Mr. Sanctions

Category: HMRC (UK)

  • June 30, 2026: Not just OFSI: HMRC gets a 500K GBP settlement for Russia sanctions breaches

    First, Notice to Exporters 2026/15:

    Notice to exporters 2026/15: firm named after Russia sanctions breach settlement

    Published 29 June 2026

    1. Introduction

    Petrofac Facilities Management Limited (PFML) have paid HM Revenue and Customs a compound settlement of £569,157.07 for offences under  The Russia (Sanctions) (EU Exit) Regulations 2019 (the Russia Regulations). The offences were committed while PFML was divesting its operations in Russia in 2022 to 2023.  

    PFML  breached Regulation 46Y(2)(c) on 2 occasions in relation to industrial goods, sanctioned under the G7 Dependency and Further Goods chapter of the Russia Regulations. The first offence was for making the sanctioned goods available to a person connected to Russia. The second offence was for making available sanctioned goods for  use in Russia. PFML  also breached Regulation 46Z(1)(b) by providing technical  assistance in respect of the goods they made available.   

    This case was brought to HMRC’s attention following a voluntary disclosure by PFML, who have fully cooperated with HMRC’s investigation.

    2. Compound settlements criteria

    Compound settlements may be offered where an exporter has both:

    • committed a breach that was inadvertent or due to weaknesses in internal controls – HMRC will not normally offer a compound settlement where an exporter intended to breach the controls
    • voluntarily told HMRC about sanctions or export control breaches

    And a press release, to boot:

    Energy firm named after £500,000 Russia sanctions settlement

    An energy services firm has paid more than £500,000 to HM Revenue and Customs (HMRC) for breaching Russia sanctions regulations.From:HM Revenue & CustomsPublished29 June 2026

    Petrofac Facilities Management Limited (PFML) paid a £569,157 compound settlement and has become the first company to be publicly named by HMRC for accepting such a penalty. 

    The breaches by PFML occurred in 2022 and 2023 while the company was winding down its Russian operations. The company supplied sanctioned industrial goods to individuals connected to Russia and provided technical assistance relating to those goods.  

    PFML self-reported the breaches to HMRC and fully cooperated with the investigation. 

    Naming the company marks a shift in how HMRC handles compound settlements in relation to strategic exports and sanctions. 

    Edwige Hill, Deputy Director in HMRC’s Fraud Investigation Service, said: 

    Non-compliance with Russia sanctions is a serious offence and together with our international partners, the UK Government has implemented the most severe package of sanctions ever imposed on a major economy.  

    Naming those involved brings us into line with other enforcement partners whilst sending a clear message on the consequences of breaching sanctions rules.

    Where appropriate, HMRC will now include naming as a condition when offering a compound settlement for strategic export and sanctions offences.  

    The new approach will improve transparency and ensure greater consistency with other UK sanctions enforcement bodies such as the Office of Financial Sanctions Implementation (OFSI). 

    Further information

    Non-compliance with sanctions is a serious offence and those who breach them may be subject to a range of enforcement actions by HMRC, including large financial penalties or referral for criminal prosecution.

    A compound settlement is the means where, through payment of a sum of money, HMRC may offer to settle alleged Sanction and Strategic Export offences committed under the Customs and Excise Management Act and the Export Control Order, out of court. This saves time and money – both for the offender and HMRC – by avoiding the need for legal proceedings. HMRC will only offer a compound settlement where it is believed there is sufficient evidence to prosecute.

    When deciding if a compound settlement is appropriate and the level of the offer; HMRC’s considerations will include:

    • the seriousness of the alleged offence
    • whether fraudulent intent can be proven
    • the extent of the efforts to perpetrate the alleged offence
    • the type and value of any goods involved
    • the offender’s previous history
    • the extent to which the offender has co-operated with any investigation
    • the level of financial penalties known to have been imposed by courts for similar offences

    Information on payments of compound settlements is published by the Export Control Joint Unit (ECJU) via Notices to Exporters (NTEs)

    Further guidance on the voluntary disclosure regime is available on GOV.UK

    You can find out more about HMRC’s approach to strategic export violationson GOV.UK.

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  • Burning Question: Why is sanctioned goods licensing being transitioned to OTSI?

    The prompt:

    How are sanctioned goods licensed today in the UK? Why is that responsibility being transferred to OTSI? Were there any specific problems with the current situation? Provide sources for your analysis.

    Gemini’s response:

    As of today, April 11, 2026, the licensing of sanctioned goods in the UK is in the final stages of a major structural transition. While the Export Control Joint Unit (ECJU) still handles most “today,” a significant transfer of power to the Office of Trade Sanctions Implementation (OTSI) is scheduled for April 27, 2026.

    Below is an analysis of the current landscape, the reasons for the transfer, and the systemic problems this change aims to solve.

    1. How Sanctioned Goods are Licensed “Today” (April 11, 2026)

    Currently, the responsibility is split between three primary bodies, often requiring businesses to apply for multiple licenses for a single transaction:

    • Export Control Joint Unit (ECJU): Historically the “heavy lifter,” the ECJU remains responsible for licensing strategic goods (military and dual-use items). For another two weeks, they also continue to process licenses for sanctioned goods (non-strategic items heading to sanctioned destinations like Russia).
    • Office of Trade Sanctions Implementation (OTSI): Launched in October 2024, OTSI currently handles the licensing of sanctioned services (e.g., professional, business, and legal services) and enforcement of trade sanctions for activities occurring outside the UK border.
    • Office of Financial Sanctions Implementation (OFSI): Handles the “financial” side (asset freezes and funds), as seen with the Maritime Mutual license discussed previously.

    2. The Transfer to OTSI (Effective April 27, 2026)

    From April 27, 2026, OTSI will take over the licensing of all sanctioned goods and associated ancillary servicesdestined for sanctioned countries.

    • What stays with ECJU: Strategic export controls (military/dual-use goods) will remain under the ECJU to ensure that national security expertise stays centralized.
    • The System: Even after the transfer, exporters will continue to use the SPIRE system for goods, while “standalone” services licenses will remain on the OTSI portal.

    3. Why the Transfer? (Solving Specific Problems)

    The UK Government’s May 2025 Cross-Government Review of Sanctions identified several “frictions” in the pre-2024 system that OTSI was created to fix:

    A. The “Services Gap”

    Before OTSI, the UK had robust enforcement for goods at the border (via HMRC), but enforcement for services (like accounting or consulting provided to sanctioned entities) was fragmented and lacked a dedicated civil enforcement body. OTSI provides a “civil” counterpart to OFSI, specifically for trade.

    B. The Enforcement “Clarity” Problem

    Historically, trade sanctions enforcement was primarily criminal, handled by HMRC. This created a high bar for prosecution. OTSI was granted the power to issue civil monetary penalties (up to £1 million or 50% of the breach value), allowing for more “proportionate and frequent” enforcement action against non-compliant businesses that didn’t meet the threshold for criminal intent.

    C. Administrative Fragmentation

    Businesses previously struggled with “license-stacking.” A single deal might require a financial license from OFSI, a goods license from ECJU, and a services license from the Department for Business and Trade (DBT). Moving sanctioned goods to OTSI concentrates trade-related expertise in one office, reducing the need for businesses to navigate multiple departments for the same sanctions regime.

    D. The “Shadow Fleet” and Circumvention

    Traditional export controls were designed for “shipment-to-destination” tracking. Modern sanctions evasion (like the Russian shadow fleet) often involves complex third-country brokering where goods never touch UK soil. HMRC’s powers are border-centric; OTSI was given broader jurisdiction over UK persons globally, allowing them to target circumvention that occurs entirely outside the UK.

    Source List

    1. OTSI Official Blog (April 9, 2026): “Expanding OTSI’s Licensing Remit” – Confirms the April 27 transition date.
    2. GOV.UK Guidance (March 2026): “UK Government’s Strategic Approach to Sanctions Enforcement” – Details the civil penalty framework and the 2025 cross-government review findings.
    3. OFSI Annual Review 2024-25: Provides data on the increase in license applications and the need for specialized “aftercare” services now being mirrored by OTSI.
    4. Business and Trade Committee Report (February 2026): Correspondence from the Chair regarding the 185 investigations opened by OTSI in its first year, highlighting the “services sector” as the primary source of breaches.
    5. Department for Business and Trade (DBT): “Trade Sanctions, Arms Embargoes, and Other Trade Restrictions”(Updated 2026).

    Analysis of Source Support

    • Fully Supported: The dates of the transfer, the new civil penalty limits, and the split between strategic and sanctioned goods.
    • Inferred/Expert Analysis: The “Administrative Fragmentation” point is a common industry critique found in legal briefings (e.g., from Clifford Chance and Linklaters) and was a central theme of the 2025 review, though the government describes it more diplomatically as “improving the user experience.”

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