UK Fines Colorcon £152,750 for Breaching Russia Sanctions: Key Lessons in Compliance

The Office of Financial Sanctions Implementation (OFSI) has issued a monetary penalty of £152,750 on Colorcon Limited, a pharmaceutical industry supplier and UK-registered subsidiary of Colorcon Inc.

The penalty relates to payments made by Colorcon’s Moscow office to accounts held at designated Russian financial institutions, in breach of the Russian economic sanctions regime linked to Russia’s illegal invasion of Ukraine in 2022.This case highlights several key lessons for the industry, including the risks associated with relying on third parties to ensure compliance.

The party that breaches financial sanctions will be held responsible.

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• On September 10, 2025, the UK's Office of Financial Sanctions Implementation (OFSI) imposed a £152,750 penalty on Colorcon Limited, a UK-registered subsidiary of a global pharmaceutical products provider, for breaching Regulation 12 of the Russia (Sanctions) (EU Exit) Regulations 2019.
• The breaches involved making funds available to designated Russian banks (Alfa Bank JSC, Promsvyazbank, Sberbank, and VTB Bank) via 123 payments totalling £191,290.57, made between March 23 and December 2, 2022, through its Moscow representative office.
• These payments primarily covered employee salaries, bookkeeping, payroll, insurance, and other related services.
• 44 payments (£63,012.85) from August 12 to October 31, 2022, were permitted under the expiring General Licence INT/2022/2055384 for winding down Russian operations; however, Colorcon failed to meet its reporting requirements, which was an aggravating factor and a separate offence.
• The remaining 79 payments (£128,277.72) were deemed breaches.  OFSI determined that Colorcon had knowledge or reasonable cause to suspect the pre-June 2022 breaches (before strict civil liability was introduced).
• Colorcon voluntarily disclosed the breaches, but with a 4-month delay after discovery, resulting in a reduced 35% discount on the penalty (from a potential 50% for prompt disclosure).
• Without the discount, the penalty would have been £235,000.
• Colorcon cooperated with the investigation but did not contest the decision or seek a review.

Background and Investigation:

• Colorcon operated a Moscow office for over 15 years and had engaged legal counsel on sanctions compliance before Russia invaded Ukraine.
• It decided to close the office in August 2022 amid heightened sanctions risks.
• The company reported the breaches on April 21, 2023 (initially) and June 30, 2023 (detailed), prompting OFSI's investigation under its November 2024 Enforcement Guidance.
• Payments were initiated by a Russian bookkeeper and authorised by UK signatories, who checked amounts and payees but not the banks' sanctions status.
• Colorcon assumed its bank would screen for sanctions but never verified this.

Case Assessment:

OFSI classified the case as "serious" (not "most serious") based on aggravating and mitigating factors:

Aggravating Factors:

• Breach value of £128,277.72.
• Direct payments to designated banks, undermining sanctions objectives.
• Colorcon's global presence and Russia exposure meant it should have better managed risks, but compliance focused on customers/remitting banks, not employees/service providers.
• Reasonable suspicion of breaches pre-June 2022.
• Insufficient policies (unchanged since 2018), failure to clarify bank screening, and non-compliance with general license reporting.
• Repeated breaches over months and delayed disclosure to OFSI.

Mitigating Factors:

• Some payments related to medical/humanitarian purposes.
• Voluntary (though not prompt) disclosures with detailed information and full cooperation.
• Decision to exit the Russian market, showing sanctions awareness.

The statutory maximum penalty was £1,000,000, but OFSI deemed £235,000 proportionate before the 35% discount.

Compliance Lessons

The case underscores key sanctions compliance principles:

• UK sanctions apply globally to UK entities, including overseas offices.
• Companies cannot solely rely on third parties (e.g., banks) for screening without verification.
• Sanctions policies must be regularly updated to address all risks, including financial and trade sanctions.
• General licenses have strict limits and reporting requirements; non-compliance is an offence and aggravating.
• Breaches must be disclosed to OFSI promptly after discovery to maximise mitigation discounts.
• Funds of designated persons must be frozen and reported, with dealings only allowed under exceptions or licenses.

For the penalty notice, click here:

• https://lnkd.in/eFcKwgn2
• https://www.gov.uk/government/publications/imposition-of-monetary-penalty-colorcon-limited
• https://assets.publishing.service.gov.uk/media/68db9df2ef1c2f72bc1e4bf0/Colorcon_Penalty_Notice.pdf