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Herbert Smith Freehills has been fined £465,000 by the UK government after its Moscow office was found to have breached sanctions against Russia by paying millions into sanctioned banks.
The firm said it was “disappointed” at the penalty given it had self-disclosed the mistake and co-operated with authorities.
Following Russia’s invasion of Ukraine in February 2022, UK law firms were banned from handling transactional work for Russian clients.
Many firms with offices in Russia promptly withdrew from the country, including HSF, which closed its Moscow branch on 31 May 2022.
But as it wound down operations, it transferred money to three Russian banks which were subject to an asset freeze.
Over the final seven days before their office shut, HSF Moscow’s finance team paid out a total of £3.9m to Alfa-Bank JSC, PJSC Sovcombank, and PJSC Sberbank.
RollOnFriday understands that the most substantial payment – which resulted in the fine – was made in error on the final day of the office’s operations, when HSF paid out to a non-sanctioned payee who had an account at a sanctioned bank.
The firm said the money was only where it shouldn’t have been briefly, and was swiftly transferred to a non-sanctioned bank once the error was discovered.
The Office of Financial Sanctions Implementation (OFSI) initially levied a penalty of £930,000 on HSF’s Moscow office.
It said that “In committing the breaches, the firm made funds directly available to sanctioned entities” and that the payments “demonstrated a pattern of failings”.
However, much like a very, very costly parking ticket, OFSI applied a 50% reduction because Herbies’ London office voluntarily disclosed the breaches committed by its outpost.
OFSI also stressed that it had “found no fault with the actions of the parent company, HSF London”.
Nevertheless, since the Moscow branch is no more, HSF in London ended up footing the bill.
Commenting on the fine, Economic Secretary to the Treasury Emma Reynolds MP said, “Our commitment to robust enforcement of UK financial sanctions is steadfast”.
“A just and lasting peace in Ukraine must be our priority, and UK financial sanctions continue to be essential to disrupting Russia’s war machine and putting Ukraine on the strongest footing possible.”
HSF said the wrongful payments were made “as a result of human error” and “do not relate to the firm’s clients or client work, or to any of the firm’s offices other than our former office in Moscow”.
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