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On 5 August 2021, the Office of Financial Sanctions Implementation (“OFSI“) imposed a GBP 50,000 penalty on TransferGo Limited (“TransferGo“), a UK FinTech company, for breaching UK sanctions when it issued instructions to make payments to accounts held at the Russian National Commercial Bank (“RNCB“), a designated party.  

Between 20 March 2018 and 18 December 2019, TransferGo issued instructions to make 16 payments into accounts held at RNCB, the total value of which was GBP 7,764.77. OFSI considered that these payments constituted a breach of UK sanctions and that TransferGo knew or had reasonable cause to suspect that the payments were in breach of the UK sanctions.

OFSI’s view was that TransferGo erred in its assessment of whether payments to RNCB were subject to financial sanctions restrictions. TransferGo contested that as the account holders were not designated persons, the payments into their accounts were not breaches of UK financial sanctions. OFSI however considered that funds held by customers of RNCB in an RNCB bank account should ultimately be viewed as belonging to RNCB. TransferGo did not voluntarily disclose the transactions and only disclosed some transactions in response to OFSI’s information requests.  Therefore, TransferGo did not receive the 50% discount on the baseline penalty amount available for voluntary disclosure.

In order to gain the benefit of voluntary disclosure in OFSI’s case assessment and any subsequent penalty, which can result in a 50% reduction of the baseline penalty amount, disclosure should be “as soon as reasonably practicable” and “include all the evidence relating to all the facts of the breach“. As shown by TransferGo’s penalty, this disclosure must be proactive. OFSI will not consider a disclosure to be voluntary if it is in response to information requests, in response to prompts during a case assessment or disclosure prompted or required by law in a separate law enforcement or regulatory investigation. This penalty decision underlines OFSI’s position that transfers to an account of a designated bank, even when the accounts are not held by designated persons, are regarded as making funds available indirectly for the benefit of a sanctioned person and therefore are a breach of UK financial sanctions restrictions.

Author

Sunny Mann is a Partner in Baker McKenzie's London office and co-leads the UK Compliance and Investigations Practice, as well as the UK International Commercial and Trade Practice. Both these practices are ranked Tier 1 by Legal 500 UK. He has also worked in our Firm's Washington DC, New York and Sydney offices. Sunny also advises many clients on risk matters in India. He advises clients (including numerous FTSE 100 and Fortune 100 businesses) on compliance and investigations with respect to export controls, trade sanctions and anti-bribery rules. The Legal 500 ranked Sunny as a “Leading Practitioner", and as "excellent", with a ‘calm’ and "very practical" approach. The India Business Law Journal also noted that Sunny is "excellent and has deep experience in India". He is a Visiting Professor at the College of Europe, the leading institute for post-graduate European studies, where he teaches a course on Corporate Compliance.

Author

Sven Bates is a senior associate in Baker McKenzie's London office.

Author

Ola McLees is a Trainee Solicitor in Baker McKenzie London office.

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