MLR1PP8400 - Penalties guidance: identifying the breaches

When calculating the additional penalty for any business, the first step is to establish:

• to what degree the business has failed to comply with the Regulations following anti money laundering guidance
• if issuing a penalty is the most appropriate action to take. See MLR1PP7100

Several weaknesses and breaches may have been identified at the visit, but a penalty might not be appropriate for all of these.

For example, following a previous visit a warning letter was issued for failing minimum customer due diligence checks. The warning letter told the business that certain improvements had to be made within a specified timescale. During the second visit it became clear that the business had not made these improvements and was now in breach of the Regulations. Under these circumstances a penalty is the appropriate sanction for this continued breach.

During the second visit it was also established that the business had failed to maintain and update its internal instructions and procedures. This was a new failing which was not identified during the previous visit. If this new failing is not corrected it would result in a breach of the Regulations. This did not have a serious MLR impact so the business should be given the opportunity to correct the failing and this should not be treated as a breach on this occasion. This means that a penalty should be issued for the failed customer due diligence and a warning should be issued for failing to update internal procedures. In practice the penalty warning will be included with the pre-penalty and penalty notice under most circumstances. See MLR1PP11050