UK Launches New Sanctions Agency, Outlines Scope, Reporting Rules

The U.K. this week issued new guidance to mark the official launch of the Office of Trade Sanctions Implementation, a new agency that it said will boost the country’s powers to investigate, catch and penalize Russia-related sanctions evaders and others who breach U.K. trade controls outside the country (see 2409130015).

Effective Oct. 10, financial services firms, money service businesses and legal service providers need to comply with new reporting obligations overseen by OTSI and will be “expected to inform OTSI of suspected breaches of certain trade sanctions,” the U.K. said. New guidance issued by the agency outlines how the sanctions apply to U.K. people and companies overseas, when they need to apply for a license to provide sanctioned trade services and when they need to report a suspected sanctions breach.

The agency said it plans to issue more guidance and launch “user-friendly online tools” to “make complying with sanctions obligations as straightforward as possible.” It also reminded U.K. industry that it has the powers to publish information about companies that violate sanctions and impose civil fines.

U.K. Sanctions Minister Stephen Doughty said the government is looking to strengthen its sanctions powers through “robust enforcement and penalties” against violators. “From Moscow to Tehran -- kleptocrats, aggressors and the enablers who support and facilitate their wealth and malign actions should be on notice,” he said.

OTSI, part of the U.K.’s Department for Business and Trade, will oversee license applications for certain sanctioned services, including restrictions over accounting, advertising, architectural, auditing, business and management consulting, engineering, information technology and legal advisory services. The agency may also grant licenses for certain energy-related services involving Russia, such as drilling and logging; mining, manufacturing and aircraft-related services under the North Korea sanctions regime; interception or monitoring services under the Russia, Belarus, Iran, Myanmar, Syria and Venezuela sanctions regimes; and more.

In new guidance, OTSI said all companies with a U.K. “nexus” may need a license to provide certain services, including companies operating within the territory and territorial sea of the U.K. and all U.K. nationals or businesses “wherever they are in the world.” Even if a business doesn’t have a U.K. nexus, it may still need a license for employees or consultants who do have a U.K. nexus if they will be providing sanctioned services on behalf of the business.

When applying for a license, the applicant should describe the “specific services you want to provide and show how these align with one, or more, of the definitions of prohibited services in sanctions regulations,” OTSI said. “To do this, you’ll need to refer closely to the sanctions regulations relevant to you.”

License applicants will also need to show how providing their services is “consistent with the purposes of the sanctions” or align with certain “pre-defined activities” that the U.K. considers eligible for a license.

Those licensing grounds are:

• services necessary for humanitarian assistance
• services in connection with the production or distribution of food for civilians
• services for medical and pharmaceutical purposes for civilians
• civil society activities that directly promote democracy, human rights or the rule of law in Russia
• services that are necessary for non-Russian persons to divest from or wind down business operations in Russia
• services to a person connected with Russia by a U.K. parent company or U.K. subsidiary of that parent company
• services involving the “urgent prevention or mitigation of an event likely to have a serious and significant impact on human health or safety”
• services necessary for critical energy supply.

For legal advisory services, OTSI said it may grant a license “where a licensing ground would apply to the activity in relation to which the legal advisory services are being given” if the activity were done by a U.K. person or taking place in the U.K. The guidance also links to other licensing considerations under the U.K.’s various sanctions regimes, and stressed that companies need to adhere to the specific terms of any granted license.

“If you do not, you may be committing a breach of trade sanctions and could be subject to enforcement action,” OTSI said.

New reporting guidance said people or companies should report to OTSI about possible violations involving the provision or procurement of sanctioned services, and the “moving, making available or acquiring” of sanctioned goods or technology outside the U.K. Reports should also be sent to OSTI about violations involving “ancillary services to the movement, making available or acquisition” of sanctioned goods or technology outside the U.K.

OTSI also said companies can submit voluntary disclosures about a possible sanctions violation, which could count as a “mitigating factor” in a future OTSI enforcement action and may reduce a possible fine. The agency also said legal or financial services providers have a “legal obligation” to report a suspected sanctions breach.

After submitting a report or disclosure, OTSI said it may “get in touch with you for more details before they can decide if there has been a breach.” The agency said it “cannot give a timescale” for responses or decisions on reports “due to the complexity of some cases.”

OTSI said it has seen “overwhelming support from business in implementing sanctions against Russia” and noted that the “vast majority of businesses comply.” The new agency will “ensure businesses comply with trade sanctions and take decisive enforcement action where needed so that, together with business, we can continue to exert maximum pressure on [Vladimir] Putin’s regime,” Business and Trade Secretary Jonathan Reynolds said.