Following widespread press reports (initially in the Financial Times) that a series of front companies linked to the Iranian Revolutionary Guard held accounts in the UK with Lloyds Bank and Santander, it is now being reported (behind a paywall) that both banks have been contacted by the Financial Conduct Authority in relation to the allegations.
Both banks have denied breaching sanctions.
It has been reported today that the UK’s National Crime Agency has arrested and charged Dmitry Ovsyannikov, a Russian national, with seven counts of circumventing sanctions as well as two money laundering charges.
Ovsyannikov was formerly the governor of Russian-seized Sevastopol and was designated by the EU in 2017 and then post-Brexit by the UK in 2020.
He is due to first appear in Southwark Crown Court on 20 February. He was arrested on 22 January.
To date the National Crime Agency has not issued a press release
It has been reported today that the UK has provided the UN Committee responsible for oversight of the UN’s sanctions against North Korea with a dossier of evidence said to establish breaches of those sanctions by Russian shipping.
The Committee has the power to designate vessels which it finds were complicit in breaching the existing sanctions.
The UK’s Office of Financial Sanctions Implementation has today published its Annual Review for 2022-2023.
The report includes the following regarding enforcement activity:
“As of April 2023, OFSI’s Enforcement Unit had 172 cases under live investigation, many of which are complex and remain ongoing.
In 2022-2023, OFSI recorded 473 suspected breaches of financial sanctions (excluding oil price cap and counter-terrorism breaches). This is a significant increase on the 147 cases recorded in 2021-2022. This increase was expected given the scale of increased Russia sanctions, and OFSI’s increased enforcement capabilities. This data refers to the year in which a suspected breach is recorded, rather than the year in which the potential breach activity occurred. Recorded breaches includes cases which are self-reported, reported by a third party, and those independently generated by OFSI.
Over the course of the financial year, OFSI issued 7 warning letters in response to confirmed breaches which OFSI did not consider warranted public enforcement action, and 2 monetary penalties. 51 cases were closed with no further action, 44 of which related to Russia related sanctions breach reports. OFSI does not in all cases provide its view of whether a breach occurred or not, although many suspected breaches recorded by OFSI are considered not to be breaches of financial sanctions following further investigation. A number of cases in this period were referred to other agencies, including criminal and regulatory authorities. OFSI does not provide further breakdowns on referrals to criminal authorities”.
The UK’s HMRC has today announced three new compound penalties imposed on experts for unlawful exports.
The first penalty was £67,000.31 imposed for the attempted export of goods in breach of the UK’s Russian sanctions. The person or company involved was not named.
The second penalty was for £1,000 and the attempted unlicensed export of dual-use goods. Again the penalised company was not named.
The third penalty was for £9,088.99 for exporting dual-use goods without a licence. This too was anonymised.
A law firm which self-reported itself to the legal regulator in relation to three real estate transactions has been fined £101,357 by the Solicitors Regulation Authority.
The transactions did not actually involve sanctioned persons or entities, but screening had not been conducted at the time of the transactions and subsequently a possible link between one of the transactions and a designated person was identified.
It has been reported today that the FCA is currently investigating Revolut for permitting transactions valued at £1.7 million in breach of the UK’s sanctions between July and August this year.
Revolut has stated in response that it reported the transactions to the FCA and that the value is £500,000.
The UK’s financial services regulator has today published a report based on its review of sanctions compliance by a sample of 90 regulated firms.
The FCA emphasised the importance it places on compliance with sanctions and the proactive approach it intends to take to enforcement.
The FCA also published examples of what it considers to be good practice and bad practice. The examples of bad practice include:
(i) insufficient information given to management on sanctions risks, and insufficient management attention;
(ii) global sanctions policies that are insufficiently attuned to the specifics of the UK’s regime;
(iii) over-reliance on third-party screening tools without sufficient oversight or attention to the detail and calibration of such tools;
(iv) insufficient contingency planning in advance of anticipated changes to sanctions;
(v) insufficient resources applied to sanctions compliance resulting in significant backlogs; and
(vi) insufficient and inappropriate calibration of of screening tools allowing either too many false positives, or gaps in screening hits.
The UK’s Office of Financial Sanctions Implementation (OFSI) has announced its most recent enforcement action, coupled with changes to its Guidance on its attitude to enforcement.
On 29 June 2022 a new person was added to the UK’s sanctions list as a “Designated Person”. At 4am the next morning a debit card in that Designated Person’s name, but relating to a separate company (albeit one owned or controlled by the Designated Person) was used to withdraw £250. OFSI’s published action relates to Wise Payments Limited (Wise), the regulated financial services firm with which the account was held. While Wise had reacted to the designation of its customer by blocking transfers into or out of the account, its policy was not to stop debit cards on the basis that it often had a lot of false positives with sanctions screening and that it had a duty to its customers as well. The debit card was not blocked until the after the weekend as its sanctions team did not work on the weekend. No further withdrawals were made over this period.
OFSI’s view in its notice is that blocking debit cards while ascertaining if a screening match is genuine is a wholly proportionate policy for managing sanctions risk. Further, not having a sanctions team to review screening hits over the weekend was insufficient.
Thus while the value of the breach was low, and Wise self-reported promptly and co-operated, OFSI applied its “severity” test and determined that Wise’s actions amounted to a moderately severe breach. It was on this basis that OFSI has published the details of this breach, albeit it did not impose a civil penalty nor propose a criminal prosecution. This is the first time that OFSI has used its new “disclosure” power in this way.
The other noteworthy factor is that Wise’s conduct was treated as “making available” assets to a designated person. Wise’s role was passive – it took no step to transfer or give assets to the Designated Person. Nonetheless, the failure to block the debit card was interpreted as itself amounting to “making available” what should be frozen assets to a designated person. This is helpful in clarifying the breadth of the view taken by OFSI on what can amount to “making available”.
The British authorities today announced the imposition by HM Revenue and Customs of a £1m compound penalty on an unnamed UK company for unlicensed exports to Russia in breach of the UK’s Russian sanctions regulations.
No further information has been released.
