‘Human error’ costs HSF £465k as firm fined over Russia sanctions breach

The penalty concerns £4 million in payments from 2022

Herbert Smith Freehills (HSF) has been hit with a £465,000 fine after its Moscow office breached UK sanctions by making payments to Russian banks subject to asset freezes.

The Office of Financial Sanctions Implementation (OFSI), which sits within HM Treasury, said six payments totalling just under £4 million were made to sanctioned institutions including Sberbank, Sovcombank and Alfa-Bank. All three were subject to UK asset freezes following Russia’s invasion of Ukraine in early 2022.

The payments were made by HSF’s Russian subsidiary, Herbert Smith Freehills CIS LLP, over a seven-day period as it wound down its operations in Moscow. The office officially closed in May 2022.

OFSI said the payments, which made funds “directly available” to designated persons, demonstrated a “pattern of failings”. The enforcement body noted that while HSF’s UK arm voluntarily disclosed the breaches, the seriousness of the misconduct warranted a public penalty.

Because of this voluntary disclosure and HSF’s cooperation, the final fine was cut in half to £465k.

In a statement, HSF said the payments were made “as the 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 its former Moscow base.

“Given the firm’s self-reporting and cooperation, OFSI’s recognition that these payments occurred as a result of good faith errors made during our withdrawal from Russia, and the prompt recovery of the only substantial payment, we were disappointed by the fine that has been imposed,” the statement continued. “Nonetheless, we are pleased that this matter has now been resolved. The firm is committed to complying in full with its obligations.”

The penalty was issued specifically against HSF Moscow (not its parent firm in London) and OFSI has confirmed it found no fault with HSF London’s conduct.

Economic Secretary to the Treasury Emma Reynolds said: “Our commitment to robust enforcement of UK financial sanctions is steadfast.” She added that financial sanctions are a key part of the UK’s efforts “to disrupt Russia’s war machine and put Ukraine on the strongest footing possible”.