What's happened
Herbert Smith Freehills has been fined £465,000 by the UK government for making payments to sanctioned Russian banks through its former Moscow office. The penalty follows a review by the Office of Financial Sanctions Implementation, which cited a pattern of failings during the firm's closure of its Russian operations in 2022.
What's behind the headline?
Key Insights:
- Human Error: Herbert Smith Freehills attributed the payments to human error during the rapid closure of its Moscow office, highlighting the challenges firms face in compliance during crises.
- Regulatory Scrutiny: The fine reflects the UK's stringent enforcement of sanctions against Russia, emphasizing the government's commitment to disrupt financial support for the war effort.
- Impact on Legal Sector: This case may set a precedent for other firms operating in high-risk jurisdictions, urging them to enhance compliance measures to avoid similar penalties.
- Voluntary Disclosure: HSF London’s voluntary disclosure of the breaches led to a 50% reduction in the penalty, showcasing the importance of transparency in regulatory compliance.
- Future Implications: As investigations into sanctions breaches increase, firms must prioritize robust due diligence and sanctions screening to mitigate risks associated with international operations.
What the papers say
According to The Guardian, Herbert Smith Freehills was fined for payments made to sanctioned banks, with the Office of Financial Sanctions Implementation noting a 'pattern of failings' during the firm's closure of its Moscow office. Politico adds that the payments were made as the firm wound down operations, emphasizing the need for better compliance practices. The Scotsman highlights a broader trend of increasing investigations into sanctions breaches by HMRC, indicating a tightening regulatory environment for firms involved in international trade.
How we got here
The fine stems from six payments totaling £3.9 million made by HSF Moscow to banks under UK sanctions following Russia's invasion of Ukraine. The firm closed its Moscow office in May 2022 amid increasing sanctions.
Go deeper
- What led to the closure of HSF Moscow?
- How are other firms responding to sanctions enforcement?
- What are the implications for international law firms?
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