Penalties guidance: legislative background to this guidance
The Money Laundering Regulations 2007 came into force on 15 December 2007. These apply to:
- Money Service Businesses (MSBs)
- High Value Dealers (HVDs)
- Trust or Company Service Providers (TCSPs)
- Accountancy Service Providers (ASPs)
- Bill Payment Service Providers (BPSPs)
- Telecommunications Digital and IT Payment Service Providers (TDITPSPs)
- Estate Agency Businesses (EABs)
The Transfer of Funds (Information on the Payer) Regulations 2007 also came into force on 15 December 2007. These Regulations only apply to Money Transmitters. The UK Transfer of Funds Regulations is complimentary to the European Payments Regulation 2006 and both should be considered together. The Transfer of Funds Regulations gives us the authority to issue penalties or prosecute businesses for breaches of the Payments Regulation. In other words there is an essential link between the two.
Any reference in this guidance to the Payments Regulation or the Transfer of funds Regulations should be seen to mean the appropriate sections of both sets of legislation. Unless we are referring to a specific Regulation in the UK legislation the generic term ‘Payments Regulation’ has been adopted throughout this guidance to avoid confusion.
In a similar way we have adopted the generic term ‘Regulations’ to cover all three sets of legislation where this is appropriate.
Also, all references to ‘money laundering’ apply equally to money laundering and terrorist financing. This guidance only applies to business activities which are supervised by us for the purposes of the Regulations. Although we refer to MSBs/HVDs and ASPs/TCSPs/EABs throughout the guidance, any registered BPSPs/TDITPSPs must follow the same methodology for penalty calculation as that relevant to MSBs.
The purpose of the Regulations is to ensure businesses employ a range of measures and controls to reduce the risks that, the business, or its clients, could be used by money launderers or terrorists.
The ultimate purpose of the controls is to deter and detect money laundering activity and report any suspicions to SOCA. The role of the business is effectively to police their customers and clients. Our role is to ensure that the controls businesses have in place meet the requirements of the Regulations. Adoption of a risk based approach by both businesses and our Compliance staff is essential to both processes.
The Counter Terrorism Act 2008 (CT Act) came into force on 26 November 2008.
There are civil penalties and criminal sanctions for failure to comply with the CT Act Schedule 7. These include fines and imprisonment for up to two years.
Breaches of the CT Act are regarded as a serious matter. There are a range of sanctions in the CT Act for failure to comply with a direction that are similar to the sanctions for non compliance with the Money Laundering Regulations. The sanction used will depend on the facts on each case.
Where compliance officers identify a failure by a business to comply with a direction issued under the CT Act they should send a full report detailing all the facts of the case to the Anti Money Laundering Supervision (AMLS) Policy Team who will consult with HM Treasury and consider what sanction is appropriate in the circumstances.