On 13 February 2025, the UK’s Office of Financial Sanctions Implementation (OFSI) published an assessment of suspected sanctions breaches involving UK financial services firms since February 2022. It highlights three areas of concern:
Compliance
OFSI has identified several common issues that contribute to non-compliance by UK financial institutions:
- Improper maintenance of frozen assets, particularly in relation to debits from accounts held by sanctioned persons (DPs);
- Breaches of specific and general OFSI license conditions;
- Inaccurate ownership assessments; and
- Inaccurate UK nexus assessments.
Russian DPs and Enablers
Professional and non-professional enablers have been increasingly providing the following services on behalf of Russian DPs:
- Maintaining the lifestyles and assets of DPs;
- Attempting to front on behalf of DPs to claim ownership of frozen assets; and
- Employing increasingly sophisticated measures to evade UK financial sanctions prohibitions, particularly through the exploitation of crypto-assets.
Indicators of enablers might include:
- Individuals associated with DPs receiving funds of significant value;
- Regular payments between companies controlled or owned by DPs;
- New individuals making payments formerly made by a DP;
- Discrepancies in name spellings or transliterations (esp. from Cyrillic);
- Recently obtained non-Russian citizenships; and
- Frequent name changes.
Intermediary Countries
Suspected breaches of UK financial sanctions prohibitions by Russian DPs often involve intermediary jurisdictions including Austria, British Virgin Islands, the Cayman Islands, Cyprus, Guernsey, Isle of Man, Luxembourg, Switzerland, Turkey, and United Arab Emirates. The assessment includes a non-exhaustive list of suspicious activities that the OFSI has observed in several of these countries.
Conclusion
Financial institutions need to adopt a proactive approach to avoid their services being exploited as instruments of evasions and in turn avoid financial and reputational repercussions of non-compliance.
For further information, please see our corresponding alert.