The Solicitors Regulation Authority (SRA) has highlighted the necessity for voluntary disclosure regarding breaches of Russia’s sanctions.
- The Office of Financial Sanctions Implementation (OFSI) fined a concierge company £15,000 for non-disclosure of services to a sanctioned individual.
- Without a specific OFSI licence, the firm managed property services which included rent collection and maintenance.
- OFSI policies suggest up to 50% reduction in penalties for voluntary disclosures, which was not opted for in this case.
- Knowledge gaps on sanctions were admitted, underlining the importance of legal awareness.
The Solicitors Regulation Authority (SRA) has underscored the importance of voluntarily reporting breaches concerning Russia sanctions, following a precedent-setting fine under the current sanctions regime. The Office of Financial Sanctions Implementation (OFSI) imposed a £15,000 fine on a small concierge company catering predominantly to Russian and Ukrainian nationals. This penalty arose from the provision of property management services to a sanctioned individual (designated person) who owns real estate in the UK.
This company, Integral Concierge Services Ltd (ICSL), had been offering services since 2015, which included essential tasks such as rent collection from tenants and organising maintenance, repair work, and insurance. OFSI valued these services at £15,500 from the time the individual was designated. Importantly, ICSL conducted several unauthorised bank transfers involving the designated person’s funds. OFSI suggested it might have issued a licence for these operations had ICSL applied for one.
OFSI’s scrutiny emphasised that the lack of voluntary disclosure was pivotal in this case. According to their policy, entities making timely and complete voluntary disclosures could benefit from a potentially significant reduction—up to 50%—in the penalty amount. However, ICSL did not avail itself of this opportunity.
The investigation revealed that ICSL either knew or had reasonable grounds to suspect that it was violating sanctions but failed to seek guidance or clarification. Despite admitting a limited understanding of the sanctions, ICSL did not attempt to enhance its knowledge or compliance, which underscores a significant gap in legal awareness and preparedness.
Furthermore, OFSI noted that ICSL’s actions mitigated the intended disruptive impact of asset freezes on the designated person, thus reducing the pressure meant to be exerted on Russia by these sanctions.
During the investigation, ICSL demonstrated cooperation by providing details of specific breaches unknown to OFSI at the outset.
This case highlights the critical need for legal entities to voluntarily disclose sanction breaches to potentially mitigate penalties.
