ECSH85525 - General guidance applying to all sanctions


In order to impose any sanction, you must: 

  • Be satisfied that the relevant activity is in scope for supervision during the relevant period.

  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

    
  • Check company registers and other open-source information (such as The Gazette) to confirm a company is still trading (where appropriate). If Companies House shows there is a proposal to strike off or suggests the business is insolvent, you will need to consider which sanction(s) are appropriate, see Insolvency library (sharepoint.com). It is important that the business is notified of any non-compliance, even if a sanction may not be appropriate. You may also decide to impose a sanction on an individual officer who was knowingly concerned in the breaches instead. See ECSH82810. 
  • Follow the Standard Work Instructions (SWIs) for your business area and the type of sanction you intend to impose, which you can find in the Guidance (sharepoint.com) section of the Knowledge Library.  

The requirement to comply with the relevant requirements under Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) applies to all businesses within scope, regardless of whether they are registered or not. A failure to be registered does not prevent EC-S from taking action on a business if it fails to comply with any of its relevant requirements. Similarly, if a business deregisters during a compliance check or intervention, you should consider if this has an impact on your intended sanction(s). 

You must gather sufficient evidence to prove that on the balance of probabilities a breach has occurred. The types of evidence to obtain is shown within each type of sanction within this guidance.

You must also ensure that the person providing information or being interviewed for the purposes of a compliance check or intervention, has the appropriate authority to speak on behalf of the business and they are who they say they are. You may need to speak to a number of individuals within the business to ensure the information provided is accurate and would stand up to scrutiny either at tribunal or in an independent review. For guidance on how to verify identity/authority during a telephone call follow ECSH32605.

If you consider issuing a sanction to a business that has previously been found “compliant”, you should consider the scope of the previous enquiry, whether the breaches were present at that time but not picked up or handled appropriately by EC-S, or whether there has been a change in the relevant person’s compliance. Creating a “timeline” of all previous EC-S contact and outcomes may help establish whether a sanction is appropriate.


Case progression 

You must ensure cases are worked in line with the Compliance Professional Standards and within agreed timescales. If a case has not been progressed in a timely manner by HMRC, this may affect your intended sanction(s). For example, if HMRC has created an unreasonable delay and the non-compliant activity has continued, you would have to carefully consider if it is appropriate to suspend a business’s registration with immediate effect. 

When there has been a delay in communication with a business, the business may assume that we are no longer pursuing the action started. When re-establishing contact, it is good practice to acknowledge the delay. The first communication issued to the business after the delay should be proportionate. For example, it would not be appropriate to issue an intention to impose a sanction letter to re-establish contact. Delays may adversely impact on HMRC if a sanction is appealed. Where a delay is likely to occur, for instance if seeking policy or legal advice, you should issue a holding letter. Breaks in communication should never exceed 60 days.

 

Issuing a combination of sanctions

If you are considering imposing a range of sanctions to address non-compliance in several areas (for example, a type 3 penalty for failing to notify a material change alongside a suspension notice) you should consider the timing of each sanction. For example, suspending or cancelling a relevant person’s registration may affect its ability to pay a penalty.

You should take appropriate action, including where necessary imposing a sanction as soon as you have established all the facts and have sufficient evidence of the contravention.  For example, it would be unusual to issue a Type 1 penalty for compliance breaches at the same time as a penalty for registration breaches, which would be identified at the start of the compliance check.

See ECSH82625 for more information.

The appropriate administration charge should be applied.

 

Drafting the paperwork

Each decision should have its own notice which clearly explains other enclosures and appendices. For example, a Type 1 Penalty for Compliance breaches should be accompanied by a Table of Failures, a Penalty Calculation showing how the penalty has been calculated, along with any other appendices, such as a list of transactions tested. Each document should contain sufficient information so it can be read in isolation and refer the reader to other appendices for more detailed information. There is no need to duplicate details across all of the documents.

Always use the latest template provided in the Knowledge Library and use a blank template each time – do not use locally stored templates or cut and paste from previous or similar cases.

Always:

  • Use plain English and active language. In other words, ensure someone performs an action, so “Joe Bloggs gave Officer Smith a copy of the customer’s ID”, rather than “A copy of the customer’s ID was given to Officer Smith”.
  • Ensure acronyms are written in full the first time​ they are used.
  • Use bullets, numbering and sub-headings​ to improve readability.
  • Stick to the facts.
  • Always give the full name and job role when you introduce a person, such as Joe Bloggs, the sole director and nominated officer for the Business.
  • Use quotes where appropriate​ (although it is better to refer the reader to a particular response within another document, for example notes of meeting).
  • Anchor events in time (for example, Joe Bloggs emailed documents on 1 January 2022”).
  • State clearly what you did to establish the position, for example “I asked to see a list of sales for the Business between 1 June 2022 and 31 May 2023.”
  • Be succinct - use appendices to provide further evidence (for example transaction listings or results of records testing).
  • Be consistent. Follow the Writing and style guide for how to use dates and numbering etc.

Avoid:

  • Jargon and acronyms.
  • Long sentences and paragraphs.
  • Unnecessary adjectives (e.g. “really” or “very”).
  • Using the passive tense (e.g. “Documents were received last week”).
  • Complex or overly technical language.
  • Commenting on the facts.
  • Repetition or unnecessary narrative.

You may decide to issue a letter telling the business or individual you intend to impose a sanction. This provides them with an opportunity to consider your evidence and let you know if there’s any more information you need to consider. You must consider any representations received and adjust your final decision accordingly. See ECSH86030.

 

Authority to impose a sanction

The outcome of each case, including any decision not to impose a sanction where a breach has been identified, must be authorised – see ECSH85980.

There may be occasions where a breach occurs despite a business taking all reasonable steps and exercising all due diligence.. Where a situation occurs which is out of the business’s control, decisions makers may need to consider HMRC guidance relating to Reasonable excuse: contents (sharepoint.com). If a reasonable excuse exists and the breach was corrected immediately after the excuse ended, a sanction may not be appropriate.