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HMRC internal manual

MLR1 Penalties Guidance

Penalties guidance: the additional penalty and different business sectors: introduction

The additional penalty is calculated differently for MSBs/HVDs and TCSPs/ASPs/EABs. This is because of the different vulnerabilities to money laundering which are likely to arise as a result of regulatory breaches within these business sectors. The basic difference is that regulatory breaches by MSBs and HVDs mean that their actual business income or turnover will potentially include proceeds of crime which may have been successfully laundered through their business when the Regulations are not correctly applied.

The level of the additional penalty for MSBs and HVDs is therefore based on the turnover which may have been exposed to money laundering when they breached the Regulations. The amount exposed to money laundering is referred to in this guidance as the culpable turnover. For MSBs and HVDs the additional penalty will be based on 20% of the culpable turnover.

In contrast TCSPs/ASPs/EABs will normally be paid a fee for the products or services they provide to their clients.

Although the fees could still have potentially been paid out of the proceeds of crime the main risks for TCSPs/ASPs/EABs if they breach the Regulations will be a failure to:

  • identify suspicious activities which should be reported to NCA
  • identify the source of criminal and terrorist funding
  • identify the beneficial owners of businesses
  • provide law enforcement agencies with information about their clients which they may need to investigate money laundering offences

This effectively means that failures expose the business, the TCSP/ASP/EAB itself, to becoming involved in their clients’ money laundering activities.

Because we will not always have access to the third party Accounts of TCSPs/ASPs/EABs client’s it will not always be possible to establish the portion of business income potentially exposed to money laundering as a result of any breaches. The amount of money potentially exposed to money laundering as a result of the breaches will however have a direct relationship to the number of clients who were not subjected to the controls imposed by the Regulations.