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HMRC internal manual

MLR1 Penalties Guidance

Penalty guidance: the criteria for penalty reductions: introduction

The first things to consider when applying the reduction table to the maximum penalty are the reasons for the breaches.

When a breach has been identified it may normally be a result of neglect, negligence or a failure to take reasonable steps to comply with the Regulations. The business will have either failed to do what the Regulations stipulate, or will have failed to apply the Regulations in accordance with our anti-money laundering guidance, or guidance produced by external bodies, which has our approval, such as the CCAB Guidance for ASPs.

A breach that has arisen as a result of negligence will have occurred because a business has not exercised the level of due diligence in applying the Regulations, which as supervisor we believe the Regulations say it should have applied.

Regulation 76 (4) specifies that we must not impose a penalty where we are satisfied that all reasonable steps were taken to ensure the requirements of the Regulations were complied with.

This in practice means that before a breach can be treated as neglect, we will need to establish that there was some degree of culpability. Further guidance can be found in MLR1PP5250 MLR1PP6100 MLR1PP7100.