OTSI will work in parallel with the Office of Financial Sanctions Implementation (“OFSI”).
OTSI’s goal and role
Trade sanctions are currently administered by the Export Control Joint Unit (“ECJU”), which is responsible for export controls and restrictions on dual-use items.According to the official press release, the goal of incorporating OTSI is to strengthen control over companies that evade trade restrictions and to clamp down on the circumvention of imposed restrictive measures. Although OTSI will be responsible for enforcing all UK trade restrictions, UK officials are placing particular emphasis on sanctions against Russia.
OTSI will “help business comply with sanctions” (i.e., it is envisaged that the regulator is to act in an advisory role) and investigate breaches, issue civil penalties, and refer cases to HM Revenue & Customs (HMRC) for criminal enforcement.
We believe that a particular focus of OTSI’s work will be to monitor companies that could potentially circumvent sanctions by sending products through third states.
However, it does not appear from the press release that OTSI will have the authority to issue licences. Most likely, at least at the initial stage, the power to issue licences will remain with the ECJU.
OTSI is will launch in early 2024. A more precise start date for the new regulator has not yet been announced.
Significance
For a long time, the UK has focused on financial restrictive measures falling within the remit of OFSI.However, over the recent years, the UK has imposed many trade restrictions (primarily against Russia).
The emergence of OTSI along with OFSI is the next step in sanctions enforcement. In addition to investigations and prosecutions, new clarifications would be expected from OTSI that will need to be taken into account in practice.
