OFSI PUBLISH lessons learnt from the £465,000 fine to Herbert Smith Freehills Russian sanctions breach

On 20 March 2025, the Office of Financial Sanctions Implementation (OFSI) announced a monetary penalty of £465,000 against Herbert Smith Freehills CIS LLP (“HSF Moscow”) for breaches of UK financial sanctions on Russia linked to its illegal invasion of Ukraine.  

• https://assets.publishing.service.gov.uk/media/67dae19a1a60f79643028472/200325_HSF_PENALTY_NOTICE.pdf

The penalty relates to six payments made by HSF Moscow, with a collective value of £3,932,392.10, to designated persons subject to an asset freeze.

The payments, which took place over seven days as the firm wound down its Russian offices, demonstrated a pattern of failings brought about primarily by inadequate due diligence and sanctions screening and errors caused by the hasty closure of the HSF Moscow office. HSF London, on behalf of HSF Moscow, voluntarily disclosed the breaches to OFSI, and therefore, a 50% reduction has been applied to the final penalty amount. 

Below ARE THE OFSI three key lessons that businesses can draw from this case:

1. Understand your exposure to sanctions risks
2. Adhere properly to any sanctions policies and procedures in place in your organisation
3. Fully consider ownership and control

The HSF Moscow penalty carries several essential compliance messages for the industry, not just the legal sector. Below, we have highlighted three key lessons that businesses can draw from this case: 

1. Understand your exposure to sanctions risks 
1. Firms must understand their exposure to sanctions risks and take appropriate action to address them.
2. Firms operating in higher-risk environments should fully educate themselves on the risks by engaging with OFSI’s published guidance and seeking professional advice on their sanctions obligations where necessary.
3. In particular, parent companies with subsidiaries in areas that pose a heightened sanctions risk (such as overseas offices) should ensure that they are providing suitable advice and assurance to their subsidiaries.
4. A prior OFSI penalty against Tracerco in May 2022 also highlighted this risk. 
2. Adhere properly to any sanctions policies and processes in place in your organisation 
1. Firms should follow all relevant sanctions screening and due diligence measures they have in place.
2. This applies to everyone in an organisation, regardless of seniority.
3. While OFSI usually considers the existence of appropriate sanctions policies and procedures a mitigating factor, failure to comply with them is likely to negate the mitigating factor of having them in place. This is unless there was a good reason for not following said measures and the decision not to follow them was taken at the appropriate level.
4. Further, the HSF Moscow case demonstrates the significant risks that can emerge when payments are made in haste and procedures are not adequately followed by senior figures.  
3. Fully consider ownership and control 
1. Firms must carefully consider ownership and control beyond whether an entity is directly subject to sanctions.
2. OFSI views failure to properly consider and identify clear ownership more poorly than an incorrect but good faith assessment of control. Firms should therefore take sufficient time and care to properly assess the applicability of sanctions to the specific legal entities they are dealing with.
3. Ownership and control are considered under case factor F within OFSI’s Enforcement and Monetary Penalties guidance, with examples of areas of enquiry OFSI may expect to be undertaken by persons seeking to establish whether an entity is owned or controlled by a designated person. 

Sources

• https://ofsi.blog.gov.uk/2025/04/04/hsf-moscow-penalty-key-lessons-for-industry/
• https://assets.publishing.service.gov.uk/media/67dae19a1a60f79643028472/200325_HSF_PENALTY_NOTICE.pdf

OFSI guidance: 

https://www.gov.uk/guidance/uk-financial-sanctions-guidance