In May 2025, a UK exporter agreed to pay £1.16 million ($1.55million dollars) to HM Revenue & Customs (HMRC) for violating Russia sanctions in a record-breaking compound settlement. This sent shockwaves through the compliance community. This unprecedented penalty highlights a critical reality: enforcement is escalating rapidly, and businesses of all types and sizes face increasing risks if they fail to keep pace with sanctions and export control regulations. This wake up call applies to everyone, including trade compliance teams and legal counsel, underscoring the urgent need for organisations to reassess export control processes and readiness. Shahab Wahdatehagh explains more and offers insight on these situations for organisations…

The Story Behind the UK’s Largest Export Control Fine

According to the UK Government’s Notice to Exporters 2025/18, the exporter supplied goods to Russia in breach of The Russia (Sanctions) (EU Exit) Regulations 2019. Rather than facing criminal prosecution, the company reached a compound settlement. This is a negotiated administrative resolution in which it accepted liability and agreed to pay the penalty.

An important fact to note about this is that £1.16 million is more than twice the value of any previous UK export control settlement.  HMRC stressed that this reflects the heightened enforcement priority since Russia’s invasion of Ukraine. What is more, this case joins a growing list of recent settlements, including a £374,000 penalty for unlicensed dual-use exports and a criminal conviction resulting in an £89,000 fine.

How Enforcement of Export Controls and Sanctions Works

The situation around sanctions compliance can feel opaque. However, understanding the following steps associated with how it is enforced and typically unfolds in the UK might help.

1. Detection or Disclosure:  HMRC, Office of Technology and Solutions Integration (OTSI) or the Export Control Joint Unit (ECJU) detect potential breaches via customs data, intelligence, or whistleblowers.  Additionally, companies sometimes make voluntary disclosures, which can significantly mitigate penalties.
2. Investigation: Authorities request records: shipping documentation, contracts, communications, and internal procedures. Employees and directors may be interviewed under caution.
3. Settlement Offer: For less severe or negligent breaches, HMRC offers a compound settlement instead of prosecution. Acceptance results in a financial penalty but no criminal record.
4. Prosecution:  Where breaches are egregious or settlements are declined, cases proceed to criminal court. Convictions can lead to unlimited fines and prison sentences.

Additionally, though, the UK is far from alone in ramping sanctions enforcement. Trade compliance is a multi-jurisdictional minefield and various sanctions overlap. Regulators in the UK, EU and U.S collaborate and share intelligence more closely than ever. In the US fines are enforced by Office of Foreign Assets Control (OFAC)/ Bureau of Industry Security (BIS) – and, they can exceed $1 million per violation (e.g. in 2023 there was $508m OFAC settlement). In comparison, in Europe maximum fines vary by member states, and are enforced by national export authorities. For instance, there was a €13.6m fine in Lithuania (2024).

Hidden Risks: Supply Chains, Dual-Use Goods, and Re-Exports

One of the biggest misconceptions by many is that sanctions only applies to direct exports. In reality, risk often lurks across the value chain.

Intermediaries including third-party distributors or resellers may re-export an organisation’s goods to sanctioned destinations without the business’s knowledge. Re-exports could occur and a product can be incorporated into another system destined for a sanctioned country. Or, end-use violations could be problematic with even perceivably legitimate shipments breaching rules if used for prohibited military or dual-use purposes.

Take this example: a UK company ships dual-use components to an EU partner. The EU firm resells them into Russia, violating sanctions. Despite no direct shipment, the UK exporter can face enforcement action for failing to exercise due diligence.

Enforcement and Legislative Trends   

Aside from appreciating that sanctions enforcement applies to the entire supply chain, it is important to understand the wider enforcement and legislative trends. As geopolitical tensions and regulatory expectations continue to rise, the UK, EU, and US are sharpening their focus on many critical areas of trade compliance. Over the next year, companies can expect increased enforcement and tighter rules designed to address security and policy priorities.

One major area is Russia sanctions circumvention. Authorities are zeroing in on re-exports routed through third-party countries, transactions of which are designed to disguise the ultimate destination of goods and technology. Regulators are determined to crack down on these indirect channels, and businesses involved in moving shipments through intermediary nations will face growing scrutiny.

Emerging technologies and cyber surveillance tools are also high on the export control enforcement agenda. Advanced semiconductors, artificial intelligence (AI)-powered software, encryption products, and sophisticated monitoring systems are seen as central to both national security and human rights risks. Therefore controls on these products are evolving quickly, making it essential for exporters and logistics providers to stay current and ensure classifications and licenses are up to date.

More Coordinated Oversight is Required

Military and dual-use goods have always been a high priority and will continue to be. Such as components that can serve both civilian and defence applications; including aerospace parts, electronics, sensors, and certain chemicals. Regulators expect businesses to exercise rigorous due diligence and end-use verification before moving these items across borders.

Finally, companies operating internationally should prepare for more coordinated oversight. The UK, EU, and US are increasingly coordinating enforcement priorities, sharing intelligence, and pursuing parallel actions to tighten export controls and sanctions compliance.

This means compliance programmes can no longer focus on just one jurisdiction, they must account for overlapping obligations and be ready to demonstrate a consistent approach to screening, classification, and recordkeeping. Staying ahead of these priorities will require more than good intentions. It demands proactive systems, current data, and a commitment to building compliance into every transaction, not treating it as a checkbox exercise.

Five Practical Steps to Strengthen Export Controls Compliance    

With that in mind, there are five immediate actions organisations can take to strengthen their export control programmes and prepare for closer scrutiny:

1. Map the supply chain in detail: Build a clear picture of where goods, parts, and technology flow, especially where they may be re-exported or routed through third countries. Document any touchpoints in higher-risk jurisdictions. This visibility is critical for identifying potential sanctions circumvention and end-use risks before regulators do.
2. Update and expand screening lists: Relying on static or outdated denied party lists should never be an option. Implement real-time screening that automatically updates as new sanctions, entity designations, and export restrictions are issued. Include not just direct customers and suppliers but also beneficial owners, intermediaries, and logistics partners.
3. Review, update, and document the compliance programme: Regulators increasingly expect organisations to prove that policies aren’t just on paper. Audit procedures for export classification, licensing, and due diligence. Retain clear records of who conducted screenings, how decisions were made, and when updates were applied. A well-documented programme is the strongest defence in an investigation.
4. Assess whether a voluntary disclosure is appropriate: If past violations are uncovered, whether it’s misclassified shipments, unlicensed exports, or dealings with sanctioned parties, consult legal counsel about voluntary disclosure. Self-reporting can often lead to significantly lower penalties and will demonstrate good faith cooperation.
5. Invest in compliance automation and integration: Manual processes like spreadsheets and email-based checks are unfit to achieve meaningful export control objectives. Consider tools that integrate screening, classification, and recordkeeping directly into workflows. Automation not only reduces errors but also shows regulators  that the organisation is taking reasonable steps to stay compliant as regulations evolve.

Conclusion

In an era of geopolitical upheaval, trade compliance is no longer a back-office function. It’s a frontline risk requiring investment, vigilance, and strategic focus. This recent record-setting £1.16 million settlement serves as a stark reminder that UK export control and sanctions enforcement has entered a new era, one where efforts to curb Russia sanctions evasion, decode complex dual-use regimes, and track re-exports are pursued relentlessly.

To stay ahead, UK exporters must build trade compliance programmes that are robust, auditable, and technology-enabled. With stronger systems and smarter processes, UK businesses can transform export controls from a source of risk into a foundation for global competitiveness.