Not the Standard Chartered case in the OFAC record, which concerns Iran and Dubai accounts. This one concerns Russia, loans, and a bank in Türkiye that a sanctioned Russian bank owned almost outright.
The structure
In 2014 the EU, and with it the UK, restricted lending to certain Russian banks and their subsidiaries. Article 5(3) of Council Regulation 833/2014 prohibited loans or credit with a maturity over 30 days to the listed entities. Sberbank was one of them, and OFSI’s notice records that its restrictions applied to Denizbank A.Ş. as its majority-held subsidiary.
Between April 2015 and January 2018 Standard Chartered made 102 loans to Denizbank. Article 5(3)(a) exempts credit whose specific and documented objective is financing the import or export of non-prohibited goods between the EU and a third country, which means the financed trade has to have an EU nexus. OFSI assessed that some of the 102 loans qualified and that 70, with an estimated transaction value over £266 million, did not.
Why it is a screening case, not a scheme
The bank did not hide anything. It had ceased all trade finance with Denizbank when the restrictions arrived. It then introduced dispensations to allow loans where it judged an exemption applied, and OFSI found those dispensations “were not appropriately put in place”, so the loans that followed were made outside any exemption, repeatedly, over an extended period.
The subsidiary is the point. A designated parent’s majority-owned subsidiary is restricted whether or not it is named on any list, which is the same lesson as the fifty percent rule, arriving through a lending desk instead of a payments queue. And the exemption that was supposed to guard against it had a single, checkable condition, the EU nexus, that the loans did not meet.
Why the figures moved
OFSI could penalise only breaches after 1 April 2017, when the relevant power under section 146 of the Policing and Crime Act 2017 began. That is why the penalties cover 21 of the 70 non-qualifying loans, £97.4m of the £266m. OFSI classed the case “most serious”, applied a 30% reduction for voluntary disclosure and cooperation, and imposed £11.9m in August 2019 and £19.6m in December 2019. On ministerial review in February 2020 the Economic Secretary substituted £7,693,233.50 and £12,778,576.33, for a total of £20,471,809.83. A published penalty can move after review, and in this case it moved down by about a third.