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Lloyds Banking Group has been fined for sanctions breaches after it opened a bank account for an ally of Russian President Vladimir Putin who later became the first person to be prosecuted for circumventing UK sanctions.
Bank of Scotland, which is a subsidiary of the UK’s biggest retail bank, was hit with a £160,000 penalty by the Office of Financial Sanctions Implementation (OFSI) on Monday after allowing Dmitrii Ovsiannikov to open an account with Halifax in 2023.
Ovsiannikov — who was once appointed governor of Sevastopol in Russian-annexed Crimea by Putin — was not named in the notice. People familiar with the case confirmed that he was the individual in question.
Ovsiannikov was jailed for 40 months last year after he was convicted of breaching sanctions and money laundering. The prosecution was the first to be brought under the UK’s Russia Regulations — sanctions legislation aimed at discouraging Russia from its continued war in Ukraine.
As a result of his previous positions in Russia, Ovsiannikov was a “designated person” on the UK sanctions list. Designated persons have restrictions placed on them around the movement of funds in Britain.
Ovsiannikov, who is also a British national because his father was born in Bradford, travelled to the UK in 2023 and used a Halifax account to process 24 payments, totalling £77,383.
A person familiar with the bank’s position said that the breach occurred because Ovsiannikov opened the account using a British passport that contained a different spelling of his name. That meant the bank’s systems did not flag him as a designated person.
However, his identity was discovered during a fuller screening of politically exposed persons. Lloyds restricted the account and notified OFSI.
A Lloyds spokesperson said it took regulatory responsibilities “extremely seriously” and that it had informed OFSI of the breach and “strengthened our controls” following the incident.
The Lloyds fine was reduced from £320,000 as the lender voluntarily disclosed the breaches. A penalty notice of £175,000 was originally issued to the bank in August last year, which was lowered further following representations from the bank, OFSI said.
The action comes after OFSI also fined law firm Herbert Smith Freehills Kramer £465,000 last year for breaching UK sanctions on Russia. OFSI penalties are relatively rare, with 17 enforcement actions taken since 2019, according to a list on the body’s website.
A lawyer for Ovsiannikov declined to comment. HM Treasury, which oversees OFSI, did not immediately respond to a request for comment on Ovsiannikov’s identity.