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Standard Chartered was found to have made over 70 loans - worth £266 million - to Denizbank A.S. which was almost wholly owned by Sberbank of Russia. The nature and purpose of the loans meant they were prohibited under the EU Council Regulation 833/2014 – EU sanctions aimed at those responsible for undermining the territorial integrity and sovereignty of Ukraine. Those sanctions were intended, amongst other things, to prevent certain Russian banks, companies, and their subsidiaries from accessing EU primary and secondary capital markets (including access to loans).
Standard Chartered Bank disclosed the suspected breaches of financial sanctions to OFSI, carried out an internal investigation of the breaches, provided a detailed report of the investigation to OFSI as well as interim updates, and cooperated with OFSI’s investigation.
OFSI originally imposed a penalty of £30 million, including a 30% reduction in fines to reflect Standard Chartered's self-disclosure and cooperation with the investigation. This original penalty was reduced to just over £20 million on appeal to the responsible UK Minister who found that Standard Chartered did not wilfully breach the sanctions regime, had acted in good faith, had intended to comply with the relevant restrictions, had fully co-operated with OFSI and had taken remedial steps following the breach. The Minister took the view that while these factors had been considered in OFSI’s assessment, they should have been given more weight in the penalty recommendation.
The fine follows a $1.1 billion settlement in 2019 agreed between Standard Chartered and US local and federal authorities and the UK Financial Conduct Authority for serious and sustained shortcomings in its AML policies and for acting in breach of relevant economic sanctions relating to Burma, Cuba, Iran, Sudan and Syria.
The latest fine represents the most significant penalty imposed for sanctions breaches by UK sanctions regulators. Whilst there were a number of loans that were in breach of EU sanctions, the fine is notable given the prohibited loans were made in the context of a series of loans, some of which were permissible under the EU sanctions regimes and given the finding that Standard Chartered had acted in good faith and disclosed the breach upon discovery.
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