Sanctions watchdog fines Lloyds subsidiary for breaching Russia rules

(Sharecast News) - The UK Treasury's sanctions watchdog fined Lloyds subsidiary Bank of Scotland £160,000 on Monday, for breaching financial sanctions imposed on Russia after it processed payments linked to a UK-designated individual in early 2023. The Office of Financial Sanctions Implementation (OFSI) said the lender handled 24 transactions between 8 and 24 February 2023, totalling £77,383, to and from a personal current account held by a sanctioned person.

OFSI concluded the bank breached prohibitions on dealing with funds and making funds available under the UK's Russia sanctions regime, which was introduced following Moscow's invasion of Ukraine.

According to OFSI, the account was opened with Halifax, a trading division of Bank of Scotland, using a UK passport that contained spelling variations of the customer's name compared with the official sanctions list.

Those discrepancies meant the bank's automated sanctions screening failed to identify the individual at account opening.

Although a politically exposed person alert was later triggered and a manual review identified adverse media links, the account remained unrestricted for several days due to human error and weaknesses in escalation procedures.

The sanctioned individual was later identified as Dmitrii Ovsiannikov, a former Russian-appointed governor of Sevastopol who was jailed last year for breaching UK sanctions and money laundering, in the first prosecution brought under the Russia Regulations.

Ovsiannikov, who also holds British citizenship, used the Halifax account to move funds while subject to an asset freeze.

OFSI described the breaches as "serious", citing the value of funds made available, repeated transactions over more than two weeks and shortcomings in sanctions screening, training and controls.

However, the regulator applied the maximum 50% reduction to the penalty after Lloyds Banking Group voluntarily disclosed the issue in March 2023 and cooperated fully with the investigation.

Without the discount, the fine would have been £320,000.

At 1306 GMT, shares in Lloyds Banking Group were up 1.38% at 103.05p.

Reporting by Josh White for Sharecast.com.