Aircraft Manufacturer Violates Strategic Export Controls: What You Need to Know

Airbus Operations Limited (AOL) has made a payment exceeding £6.4 million to HM Revenue and Customs (HMRC) after acknowledging several violations of Strategic Export Controls. This payment marks the largest compound settlement ever reached by HMRC concerning strategic export offences.

The company disclosed the breach in its quarterly earnings report, with additional details made available on the official government website, GOV.UK.

On numerous occasions, AOL failed to maintain precise records of the transfers of controlled technology, contravening the stipulations of three of their Open General Export Licences (OGELs). The company took the initiative to self-report these breaches to HMRC and fully cooperated throughout the ensuing investigation.

Commitment to Export Control Compliance

Edwige Hill, Deputy Director in HMRC’s Fraud Investigation Service, remarked on the significance of maintaining a stringent licensing framework. She stated, “The UK operates a strict licensing regime to uphold the UK’s Export Control regime, ensuring that military equipment does not fall into the wrong hands. We employ a range of powers to enforce effective controls on military goods, which contributes to the UK’s national security. This settlement demonstrates our commitment to taking decisive action.”

The breaches identified at AOL included multiple infringements of Article 29(2)(a-g) for failing to keep accurate records regarding the transfer of controlled technology as mandated by their OGELs. Additionally, the company was cited for non-compliance with Article 29(3) concerning the maintenance of registers related to their OGELs, and Article 29(2)(i) for inaccuracies in records linked to one of their OGELs. There was also a single instance of failure to comply with the conditions of a Standard Individual Export Licence.

The Role of Export Control Licensing

The United Kingdom has established an export control licensing regime that governs specific strategic goods, including military items, dual-use items, and materials potentially applicable for Weapons of Mass Destruction programmes. This system is part of a broader international framework and is grounded in various international agreements.

A compound settlement serves as a mechanism through which HMRC can resolve alleged Strategic Export offences under the Customs and Excise Management Act and the Export Control Order without resorting to court proceedings. This approach is designed to save both time and resources for HMRC and the offender, provided there is adequate evidence for prosecution.

In a recent development, Petrofac Facilities Management Limited (PFML) was the first company publicly named by HMRC for accepting such a penalty. PFML also self-reported its breaches and cooperated with the investigation, indicating a shift in HMRC’s approach to handling compound settlements related to strategic exports. This new strategy aims to enhance transparency and align practices with other UK law enforcement agencies.

Factors Considered for Compound Settlements

When determining whether a compound settlement is appropriate, HMRC considers several factors, including:

• The seriousness of the alleged offence
• Whether fraudulent intent can be established
• The extent of the efforts to commit the alleged offence
• The type and value of the goods involved
• The offender’s previous history
• The degree of cooperation offered by the offender during the investigation
• The financial penalties previously imposed by courts for similar offences

Effective controls on military goods are crucial for the UK’s national security. HMRC supports this objective by operating a voluntary disclosure process for unlicensed exports of strategic or sanctioned goods and the transfer of controlled technology. All disclosures undergo assessment and may lead to educational visits, written warnings, compound settlements, or, in severe cases, referral to UK prosecuting authorities.

Information regarding compound settlement payments is publicly available through the Export Control Joint Unit (ECJU) via Notices to Exporters (NTEs). Further guidance on the voluntary disclosure regime can also be found on GOV.UK.

For comprehensive insights into HMRC’s stance on strategic export violations, additional information is accessible on GOV.UK.