HMRC Names Subject of Compound Penalty for the First Time

On 29 June 2026, HM Revenue & Customs announced that Petrofac Facilities Management Limited ("PFML") had paid a compound settlement of £569,157.07 for offences under the Russia (Sanctions) (EU Exit) Regulations 2019 (the "Russia Regulations"). This is the first time that a party paying a compound penalty for sanctions or export control violations has been named by HMRC.

The Notice states that PFML breached Regulation 46Y(2) of the Russia Regulations by making certain sanctioned goods available to a person connected with Russia and for use in Russia. It also breached Regulation 46Z(1)(b) by providing technical assistance in respect of the goods that had been made available. PFML made a voluntary disclosure to HMRC and cooperated with HMRC's investigation. According to an HMRC press release, these breaches occurred in 2022 and 2023 whilst PFML was winding down its Russian operations.

Compound penalties

Generally speaking, a compound settlement is an agreement reached with HMRC to pay a sum of money in lieu of a referral to a prosecuting authority for the consideration of a criminal prosecution. The statutory basis for these settlements is section 152 of the Customs and Excise Management Act 1979, which enables HMRC to "compound" (i.e., settle) offences. There is no obligation on an exporter to accept an offer and they are free to decline, but the case will subsequently be referred to prosecuting authorities.

In recent notices about compound settlements (including the notice relating to PFML), HMRC has stated that compound settlements may be offered where an exporter has both committed a breach that was inadvertent or due to weaknesses in internal controls and voluntarily disclosed to HMRC. The UK government policy paper UK Government's strategic approach to sanctions enforcement also emphasises the importance of cooperation and remediation, stating that compound settlements are used "primarily where businesses have voluntarily disclosed sanctions offences to HMRC that were inadvertent or due to weaknesses in internal controls, cooperated with the investigation and sought to remedy any underlying failings."

Notably, the HMRC press release lists the considerations that HMRC will take into account when determining whether a compound settlement is appropriate and the level of the offer:

• 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 cooperated with any investigation (which reflects the language in the abovementioned policy paper); and
• The level of financial penalties known to have been imposed by courts for similar offences.

Identifying the subject

Historically, public notices about compound settlements have not named the subject party. The concerns behind this approach were highlighted in oral evidence given to the Business and Trade Sub-Committee in February this year. In part, the concern was whether publicity could disincentivise parties from entering settlements. Sir Chris Bryant MP, Minister of State for Trade, Department for Business and Trade noted that "a compound settlement is a sort of agreement with the other party. If that then prevented them from coming to an agreement, we might be in a process where we were going to pursue legal action, which might not be successful and would incur significant costs for Government as well." In addition, the witnesses highlighted that HMRC was reviewing the potential legal basis for greater transparency.

The HMRC press release notes that "Naming the company marks a shift in how HMRC handles compound settlements in relation to strategic exports and sanctions," and that "Where appropriate, HMRC will now include naming as a condition when offering a compound settlement for strategic export and sanctions offences."

This approach is intended to improve transparency and ensure greater consistency with other UK sanctions enforcement bodies. The Office of Financial Sanctions Implementation is required to publish reports about the imposition of monetary penalties under section 149(2) of the Policing and Crime Act 2017 and will normally publish all details including the subject of the penalty (according to its guidance). OFSI may also choose to publish details of breach cases where no monetary penalty has been imposed (a "disclosure"), under section 149(3) of the Act. The Office of Trade Sanctions Implementation may choose to publish reports about penalties, or breaches where no penalty is imposed, under regulation 13 of the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024.

Conclusion

This case marks a significant change in HMRC's approach to transparency around compound settlements. Where parties voluntarily disclose breaches to HMRC, they should prepare for the possibility that HMRC will require publication of their identity as a condition to entering a compound settlement. The HMRC press release also provides some valuable insight into how HMRC approaches compound penalties in particular cases, including the importance of co-operating with HMRC once a breach has been disclosed.