On August 11th, the U.K.’s Office of Financial Sanctions Implementation (“OFSI”) imposed a £4.7mn penalty against Citibank’s London Branch (“Citibank”) for Russia-related transactions the branch processed in the wake of Russia’s invasion of Ukraine. After announcing the penalty, OFSI increased its maximum monetary penalty from 50% of the value of the transactions to the full value of the transaction.
While the values of these penalties are not quite as eye-popping as those of OFSI’s counterpart in the United States, these actions are part of a gradual effort for OFSI to build its enforcement capabilities and frameworks with the goal of being a similar enforcement powerhouse as OFAC. Indeed, the Citibank penalty is one of a string of penalties against major companies and financial institutions such as Apple and Deutsche Bank designed to establish enforcement history and show markets that no company is too big or too important to hold accountable.
“The U.S. Office of Foreign Assets Control went through a similar process over a decade ago,” said David Tannenbaum, the Director of Deep Blue Intelligence – a joint program between Pole Star and Blackstone Compliance focused on maritime sanctions. “When I started out at OFAC the agency was building a similar enforcement framework. By the time I left we were working on billion-dollar penalties.”
- Citibank and Sovcomflot – Why Understanding Vessel Ownership is Essential
The Citibank penalty covers a range of mistakes, and we encourage the wider compliance community to read it. As OFSI noted, Citibank “had particularly high exposure to future Russia sanctions risks in February 2022 due to its Russian client base, correspondent banking operations involving Russian financial institutions and [sic] payments relating to its Russian affiliate, AO Citibank (which has since been sold by Citi).” However, one passage in particular caught our attention:
“CBNA London did not promptly restrict 32 commercial bank accounts held by 29 different entities owned or controlled by designated person PJSC Sovcomflot (“SCF”), resulting in the bank processing 328 transactions with a total value of approximately £5.4 million which OFSI considers were in breach of regulation 11 (dealing with frozen funds) of the Russia Regulations.”
Sovcomflot is no stranger to obfuscation and lest we think Citibank was alone in this mishap, it’s instructive to look at OFAC, OFSI, and the EU’s (collectively “the Coalition”) own track record in sanctioning Sovcomflot. While the U.K. placed Sovcomflot under an asset freeze early within the war, the United States only followed up on their debt and equity sanctions with full blocking sanctions in February 2024, on the second anniversary of Russia’s invasion of Ukraine. Sovcomflot continued to shuffle their vessels around various companies, and it wasn’t until the following year, in January 2025, that OFAC would designate the vessels themselves.
The case of the Jagger (IMO 9354301) is instructive.
- At the outset of the war, the Jagger was clearly owned and operated by Sovcomflot through its UAE subsidiary, SCF Ship Management Services.
- After the U.K. placed sanctions on Sovcomflot, the company moved the vessel through three other UAE companies, moving it each time the authorities placed the new subsidiary under sanctions.
- It wasn’t until December 2024 – a full two years after a Coalition member placed an asset freeze on Sovcomflot – that the E.U. would designate the Jagger. OFAC designated this vessel a month later, but the U.K. has yet to sanction it directly.
- At the time of writing, the Jagger has been parked under a new front company used by Sovcomflot to manage its vessels. This company, North Fleet Ltd., and its sister company, South Fleet Ltd., have yet to be sanctioned by any Coalition member.
Quality Maritime Intelligence is Essential
Sanctions extend not just to the target but also property – including both companies and vessels – majority owned by a sanctioned person. E.U. and U.K. sanctions also apply to property that is controlled by a sanctioned person, and OFAC’s definition of control is even broader, including all property that a sanctioned person may have a direct, indirect, or even a contingent interest in.
With the Coalition focused on the Dark Fleet, it’s now more important than ever for compliance officers to have access to quality maritime intelligence tools, targeting, and training. PurpleTrac, Pole Star’s award winning compliance solution, not only screens the vessel but also its historical ownership, management, and tracks its movement history. In this example, PurpleTrac shows the Jagger’s clear relationship to Sovcomflot, no matter how many front companies they shuffle her through.
Similarly, Deep Blue Intelligence provides unparalleled targeting information with its watchlist of more than 1,700 Dark Fleet vessels, replete with our analysis of the vessel’s ownership, extensive due diligence, satellite imagery, and even primary source documents such as fraudulent bills of lading. The DBI team is staffed by sanctions experts, including OFAC alumni, to assist our clients in investigating suspicious activity, and DBI has trained over a thousand compliance officers to detect sanctions evasion on the high seas. Our new Maritime Sanctions Investigator training provides intensive training on how to use our tools to investigate sanctions evasion.
Investing in quality maritime intelligence is essential. Maritime sanctions form the cornerstone of not just OFAC’s approach to Iran, but the U.K., E.U., and Switzerland’s approach to Russia. Companies can’t rely on the government to clearly identify which vessels are engaged in prohibited conduct, or even which ones are owned or controlled by the Russian government. Yet the Citibank penalty shows that authorities expect that those same companies will conduct the necessary due diligence to find those links. PurpleTrac and DBI provide the right tools, targeting, and training to do just that.