UK Treasury Upholds Sanctions Breach Penalty for Sending Money to Russian Bank

The United Kingdom's Economic Secretary to the Treasury upheld an Office of Financial Sanctions Implementation penalty on TransferGo Limited for violating the U.K.'s sanctions in response to the annexation of Crimea by Russia. TransferGo, a money transfer company, was penalized for allowing payments to accounts at the sanctioned Russian National Commercial Bank between March 2018 and December 2019. The penalty of over $69,000 was sustained following a June review of the Policing and Crime Act 2017.

TransferGo's transactions, totaling nearly $10,000, violated the U.K.'s sanctions on "those responsible for actions which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine." The U.K. said it didn't credit TransferGo with a penalty "discount" because the company didn't disclose the violations and only disclosed "some" of the transactions after it was contacted by OFSI. But the agency said TransferGo "fully cooperated" with the investigation and "promptly" provided requested information.

The penalty was the first made after an April notice provided more guidance on Treasury's penalty powers (see 2104010023). OFSI said "transferring funds to accounts held by non-designated persons with designated banks" is a "breach of the prohibition on making funds available to a designated person in the U.K. Regulations if the person knew, or had reasonable cause to suspect, it was doing so." The agency said companies should "carry out due diligence on the banks and financial institutions involved in transactions, as well as all other parties in the transaction, to ensure they do not breach financial sanctions."

OFSI first became aware of the violations in April 2018 when TransferGo allowed eight payments by two individuals to two different RNCB accounts. The sanctions office found these payments to be sanctions violations and that TransferGo "knew or had reasonable cause to suspect that the payments were in breach of financial sanctions restrictions."

"TransferGo made an error in its assessment of whether the payments to RNCB were subject to financial sanctions restrictions," the notice said. "TransferGo asserted that as the relevant clients and beneficiaries were not themselves subject to financial sanctions restrictions, the payments to their accounts with RNCB were not breaches; OFSI considers that this is not the case as funds held in bank accounts ultimately belong to those banks. In respect of this and other factors, TransferGo demonstrated a poor understanding of financial sanctions throughout its engagement with OFSI."

Should a company suspect they are dealing with the funds or economic resources of a designated individual or entity, they should stop dealing with them unless a legislative exemption or license is known to the relevant party. This person should also inform OFSI of this dealing, the notice said. OFSI added that it would have issued "a discount of 50% of the baseline penalty amount" if TransferGo voluntarily disclosed the violations.