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


Introduction 

This financial penalty framework has been in place since the 1 April 2020.  

Financial penalties are just one of the sanctions 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 decision maker (DM) should ensure that the decision to issue a penalty is: 

  • Supported by valid and clearly articulated reasoning/rationale. 

  • Based on either The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) or the Money Laundering Regulations 2007 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 DM has considered all of the factors in regulation 83 MLR 2017 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 – money service businesses, high value dealers and art market participants), see ECSH82785. 

  • Type 1 (compliance breaches - scale charge – accountancy service providers, trust or company service providers, estate agency business and letting agency businesses), see ECSH82790. 

  • Type 2 (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. 

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 appropriate and why the amount being imposed is appropriate. All of the relevant factors of the case must therefore be taken into account and documented within the appropriateness review, along with consideration of the relevant factors within regulation 83(1) MLR 2017 see ECSH82625. 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. Further information on these can be found here.