The penalty was reduced by 50% because Lloyds Banking Group voluntarily disclosed the breaches on behalf of Bank of Scotland, the Office of Financial Sanctions Implementation (OFSI) said in a Monday (Jan. 26) notice. Otherwise, the penalty would have been £320,000 (about $438,000).
The OFSI determined that the bank processed 24 payments totaling about £77,000 (about $105,000) to or from a person designated under the Russia Regulations over a 16-day period in February 2023, according to the notice.
The designated person was a British citizen and used a U.K. passport for identification when opening the account, the notice said. The person’s name was spelled differently on the passport than it was on the OFSI Consolidated List, due to character changes commonly made in Russian-to-English translations, and the bank’s screening system was unable to identify a potential match, per the notice.
A day after the account opening, an automatic Politically Exposed Person (PEP) alert was generated and a manual review was conducted, but due to human error the review determined that the customer had been removed from both the U.K. and the European Union sanctions list, when in fact the customer had been removed from only the EU list, according to the notice.
The bank later identified the customer as a designated person after an internal investigation of a related account, and Lloyds Banking Group voluntarily disclosed the breaches on behalf of Bank of Scotland in March 2023, per the notice.
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Reached by PYMNTS, a Lloyds Banking Group spokesperson said in an emailed statement that the bank takes its regulatory responsibilities extremely seriously.
“We acted swiftly and transparently, proactively referring this one-off, isolated matter to OFSI and working closely with them throughout,” the statement said. “OFSI has recognized our prompt voluntary disclosure, resulting in the maximum possible reduction of the penalty. We have further strengthened our controls to ensure we continue to meet the highest standards of risk management and governance.”
The OFSI has taken action against 17 organizations as part of its enforcement of financial sanctions over the past seven years, according to a list updated by the regulator on Monday.
