Sanctions Tracker: Largest Penalty For UK Financial Sanctions Breach Since The Invasion Of Ukraine, New FAQs, Licences, Designations And More

Our latest sanctions tracker update provides an overview of recent UK sanctions developments including the latest financial sanctions enforcement action. 

OFSI imposes new financial sanctions penalty

The Office of Financial Sanctions Implementation (OFSI) has announced the imposition of a monetary penalty on Sabre Global Technologies Limited (SGTL), representing the largest penalty imposed since the 2022 invasion of Ukraine and the first monetary penalty imposed in respect of a circumvention breach. We have summarised the key takeaways from the penalty notice below.

SGTL conduct amounting to a breach of financial sanctions

SGTL provided travel services (including access to a Global Distribution System (GDS) service) to Ural Airlines (Ural) under a contract first entered into in 2007. Ural was designated by the UK in May 2022 but the contract between the parties continued until November 2022 and Ural’s access to the GDS continued until December 2022. During the post-designation period, Ural attempted to make three payments to SGTL’s UK bank account in settlement of invoices issued by SGTL; all three payments were frozen by SGTL’s bank. 

According to OFSI’s notice, during July and August 2022, SGTL explored alternative routes to receive funds from Ural, including receipt of funds via its US bank account. Ural sent a test payment to this account in September 2022.

OFSI investigation and settlement process

In keeping with nearly all OFSI’s enforcement cases to date, the case was based on a self-report. SGTL submitted a voluntary breach report to OFSI in October 2022 in respect of the three payments frozen by its UK bank, and subsequently provided further information to OFSI regarding its relationship with Ural. However, it appears that the contractual relationship with Ural continued, even after the self-report had been made.

Following its investigation, OFSI informed SGTL of its intention to issue a monetary penalty in January 2026. As readers will be aware, this was shortly before the introduction of changes to OFSI’s enforcement framework (see our previous post for more detail) and OFSI and SGTL subsequently entered into settlement discussions, ultimately agreeing a settlement under which OFSI imposed a penalty of £1,000,920.59. This incorporates a 20% discount from the baseline penalty in recognition of SGTL’s voluntary disclosure and settlement of the case.

Key takeaways 

One of the most interesting takeaways from the notice is the way in which OFSI has characterised the dealings between SGTL and Ural. The notice refers to three separate breaches by SGTL: (i) by invoicing Ural and instructing the payment of funds into its UK bank account, SGTL is said to have made funds available to its bank for Ural’s benefit (and thereby breached the prohibition on making funds available for the benefit of a designated person); (ii) allowing continued access to the GDS is characterised as the making available of an economic resource to Ural; and (iii) the test payment to SGTL’s US bank account is described as a circumvention of the asset freeze measures.

The characterisation of (i) in particular may be seen as a surprising interpretation of the asset freeze restrictions. Although companies would be well-advised not to invoice designated person counterparties for services provided with a view to payment (not least because of the “dealing” prohibition and risks in respect of the receipt of payment), one would not ordinarily think of a request for payment (and the making of that payment) as the making available of funds for the payor’s benefit. OFSI states in the notice that there was nonetheless a making available for Ural’s benefit because Ural obtained a significant financial benefit by virtue of its financial obligations to SGTL being discharged (by its own payment). The notice contains limited detail, and proceeded by way of agreed settlement. However, until and unless the point is subject to further (judicial) scrutiny, for compliance purposes firms will need to work on the basis that this represents OFSI’s interpretation of the prohibition. 

The approach taken in (ii) is also of interest as it represents a continuation of OFSI’s broad approach to the definition of “economic resources”. The notice states that: “a service that enables a designated person or entity to generate revenue, maintain operations, or otherwise obtain an economic advantage may amount to making an economic resource available”. This would suggest that almost any commercial service provided to a designated person could be viewed as problematic from OFSI’s perspective. The broad interpretation of the statutory test (which provides that an economic resource is made available in circumstances where the designated person is likely to exchange the economic resource for, or use it in exchange for, funds, goods or services) is consistent with OFSI’s previous decision in the Hong Kong Wines and Spirits case.

Limb (iii) of the breaches is perhaps less surprising; UK persons should be aware of the circumvention risk in seeking to restructure payment or transaction flows to avoid UK sanctions, and should note that UK sanctions apply to activity by UK persons anywhere in the world.

More generally, the case suggests that OFSI will adopt a range of approaches to the asset freeze restrictions in order to ensure that enforcement action can be taken in respect of dealings with a designated person and, presumably, to maximise penalty recovery.

The notice also reveals some detail about OFSI’s case assessment process as it relates to the assessment of the total value of the breaches involved in this case. The total value of the breaches was assessed to be around £2.6m, comprising the value of the GDS provided to Ural (presumably based on the invoices issued by SGTL), a pro rata portion of the frozen payments attributable to services provided to Ural prior to its designation, the value of the test payment, and a deduction in respect of booking fees permitted under a general licence. This demonstrates OFSI’s desire not to “double-count” – i.e. to include both the value of services provided and the amounts paid for those services.

Unusually, this case was assessed by OFSI as “most serious” under its case assessment framework; the majority of monetary penalties imposed to date have related to cases defined as “serious”. This appears to have been based on factors including the deliberate circumvention involved in the test payment, the high value of the breaches and the extended period over which SGTL dealt with Ural.

New Russia designations

The UK has announced a new round of Russia-related designations targeting the shadow fleet, military procurement supply chains and illicit finance networks used to circumvent sanctions. The full list of new designations includes individuals and companies involved in procuring dual-use technology / supplying dual-use goods to Russia, a number of banks said to be involved in circumvention activity and the specification of ships involved in transporting Russian oil and LNG to third countries. 

This follows a separate sanctions package targeting crypto and illicit finance networks used for sanctions circumvention. The full list of designated persons is available here 

New OFSI general licence

OFSI has issued a new General Licence (GL) in relation to the so-called “Interdiction”, i.e. steps taken in support of the UK government under regulations 57C and 57D of the Russia Sanctions (EU Exit) Regulations 2019.  These measures relate to the movement and detention of ships and allow the government to direct certain actions in relation to ships owned, controlled, chartered or operated by a designated person, or a person connected with Russia, together with Russian registered or flagged ships and “specified ships” (i.e. vessels which have been specifically listed as subject to sanctions).

The GL allows any person contacted or directed by the UK government to take any necessary steps to enable and enact the Interdiction, and the activity permitted by the GL includes the making available of funds to a designated person for the sole purpose of enabling and enacting the Interdiction. 

The GL is subject to a record-keeping obligation and is of indefinite duration. 

New OFSI FAQs

OFSI has supplemented its financial sanctions FAQs with: (i) a question on Huobi Global SA (Huobi), (ii) a question on mandatory corporate actions, and (iii) questions on PJSC Transneft (Transneft).

• In relation to (i), new FAQ 186 confirms that the designation of Huobi applies to the HTX cryptocurrency exchange due to its ownership by Huobi. 
• In relation to (ii), FAQ 187 confirms that the question of whether a corporate action results in the creation of new securities for the purposes of the UK capital markets restrictions will be assessed on a case by case basis, with OFSI placing significant weight on whether an issuance results in finance being raised for the issuer. The FAQ confirms that the restrictions on dealing with new securities may not apply in the case of a mandatory stock split which does not raise new finance and which does not give rise to any material change to the rights and/or value of the shares.
• In relation to (iii), a new section on Transneft (FAQs 188 to 195) sets out OFSI’s view of the application of sanctions to Transneft, including in relation to insurance, dealing with Transneft-owned or -controlled ports and dealing with Transneft infrastructure.

General trade licence regarding refined oil products

Following the announcement of restrictions on the import of Russian origin oil products, and the associated general licence relating to jet fuel and diesel (discussed in our previous post), the UK government has announced its intention to phase out Russian-origin third country-processed diesel and jet fuel imports by 1 January 2027.

As readers may recall, the general trade licence relating to these products was originally stated to be of indefinite duration (albeit subject to periodic review). This licence will now expire by 1 January 2027 and will be subject to fortnightly review, in line with the government’s intention to remove the licence as soon as possible. 

The relevant Notice to Importers has also been updated to reflect the new expiration date. 

Memoranda of understanding between OFSI / OTSI and FCA

A new memorandum of understanding (MOU) between OFSI and the Financial Conduct Authority (FCA) sets out the arrangements for cooperation and the exchange of relevant information between the two bodies. 

The FCA has also recently announced the signing of a similar MOU with the Office of Trade Sanctions Implementation.