OFSI Imposes £300,000 Fine on UK Financial Services Company for Breach of Russia Sanctions

This case is of particular significance due to:

• The size of the fine (£300,000) relative to the funds transferred (£416,590.92).
• The fact that the lateness of the disclosure (eight months between the breach and report to OFSI) impacted the credit that the disclosure received (noting MML UK did not receive a voluntary disclosure discount, although the precise reasons are not stated).
• The requirement that companies have assessed and understand their exposure and are required to have policies in place.
• The implication that the presence of policies will be a mitigating factor (this is not explicit in the legislation, unlike for anti-money laundering where the presence of policies can be a defence). However, if the policies are not fit for purpose, then they will not be a mitigating factor.
• MML UK was penalised under the old sanctions regime, that is OFSI considered MML UK knew funds were being transferred to a sanctioned person in breach of UK sanctions. The position now is one of strict liability, making it all the more important to have robust compliance systems in place. Part 2 of our blog regarding UK, EU and US sanctions on Russia sets out a 5-step checklist to help businesses' better manage sanctions compliance.

We set out below a summary of the breach, OFSI's assessment and compliance lessons for companies, as well as information on OFSI's consultation on enforcement processes.

The full list of decisions and monetary penalties imposed by OFSI to enforce financial sanctions can be found here.

Background

• MML UK is a UK incorporated company and part of the Markom Group, which also includes a Cypriot company.
• On 19 February 2018, a designated person ("DP") transferred funds to a client of the Cypriot company ("Client"). The transfer occurred between two accounts at Gazprombank, a non-EU bank in Moscow, and did not involve MML UK. This did not breach UK or EU regulations.
• The Client used to be a client of MML UK, and MML UK employees remained a point of contact on day-to-day matters for the Client.
• On 20 February 2018, MML UK was informed that the transfer included an overpayment of £416,590.02 and then instructed Gazprombank to transfer the amount from the Client to the DP (resulting in funds being made directly available to the DP, in breach of UK and EU regulations).
• MML UK identified the breach during an internal review and notified OFSI on 19 October 2018 – eight months after the transfer was made.

Assessment

The breach occurred prior to the strict liability amendments to the Policing and Crime Act 2017 coming into effect.[2]  In other words, MML UK was penalised because it knew funds were being sent to a DP, contrary to UK sanctions. The current strict liability regime means that companies can be liable for breaches of financial sanctions even when they did not know there was a breach of sanctions.

The case was assessed against OFSI's Enforcement and Monetary Penalties Guidance (recent guidance can be found here).

OFSI identified the following aggravating factors:

• MML UK made £416,590.92 directly available to the DP, which was a 'high value breach'.
• UK sanctions in respect of Ukraine were a strategic priority for the UK's foreign policy and were harmed by transferring funds to the DP.
• MML UK did not take steps to verify their understanding of sanctions through legal advice and made the payment in haste, demonstrating a disregard for sanctions compliance.
• MML UK's policies were inadequate because there were no controls to manage the sanctions risk of the informal transnational working practices between MML UK and the Cypriot company.
• MML UK had knowledge that the recipient was the DP.

OFSI identified the following mitigating factors:

• MML UK took steps to improve their sanctions compliance after discovering the breach. OFSI considers the breach to be a one-off.
• MML UK submitted a materially complete initial disclosure to OFSI. However, the disclosure was not eligible for a voluntary discount reduction in penalty (the precise reasons are not stated).
• MML UK cooperated fully throughout OFSI’s investigation.

OFSI weighed the aggravating factors against the mitigating factors and assessed the case to be 'serious' as opposed to 'most serious'.

On 1 August 2024, OFSI notified MML UK of its intention to impose a £400,000 penalty (noting that the permitted statutory maximum penalty was £1m). OFSI subsequently reduced the penalty to £300,000 after considering MML's representations between October and December 2024.

MML exercised its right to a ministerial review on 18 February 2025.[3] The review concluded on 4 June 2025 and OFSI upheld its decision to impose a £300,000 penalty.

Compliance Lessons

OFSI highlights several compliance lessons arising from this case. All firms, regardless of size, should:

• Take appropriate steps to understand and address their exposure to sanctions risks. Firms with higher risk clients should educate themselves to an appropriate level on the risks, including by engaging with OFSI’s guidance and seeking professional advice on their sanctions obligations where necessary.
• Have adequate sanctions processes in place to ensure compliance. OFSI will not necessarily consider the existence of sanctions policies mitigating if they are not fit for purpose.
• Have appropriate systems and controls in place to promptly identify and report suspected breaches to OFSI. Voluntary disclosure in serious cases can result in a discount of up to 50% (however OFSI is proposing to reduce this to 30% – see our comments under 'Consultation' below).

Part 2 of our blog regarding UK, EU and US sanctions on Russia sets out a 5-step checklist to help businesses' better manage sanctions compliance.

Consultation

OFSI is currently consulting on proposed changes to improve the effectiveness of its enforcement processes. OFSI proposes to (among other things) double the value of penalties for the worst sanctions breaches (from £1m to £2m) and introduce other ways to obtain penalty discounts (including through early settlement and providing comprehensive accounts).

Responses can be submitted on HM Treasury's online Smart Survey form or emailed to OFSIEnforcementConsultation@hmtreasury.gov.uk by 13 October 2025.

Our Team

Fieldfisher's experienced multi-disciplinary sanctions and export control team includes lawyers who have negotiated and drafted EU and UN sanctions regimes in Government and regularly provide sanctions advice to businesses operating around the world in a wide variety of sectors.  We work closely with US partners to provide coordinated, comprehensive and practical advice to help business understand and manage the impact of sanctions. 

For more information please contact Andrew Hood (Partner, International Trade): Andrew.hood@fieldfisher.com .
 
* The contents of this notice do not constitute legal advice and are provided for general information purposes only.