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.