ECSH83525 - Sanctions for non-compliance: suspension and cancellation: introduction

Introduction

Regulation 60 of the Money Laundering Regulation permits HMRC to suspend or cancel a business’s registration. The evidence required to suspend or cancel a business is the same. However, as cancellation leads to the permanent removal of the business from the register, in practice, the courts would apply a higher standard of evidence for cancellation.

Where the decision-maker (DM) has reached the conclusion that suspension or cancellation of registration is an appropriate sanction, they must issue a notice of that decision. The suspension or cancellation of registration will take effect immediately or on a given date.

Suspension or cancellation of registration can be used as a stand-alone sanction or as part of a range of sanctions, depending on the facts of the case.

Suspension of registration

For more information on suspension of registration, see ECSH83825.

Suspending a business’s registration means the temporary removal of the business from HMRC’s register of supervised businesses. This effectively means that the business cannot lawfully engage in the activity they are supervised for, under the Money Laundering Regulations 2017 (MLR 2017), whilst they are suspended. Suspension is therefore a significant (albeit temporary) sanction and should only be applied for the length of time necessary for the business to address the money laundering/terrorist financing risks/non-compliance and to satisfy the DM that these have been sufficiently addressed and remedied.

It may be appropriate either to extend a period of suspension or to follow it with cancellation in cases where we determine that the risks of money laundering or terrorist financing and associated compliance failures have not been sufficiently addressed.

During the period of suspension, the ongoing intervention may reveal further or more significant breaches of the regulations and/or risks which could lead to the registration of the business being cancelled.

Cancellation of registration

Cancelling a business’s registration, which is also known as a statutory cancellation, prevents the business from trading in a ‘relevant activity’ as defined in the Money Laundering Regulations. Cancellation of registration ensures the permanent removal of the business from HMRC’s register of supervised businesses.

Cancellation of registration is considered a severe sanction as it prevents the business from legally trading in a relevant activity. It is therefore only to be used in the most serious cases and/or sustained non-compliance and risk (where allowing the business to remain on the register presents too great a risk).

Additionally, registration of a business can be cancelled where following a series of reminders:

• a business fails to pay its annual fees, the registration will be cancelled;
• a business’s registered under the 2007 regulations that failed to provide the additional information required for inclusion in the MLR 2017 registers (R54 or R55)

Cancellation of registration is unlikely to be appropriate where the DM considers other sanctions are more appropriate to encourage regulatory compliance and to ‘drive through’ behavioural change.