Compliance News | March 2025

This month's key compliance news includes HSF's sanctions fine, the first-ever criminal trial for breaches of Russia Regulations, resilience and the fire at Heathrow, Google's $28m payout, pay collusion by broadcasters, and more.

Our pick of compliance stories this month

• Law firm fined £465k for sanctions breaches
• First-ever criminal trial for breaches of UK Russia Regulations
• Family sues Boeing for wrongful death of whistleblower
• UK resilience questioned after a fire shuts down Heathrow
• Google pays $28m to settle racial bias lawsuit
• Broadcasters fined £4.2m for pay collusion
• Corbett Bookmakers pays £686k for social responsibility and AML failings
• Five arrested over suspected bribery in European Parliament
• "Tuna bond" scandal: FCA bans Credit Suisse MDs and compliance chief is fined
• FCA fines and bans Odey from the City
  
• Former Co-operative Bank chairman jailed for £100k fraud

Law firm fined £465k for sanctions breaches

The Office of Financial Sanctions Implementation (OFSI) has fined Herbert Smith Freehills CIS LLP Moscow ("HSF Moscow") £465,000 for breaching UK financial sanctions.

HSK Moscow, the subsidiary of UK-registered Herbert Smith Freehills LLP ("HSF London"), was closed on 31 May 2022 following Russia's invasion of Ukraine in February 2022.

OFSI said that HSK Moscow made six payments with a total value of £3.93 million to "designated persons subject to an asset freeze" in the seven days prior to the closure of its Moscow office. The designated persons were Alfa-Bank JSC, PJSC Sovcombank, and PJSC Sberbank, "demonstrating a pattern of failings".

Some of the payments related to redundancy and life insurance payments to staff. The largest payment (£3.92m) related to the transfer of HSF Moscow's lease agreement to a local firm.

Herbert Smith Freehills, which has agreed to pay the settlement, said the payments were "the result of human error, in the final week of the winding-up of our former Moscow office's operations".

OFSI said that there was inadequate due diligence and sanctions screening due the "hasty closure" of HSF Moscow. The closure "should have been conducted in a more orderly fashion".

The law firm, which voluntarily disclosed the breaches and received a 50% discount, said it was disappointed with the findings. It pointed out that the payments "do not relate to the firm's clients or client work, or to any of the firm's offices other than our former office in Moscow, Herbert Smith Freehills (CIS) LLP".

"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."

First-ever criminal trial for breaches of UK Russia Regulations

The UK's first-ever criminal trial for breaching sanctions against Russia has begun. Dmitry Ovsyannikov - the Russia-appointed governor in Crimea - is accused of attempting to circumvent sanctions between February 2023 and January 2024.

Ovsyannikov was sanctioned in December 2020 following the UK's exit from the EU.

Ovsyannikov is accused of opening a Halifax Bank of Scotland (HBOS) bank account and receiving £76,000 from his wife Ekaterina Ovsyannikova, in breach of Russia (Sanctions) (EU Exit) Regulations 2019. When his account was frozen, he got his brother Alexei Owsjanikow to pay £54,000 for a Mercedes Benz SUV and insurance instead, representing a further sanctions breach. He later paid £41,000 for the private school fees of his own and his brother's children - also in breach of sanctions against him.

The prosecution said that his wife and brother "maintain that they either did not know that Dmitry was a designated person or they did not realise that as a designated person he was not permitted to receive that type of help".

Ovsyannikov challenged the EU's sanctions against him in 2022 and applied to have British sanctions lifting in 2023, providing his unique ID number on the form.

The prosecution claim that this demonstrates that Ovsyannikov was fully aware of the sanctions and "and he must have made his nearest and dearest aware of that too".

Giving evidence at the trial, Neil Cufley from the Royal Russell School said he became aware that Ovsyannikov was a designated person after an email from Barclays in November 2022. He said: "We looked at the situation and said, well, if Mr Ovsyannikov isn't paying then that's fine, because we aren't taking any payment from him. This is a very difficult situation for an independent school." Cufley said it was a "very sad experience" having to remove the children from the school because of the sanctions.

The trial is expected to last one week.

Key takeaways:

• Assess the risks and consider our exposure - remember, high-value dealers and art market participants (eg luxury cars, art and antiques, designer goods, property, and even private schools) must comply with sanctions too
• Conduct adequate sanctions screening and due diligence - before entering new business relationships and on existing customers, especially those in high-risk places with known links to sanctioned countries
• Conduct proportionate due diligence checks - including enhanced due diligence on high-risk customers (eg politically-exposed persons or PEPs) and document the results as an audit trail
• Don't use 'workarounds' or 'creative means' to bypass controls or evade sanctions restrictions - eg accepting payments via third parties. You will be caught!
• Check for adverse media - if you see adverse media reports about anyone with links to our company (eg a supplier, customer or partner), report it to Compliance
• Don't put profit before principles - this can damage our reputation and facilitate financial crime
• Remember, this also links to ESG - we have a moral duty to rid society of drugs, gun crime, trafficking, and organised crime and to prevent kleptocracy and corruption, where nations are deprived of their wealth and land.

Family sues Boeing for wrongful death

The family of a whistleblower who took his own life is suing Boeing for wrongful death.

The lawsuit claims that John Barnett was subjected to harassment, abuse and humiliation after he raised safety concerns relating to the plant building the 787 Dreamliner.

There has been intense scrutiny of the planemaker's safety record following two fatal crashes of the 737 Max aircraft and the blow-out of a door panel mid-air after engineers failed to replace the bolts, prompting alarm about the company's safety culture.

Barnett, a quality manager at Boeing for three decades, voiced concerns about Boeing's safety record to journalists, specifically about problems with onboard oxygen systems and the presence of metal shavings near critical control wires. Boeing denied the claims although the US regulator upheld some of them and ordered the planemaker to take remedial action.

According to the lawsuit, Barnett was subjected to a "campaign of harassment, abuse and intimidation intended to discourage, discredit and humiliate him until he would either give up or be discredited". He was given poor reviews, less desirable shifts and had his transfer to another plant blocked.

He took early retirement in 2017 due to severe anxiety and depression.

The lawsuit, brought by his mother Vicky Stokes and his two brothers, claims that Boeing's conduct was "the clear, foreseeable cause" of his death and managers had engaged in retaliatory behaviour that created "a hostile work environment".

Barnett died of a gunshot wound days after giving evidence against the company.

In a statement, Boeing said, "We are saddened by John Barnett's death and extend our condolences to his family."

The company previously responded to Barnett's allegations as follows: "Boeing reviewed and addressed quality issues that Mr Barnett raised before he retired in 2017, as well as other quality issues referred to in the complaint. Engineering analysis determined the issues he raised did not affect airplane safety."

It also pointed out that the US Occupational Safety and Health Administration had concluded it had not breached whistleblower protection law, adding: "We appreciate employees who raise their voice, and we have systems in place to encourage them to speak up confidentially or anonymously."

Key takeaways:

• Speak up if you witness wrongdoing or have concerns about anything at work - including harassment, discrimination, suspected bribery, collusion with competitors, or anything else
• "You're a witness, not an investigator" - don't gather evidence unless it's part of your job or valuable evidence may be lost!
• Create psychological safety in your team - let people know that they will be supported and have an open door policy to encourage reporting
• Provide a range of channels for whistleblowing - so reports can also be made anonymously if required
• Don't blame the messenger - reports must be handled fairly without blame and investigated independently if necessary
• Don't retaliate against those making reports or treat them unfairly - by law, whistleblowers are protected from retaliation, unfair dismissal or detriment.

UK resilience questioned after a fire shuts down Heathrow

Questions are being asked about the UK's resilience after an overnight fire at an electrical substation caused widespread disruption at Heathrow airport.

Over 1,300 flights were cancelled, impacting around 200,000 passengers, when one of the world's busiest travel hubs was left without power and shut down for around 19 hours.

Flights were diverted to other airports and services were disrupted for several days, with government ministers acknowledging "the immense distress and disruption".

Heathrow's chief executive Thomas Woldbye apologised to passengers for the "unprecedented" event, adding: "I'd like to stress that this has been an incident of major severity. It's not a small fire. We have lost power equal to that of a mid-sized city and our back-up systems have been working as they should but they are not sized to run the entire airport."

Over 83.9 passengers travelled through Heathrow in 2024.

The government has ordered an urgent review into the disruption, believed to be the most serious since 2010 when eruptions from an Icelandic volcano led to the closure of European airspace.

Experts are now warning other airports to check their resilience plans, including their susceptibility to power outages.

In the UK, MI5 is ultimately responsible for critical national infrastructure through the National Protective Security Authority and lists 13 national infrastructure sectors, from chemicals, to emergency services, food to water. Key risks are included in the National Risk Register.

Google pays $28m to settle racial bias lawsuit

Google has agreed to pay $28m to settle claims that it gave white and Asian employees better pay and career progression opportunities than those from other ethnic backgrounds.

The lawsuit was filed by 6,632 ex-Google employees who worked for the technology giant between February 2018 and December 2024.

Former Google employee Ana Cantu who filed the case claimed that workers from Hispanic, Latino, Native American and other backgrounds started on lower salaries and job levels than white and Asian counterparts despite doing similar work, as evidenced in a leaked internal document. Ms Cantu's lawyers said this reinforced historical race and ethnicity disparities.

Praising the 'bravery' of those who self-reported their pay, Cathy Goble said, "Suspected pay inequity is too easily concealed without this kind of collective action from employees".

In a statement, Google said, "We reached a resolution, but continue to disagree with the allegations that we treated anyone differently, and remain committed to paying, hiring, and levelling all employees fairly."

Google recently joined Meta, Amazon, Pepsi, Walmart and McDonald's in rolling back diversity, equity and inclusion (DEI) initiatives and commitments.

Broadcasters fined £4.2m for pay collusion

UK sports broadcasters and production companies shared sensitive information about freelancers' fees, according to the Competition and Markets Authority (CMA).

The BBC, BT, ITV, Sky and production company IMG illegally shared information about the fees of camera operators and sound technicians working at football and rugby matches.

All the companies, except Sky, have agreed to pay fines totalling £4.2 million. Sky escaped the financial penalty under leniency rules, having alerted the CMA about the illegal information sharing.

A CMA investigation found evidence of 15 instances where companies unlawfully shared sensitive information on pay (including day rates and pay rises). Their aim was to coordinate how much they paid freelancers. On one occasion, one business told another that they had "no intention of getting into a bidding war" but "want to be aligned and benchmark the rates". Another company said it wanted to "present a united front" with its competitor.

The CMA's Executive Director for Competition Enforcement, Juliette Enser, said: "Millions watch sports on TV each day, with production teams working behind the scenes to make this possible - and it is only right they are paid fairly."

"Companies should set rates independently of each other so pay is competitive - not doing so could leave workers out of pocket. Employers must ensure those who hire staff know the rules and stick to them to prevent this happening in the future."

Sky was the most persistent offender with 10 infringements between March 2014 and January 2021, but it received total immunity and escaped fines because it was the first to report cartel activity.

BT, which no longer broadcasts sport, will pay £1.7m for six infringements. IMG will also pay £1.7m, with the BBC and ITV paying £424,165 and £339,918, respectively. All of them received discounts for early settlement.

Corbett Bookmakers pays £686k for failings

Corbett Bookmakers has been ordered to pay £686,070 for social responsibility and Anti-Money Laundering failings.

The Gambling Commission found a number of failings within the gambling firm. Social responsibility failings included:

• Failing to recognise a customer who staked £23,674 in 13 days as being at risk of or experiencing harms associated with gambling
• Failing to adequately interact with a customer during a four-hour session when they placed 56 bets and lost £3,523
• Failing to adequately interact with a customer who staked £47,416 and lost £6,741 over 10 weeks. 

AML failings included:

• Allowing customers to stake and lose significant sums without sufficient Know Your Customer evidence or verifying the source or legitimacy of funds
• Failing to consider the full scope of customer, product, geographic and payment risks during money laundering and terrorist financing risk assessments, thereby failing to take a sufficiently risk-based approach to AML. 

The breaches occurred between February 2022 and May 2024.

"This operator has failed to adhere to vital regulations designed to make gambling safer and free from criminal activity. As a result, it will not only pay a significant fine but also undergo a rigorous audit to ensure full compliance with anti-money laundering and safer gambling measures. All operators should carefully consider this case and the price this operator is now paying."

Five arrested over suspected bribery in European Parliament

Belgian police have raided several locations and five people have been arrested in connection with suspected bribery in the European Parliament linked to the Chinese firm, Huawei.

Four of those arrested have been charged with active corruption and a fifth faces charges of money laundering.

Belgian prosecutors said that corruption was practised 'very discreetly' from 2021 allegedly "under the guise of commercial lobbying and taking various forms, such as compensation for political positions or excessive gifts such as food and travel expenses, or regular invitations to football matches."

Huawei said it had "a zero-tolerance policy towards corruption or other wrongdoing, and we are committed to complying with all applicable laws and regulations at all times".

Prosecutors did not reveal the names of those involved or provide any information which could identify them.

Two offices were sealed inside the European Parliament at the request of the judge and 21 raids were carried out in Brussels, Flanders and Wallonia as part of the investigation.

Key takeaways:

• Follow our Gifts and Hospitality policy - make sure you know what is and is not acceptable, including the limits and thresholds
• Remember, many anti-bribery laws (including the UK Bribery Act) have extra-territorial reach - meaning you can be prosecuted for bribes paid anywhere in the world
• Have proper oversight of third parties and intermediaries - we can be found guilty of bribes paid by consultants and intermediaries, even without our knowledge
• Take extra care in all dealings with foreign public officials – including state-owned entities
• Declare any gifts and hospitality you receive – in line with our policy and rules
• Practise how to decline graciously using roleplays - so your team doesn't feel tempted to accept due to embarrassment or coercion
• Talk to Compliance or Legal first – if you feel there are legitimate reasons to accept or offer anything outside our limits or thresholds.

"Tuna bond" scandal: FCA bans Credit Suisse MDs and compliance chief is fined

Former Credit Suisse managing directors, Andrew Pearse and Surjan Singh, have been banned from the UK financial services sector for accepting kickbacks after arranging fraudulent loans for the Republic of Mozambique.

In the 2010s, three state-owned companies - Ematum, Mozambique Asset Management (MAM), Proindicus - borrowed $622 million from Credit Suisse and $535 million from VTB supposedly to finance a tuna fishing project.

But the loans were "tainted by corruption", according to the Financial Conduct Authority (FCA), with over $100 million paid in bribes to Mozambique officials and Credit Suisse's former employees - Andrew Pearse and Surjan Singh.

The FCA said that Pearse accepted over $45 million in unlawful kickbacks relating to the loans and Singh received $5.7 million.

The ban comes after the pair pleaded guilty and were convicted of money laundering in the US in 2019. Pearse also admitted wire fraud.

Credit Suisse was fined £145m by the regulator in 2021 and agreed to write off Mozambique's $200m debt.

"Mr Pearse and Mr Singh were experienced executives at Credit Suisse who admit to having received over US$50m in kickbacks. There is no place in our markets for those who engage in bribery and corruption."

Separately, the bank's former compliance chief Lara Warner has been fined $114,000 for failing to notify Switzerland's anti-money laundering authorities about the suspicious transaction for 7.9 million francs by Credit Suisse involving the finance ministry of Mozambique.

Warner's lawyer said, "The decision not to file a money laundering report was not made by Ms. Warner." She is challenging the fine.

FCA fines and bans Odey from the City

Crispin Odey of Odey Asset Management (OAM) will be fined £1.8 million and banned from the UK financial services industry for "a lack of integrity", according to the Financial Conduct Authority.

The UK regulator said Odey had deliberately tried to frustrate the disciplinary process into sexual harassment allegations at the former hedge fund to protect his own interests. He had shown "reckless disregard" for OAM's governance and was "not a fit and proper person to perform any function related to regulated activities".

Odey had received a final written warning from OAM's executive committee (ExCo) regarding inappropriate behaviour in February 2021 and a disciplinary hearing was scheduled to take place. But Mr Odey used his majority shareholding to remove existing ExCo members and appoint himself as ExCo's sole member. The hearing was postponed indefinitely.

New ExCo members were appointed in January 2022 and Odey resigned. But there was disagreement about how to proceed so again Mr Odey removed OAM's ExCo members, appointing himself as its sole member. OAM's disciplinary hearing eventually took place in November 2022, almost a year after it was first scheduled.

"A culture of silence in which allegations of misconduct are not dealt with effectively can put consumers and markets at risk. Mr Odey repeatedly sought to evade and obstruct efforts to hold him to account. His lack of integrity means he deserves to be banned from the industry."

Odey has referred the Decision Notice to the Upper Tribunal so the findings are provisional

Key takeaways:

• Follow the FCA's Conduct Rules - remember the rules apply both inside and outside the workplace
• Be clear about our expectations - including Individual Conduct Rule 1: Acting with integrity. You can face dismissal and be barred from financial services if your behaviour falls short
• Consider non-financial misconduct (including bullying, sexual harassment and discrimination) - this can affect fit and proper assessments
• Role model the right behaviours to create the right culture - remember that new hires will often mimic what you do!

Former Co-operative Bank chairman jailed

The former Co-operative Bank chairman Paul Flowers has been jailed for three years after defrauding an elderly and vulnerable friend.

Flowers admitted defrauding his long-time friend Margaret Jarvis out of almost £100,000 over a two-year period to 2017, before and after her death.

The former Co-operative Bank chairman was appointed Ms Jarvis's power of attorney and executor of her will in 1995. As her health deteriorated and she was unable to look after her own affairs, he began to manage her accounts.

As well as making legitimate payments for her care, Flowers also treated her accounts as his own, paying for theatre trips, wine and a cruise.

Jayne Sharp for the Crown Prosecution Service said, "… the trust and confidence Ms Jarvis had in Flowers when she named him as executor of her will and gave him power of attorney was sorely misplaced. He carried out a systematic fraud over a period of six years, seemingly motivated by his darker side; in particular, his addiction to class A drugs."

When Ms Jarvis died in October 2016, Flowers kept taking money from her estate. The fraudulent transactions came to light when the bank was asked to repay an overpayment of Ms Jarvis's pension. Flowers pleaded guilty to 18 counts of fraud.

Sentencing him to three years, Judge Nicholas Dean KC said, "This is a story of betrayal, no less than that. Betrayal by you of an old friend, someone who trusted you, who had every reason to believe she could trust you. In truth, you knew all along she could not, because of your own weaknesses and failings."

Sharp said, "Flowers stole a significant sum of money from his friend, with no thought for her, her family or the charities she had chosen to support after her death. He will now face the consequences of his actions."

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