One of the world’s biggest law firms, Herbert Smith Freehills (HSF), has been fined £465,000 for breaking UK financial sanctions on Russia. The UK Treasury’s Office of Financial Sanctions Implementation (OFSI) imposed the penalty after the firm’s Moscow office made payments to Russian banks that were banned due to sanctions.
The firm made these payments while closing down its Moscow office in May 2022, a few months after Russia invaded Ukraine. These payments went to Russian banks Sovcombank, Sberbank, and Alfa-Bank, which were on the UK’s list of restricted entities. In total, £3.9 million was paid to these banks.
HSF admitted the mistake and immediately reported it to the authorities. Since the firm voluntarily disclosed the issue and cooperated with the investigation, it received a 50% reduction in its penalty. Otherwise, the fine could have been much higher.
How Did the Breach Happen?
HSF stated that the payments were made due to human error. The firm was in the process of shutting down its Moscow office following Russia’s attack on Ukraine. During this time, it made several payments over a period of seven days to these Russian banks, which were already under strict UK sanctions.
UK sanctions are meant to prevent financial transactions with certain Russian entities as a way to pressure Russia over its actions in Ukraine. Any company that ignores these restrictions faces serious consequences, including financial penalties.
OFSI stated that despite the firm’s good faith efforts, financial sanctions must be strictly upheld. This case marks the first time a law firm has been penalized for violating Russia-related financial sanctions. It highlights the importance of thorough compliance checks, even in situations of office closures or operational wind-downs.
Government and Firm’s Response
A spokesperson for HSF said that the payments had nothing to do with the firm’s clients. They were made only as part of winding up operations in Russia. The firm emphasized that it acted in good faith and fully cooperated with the investigation.
HSF also expressed disappointment with the fine, arguing that it had self-reported the mistake and recovered most of the money. The firm stated that given its voluntary disclosure and cooperation, it had hoped for a lesser penalty.
However, the Treasury stood firm on its decision, stating that enforcing sanctions strictly is a top priority. Economic Secretary to the Treasury, Emma Reynolds, reaffirmed the government’s commitment to upholding financial sanctions to disrupt any funding that could support Russia’s military actions.
The UK government has been actively monitoring businesses to ensure they follow the rules. Officials have made it clear that all companies, even major law firms, must comply with the financial sanctions imposed on Russia.
With this case, the UK government sends a strong message: no organization is above the law when it comes to sanctions compliance. Businesses are expected to have robust financial controls in place to avoid breaching critical sanctions regulations.
