Sanctions and Export Control | UK Regulatory Outlook October 2024

Office of Trade Sanctions Implementation launch

As previously reported, the Office of Trade Sanctions Implementation (OTSI) officially launched on 10 October 2024.

The new unit, which sits within the Department for Business and Trade, will be responsible for the civil enforcement of certain trade sanctions relating to UK services and trade of sanctioned goods outside the UK. Applications may now be made to OTSI for licences for the provision of standalone services, including professional business services.

The following guidance pages have been updated to reflect OTSI's launch:

• Providing professional and business services to a person connected with Russia.
• Applying for a licence to provide sanctioned trade services.
• Mandatory reporting for suspected breaches of trade sanctions.
• Reporting a suspected breach of trade sanctions.

For further information on OTSI's new powers, see our Insight.

G7 issues guidance for industry on preventing Russian export controls and sanctions evasion

The UK, US, Canada, France, Germany, Italy and Japan (the G7) published guidance for industry on preventing Russian evasion of export controls and sanctions.

The guidance aims to help industry in identifying Russian evasion practices and to comply with Global Export Control Coalition (GECC) controls.

The joint guidance outlines the following areas:

• a list of items which pose a heightened risk of being diverted to Russia (the common high priority list);
• updated red flag indicators of potential export control and sanctions evasion;
• best practices for industry to address these red flags; and
• screening tools and resources to assist industry in conducting enhanced due diligence.

OFSI issues monetary penalty for breach of Russia sanctions

The Office of Financial Sanctions Implementation (OFSI) issued a monetary penalty to Integral Concierge Services (ICSL) for breaches of the Russia sanctions regime.

This is only the second penalty issued by OFSI in relation to the sanctions implemented in the UK against Russia following its 2022 invasion of Ukraine.

ICSL was given a penalty of £15,000 for services provided to a designated person subject to an asset freeze. Between 2022 and 2023, ICSL made or received 26 payments amounting to £15,487.30 in connection with the services it was providing to the designated person, despite knowing or having reasonable cause to suspect these were in breach of financial sanctions in the UK.

This case was classified as "serious". Aggravating factors included the cumulative amount of the payments (although the majority were of lower value) and their repeated nature. While it did co-operate with the investigation and OFSI considered this to be a mitigating factor, this did not entitle it to a reduction in the penalty since ICSL had not make a voluntary disclosure.

OFSI stated that the case emphasises the importance of voluntarily disclosing breaches of the regulations to OFSI. Of the ten monetary penalties OFSI has imposed, five of these did not originate from voluntary disclosures.

See the full penalty report. For further reading, see our Insight on the first monetary penalty issued by OFSI in 2019.

OFSI general licences

• OFSI published general licence INT/2024/5294388, which allows persons to make and facilitate payments in respect of UK government debt, including all securities issued by or on behalf of HM government. The licence, which takes effect from 14 October 2024, applies to all UK autonomous sanctions regulations, and is of indefinite duration.
• OFSI amended general licence INT/2023/3179120, which allows UK designated persons to make permitted payments to water companies from a frozen UK bank account. The definitions for UK designated persons and return payments under the licence have been updated. The licence took effect from 21 September 2023 and is of indefinite duration.

Update on Russia sanctions licensing for intra-corporate services

The Export Control Joint Unit within the Department for Business and Trade announced that from 31 October 2024, the provision of intra-corporate services will no longer be considered as grounds for licensing under Russia (Sanctions) (EU Exit) Regulations 2019 (Russia sanctions regulations).

Following a review of the professional and business services sanctions under Regulation 54C of the Russia sanctions regulations, the UK government decided to remove the licensing consideration relating to the provision of such services from UK parent companies and their UK subsidiaries to their Russian subsidiaries.

Companies that still wish to provide intra-corporate services to their Russian subsidiary may seek a licence from the secretary of state under Regulation 65 of the Russia sanctions regulations, provided they are able to demonstrate how the provision of services aligns with the overarching goals of the sanctions regime.

Licensing applications submitted before 31 October 2024 will not be affected.