OFSI Imposes £300,000 Penalty on Markom Management Limited

Imposition of Monetary Penalty – Markom Man agement Ltd (MML) SUMMARY 1. On 10 January 2025, t he Off ice of Financial Sanctions I mplementation (“OFSI”), par t of HM Trea sury, imposed a penalty of £300,000 on a UK registered company, Markom Manageme nt Limited (“MML”), in ac cordance with section 146 of the Policing and Crime Act (“PACA”) 20 17. 2. The pena lty was i mposed on account of MML’s contr avention of The U kraine (Europea n Union Financial Sanctions) (No.2) Regulations 2014 (“the Ukraine R egulations”) whic h gave eff ect to Council Reg ulation (EU) No 269/ 2014 (Ukraine Misapp ropriation and Human Rights) (“the EU Re gulat ions”). In partic ular, the penalty rel ates to a pa yment of £416,590.92 inst ructed by MML to be mad e on 20 February 2018, to a person designa ted un der t he EU R egula tio ns (“th e Desig nated P erson ”) (“t he Pa yment”). 3. OFSI imposed a m onetary penalty on MML beca use it was satisfied that, on the balance of probabi lit ies, M ML breach ed prohibitions impose d by financ ial sanctions legislation and kn ew, or h ad reaso nabl e cause t o sus pect, that their ac tions would res ult in funds being ma de avai labl e to a designa ted pe rson. 4. OFSI did not consider MM L’s di sclos ure to OFSI t o be elig ible fo r a voluntary disclosur e discount and therefo re no discou nt w as appl ied. 5. Following the issue of a N otice of Intention to Imp ose a Monetary Pe nalty of £400,000 on 1 August 2024 (“the Not ice”), and consideration of add itional mater ial submi tted by MML in rep resentations received betw een 23 October 2024 and 17 December 2024, on 10 January 2025, OFS I consi dered it appropri at e to r evise t he pena lty amount from £400,000 down to £300,000. 6. Under the pr ovisions of PACA, any p erson who has a monetary p enalty impose d on them i s enti tled t o a min ister ial rev iew. Under t hese prov isi ons, the min ister may: a. u phold the de cision to impos e the penalty and its amount; b. u phol d the deci sio n to impose th e penalt y, but alt er th e amoun t; or c. c ancel t he de cisio n to impose a p enal ty. 7. MML exer cised i ts ri ght t o a mi nisteri al rev iew on 18 F ebruary 2025. The mini ster delegat ed the r evi ew to a senio r Treas ury off ici al wi th no prior i nvolv ement in the ca se. The rev iew wa s concl uded on 4 Ju ne 2025, and O FSI’ s decisi on bot h to impo se the penalt y, and t he deter min ed sum of £300,000, was uphel d.

BACKGROUND & BREA CH 8. MML is a UK incor porate d company which, in 2018, prov ided fidu cia ry, man agement, admini stra tio n, book keeping an d accou nti ng serv ices to companies across various jurisdic tions. 9. MML wa s part of the Markom Group, including Markom Manage ment Cypr us (“MMC”). MMC prov ided t he same s erv ices as MM L, but fo r compan ies regist ered an d operating in C yprus. 10. On 19 Februa ry 2018, the D esigna ted Per son ma de a pay ment t o a client of MMC (“ Company A”) in a ccorda nce wit h a s al e and p urch ase a gre ement. Th e fun ds were trans ferred b etween two accoun ts at Gazpro mbank, a non - EU bank in Moscow, and did not involve MML, therefo re this was not prohibited und er the Ukraine or EU Regulations. However, on 20 February 2018, memb ers of M ML senior manageme nt were informed via e mail that this transfer of fu nds had i nclu ded an ov erpaym ent of RUB 33,000,000 or app roxima tely £416,590.02. MML then issued a transfe r instruction to Gazprombank, for a transfer of this amount to be made f rom Company A’s account to the Design ated P erson’s a ccoun t. Th is tran sfer wa s then execute d, resulting in the Paymen t wh ich made f unds directly avai labl e to th e Design ated P erson, in brea ch of t he Ukraine and EU Re gulations. 11. MML notified OFSI of this bre ach through its leg al represe ntatives on 19 October 20 18. The com pany only iden tifi ed the br each during an int ernal r eview, commis sion ed as a result o f thi rd party activity. As a result of t hat thir d party a ctiv ity and OFS I's engagem ent w ith the third party, OFSI ’s civil investig ation did not com mence until June 2021. 12. OFSI assessed this case in line with the 2 May 2024 version of OFSI’s public Enforce ment and Monetary Penalties G uidance. This g uidance states th at OFSI will assess all ca ses in lin e with t he enfo rcement g uidan ce in eff ect at th e time of assess ment. Al l brea che s in t his case occu rred pri or to the st rict liabil ity amendment s to PACA comi ng in to effe ct. CIRCU MSTANCE S 13. Despit e Company A not being a cl ient of MM L at the time of the b reach, MML was noti fied of the ov erpaymen t for sev eral reaso ns. 14. Company A ha d prev iou sly been a clien t of M M L, meaning there was a historic connect ion between the t wo ent ities and mem bers of st aff wit hin M ML remai ned a

point of contact on d ay - to - day matters fo r Company A, including the exec ution of payment s, due t o bein g abl e to communicate in Russian wi th Compa ny A’s represen tat ive. Thi s was reflect ive o f the i nformal transnationa l working m odel that had develo ped between MML and MMC. 15. MML’s lack o f appropri at e process es and inadequate knowledge of sanctions compli ance al ong w ith the desire t o mak e a pa yment in haste, mean t tha t t he ri sk of returning f unds to the Desig nated Person in breach of t he Ukraine and EU Regulatio ns was no t appreci ated. CASE ASSESSMENT 16. OFSI will t ake sev eral fact ors i nto accoun t that could be a ssess ed as ag grav ati ng or mitigating whe n determining how seriousl y it views a case (the “cas e fact ors”). Wit hin these ca se facto rs, OF SI w ill make an overal l assessmen t as to t he brea ch sev erity a nd the con duct o f the pers on who has brea ched. W ith referen ce to t hese factor s set o ut i n OFSI’s Enforce ment and Monetar y Penalties Gui dance, the ag gravating factors in this case wer e: a. MML made £ 416,5 90.9 2 direct ly av ail able t o the D esigna ted P erson, which OFSI consi ders to be a hig h va lue breach (case factor B). b. T he Desi gnat ed Perso n fin ancia lly benefit e d from t hose res ponsi ble for th e annexation of Cr imea and de stabilisation of ea stern Ukraine, therefore the purposes of the sanctions r egime are har med in making funds avai lable to them, enabling the Designated Person to avoid suf fering a net loss of funds (case factor C). c. In 2018, san ctio ns imposed by the UK in res pect of Uk raine w ere a st rategi c priorit y for the UK and i ts foreign polic y (oth er releva nt ca se facto r reg arding severi ty). d. MM L made fun ds di rect ly av ailabl e to t he Des ignated P erson by instructing Gazpro mbank to m ake the Pay ment, w ith a cl ear vi ew of t he recipi ent o f the P ayment. OFSI does not c onsider MML’ s reported misunderstanding of the sanctions reg ulations to be accept able condu ct, as MML di d not t ake an y steps t o veri fy th eir un derstan ding t hrou gh seek ing l egal a dvice, inst ead prioritis ing making the Pay ment in haste, thereby demon stra tin g disrega rd for sanctions c ompliance (case fact or D). e. MML had policies i n pla ce tha t sho uld h ave meant employees woul d be aware of r elevant sanctions re gimes and the s anctioned status of any of their custo mers. H ow ever, th ese wer e ina dequate b eca use t here we re no pol icies or controls in plac e to manag e the sanctions ri sk of the informal

transnational working pract ices t hat exist ed betw een MM L and MM C; the contex t wi thin w hich the breach t ook place (case factor E). f. MML played an activ e rol e in t he breach. There was n o compl exit y leadi ng to MML’s accident al inv olve ment; rather t hey mad e th e decision to instruc t the Paymen t wi th the k nowl edge that th e recipien t was the D esign ated P erson (case factor M). 17. These fa ctors were w eigh ed agai nst the mi tigat ing fa ctors i n th e case, w hich w ere as follows: a. After dis cov ering t he br each, M ML t ook s teps to i mprov e thei r sanctions compli ance to avo id repeat ed fail ures, a nd OF SI co nsi ders thi s part icul ar breach to be a one - off (case fac tor I). b. MML submi tt ed a materially c omplete initial disc losu re to OFSI, wi th full detail of t he int ernal review pro vided i n goo d fai th. Th is was assessed as mitigating by OF SI in its assessment of the relev ant case fa ctor, h o wever, th e disclo sure was not considered to have me t the criteria f or a voluntary discou nt redu ctio n in penalt y (case fa ctor J). c. MML co - ope r ated ful ly t hro ughout OFSI’s inves tigation in respond ing to all requests for in form atio n by ag reed d eadlin es a nd submitting pr eliminary notifications and relevant docum entation without sp ecific reque st s (ca se factor K). 18. In the context of these aggravating and mitigating fac tors, and in acc ordance with the Enforce ment and Monetary Penalties G uidance, OFSI ass essed th is cas e overa ll t o be “serious” as opposed to “m ost serious”. 19. The total breach value in this case was £416,590.92, ther efore the permitte d statutor y maximum pena lty was £1,000,000. T ak ing into acc ount all the case factors, OFSI notified MML of its intention to imp ose a penalty of £400,000 with n o voluntary disclo sure discount. 20. Following r eceip t of MML’s re presentations submitted i n respo nse to the No tice a nd additional inf ormation, OFSI reev alu ated t he aggrav atin g and mi tig ating wei ght att ribut ed to cert ain case factors used in its assess ment. As a resu lt, O FSI decided i t appropriate to impose a penalty of £300,000. This reduced penalty amount was subsequen tly uphel d following a delegat ed Ministerial Re view.

NOTES ON COMPLIANCE 21. UK financial sa nctions apply to all UK Persons including legal en tit ies esta blish ed under UK law, whi ch mu st ensu re they co mply wi th th os e UK financial sanctions that are in force. This case highlights imp ortant complianc e lessons f or a wide ra ng e of industry stak ehol ders. 22. Firstly, th is case hig hlights tha t it is ess ential for firms to und erstand their levels of exposur e to sanctions risks and to ta ke necessary acti on t o address t hem. T his expect atio n applies to a ll firms r egardles s of their size. Fir ms with hig her risk clients shou ld educat e them sel ves to an appro priat e level on the risks, including by properl y engaging with OFSI ’s published guidance and seeking profe ssional advice on their sanctions obliga tions wher e nec essary. The need for a sound knowledge of ac tivity prohibi ted by sanctions regulations is highlig hted in this case by the signif icant misunder standing of prohibitio ns in rel atio n to payment s rega rded as refu nds an d the speed of maki ng payme nts being pri orit ised o ver payi ng su fficien t r egard t o ens urin g compli ance. 23. Second, the n eed for a dequa te sanctions proces ses to ens ure com plia nce. OFSI will not necessari ly co nside r th e exist ence of sa ncti ons po lici es and pro cess es mitigating if they are not fi t for pu rpose. Furt her, t his case demo nst rates the si gnifi cant risks t hat can emerge wh en no proce sses a re in pl ace to man age th e sanct ion s risk o f informal transnational working pract ices. 24. Th ird, this case illus trates the need for all firms t o have appropri ate systems and controls in place t o prompt ly iden tif y and repo rt s uspected brea ches o f fin anci al sanctions to OFS I. Voluntary disc losure in serious c ases can re sult in a discount of up to 50% under OFSI’s current policy. 25. Further information an d guidance on UK financial sanctions can b e found on OFSI’s websit e: https://www.gov.uk /government/or ganisations/offic e - of - financial - sanctions - implemen tat ion