MLR1PP15030 - Type 1 penalties (compliance breaches): The starting point – Using ‘benefits gained’ or ‘scale charge’
To calculate the maximum penalty, different mechanisms are used depending upon the type of business. Impacted businesses are:
- Art Market Participants (AMPs)
- Bill Payment Service Providers (BPSPs)
- Money Service Businesses (MSBs)
- High Value Dealers (HVDs)
- Accountancy Service Providers (ASPs)
- Estate Agency Businesses (EABs)
- Letting Agency Businesses (LABs)
- Telecommunications, Digital & IT Payment Service Providers (TDITPSPs)
- Trust or Company Service Providers (TCSPs).
For AMPs, BPSPs, MSBs, HVDs and TDITPSPs, the benefits gained framework is used. Further informationon this framework can be found at MLR1PP16000.
For ASPs, EABs, LABs and TCSPs, breaches will be grouped. For each group of regulations breached, the business will be charged a flat rate of £5,000 plus a scale charge based upon the number of clients associated with the breach/es involved to calculate the starting penalty. This starting penalty is before any applicable reductions.
The scale charge is as follows:
1- 25 clients = £5,000
26-249 clients = £10,000
250 – 499 clients = £20,000
500 – 999 clients = £30,000
1,000 – 1,999 clients = £40,000
2,000 – 2,999 clients = £50,000
3,000 – 3,999 clients = £60,000
4,000 – 4,999 clients = £80,000
5,000 to 5,999 clients = £90,000
Each additional 1,000 clients £10,000
Type 1 Penalties that are calculated using the scale charge, will be liable for a penalty cap of 25% of the business’ gross profit in the preceding 12 month period, which will normally be the accounting period. It is important to note that this is normally the total gross profit from all business activity; including non regulated activities.
Please note that the potential abatements detailed on the following pages only apply to penalties levied under types 1 to 3. Penalties levied under type 4 do not attract these potential abatements.