The UK’s Office of Financial Sanctions Implementation (OFSI) has fined London-based law firm Herbert Smith Freehills (HSF) £465,000 (€556,000) for breaching sanctions against Russia. The firm made payments to sanctioned Russian banks after the invasion of Ukraine. This violated UK financial restrictions designed to weaken Russia’s economy and military operations.
Payments Made to Sanctioned Russian Banks
In May 2022, Herbert Smith Freehills Moscow was closing its operations. During this time, it transferred £3.93 million (€4.7 million) through six payments. The money went to three Russian banks under UK asset freezes:
- Alfa-Bank JSC
- PJSC Sovcombank
- PJSC Sberbank
UK law prohibits financial transfers to sanctioned banks. However, HSF Moscow did not follow proper due diligence and screening processes. As a result, these payments breached UK sanctions.
Payments Linked to Redundancy and Service Fees
The OFSI found compliance failures in HSF Moscow’s payment handling. Some funds were used for employee redundancy settlements. Others covered audit services and insurance fees.
The UK government enforces strict financial sanctions. These measures aim to disrupt Russia’s war financing. Economic Secretary to the Treasury, Emma Reynolds, stated:
“UK financial sanctions remain crucial in disrupting Russia’s war machine and ensuring Ukraine’s resilience.”
Voluntary Disclosure Leads to Reduced Fine
HSF London voluntarily reported the breach to authorities. Due to this, the OFSI reduced the fine by 50%. Regulators encourage self-reporting and often give lighter penalties to firms that cooperate.
Even with the reduced fine, the OFSI emphasized that it strictly enforces sanctions. It warned that financial penalties apply regardless of a company’s size or reputation.
Appeal Denied, Fine Upheld
HSF London appealed the fine and requested a ministerial review. However, a senior Treasury official upheld the OFSI’s decision. The official ruled that the penalty was fair, proportionate, and legally justified.
The OFSI clarified that the fine applied only to HSF Moscow. The firm’s London headquarters was not directly involved. HSF London remains a key player in financial compliance and sanctions advisory services.
UK’s Strict Sanctions Policy
This case highlights the UK’s firm stance on financial sanctions. It serves as a warning to businesses handling transactions with sanctioned entities. Companies must ensure full compliance with UK regulations to avoid penalties.
As the UK government continues to tighten enforcement, firms dealing with international finance must remain vigilant. This case reinforces that even well-known institutions are not exempt from sanctions laws.