Syedur Rahman and Ulrich Schmidt assess the issues and the penalty imposed in the case
A financial services company has been fined £300,000 for a breach of sanctions that happened in 2018.
The financial penalty was imposed on Markom Management Limited (MML) by the Office of Financial Sanctions Implementation (OFSI) for a breach of the UK financial sanctions imposed on Russia following the 2014 annexation of Crimea.
The breach relates to MML’s involvement in making a £416,590.92 payment to a designated person, who remains subject to an asset freeze under current Russia sanctions. MML gave instructions to make the payment from another company’s bank account with the knowledge that the recipient was a designated person, having failed to put in place adequate compliance and control procedures.
The penalty was issued under the Ukraine Regulations 2014 (which was part of EU Regulations) and not the current 2019 Russia Regulations. Although the breach occurred in 2018 and was reported within two months of it occurring, it has taken until late 2025 for a penalty to be issued.
Issues
The case highlights a number of issues. As OFSI makes clear, it is important that all firms take appropriate steps to both understand and address their exposure to sanctions risks and ensure they have compliance procedures in place that are fit for purpose. The UK considers financial sanctions to be a vital foreign policy tool. As a succession of financial penalties issued over the past year has shown, OFSI will not hesitate to take action against those it suspects of breaching sanctions.
It is also worth considering the fact that while MML self-reported its breach of sanctions regulations, it does not appear to have been considered for a 50% discount on its penalty; as is possible under current OFSI policies. Instead, OFSI first opted to impose a fine of £400,000, specifically without a voluntary disclosure discount. This was then reduced to £300,000 after the submission of representations by MML’s legal representatives.
The case illustrates that OFSI is not simply providing voluntary disclosure discounts automatically - it will carefully consider all circumstances before applying any discounts. In this case, OFSI noted that sanctions compliance guidelines were present within MML but were wholly inadequate for a firm of its size. The penalty imposed on MML amounts to more than 70% of the value of the sanctions breach – and was almost 100% of it before the reduction was made. While the fine in this case is smaller than the £465,000 imposed (under the 2019 Russia Regulations) on law firm Herbert Smith Freehills earlier this year, the breach in that case amounted to almost £4 million.
MML’s punishment, therefore, can be seen as a warning that a “sliding scale’’ approach can be taken to fines in relation to a company’s lack of regard for sanctions risk, regardless of self-reporting and how long ago the failings occurred.
Timeline
Whilst the penalty is, therefore, a clear sign of OFSI’s stronger enforcement approach, it must be noted that following MML’s self-report, OFSI did not commence a civil investigation until almost three years later. OFSI has struggled with timeline-related issues; often requiring months to respond to inquiries.
This delay in responding is especially stark in licence applications, where applicants are deeply affected by the delay. However, in this case it has also meant that there was a substantial lack of clarity for MML.
Along with the positive aspects of its stronger enforcement approach, OFSI would benefit from ensuring that investigations are commenced and conducted in a timely manner.
