@James Chan_110, Thanks for posting in Q&A.
From your description, I know you encountered an issue when you add groups to Additional recipients under Actions for noncompliance settings in Compliance policy.
Based on my testing, I found that only groups whose Group type is Microsoft 365 or Distribution can be assigned to Additional recipients. If you want to add groups to Additional recipients, you can create a Microsoft 365 type group and add the members, then you can add it to Additional recipients.
Hope above information can help you. If there is any update, feel free to let me know.
If the answer is helpful, please click "Accept Answer" and kindly upvote it. If you have extra questions about this answer, please click "Comment".
Note: Please follow the steps in our documentation to enable e-mail notifications if you want to receive the related email notification for this thread.