The UK’s Financial Conduct Authority has today fined Starling Bank £28,959,426 for sanctions compliance failings.
The Final Notice states that the bank became aware in January 2023 that its screening was being done against a small sub-set of the Consolidated List of sanctions targets.
The FCA described the compliance program at Starling as “shockingly lax”.
The FCA also noted that the fine would have been £40,959,426 without Starling’s agreement to resolve the matter.
It is being reported that German authorities in the city of Karlsruhe have arrested two individuals. The individuals were husband who is a German national and wife of Ukrainian nationality.
It is alleged that they made available internet access to the sanctioned broadcasting channels Rossiya-1 and Russia Today. EU sanctions prohibit for a person “to broadcast or to enable, facilitate or otherwise contribute to broadcast” of these channels.
Raids on the couple’s home gathered evidence and €40,000. The authorities also obtained a freezing order over a bank account containing €120,000.
With the news of OFSI imposing a civil penalty, Europe has today hit its 300th successfully-concluded enforcement action in relation to trade and financial sanctions and export controls since the start of 2017.
To mark the occasion we are publishing updated enforcement graphs which we last posted back in January when this blog first went live.
Total number of fines/penalties/convictions: 2017-2024
As the graph shows 2024 has, to date, been the most prolific in terms of sanctions enforcement in recent years with 69 so far this year. Already there have been three times as many successfully-concluded enforcement actions in Europe in 2024 as there were in 2017.
Total value of fines/penalties: 2017-2024
While the volume of enforcement has increased, the shape of this graph illustrates that the value of the fines imposed did not keep pace in the years following when the UK and French financial services regulators having imposed fines of £102m, €50m, and £38m.
After several years of plateau 2024 is, however, showing signs of acceleration with fines of over €32m imposed so far this year – more than double the figure for 2023.
Russian / Belarusian sanctions enforcement
Focusing just on enforcement of the sanctions against Russia and Belarus, perhaps unsurprisingly, the picture varies across Europe, although the total of 111 examples to date is worth stressing in and of itself.
This graph includes only enforcement actions that have concluded with a fine, penalty, conviction or confiscation. A total of 18 countries show no examples, although it is possible that there are such examples and they have not been made public. Poland, the Netherlands, Switzerland and Latvia are the only countries with more than 10 examples.
This is another way of looking at the same data. Again, this is specific to the Russia/Belarus sanctions, and is the number of concluded enforcements. This does not reflect the scale of the fines. A few countries dominate the picture.
Current investigations
Looking at publicly-available data on the number of current/live investigations reveals a similar picture. Many states appear to be currently inactive, while there are more than 2000 investigations which are reported as ongoing across Europe. That is a figure which bears repeating – more than 2000 ongoing regulatory/criminal sanctions investigations across Europe.
It should be remembered, however, that for most states such information has not been made public. In Germany alone nearly 2000 investigations have been started since early 2022, but the information is limited on how many of these remain active.
The UK’s Office of Financial Sanctions Implementation has today issued notice of a civil monetary penalty it has imposed on a company called Integral Concierge Services Limited (“ICSL”).
The penalty was for £15,000.
The fine related to 26 payments made to, or received from, a designated person under the UK’s Russian sanctions. The payments related to property management including collecting rent, paying for maintenance, and ICSL taking its own management fees. The designated person was not named.
The company did not initially self-disclose, but did then cooperate including by disclosing breaches that had not yet been identified by OFSI.
The company also breaches the reporting requirements under several general licences, but OFSO chose to not fine in relation to those breaches but rather to treat those failures as aggravating factors.
Germany’s Federal Criminal Police have seized the infrastructure of 47 Russian-language no-KYC cryptocurrency exchanges.
The website announcing the action (called “Operation Final Exchange”) states: “We have found their servers and seized them – development servers, production servers, backup servers. We have their data – and therefore we have your data. Transactions, registration data, IP addresses
Our search for traces begins. See you soon“.
It is being reported that the seizures, while certainly targeting a range of financial crimes, were also driven by the use of these exchanges as a means of circumventing sanctions, particularly by designated Russian banks.
It is likely that this Operation Final Exchange will generate substantive financial intelligence and further enforcement actions.
Back in July we published a post highlighting that Switzerland’s SECO had imposed 5 new fines for sanctions breaches.
Through a Freedom of Information request we have obtained anonymized and redacted copies of these five Final Administrative Criminal Decisions.
These five decisions, and machine-generated translations are provided below, as well as summaries of the enforcement actions. The numbering sequence from when this blog published the previous 10 decisions is continued.
As previously, the value of the fines are all fairly low and these five cases combine for a total of CHF 13,490.
11. Final administrative criminal decision, dated 19 February 2024
Original: 2024-02-19-I.77-Strafbescheid.pdf
Translation: 2024-02-19-I.77-Strafbescheid_Translation.pdf
This case concerned the attempted export of CHF 10,569.90 of electrical switches to Russia. The export was stopped at Zurich Airport Customs in December 2023.
The goods in question had been included on the Swiss sanctions list as of 25 January 2023.
The company claimed it was unaware the goods were sanctioned, and SECO accepted this finding that the export was negligent rather than intentional.
In light of the company’s cooperation, and the company being able to show a track record of refusing sales to Russia which they knew were sanctioned, SECO set the fine at CHF 750, plus CHF 250 in costs.
The goods in question were returned to the seller.
12. Final administrative criminal decision, dated 26 February 2024
Original: 2024-02-26-I.78-Strafbescheid.pdf
Translation: 2024-02-26-I.78-Strafbescheid_Translation.pdf
This case concerned the attempted export of €57,263 worth of pressure transmitters, pressure transducers and pressure gauges to Russia. The export was stopped at Zurich Airport Customs in December 2022.
The goods in question had been added to the Swiss sanctions list during November 2022.
SECO had earlier written to the company, in 2021, to say that the export of the goods could be done without a licence, subject to the changing requirements of Swiss sanctions.
SECO accepted the argument that the export was not intentional, but found it was negligent and that the company should have been more aware of the sanctions in place.
In light of the company’s cooperation, SECO set the fine at CHF 2,900, plus CHF 970 in costs.
The goods in question were returned to the seller.
13. Final administrative criminal decision, dated 26 February 2024
Original: 2024-02-26-I.67-Strafbescheid.pdf
Translation: 2024-02-26-I.67-Strafbescheid_translation.pdf
This case concerns two attempted exports of spare parts for medical and dental devices to Russia. Within wider sales of nearly €27,000 worth of parts, sanctioned goods with a value of approximately €3,600 were included.
On both occasions the goods were stopped by customs.
The company sought to explain the two prohibited exports by saying that the wrong HS code had been entered into its internal system (9026.2000 instead of 8481.1010) and so it had not been caught by its systems. In the other instance the company said it searched for the HS code using the format in the customs tariff (which used a full-stop in the number), while in the relevant Appendix in the Ordinance the HS code used a space instead of a full stop. The company’s searches against its products therefore resulted in false negatives and the shipments were incorrectly authorised.
The company relied heavily on its detailed procedures and training as mitigation, and had appointed an outside consultant to assist further with compliance. In addition, the company sought a retrospective approval for the exports on humanitarian/medical grounds.
SECO denied that request saying “a retroactive authorization cannot be issued to regularize exports”.
While not alleging an intention to breach the sanctions, SECO decided that the company had been negligent and commented that a “more precise check” of the prohibited codes would have prevented the export. It is as good an example of the importance of fuzzy searching as you’ll find.
The company was fined CHF1,000 and costs of CHF590. The seized goods were returned to the company.
14. Final administrative criminal decision, dated 11 March 2024
Original: 2024-03-11-I.79-Strafbescheid.pdf
Translation: 2024-03-11-I.79-Strafbescheid_Translation.pdf
This case concerned two blocked exports of goods valued at €2000 which were stopped by the Zurich Customs office. The goods included foam generators and level sensors.
In the first example the attempted export took place on the same day as the respective goods were announced as being added to the lists of prohibited items. The version of Annex 23 to the Ordinance had been updated on SECO’s website, but not on other versions. Nonetheless, SECO determined that the export fell under the heading of “negligent”.
In the second example, the company argued that the prohibition against certain goods which are “suitable for use in the aerospace industry” could be negatived by evidence that this was not going to be the actual use. SECO disagreed.
The company was fined CHF2,300 and ordered to pay costs of CHF970. The seized goods were returned to the company.
15. Final administrative criminal decision, dated 13 March 2024
Original: 2024-03-13-I.76-Strafbescheid-002.pdf
Translation: 2024-03-13-I.76-Strafbescheid_translation.pdf
This case concerned a shipment of 8,640kg of products with customs code 3824.9919 valued at €19,612.80.
The goods were seized by the St. Gallen customs office in October 2022.
The company claimed that it had no knowledge that the goods in question were subject to Switzerland’s Russian sanctions.
SECO’s response was to state:
“However, it is not the actual knowledge of the persons concerned of the criminal nature of the sale and export transaction that establishes criminal liability, but it is sufficient if the knowledge of the criminal liability should have been present in the company with due diligence. This must be affirmed in the present case.”
SECO accordingly concluded that the company was guilty of a negligent breach of sanctions.
A fine of CHF2,800 was imposed and costs of CHF960. The seized goods were returned to the company.
Luxembourg’s financial services regulator, the CSSF, has today announced a fine of €40,000 on Dock Financial S.A.
The fines relates to AML and sanctions compliance failings identified as part of an on-site inspection between December 2021 and November 2022.
In relation to sanctions, the CSSF has found that:
“A substantial part of the EMI’s client portfolio was not subject to name screening controls on a daily basis, over a substantial period of time, thus constituting a failure to comply with the obligation to detect persons, entities and groups subject to restrictive measures in financial matters without delay so that the necessary restrictive measures can be applied to them in line with all United Nations Security Council resolutions, acts adopted by the European Union (resolutions and acts directly applicable in Luxembourg) and national regulations“.
This was identified as a breach of CSSF regulations requiring detection of designated persons.
Further to our earlier post from July 2023 regarding the arrest of a 73-year old individual, the Dutch Public Prosecution Service has announced that it has reached a settlement both with the individual and a related company. The press release is only available in Dutch and was not included amongst those published in English.
The company has been fined €195,000 and the individual, the company’s director, has been fined €20,000. The company and the individual have not been named.
The fines have been imposed because at the end of 2021 the company paid out dividends of approximately €18m to one of its shareholders who was a designated person under the EU’s Russian sanctions. The company also did not freeze the designated person’s shares, and continued to allow the shares to vote.
In addition, in 2019, a loan of €100,000 was repaid to a different Russian designated person in breach of the EU’s asset freeze.
The US Attorney’s Office for the Eastern District of New York has issued a press release concerning the guilty plea by Mohammad Bazzi on charges of conspiracy to conduct unlawful transactions with a Specially Designated Global Terrorist.
The press release confirmed that Bazzi was arrested in Romania in March 2023 by the Romanian authorities, and was then subsequently extradited to the United States to face the charges there.
It is being reported in the Zimbabwe press that 17 fire trucks purchased by the government of Zimbabwe from a supplier in Belarus were seized in March 2023 by the Lithuanian authorities on suspicion of the export and/or sale of the fire trucks breaching the EU’s Belarus sanctions.
It is also being reported that diplomatic efforts by Zimbabwe to secure the release of the trucks have so far been unsuccessful.
The report further states that the trucks are said to contain components manufactured by an entity included as a designated person under the Belarus sanctions.
While an investigation remains ongoing into the transshipment of the fire trucks to Zimbabwe via Lithuania it is unclear on what basis the fire trucks remain detained.
