Syed Rahman of Rahman Ravelli details the facts and the significance of the case.
The London branch of Deutsche Bank has been fined £165,000 for a breach of Britain’s Russia financial sanctions regime.
The fine was accompanied by a warning from the Office of Financial Sanctions Implementation (OFIS), which imposed it, that such enforcement action remains a strategic priority.
Deutsche Bank’s London branch told OFSI in September 2022 that the bank had processed two payments in June and July of that year, involving a total of £635,619, to a Russian entity that was wholly owned by a sanctioned company.
OFSI said payments were processed for a corporate customer incorporated in Ireland to a Russian app developer owned by a sanctioned entity. The Russian app developer's ownership structure had not been identified by Deutsche Bank because the bank was using a third-party screening vendor (which provides software and services to vet parties) that did not contain this data.
The bank’s voluntary disclosure of the sanctions breach meant it qualified for a 45% discount on the original £300,000 penalty that had been imposed. The penalty comes only a month after Deutsche Bank made regulators aware of potential breaches of rules that limit deposits involving Russian individuals to less than 100,000 euros.
A Deutsche Bank spokesman said: "We have strengthened and continue to strengthen all aspects of our sanctions compliance framework and associated processes.’’
Intention
The Deutsche Bank penalty can be seen as significant as it is a clear indicator that OFSI remains prepared to bring enforcement action against institutions. This is the case even in situations where there is no evidence of any intention to do wrong and / or where there has been self-reporting; although the reduction obtained by Deutsche Bank for voluntary disclosure illustrates the potential value of such an approach.
The focus is now increasingly on whether firms have sufficiently robust controls, adequate screening architecture and governance frameworks that are fit for purpose. This case has shown in the starkest terms that the use of third-party screening providers is no defence. OFSI’s decision leaves no doubt that the responsibility for sanctions compliance rests solely with the regulated entity.
