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HMRC internal manual

MLR1 Penalties Guidance

HM Revenue & Customs
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Penalties guidance: The MLR penalty process: Overview: Compliance Penalties Part 1 ASPs/TCSPs/EABs

In contrast to Money Service Businesses/High Value Dealers (MSBs/HVDs), Trust or Company Service Providers/Accountancy Service Providers/Estate Agency Businesses (TCSPs/ASPs/EABs) are normally paid a fee for the products or services they provide to their clients, and are primarily included in the Money Laundering Regulations 2007 (MLR) because they are gatekeepers, not because they themselves are a high risk of being used directly to launder cash. Any breaches are likely to result in potential money laundering taking place through their clients’ businesses, rather than directly through their own business.

For this reason we do not base the additional penalty on the amount they receive in fees for their products or services, which is their ‘culpable turnover’. We base it on the number of clients who used their products during the ‘relevant period’, when they failed to monitor their clients for MLR purposes, otherwise known as ‘relevant clients’. This ensures the size of any penalty is again geared to the degree of money laundering risk that has occurred as a result of the breach, and is therefore ‘proportionate’.

The additional penalty for ASPs/TCSPs/EABs is a fixed sum which can be increased, in proportion to the number of ‘relevant clients’, and is called a ‘scale charge’. The table of scale charges can be found at MLR1PP9000 

The more clients a non-compliant business has, the greater the risk that money laundering will take place. However some TCSPs/ASPs/EABs may only act on behalf of a small number of significant clients, who pay a large fee. So it would not be appropriate to apply the same scale charge to a business with a small number of significant clients than one with a larger number of small clients, paying a small fee, for limited services. Applying the same scale to both could result in a penalty which was not proportionate and dissuasive because it was too low in respect of the risk of money laundering by these significant clients.

In such cases therefore, when a TCSP/ASP/EAB has a small number of high paying clients, officers should suspend the penalty framework and consider an alternate method of calculating a penalty, in consultation with the MLR Policy team.

For more information on what officers must do when suspending the penalty framework see MLR1PP7160.