April 1, 2020

OFSI fines UK bank for violating Ukraine sanctions

The UK Office of Financial Sanctions Implementation has imposed two monetary penalties on Standard Chartered Bank for violating Article 5(3) of European Union Council Regulation 833/2014 and Regulation 3B of the Ukraine (European Union Financial Sanctions)(No.3) Regulations 2014.  The action follows a voluntary disclosure by Standard Chartered.

According to OFSI, 70 of the 102 loans made by the bank to Denizbank A.Ş. between 2015 and 2018 were prohibited by the EU Ukraine sanctions regime, as Denizbank was almost wholly owned during this period by Sberbank, a Russian entity subject to the EU Ukraine sanctions regime.  Of the 70 loans, 21 with an estimated transaction value of £97,484,808 were issued after April 7, 2017, and hence may be penalized pursuant to section 146 of the Policing and Crime Act 2017 (PACA 2017).  OFSI concluded that despite Standard Chartered’s awareness of the sanctions regime, the bank failed to put dispensations in place that would enable only loans that fell within an applicable exemption, and the failings persisted for several years.

Since Standard Chartered made a voluntary disclosure of the suspect loans, it was accorded a 30% reduction pursuant to OFSI’s published guidance on case assessment.  The penalty amounts approved by the Minister of the Crown were significantly less than the original penalties imposed by OFSI. The Minister agreed that Standard Chartered’s breach of financial sanctions was “most serious,” but found that the bank had not willfully breached the sanctions regime, had intended to comply with the applicable restrictions, had acted in good faith, and had cooperated with OFSI during the investigation.  He thus reduced the combined penalty amount from over £37.5 million to £20,471,809.83 (approximately US $ 25.4 million).

OFSI Penalty Report