failure to comply with other sanctions requirements relevant to the breach, such as recordkeeping and licensing conditions

• noprevious recordbreaches ofby previouslythe same individual or business, having breachedregard sanctionsto legislation 

  the time that has elapsed since they occurred
• inadequate standards of due diligence
• attempts to wrongly blame others

Voluntary disclosure

If multiple parties are involved in a breach, and relevantwant complianceto systemsmake proportionatea disclosure, we expect voluntary disclosure from each party.

Where a monetary penalty is being considered, for low and medium severity cases, OTSI will make up to a 50% reduction to the size,final exposuremonetary penalty if you have made a prompt and comprehensive voluntary disclosure of the breach.

For high severity cases, OTSI will make up to sanctionsa 30% reduction to the final monetary penalty if you have made a prompt and resourcescomprehensive voluntary disclosure of the business breach.

How7. Totality

If a monetary penalty is being imposed for more than one breach of trade sanctions, OTSI may determine a penalty for each individual breach based on the severity and circumstances. They will workthen, within otherconsideration governmentof bodiestotality, assess if the final monetary penalty is just and proportionate.

8. Instances when OTSI cannot issue a monetary penalty

OTSIOTSI cannot worksissue closelyyou with othera governmentmonetary bodiespenalty withif:

• criminal responsibilitiesproceedings are ongoing, or have taken place, against a business or person for UKthe sanctionssame enforcement,breach
• the business or person has already been convicted for an offence in particular,respect withof HMRC,that breach

9. What OTSI must tell you before they can impose a monetary penalty

Before OTSI can impose a civil monetary penalty on you, they must tell you: 

• that they intend to impose a monetary penalty
• the reasons why
• the amount of the monetary penalty
• that you are entitled to make representations
• the date by which isyou responsiblemust make any representations.

10. Monetary penalties: making representations

OTSI will consider representations made and review both the reasons for criminalthe enforcementdecision to impose a monetary penalty, and its amount. Potential outcomes include reaffirming the decision to impose the monetary penalty, changing the amount of tradethe sanctionsmonetary measures. penalty or cancelling the decision to impose the monetary penalty.

OTSI thanwill onethen typecommunicate their final decision, considering any representations made. If OTSI’s decision is still to impose a monetary penalty, they will inform you:

• what their decision is
• that you’re entitled to seek a review of sanction.the Fordecision.
• the example,date ifby which you makemust prohibitedtell servicesOTSI availableyou towant a designatedreview person,of the decision

11. Paying a monetary penalty

Once a monetary penalty becomes payable, OTSI will tell you how to pay.

All monetary penalties are paid into the Consolidated Fund and are recoverable as a civil debt.

12. Publication of breaches

OTSI may bepublish breachingreports bothabout tradebreaches.

Publishing details about breaches helps increase awareness of sanctions and financialdeters non-compliance.

Reports may name the individual or business who has committed the breach and provide facts about the breach. This may include information about specific risks and broader trends to assist other individuals and businesses to comply with sanctions.

If Ina suchdesignated cases,person was involved in the breach, OTSI willmay coordinatedisclose their enforcementidentity actionunless there are strong reasons not to. This will include consideration of any relevant obligations under data protection laws, and those concerned with confidentiality.

OTSI will not publish a report about a breach where a monetary penalty has been imposed until after you have had the Officeopportunity ofto Financialexercise Sanctionsyour Implementationright (OFSI)to request a review of a decision to ensureimpose ita remainsmonetary proportionate. penalty.

13. Report a suspected breach of trade sanctionssanctions 

If you suspect that you, or someone else, has breached trade sanctions, you should report it to OTSI as soon as possible,possible using the online serviceservice: to reportReport a suspected breach of trade sanctions.

Get help

Contact OTSI using the enquiry form.

If you’reyou are unclear whether action you’reyou are considering, or have already taken, could breach the regulations, you should consider seeking independent legal advice. advice.

Get help

Contact OTSI using the enquiry form.