Russian sanctions breach costs Bank of Scotland £160,000
Bank of Scotland has been fined £160,000 for processing payments linked to a UK‑designated Russian sanctions target, in a case that underlines the importance of effective screening controls for UK financial institutions.
The Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, found that the bank processed 24 payments to and from a personal current account belonging to an individual on the UK’s Russia sanctions list. The transactions, carried out between Feb. 8 and 24, 2023, amounted to £77,383.
BREAKING: HM Treasury has fined the Bank of Scotland £160,000 for breaching Russia sanctions linked to 24 payments in February 2023 to and from a personal account totalling around £77,000.https://t.co/ygpuBHmvgh
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The account was opened on Feb. 6, 2023 with Halifax, which operates under the Bank of Scotland licence within Lloyds Banking Group. According to OFSI, the customer used a UK passport showing a spelling variation of the sanctioned person’s name, including altered characters and an omitted middle name. Because of this discrepancy, the bank’s automated sanctions screening did not identify the applicant as a match at onboarding.
The customer was later flagged as a designated person as part of politically exposed person (PEP) screening on Feb. 24, 2023. Until that point, the account remained unrestricted and able to send and receive funds.
OFSI concluded that processing the 24 payments, and other associated transactions, breached UK financial sanctions in relation to Russia. Under the current regime, most designated individuals are subject to asset freezes and investment restrictions, with UK institutions required to block funds and economic resources belonging to them.
The enforcement notice also set out the impact of the bank’s self‑reporting on the size of the penalty. Lloyds Banking Group notified OFSI of a potential breach on March 10, 2023 and submitted a formal voluntary disclosure on March 16, 2023, shortly after the payments were made.
OFSI said the fine was initially calculated at £175,000 but was reduced to £160,000 after taking the circumstances into account. It added that, absent a voluntary disclosure, a penalty of £320,000 would have been imposed.
Bank of Scotland has been a subsidiary of Lloyds Banking Group since 2009. The case follows extensive UK and allied sanctions imposed on Russian state entities, companies and individuals following the invasion of Ukraine, and comes amid closer regulatory scrutiny of banks’ sanctions and PEP screening frameworks.
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