For asset managers, wealth managers, fund and corporate administration and law firms conducting customer and counterparty due diligence, the review highlights the importance of identifying ownership links, intermediaries and third-country exposure that may indicate attempts to circumvent trade sanctions. A recent analysis by Cascade has explored what the OTSI Annual Review means for AML compliance teams.
OTSI’s remit differs from that of the Office of Financial Sanctions Implementation (OFSI), which is responsible for implementing UK financial sanctions. Published on 27 August 2026, the review covers OTSI’s first full year of activity between 1 April 2025 and 31 March 2026. The figures show an enforcement function that is still developing, but with a growing pipeline of cases and an increasingly proactive approach to identifying potential breaches.
OTSI received 178 suspected trade sanctions breaches or referrals during the period. Of these, 156 related to the Russia sanctions regime. Financial services accounted for much of the reporting, with 111 cases, representing 62% of the total, coming from sectors subject to mandatory reporting requirements.
The review also shows how cases progressed through the enforcement process. OTSI closed 104 enforcement cases during the year, with 40 referred to HMRC either because criminal enforcement may have been appropriate or because the suspected breach occurred before OTSI acquired its relevant powers. A further 41 cases were closed without a breach being identified.
While OTSI did not issue any civil monetary penalties during 2025–26, the absence of fines does not indicate that enforcement activity is slowing. The office reported that a significant number of investigations had reached an advanced stage by the end of the reporting period, with decisions expected during 2026–27.
The review’s most important development may therefore be the change in enforcement strategy rather than the number of cases. OTSI established a dedicated intelligence function during the year to identify emerging risks, evasion techniques and sanctions typologies.
Only around 6% of cases opened during 2025–26 were initiated proactively. OTSI has indicated that it wants to increase this proportion significantly, signalling a move away from relying primarily on reports towards identifying potential sanctions breaches through intelligence-led investigations.
The regulator’s powers have also expanded. From April 2026, OTSI gained Sanctions End-Use Controls, giving it greater scope to examine exports to third countries where there is a risk goods could ultimately be diverted to a sanctioned destination. Where that risk cannot be addressed, the controls can be used to block an export.
OTSI has also expanded its licensing remit to include goods alongside services. Together, these developments give the office more tools to identify and address attempts to circumvent UK trade sanctions.
For firms conducting customer and counterparty due diligence, the implications extend beyond identifying a direct connection to a sanctioned individual or jurisdiction. Exposure can emerge through beneficial ownership structures, third-country intermediaries, corporate relationships or services that facilitate transactions.
This places greater importance on understanding the wider relationships around a customer or counterparty rather than treating a screening result as the end of the assessment. Firms need to be able to demonstrate how ownership, geographic exposure, intermediary relationships and potential trade-sanctions exposure were assessed.
The evidence supporting those decisions is becoming equally important. Compliance teams may need to show not only that relevant checks took place, but why a particular risk assessment was reached, whether concerns were escalated and what information supported the final decision.
That requires firms to bring together information that can otherwise become fragmented across separate systems, spreadsheets and email trails. Beneficial ownership records, continuous sanctions and adverse-media screening, risk assessments, escalation decisions and supporting evidence all need to connect if a firm is expected to reconstruct its decision-making process.
The OTSI review signals a shift towards more proactive, intelligence-led enforcement, with increasing attention on circumvention through third countries, intermediaries and complex corporate structures. For firms, this means looking beyond a simple sanctions-screening result and being able to demonstrate how ownership, geographic exposure and connected parties were assessed.
While trade-sanctions compliance may also require specialist export-control processes, Cascade’s end-to-end AML Software supports the wider due-diligence environment by connecting clients, legal entities, beneficial owners and counterparties with screening results, risk assessments, supporting evidence and an auditable record of decisions. This helps compliance teams identify indirect exposure and clearly document how the wider risk decision was reached.
The first annual review covers a foundational period for OTSI, but its implications extend beyond 2025–26. With investigations maturing, new powers in place and a stated ambition to increase proactive enforcement, firms will need to pay closer attention to the relationships and structures that can sit behind potential trade-sanctions circumvention.
Read the full Cascade analysis
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