MLR1PP8150 - Penalties guidance: the starting penalty for compliance breaches

For all penalties, other than registration penalties, the total starting penalty consists of two elements:

• the fixed starting penalty, which is currently set at £5000

The starting penalty where there are two or more groups of related breaches should be £5,000 per group of related breaches

The starting point for most penalties has been set at £5,000 to ensure that these penalties are dissuasive.

The £5,000 starting point however, does not apply to late registration breaches. Late registration breaches are based on a fixed penalty fee and any unpaid fees by the business. See MLR1PP9410

The starting penalty for failure to notify changes in registration details is £5,000 but there is no additional penalty. See MLR1PP9410

• the additional penalty which takes into consideration what was exposed to money laundering by the breaches. This is calculated differently for MSBs/HVDs and ASPs/TCSPs/EABs. See MLR1PP8300

The additional penalty is added to the £5,000 fixed starting penalty to produce a maximum penalty for compliance breaches. One important point to remember, the maximum penalty amount may be restricted by the penalty cap. See MLR1PP9150

The reason for a fixed starting penalty and for a penalty cap is to produce an appropriate penalty which is dissuasive and proportionate. The penalty cap will ensure that the penalty will be in proportion to a business’s profits.

The fact that the penalty cap may be applicable means that the first thing Compliance Officers should consider is the business’s gross profit in the preceding 12 months. See MLR1PP9200

If this is less than £50,000, the maximum penalty for HVDs/MSBs will always be capped at £5,000 (10% of £50,000). So under these circumstances there is no need to calculate an additional penalty as it will not be applicable. See MLR1PP9150.