On 5 August 2021, the UK’s Office of Financial Sanctions Implementation (OFSI) announced that it has imposed a penalty on TransferGo Limited (TransferGo) of £50,000 for issuing payments to accounts held at the Russian National Commercial Bank (RNCB) in violation of EU sanctions against Crimea (in breach of Council Regulation (EU) No 269/2014, as enforced in the UK under Regulation 4 of the Ukraine (EU Financial Sanctions) (No 2) Regulations 2014 (the EU Regulations)).
The relevant payments related to 16 transactions totalling £7,764.77 made by two different individuals to two different accounts held at RNCB between March 2018 and December 2019. While the individual account holders and beneficiaries were not designated persons, RNCB was a UK designated person pursuant to the EU Regulations. According to OFSI’s penalty notice, TransferGo mistakenly believed that the payments were not prohibited because the account holders and beneficiaries were not themselves sanctioned.
The penalty notice marks OFSI’s fifth monetary penalty for sanctions breaches and may signal OFSI turning its focus to how FinTech companies are complying with financial sanctions in addition to what would be considered the more established financial institutions. Details of the penalty notice and previous notices can be found here. There are a number of key points arising from the notice:
- A reminder that OFSI considers funds held in a bank account ultimately belong to that bank. As such, the relevant transactions resulted in the funds being made available to RNCB, a UK designated person. TransferGo wrongly assessed that because the individual account beneficiaries were not designated persons or subject to restrictions, then the payments to the accounts held at RNCB would not be in breach of the EU Regulations. According to the notice, this contributed (among other factors) to TransferGo demonstrating a poor understanding of financial sanctions throughout its engagement with OFSI.
- Unlike some previous cases, TransferGo did not benefit from a voluntary disclosure discount of 50 percent on the baseline penalty amount on the basis that it did not inform OFSI of the relevant breaches as soon as practicably possible. Some relevant transactions were only disclosed by TransferGo in response to information requests from OFSI. The notice states that TransferGo was fully cooperative with OFSI and provided information promptly to its requests.
- TransferGo exercised its right of ministerial review of the penalty and to its anonymity from the penalty notice. In addition to the Minister upholding OFSI’s decision to impose a penalty and the amount of the fine. The Minister also concluded that anonymity would be contrary to the objectives of OFSI’s enforcement regime and not in the public interest.
The relevant transactions predate the end of the Brexit implementation period (being after 23:00 GMT on 31 December 2020) and therefore relate to breaches of the EU Regulations, as implemented by the UK. OFSI continues to investigate and penalise sanctions breaches which occurred under various EU regulations prior to 31 December 2020. RNCB remains designated under the UK’s Russian Sanctions (EU Exit) Regulations 2019.