Colorcon operated a branch in Moscow that made 123 payments to accounts held at four sanctioned Russian banks between March and December 2022. These payments were processed by a Russian bookkeeper and approved by Colorcon employees in the UK—none of whom conducted adequate checks for sanctions compliance.
Out of the 123 payments: • 44 were legally permitted under a General License (GL) for “winding down” business. • 79 payments, totaling £128,278, were found to be in breach of Regulation 12 of the UK Russia Sanctions Regulations, which bans providing funds to sanctioned individuals or entities.
OFSI’s Assessment
OFSI considered both aggravating and mitigating factors in setting the penalty:
Aggravating Factors: • The value of the breach payments was significant. • The funds were sent to sanctioned banks, undermining UK sanctions. • Colorcon had a long-standing presence in Russia and should have been aware of the risks. • The company lacked effective compliance controls and failed to recognise the scope of the General License. • Colorcon made repeated errors and delayed informing OFSI about the breaches for four months.
Mitigating Factors: • Payments were for medical and humanitarian purposes. • Colorcon voluntarily disclosed the breaches, with largely timely and detailed reports. • The company decided to exit the Russian market in August 2022, showing some awareness of the sanctions landscape.
Penalty Breakdown
The initial penalty was set at £235,000, but this was reduced by 35% due to Colorcon’s voluntary disclosure. A full 50% discount could have applied if the breach had been reported earlier.
Final fine: £152,750.
Key Takeaways for Businesses
OFSI highlighted five critical compliance lessons: 1. Don’t rely solely on third parties for sanctions checks—companies remain liable for breaches. 2. Review and update sanctions policies regularly; outdated procedures may not be seen as mitigating. 3. A General License doesn’t cover everything—only activities that meet specific terms. 4. Failing to meet General License reporting obligations is an offence and will count against a company. 5. Report breaches promptly to benefit from full voluntary disclosure discounts.