It has just been announced that in February of this year, HM Revenue & Customs (HMRC) fined an unidentified UK company circa £2.7 million relating to unlicensed exports of military goods. The fine represents the largest penalty ever for breach of UK arms controls.
The export of military goods is governed by The Export Control Order 2008 which controls the export of a range of weapons, from torpedoes to chemical agents to military flame throwers.
HMRC has policy responsibility for enforcing export controls and investigating breaches of those controls. Whilst it can refer appropriate cases to the Crown Prosecution Service for criminal prosecution, in this instance HMRC opted, for reasons which have not been made known, to use its discretionary power to offer a ‘compound penalty’. The result of the compound penalty is an anonymous civil settlement.
Whilst the Department for International Trade’s announcement which included this record-breaking fine also contained financial details of compound penalties paid by seven other UK exporters in 2021 and 2022, the aggregate of those seven penalties is small change by comparison - totalling just under £100,000.
Although enforcement of breaches of arms controls are to be welcomed, the lack of information about this significant fine raises some concerns. Not only has the sanctioned company maintained its anonymity; there is also no guidance from HMRC as to how or why it made the decision to compound the offence rather than pursue criminal prosecution.
The decision may fit with a wider trend in the sphere of economic crime to pursue civil settlements rather than attempt criminal prosecutions, with all the attendant difficulties they present. However, an easy life is not a sufficient reason to fail to pursue criminal proceedings where the facts call for it. In this instance, no assessment of that decision can be made given the lack of details published.
Given the situation in Russia and Ukraine, we expect to see increased scrutiny around arms control and how HMRC responds to breaches, including its choice of civil or criminal enforcement.