A firm that had already decided to leave Russia, that told its own staff not to pay a particular bank, and that breached sanctions six times anyway in its final week of trading.
The closure
Herbert Smith Freehills, a large international law firm, decided in March 2022 to shut its Moscow office after Russia’s invasion of Ukraine. The office closed on 31 May 2022. In the seven days around that date, HSF Moscow’s finance staff — who had authority to approve local payments without sign-off from London — made six payments that breached UK sanctions.
- Payment 1. An audit-related bank fee created a small overdraft in HSF Moscow’s Sberbank account. Senior finance staff cleared it by transferring funds from a non-designated account into the designated Sberbank account.
- Payments 2–4. HSF Moscow paid three invoices, totalling £3,904, to Sovcombank Life — a company wholly owned by the designated PJSC Sovcombank. A senior staff member had flagged Sovcombank’s sanctioned status two months earlier, but HSF Moscow relied on an informal, unverified answer from London and wrongly concluded the life-insurance subsidiary was not covered.
- Payment 5. A departing employee’s redundancy pay was sent to their Sberbank account without the screening HSF Moscow’s own process required.
- Payment 6. The largest, £3.9 million, was the transfer of HSF Moscow’s office lease to a local firm — sent, in the rush of the final day, to that firm’s Alfa-Bank account rather than its non-designated one, despite London having told Moscow in March not to pay any funds into Alfa-Bank. Staff caught the error hours later and had the local firm move the funds onward; HSF Moscow had no legal authority over that second transfer.
What OFSI found
HSF Moscow had real sanctions training and a real screening process. Both existed, and neither was followed under time pressure. OFSI’s assessment was blunt about the sequence: the firm had the means to leave Russia compliantly, chose to compress an orderly wind-down into a handful of frantic days, and “failed to sufficiently account for these sanctions in administering the closure of its office.”
The Sovcombank Life payment is the case’s clearest structural lesson: a subsidiary wholly owned by a designated bank is itself covered by the asset freeze, whether or not it appears on the sanctions list by name. See ownership threshold structuring — the same principle OFAC states as its 50 percent rule, applied here under UK law’s ownership-and-control test.
The penalty and the review
OFSI assessed the case as “serious,” set a baseline penalty of £930,000, and applied the full 50% reduction available for prompt, complete, voluntary disclosure — HSF London reported the first breach almost immediately after discovering it, and volunteered the other five after its own internal investigation. HSF exercised its statutory right to a ministerial review; a Treasury official with no prior involvement in the case upheld the penalty in full on 14 February 2025.
What the record shows
- Good controls under bad timing still fail. Every payment here happened despite training, written warnings and an established screening process — because none of it was followed once the office was closing in days, not months.
- “Wholly owned by a designated bank” is not a grey area. OFSI treated the Sovcombank Life payment as a straightforward breach, not a hard judgment call — the ownership test does the work the name-matching test cannot.