Wise Faces Scrutiny Over Sanctions Breach: £250 Cash Withdrawal by Designated Individual

In a recent development, Wise, a prominent payments company, has found itself in the spotlight for unintentionally breaching the United Kingdom's Russia sanctions regime.

The breach in question occurred when Wise permitted a cash withdrawal of £250 ($317) by an individual who had been designated for sanctions just a day prior. This incident has attracted the attention of the Office of Financial Sanctions Implementation (OFSI), marking the agency's first involvement in a Russian sanctions violation since the commencement of the Ukraine invasion.

Wise acted promptly by reporting the suspected breach to OFSI. Following an investigation, OFSI determined that the breach, while significant, did not warrant a monetary penalty. Nevertheless, the news of the breach briefly impacted Wise's shares, causing a temporary drop of up to 5.6% before eventually rebounding.

The sequence of events that led to the breach unfolded as follows: On June 30, 2022, Wise's third-party sanctions data provider updated its list to include the designated person in response to an OFSI consolidated list update. Subsequently, during a routine customer base screening, Wise's internal systems detected a potential name match with the designated person. This triggered the suspension of the associated account. Importantly, activity on the associated debit card remained unrestricted at that point.

To everyone's surprise, at 07:25 AM on the same day, an employee of the designated person's company successfully withdrew £250 in cash using the debit card. Wise's systems permitted this withdrawal, inadvertently making funds available to an entity owned or controlled by a designated person, a clear violation of the Russia Regulations.

Wise did take subsequent steps to rectify the situation. On July 1, 2022, the company escalated the matter to its sanctions specialist team, and by July 4, 2022, the debit card had been blocked. Ultimately, the customer was removed from Wise's services.

OFSI acknowledged certain mitigating factors in favor of Wise. These included the relatively low value of the breach, Wise's voluntary disclosure, full cooperation with OFSI's information requests, and a lack of evidence indicating deliberate sanctions evasion.

Nevertheless, OFSI did find fault with Wise's systems and controls, with a particular focus on its policy regarding debit card payments, which OFSI deemed inappropriate. This assessment led to the categorization of the case as moderately severe. Consequently, Wise has implemented changes to its policies, including immediate blocking of both a customer's account and any associated cards pending review by their specialist sanctions team in cases involving a potential name match with a designated person.

In summary, Wise inadvertently allowed a breach of Russian sanctions, prompting OFSI's involvement. However, OFSI did not impose a monetary penalty, taking into account mitigating factors and Wise's subsequent corrective measures aimed at preventing future incidents of this nature. This case serves as a reminder of the challenges and responsibilities that financial institutions face in adhering to international sanctions regimes.

By fLEXI tEAM