City law firm fined over £400,000 for Russian sanctions breaches
London-headquartered law firm Herbert Smith Freehills (HSF) has been hit with a £465,000 penalty after breaching UK financial sanctions imposed on Russia.
On Thursday, the Office of Financial Sanctions Implementation (OFSI) targeted its Russian office, HSF Moscow, over payments made to people subjected to an asset freeze.
The firm, like many others, closed its Russian office as a consequence of Russia’s invasion of Ukraine in February 2022.
The monetary penalty related to six payments made by HSF Moscow with a collective value of over £3.9m to JSC, PJSC Sovcombank, and PJSC Sberbank.
The banks were “designated persons” at the time, meaning they were subject to sanctions implemented following the war in Ukraine.
OFSI said the payments, which took place over seven days as the firm wound down its Russian offices, demonstrated a pattern of failings.
By committing the breaches, HSF made funds directly available to sanctioned entities.
It was noted that HSF voluntarily disclosed these breaches to OFSI, and therefore, a 50 per cent reduction was applied to the final penalty amount.
Economic secretary to the Treasury, Emma Reynolds, said: “Our commitment to robust enforcement of UK financial sanctions is steadfast.”
“A just and lasting peace in Ukraine must be our priority, and UK financial sanctions continue to be essential to disrupting Russia’s war machine and putting Ukraine on the strongest footing possible,” she added.
Commenting on the decision, James Clark, partner at Quillon Law, said: “This is a cautionary tale for businesses withdrawing from the Russian market – particularly law firms.”
“Whilst OFSI stressed that it was issuing the monetary penalty against HSF Moscow, and that it found no fault with the actions of the parent company, it was HSF London that was left to pick up the bill,” he added.
The government launched a new unit to crack down on businesses that are in breach of UK sanctions last October.
The Office of Trade Sanctions Implementation (OTSI) is part of the Department for Business and Trade.
This all comes as a new report by law firm Pinsent Masons revealed that 50 UK businesses have self-reported breaches of Russian sanctions to the government, the majority from the financial services industry.
Stacy Keen, partner at Pinsent Masons, explained: “The challenge of dealing with Russian sanctions dwarfs the complexity of Iranian or Syrian sanctions for UK businesses, it’s so much more complex.”
“Businesses need to come clean if they think they may have been doing business with sanctioned entities.”
“Businesses need to ensure they are undertaking rigorous checks before dealing with any organisation that presents a potential ‘Russia risk,” she warned.