Anti-money laundering regulations are designed to identify and prevent money laundering through illegal means. As part of these regulations, the onus is on businesses to carry out checks on their customers to ensure money isn’t being laundered.
But what happens to a business if they are found not to be adhering to the regulations?
If a business has breached the regulations, it can face civil penalties or criminal sanctions.
The penalty for non-compliance
If a business is required to adhere to the regulations, it must register with HMRC, which is a supervisory body for money laundering regulations. HMRC then works with other enforcement agencies and government departments to tackle economic crime, including anti-money laundering regulations breaches.
The penalties that HMRC impose must be appropriate for the level of the breach that has occurred, meaning it must be proportionate to the failure and deters future non-compliance.
With this in mind, there are six different things the amount of the penalty will take into account:
- The reason for non-compliance
- The seriousness of the offence
- The compliance history of the business
- The relative size of the business
- Whether the business has received benefits
- The amount exposed to money laundering
HMRC will also consider whether the business made an unprompted disclosure of the breach before they were contacted regarding it.
Unprompted disclosures can lead to a reduction in penalties, so it can be useful to keep in mind.
How much are the penalties?
Because the penalties are proportionate to the business and the breach that has occurred, there is no fixed figure that will be charged. However, HMRC has provided a list of the administration fees that can be charged.
For example, if the non-compliance is related to record keeping, the administration charge is £1,500, or equal to the value of the penalty, whichever is less.
However, for penalties such as failing to register with HMRC, the administration charge is £350.
For more information on the administration charges, take a look at the HMRC website.
What are the other non-financial penalties that can be applied?
As mentioned above, civil penalties and criminal sanctions can be applied to a business that has breached the regulations.
These other penalties can include:
- Issuing a censuring statement
- Suspending registration
- Cancelling the registration
- Deciding that a relevant person within a business is no longer fit
- Obtaining a court injunction
- Referring a case for criminal investigation and potential prosecution
Can a business make an appeal?
If the business disagrees with the decision made by HMRC, it is possible to appeal it.
For example, if HMRC refuses to register the business under the money laundering regulations but still attempts to impose a penalty for not being registered.
Typically, when HMRC issues a decision, it will offer for a review to be carried out by an officer not involved in the original decision. If the business still is not satisfied, it can appeal to a tribunal.
Recent examples
HMRC regularly publishes lists of businesses that have faced penalties for their non-compliance, listing the regulations they breached, the penalty imposed and their appeal status.
To view the list, check out the HMRC publication.