Bank of Scotland has been hit with a £160,000 penalty from the UK's sanctions enforcement body after it opened a bank account and processed multiple payments for a close associate of Russian President Vladimir Putin.
Details of the Sanctions Violation
The Office of Financial Sanctions Implementation (OFSI) found that the bank, which is part of Lloyds Banking Group, allowed Dmitrii Ovsiannikov to access the UK banking system in February 2023. Ovsiannikov, a former governor of Sevastopol in Russian-occupied Crimea, has held senior roles in the Russian government and is listed under UK sanctions.
How the Breach Occurred
Ovsiannikov managed to open a personal current account at Halifax, a division of Bank of Scotland, on 6 February 2023. He used a UK passport that contained a slight variation in the spelling of his name compared to the entries on the official sanctions lists. This discrepancy meant that the bank's automated screening systems failed to flag the account as a potential match for a sanctioned individual.
Over the course of February 2023, a total of 24 payments were processed through this account, amounting to £77,383. The account remained active and unrestricted until 24 February 2023, when the bank identified Ovsiannikov as a designated person during a routine politically exposed person screening.
Background on Dmitrii Ovsiannikov
Ovsiannikov was first designated under EU sanctions legislation in November 2017, with authorities stating that his actions had compromised the territorial integrity, sovereignty, and independence of Ukraine. Although the EU annulled his designation in 2022, he has remained on the UK's sanctions list following the country's departure from the bloc.
In August 2022, Ovsiannikov applied for a UK passport from Turkey, having travelled from Russia just days earlier. He later became the first individual to be prosecuted in the UK for circumventing sanctions, with his trial taking place at Southwark Crown Court in London last April.
Regulatory Response and Mitigation
The fine imposed on Bank of Scotland was reduced by 50% because the bank voluntarily disclosed the breaches to OFSI within a month of the payments being made. OFSI acknowledged this prompt disclosure in its decision.
A spokeswoman for Lloyds Banking Group stated: "We take our regulatory responsibilities extremely seriously. We acted swiftly and transparently, proactively referring this one-off, isolated matter to OFSI and working closely with them throughout. OFSI has recognised our prompt voluntary disclosure, resulting in the maximum possible reduction of the penalty. We have further strengthened our controls to ensure we continue to meet the highest standards of risk management and governance."
Ovsiannikov was not explicitly named in the OFSI notice, but sources familiar with the case have confirmed his involvement. Attempts to contact Ovsiannikov for comment have been unsuccessful.
