On 20 March 2025, the Office of Financial Sanctions Implementation (OFSI) announced a monetary penalty of £465,000 against Herbert Smith Freehills CIS LLP (HSF Moscow) for breaches of UK financial sanctions on Russia linked to its illegal invasion of Ukraine. There are several lessons that can be drawn from this case that not only apply to law firms but other service-provider organisations that find themselves getting caught up in UK/EU/US/UN sanctions against countries such as Russia, Iran, and China.

What is the background to the penalty against HSF Moscow?

HSF Moscow made six payments worth almost £4 million to designated people whose assets had been frozen. The payments, which took place over a period of seven days as the firm wound down its Russian offices, demonstrated a pattern of failings.  

As a result of these breaches, OFSI has imposed a penalty of £465,000 on HSF Moscow.

Economic Secretary to the Treasury Emma Reynolds said in a press release: 

“Our commitment to robust enforcement of UK financial sanctions is steadfast.  

A just and lasting peace in Ukraine must be our priority, and UK financial sanctions continue to be essential to disrupting Russia’s war machine and putting Ukraine on the strongest footing possible.

HSF London, on behalf of HSF Moscow, voluntarily disclosed the breaches to OFSI, and therefore a 50% reduction has been applied to the final penalty amount.”   

There was no wrongdoing by HSF London. In a statement, HSF said the payments were made “as the result of human error” and do not relate to the firm’s clients or client work or to any of the firm’s offices other than its former Moscow base.

What lessons can be learned?

To ensure compliance with sanctions, businesses, including law firms, must ensure they:

Robustly check business ownership and control

It is vital to check the ownership and control of a client’s business/s. Your due diligence should go further than simply confirming whether the client or business is subject to sanctions. 

The UK financial sanctions general guidance provides that an entity is owned or controlled directly or indirectly by another person in any of the following circumstances:

  • the person holds (directly or indirectly) more than 50% of the shares or voting rights in an entity,
  • the person has the right (directly or indirectly) to appoint or remove a majority of the board of directors of the entity, or
  • it is reasonable to expect that the person would be able to ensure the affairs of the entity are conducted in accordance with the person’s wishes.

If a breach does occur, OFSI will consider whether the due diligence into ownership and control was appropriate when considering the level of risk and type of transaction.

Strictly follow your organisation’s sanctions policies and procedures

OFSI looks favourably at organisations that have clear sanction-related policies and procedures that are documented and well-communicated. However, if they are not followed, there is little point in having them in place, as OFSI is unlikely to give them much weight. 

The importance of adhering to policies and procedures needs to come from senior partners and management. In the case of HSF Moscow, the payments were made swiftly during a busy time (when the office was being discontinued and senior employees failed to follow correct procedures).

Fully understand your company’s sanctions risk exposure

In cases where a company or a subsidiary is operating in a high-risk environment (such as Moscow), extensive risk assessments need to be carried out to identify transactions that could give rise to a sanction breach. However, assessment is not enough – findings must be communicated to all staff members and other relevant stakeholders, especially those within the supply chain. In addition, training on sanction-related policies and procedures must also be carried out on a regular basis, especially when relevant governments update their sanctions information, as many did in February 2025 on the anniversary of Russia’s invasion of Ukraine.

Getting legal help

Being investigated for a sanctions breach is incredibly stressful. Given the amount of regulation around sanctions and the fact that sanctioned entities are regularly added to the register, it is relatively easy to mistakenly commit a breach, as happened in the case of HFS Moscow. If you need legal advice concerning sanctions, it is essential to obtain it early to avoid an OFSI investigation, which can damage your commercial interests and reputation.

Tanveer Qureshi has a robust track record of successfully advising on and defending sanction breaches. If you require legal representation, please get in touch with Tanveer directly at tqureshi@libertaschambers.com or via his Chambers, Libertas Chambers on ​020 7036 02000.

Author bio

Tanveer Qureshi specialises in general crime, white-collar crime, and regulatory investigations and prosecutions. He has over 20 years’ experience and is passionate about ensuring his clients get results and achieve justice. When not pouring over case briefs, Tanveer gets up at 4.30am to get his gym workout done and is a committed motorsports fan.