Syed Rahman and Ulrich Schmidt summarise the action taken by HM Revenue and Customs
HM Revenue and Customs (HMRC) has announced that it has fined an unidentified UK company £1.2 million for exporting goods in violation of UK sanctions against Russia.
The fine, which is the largest that HMRC has imposed, was issued in May as part of a compound settlement of a case. A compound settlement does not require the company or the conduct to be made public. But HMRC has announced it and confirmed that it is its largest-ever penalty “for a Russia sanctions offence”; with the goods made available to Russia in breach of The Russia (Sanctions) (EU Exit) Regulations 2019.
Until now, the highest fine for breaches of the Russia sanctions regime was the £1.05 million penalty issued to a business last year. HMRC’s highest-ever fine for export control breaches is the £3.2 million imposed on a UK-based company in April this year for shipping weapons overseas without a licence.
Escalation
This fine represents a clear escalation of enforcement efforts and could, in theory, lead to larger fines being imposed. Although with limited knowledge of the facts, it is difficult to assess the precise significance impact of this decision.
The business world has now had time to adapt to the Russia Regulations and implement adequate internal mechanisms to prevent violations. It follows that there should, as a result, be fewer accidental violations. But this could mean larger fines being imposed if companies are identified as having breached the Regulations. The regulator may take the view that failure to comply with sanctions is now more serious, given that companies have had a lot of time to adapt to the obligations placed on them.
This may be the main lesson that other businesses can take from this case. They now have no excuses not to be prepared. Internal protocols should be checked and updated to ensure they are compliant with all sanctions legislation.
