ECSH82780 - Sanctions for non-compliance: financial penalties: financial penalties framework: introduction

Introduction

This financial penalty framework is effective  from 1 April 2020. 

Financial Penalties are just one of the options available to respond to contraventions of relevant requirements. The correct response should be determined in accordance with the sanction framework, see ECSH81075. A Financial Penalty may be applied as a stand-alone sanction or as part of a suite of measures designed to remedy the compliance failing.

The DM should ensure that the decision to issue a penalty is:

  • supported by valid and clearly articulated reasoning/rationale
  • based on the MLRs that were in place at the time of the contravention being penalised
  • supported by facts and evidence; and
  • reflects the guidance that was in place at the time of the contravention being penalised.

When the decision-maker (DM) has considered all of the factors in Regulation 83 and has decided that a financial penalty is appropriate then they should go on to consider an appropriate amount.

Financial penalties are categorised into the following types: 

  • Type 1 (compliance breaches - benefits gained), see ECSH82875
  • Type 1 (compliance breaches - scale charge), see ECSH82790
  • Type 2 (registration breaches – trading whilst unregistered, see ECSH82795
  • Type 3 (failure to notify HMRC of material changes and/or inaccuracies to information provided at registration or subsequently), see ECSH82800
  • Type 4 (failure to provide information or access to business premises), see ECSH82805
  • Officer liability, see ECSH82810

When issuing a financial penalty, the DM must ensure that any penalty is effective, proportionate, and dissuasive, (see ECSH82575). The appropriateness review is the documented consideration that DMs must make, explaining how the penalty is effective, proportionate and dissuasive, and detailing how they have considered all of the relevant factors contained within regulation 83(1) MLR 2017. Failing to ensure that the penalty is appropriate, or accurately recording all factors and considerations, may lead to the penalty, if challenged, being reduced or set aside.

All penalties issued will also include an administration charge which will vary depending upon the type of penalty. HMRC introduced a penalty administration charge for all anti-money laundering supervision penalties issued from 25 July 2018. The charge is for costs of issuing penalties to businesses that do not comply with the Money Laundering Regulations (MLRs). Further information on these can be found at Penalty administration charge.