The Office of Financial Sanctions Implementation (OFSI) penalized the bank after it was found to have processed payments for a designated person currently subject to an asset freeze. According to the regulator, the bank facilitated 24 transactions totaling approximately £77,383 between February 8 and February 24, 2023.

The breach occurred when a sanctioned individual opened a current account with Halifax, a trading division of the Bank of Scotland. The individual used a UK passport to open the account; however, the name on the passport featured a slight spelling variation compared to the name listed on the OFSI’s consolidated sanctions list.

Because of this discrepancy, the bank’s automated screening systems failed to flag the customer as a designated person. The account remained active for over two weeks, during which time funds were transferred in and out. The error was eventually discovered during a separate review for “Politically Exposed Persons” (PEPs), rather than through the primary sanctions screening process.

The OFSI noted that while the bank’s screening tools were ineffective in this instance, the fine was reduced by 50% from a potential £320,000. This reduction was granted because the Bank of Scotland voluntarily disclosed the breach to the regulator promptly after discovering it.

​A spokesperson for Lloyds Banking Group said that the bank takes its regulatory responsibilities “extremely seriously”, adding “we acted swiftly and transparently, proactively referring this one-off, isolated matter to OFSI… We have further strengthened our controls to ensure we continue to meet the highest standards of risk management”.