Citibank has been hit with a fine of nearly £5m after regulators found it violated the UK’s sanctions regime on Russia.
The Wall Street giant’s London branch was found to have processed £19.7m in illicit transactions spanning 970 payments.
The Office of Financial Sanctions Implementation (OFSI) ruled that, in one instance, Citi failed to freeze as many as 24 commercial bank accounts belonging to 11 companies controlled by a single designated Russian individual. Of the £5.9m in funds passed through by that client, around £4.3m was processed in the first 24 hours of the individual being placed on the sanctions watchlist.
OFSI said Russia’s invasion of Ukraine, which prompted strict sanctions from the UK, had “placed significant strain on the bank’s alert handling and investigation processes.”
To handle the backlog, the bank was found to have temporarily altered its compliance guidance in May 2022 to stop restricting accounts unless it had evidence of over 50 per cent ownership by an individual on the sanctions list.
Citi’s fine was reduced to £4.7m after it received a 20 per cent settlement discount for co-operation. But the government unit said it had delayed reporting frozen assets to OFSI by over six weeks on 53 separate occasions, taking as long as 518 days in extreme cases.
A Citi spokesperson said: “We are pleased to conclude this matter with OFSI. Citi takes sanctions compliance extremely seriously and continues to invest significantly in its global sanctions compliance framework.” They added that its London branch proactively engaged with OFSI and cooperated throughout its investigation.
Citi’s fine rated as ‘high’ severity
The incident stemmed from Citi’s screening software failing to generate alerts for PAO Sovcomflot because it did not recognise the Russian corporate prefix “PAO” attached to the name. An automated payment processor was also found to have selected Russian correspondent banks from an internal list that was never screened against sanctions lists before adding them to transactions.
OFSI rated the severity of the case as ‘high’ with ‘aggravating’ factors, including sustained, material harm to UK foreign policy objectives
More than 20 companies have faced action for breaching the rules since 2019.
In May, Deutsche Bank was handed a £160,000 fine after it was found to have authorised two payments linked to a sanctioned Russian firm between June and July 2022. A subsidiary of Lloyds Banking Group was also fined at the beginning of the year for sanctions breaches after opening a bank account for an ally of Vladimir Putin.
The Bank of Scotland was also handed a £160,000 fine for processing 24 payments, totalling £77,383, from a personal current account held by an individual under Russian sanctions.