Penalties guidance: TCSPs/ASPs/EABs: determinations of the additional penalty
When we cannot obtain all the details we need to calculate the additional penalty for ASPs/TCSPs/EABs a determination should be made if one or more of the following circumstances apply:
- the business will not co-operate in providing the details
- the records or Accounts are not available
- it is not possible to calculate the scale charge for some other reason
Where possible, determinations should be based on the number of relevant clients in the relevant period, rather than on the turnover of the business. The precise way this is done will depend on the specific circumstances. Where the records are not available for genuine reasons an attempt should be made to agree a reasonable estimate of the number of clients. There must however be some evidential basis for the estimate. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
If the determination is being made because of non-cooperation by the business, then the scale charges should be based on the total number of relevant customers if this can be established. A reasonable determination of this figure could be based on the number of clients on the books. If this figure, or a reasonable estimate can be established, consideration will have to be given to the number of additional clients in the relevant period with which the business conducted transactions outside a business relationship (a one off, single or occasional transaction). A reduction should normally be given for a number of inactive clients on the books which could be based on a percentage of clients. This will be dependent however on the business providing some degree of evidence to verify these details.
Where it is not possible to use any other method the additional penalty for TCSPs/ASPs/EABs should be based on 20% of the relevant turnover of the business in the relevant period and a determination should be made following the guidance in MLR1PP8570 which explains how to make a determination of culpable turnover for MSBs and HVDs. The main difference is that it will not be possible to allow a deduction for any part of the relevant turnover which was deemed not subject to the breaches for the following reason.
If it is possible to identify which fees were from clients who were subject to the Regulations, it would be possible to determine the number of relevant clients, and a determination based on the scale charges could be used. This means when a determination is based on turnover for ASPs/TCSPs/EABs, all the relevant turnover in the relevant period will be culpable for the purpose of the determination. A deduction should be allowed however for non-relevant turnover, generated by non-regulated activities, if this can be established.
When a determination has been made Compliance Officers should ensure that the basis for this is recorded.
It is important to remember that a determination can be replaced with the accurate figures, if these are subsequently provided, in a form that can be verified. Businesses should normally submit these within 30 days of the pre-penalty notice being issued.