Lloyds Banking Group Subsidiary Hit with £160,000 Fine for Russian Sanctions Violation
The Office of Financial Sanctions Implementation (OFSI) has imposed a substantial financial penalty on a major UK banking institution for breaching sanctions against Russia. Bank of Scotland, which operates as a subsidiary of Lloyds Banking Group, has been fined £160,000 following an investigation into transactions linked to an ally of Russian President Vladimir Putin.
Details of the Sanctions Breach and Financial Transactions
According to the regulatory findings, the breach occurred when Bank of Scotland processed a series of payments from a personal current account held by an individual subject to UK and EU Russian sanctions. Although not explicitly named in the OFSI report, media sources have identified the individual as Dmitrii Ovsiannikov, who used a UK passport to open an account with Halifax, part of Bank of Scotland, in 2023.
Ovsiannikov has held significant positions within the Russian government, including serving as the former governor of Sevastopol in Russian-occupied Crimea and as a deputy minister. He was subsequently sentenced to 40 months in prison in the UK for sanctions violations and remains on the official Russian sanctions list.
The bank processed a total of 24 payments between 8 February and 24 February 2023, amounting to £77,383. This included four payments credited to the account, totalling £76,000, and 20 payments debited from the account, totalling £1,383.39. OFSI determined that these transactions, along with others made to an additional account, constituted a clear breach of established sanction rules.
Voluntary Disclosure Leads to Reduced Penalty
Lloyds Banking Group, acting on behalf of Bank of Scotland, took proactive steps by notifying OFSI of a potential breach on 10 March 2023, followed by a formal disclosure on 16 March 2023. This voluntary disclosure played a crucial role in mitigating the financial penalty.
The original fine was set at £175,000, but OFSI deemed it appropriate to reduce it to £160,000. Without the voluntary disclosure discount, the penalty would have been significantly higher at £320,000, highlighting the importance of transparency in regulatory compliance.
Bank's Response and Enhanced Controls
A spokesperson for Lloyds Banking Group emphasised the institution's commitment to regulatory responsibilities, stating, "We acted swiftly and transparently, proactively referring this one-off, isolated matter to the Office of Financial Sanctions Implementation and working closely with them throughout."
The bank added that it has "further strengthened our controls to ensure we continue to meet the highest standards of risk management and governance," indicating ongoing efforts to prevent future breaches. This case underscores the stringent enforcement of sanctions in the UK financial sector and the critical need for robust compliance mechanisms within banking operations.
