Penalties for failing to comply with Money Laundering Regulations
If you follow HMRC's Money Laundering Regulations guidance you can be assured that you will be protected from penalties and prosecution. However, if your business doesn't comply with the Money Laundering Regulations, HMRC can take various measures which range from warning letters to criminal prosecution.
The aim of these measures is to encourage you to comply with the regulations. Normally, the first step if HMRC discovers that you are not complying is to explain what you should be doing and provide you with guidance, advice and information. At the same time HMRC will issue you a letter warning that they may impose a penalty if you don't comply in future.
If you still fail to comply with the regulations, HMRC will consider whether to impose a penalty. If they do impose a penalty and you continue to be non-compliant, HMRC can impose further penalties, increasing the amount of the penalty each time.
If imposing penalties is not enough to make you comply with the regulations HMRC will consider criminal prosecution.
The penalties and criminal offences for failing to comply with Money Laundering Regulations
A penalty that HMRC imposes for failing to comply with the regulations must be appropriate for the failure and at a level that:
• is effective in encouraging compliance
• is proportionate to the failure
• dissuades non-compliance
The amount of the penalty will take account of the:
• reason for non-compliance
• seriousness of the offence
• compliance history of the business
• relative size of the business
• amount exposed to money laundering activities
To encourage compliance, HMRC will allow reductions to the penalty amount when you make an unprompted disclosure that you have breached the regulations, and you include an undertaking specifying how you intend to change this by becoming fully compliant with them. An unprompted disclosure means that you must contact HMRC before they contact you in respect of any type of enquiry or intervention.
Published March 2013