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HMRC internal manual

Money Laundering Regulations: Compliance

Dealing with non compliance: Identifying the impact of regulatory failings and breaches - the burden of proof

Before officers can issue a penalty, there must be sufficient evidence that a breach has taken place.

The standard of proof required for all civil penalties is proof on a balance of probabilities. This means that on the evidence, it is more probable than not that the failure was deliberate or due to carelessness .The general burden of proof lies with HMRC as supervisor. This means officers must have sufficient evidence before determining that a breach has taken place.

With the introduction of the new Tribunal system in April 2009 we have had to adopt a higher standard of evidence for penalties which are based on an additional penalty.

In practice this means more robust evidence will be required for large escalated penalties or when we are considering cancellation of fit and proper status for continued non-compliance.

In the more serious civil cases the nature, quality and weight of evidence to satisfy the civil standard of proof (i.e. tip the balance of probabilities) is increased accordingly and because we are empowered to issue unlimited civil penalties the evidential burden is shifted towards the criminal standard of beyond reasonable doubt.

This means we must first consider two fundamental questions before we can determine that a breach has take place.

  • What evidence do we hold; will it support a reasoned position that reasonable steps to comply were not taken by the business?
  • What is the potential impact of the breach? When considering if there has been a failure under Regulation 20 to adopt a risk based approach we need to have considered the impact of any failings in the risk based approach as part of our evidence.

If there is not sufficient evidence then our response should always be to issue specific written advice or a warning letter indicating what measures need to be put in place by the business to improve compliance. These should be clearly explained so that they set a benchmark and there is as little scope as possible for disagreement about what should be done before the next compliance visit.

Breaches of the Payments Regulation are subject to the same burden of proof with the same range of sanctions as the MLRs.