The UK government says it is beefing up sanctions against Russia following the launch of a new unit to help companies comply with trade sanctions and penalise those who do not.

The new Office of Trade Sanctions Implementation (OTSI), which launched on 10 October, will work with industry to make complying with sanctions obligations as straightforward as possible by issuing guidance and user-friendly online tools.

The most complex restrictions relating to professional services will now be dealt with by OTSI directly. This launch also sees new reporting obligations introduced for financial services firms, money service businesses and legal service providers. They will now be expected to inform OTSI of suspected breaches of certain trade sanctions.

Civil monetary penalties

Following Russia’s invasion of Ukraine, the UK implemented its most comprehensive set of sanctions against a major economy, with more than £20bn worth of trade with Russia now sanctioned. The government says sanctions are helping to defund Putin’s illegal war and have deprived Russia of more than $400bn of funds since February 2022.

OTSI will have powers to publish information about sanctions breaches and impose civil monetary penalties. OTSI also takes on responsibility for issuing licences for certain sanctioned activity – specifically the provision of standalone services, including professional and business services. A full list of the UK’s sanctions can be found here.

Business and Trade Secretary Jonathan Reynolds says that only by working hand in hand with business can the government make sanctions as effective as possible. “This new unit will help 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 Putin’s regime.”

Complement HMRC powers

Chloe Cina, international sanctions expert and Royal United Services Institute (RUSI) fellow says: “Investing in a new specialist unit to issue guidance, grant licences and enforce certain trade sanctions across 21 UK regimes is compelling evidence that the novel measures introduced as part of the UK’s response to Russia’s invasion of Ukraine are here to stay.

“OTSI’s new enforcement powers for trade sanctions complement those HMRC already has. While HMRC remains responsible for the enforcement of trade sanctions on goods that cross the UK border as part of its customs role, OTSI now has lead enforcement responsibility for sanctioned services leaving the UK, as well as trade in sanctioned goods and services anywhere else in the world where a UK business or person is involved.”

Effectiveness of economic sanctions

In February this year, following the second anniversary of Russia’s illegal invasion of Ukraine, MPs launched an inquiry into the effectiveness of the UK’s economic sanctions on Russia.

The Treasury Committee said it will investigate whether the UK’s programme of economic sanctions is having the desired effect – to hamper Putin’s ability to fund Russia’s armed forces. In his evidence to the inquiry, ICAEW Economic Crime Manager Mike Miller warned that while Russian sanctions have been successful in removing Kremlin-linked money from the City of London, they have been less effective in the longer term in reducing Russia’s ability to wage war.

Commenting on the launch of the new sanctions unit, Miller says: “We welcome the government’s establishment of OTSI and particularly in providing additional guidance and clarity to the accountancy sector regarding sanctions already in place and those which may be implemented in the future. 

“We will work closely with OTSI to ensure that there is regular communication between the government and sector, as mutual understanding of the aims of particular sanctions by both parties is vital for both their successful implementation and also reducing unnecessary burdens on business.”