U.K. Fines Standard Chartered Over Sanctions Breaches

Photo: Standard Chartered Bank

Standard Chartered PLC was fined GBP 20.47 million by the U.K. government’s Office of Financial Sanctions Implementation (OFSI) for breaching restrictions on loans to certain Russian financial institutions.

The penalty, imposed in February, was announced Tuesday by OFSI. Standard Chartered had made more than 100 loans to Turkey-based Denizbank A.S. between April 2015 and January 2018 when it was owned by Sberbank, a Russian lender sanctioned in 2014 by the European Union, according to OFSI. The EU restrictions sought to prevent certain Russian banks and their subsidiaries from accessing EU primary and secondary capital markets. 

As a majority-owned subsidiary of Sberbank at the time of the loans, Denizbank was also subject to the EU restrictions, OFSI said. EU regulations say majority ownership of an entity by a sanctioned party subjects the subsidiary to sanctions. Denizbank is now owned by a United Arab Emirates-based bank, according to its website. 

Some of the loans were later deemed permitted under EU regulatory exemptions for certain trade-finance related transactions, but 70 were not, according to OFSI. Of those, 21 loans, worth about GBP 97.4 million, occurred between April 2017 and January 2018 -- the period in which OFSI had the authority to enforce sanctions violations, OFSI said. OFSI received the authority to impose civil penalties in April 2017 as part of a broader U.K. criminal justice overhaul.

“It is these 21 loans for which OFSI has issued these penalties. OFSI determined that this case should be considered ‘most serious,’” OFSI said in an enforcement notice.

A Standard Chartered representative told Global Trade Review that OFSI’s findings were based on information the bank self-identified and self-reported. OFSI reduced its penalty by 30 percent due to the bank’s self-disclosure and cooperation, the enforcement notice said.

“As the penalty notice states, Standard Chartered did not wilfully breach the sanctions regime, acted in good faith, intended to comply with the relevant restrictions, fully co-operated with OFSI, and took remedial steps following the breach,” the bank said to Global Trade Review.

Standard Chartered had initially ceased trade-finance business with Denizbank when it became a sanctioned entity as a result of the designation of Sberbank, the notice said. But the bank then “sought to introduce dispensations” to begin issuing loans again when it considered an exemption was applicable, according to OFSI. The dispensations were not appropriately put in place, however, and their operation enabled non-exempt loans to be made, OFSI found. 

The failings led Standard Chartered to repeatedly make new loans to Denizbank, OFSI said.

The fine of Standard Chartered marks the fourth penalty since January 2019, and by far the largest, issued by OFSI. The last, of GBP 146,341, was announced in October against the local unit of Sweden-based telecommunication services provider Telia Carrier. The U.K. continues to apply EU sanctions through Dec. 31, 2020.

Reports surfaced in August 2019 that OFSI had notified Standard Chartered of a penalty of more than GBP 10 million. OFSI said in the notice on Tuesday that Standard Chartered sought a review of the case in January. The penalty was reduced down from GBP 31.5 million following the review, OFSI said. 

Standard Chartered was fined USD 1.1 billion in April 2019 to resolve a long-running sanctions probe in the U.S. As part of that settlement, the bank also agreed to pay GBP 102.2 million to the U.K. Financial Conduct Authority for deficient anti-money laundering (AML) controls.

 

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