Money Laundering Regulations Breaches

HMRC issue fines for breaches

Obliged firms play a vital role in the financial systems of the UK’s economy. They facilitate transactions of significant importance daily. However, that also exposes them to being used for illegal purposes. Therefore, they must always act with integrity and abide by the rules. One of the regulations that they must pay special attention to is the Anti-Money Laundering Regulations.

For professional firms that provide defined services, the regulations require their anti-money laundering systems and controls meet the UK’s anti-money laundering regime’s requirements. The regulations require these firms to ensure that relevant employees are kept aware of the firms’ policies, controls and procedures and are accountable for their actions.

However, if a firm fails to meet its obligations under the 2017 regulations, it can face civil penalties or criminal sanctions for any breach. Firms now must also be aware of the corporate criminal offence of `a failure to prevent the facilitation of tax evasion`. This legislation will make sure that banks and other obliged entities are held to account for the actions of their employees. Staff screening, supervision and training are now a very important part of compliance to the Regulations.

Penalties for non-compliance

HMRC as one of the main supervisors under the UK regime, has strict penalties for non-compliance of AML regulations. These measures are to encourage businesses to comply with these regulations. Usually, HMRC decides on the action to take against each breach separately.

The amount of penalty charged by the HMRC will consider the following factors:

–          The reason for non-compliance.

–          The seriousness of the offence.

–          The business’s compliance history.

–          The business’s relative size.

–          The benefits received.

–          The amount exposed to money laundering activities.

HMRC also allows reductions in the penalty if the business makes an unprompted disclosure for breaching the regulations. Businesses also need to pay a £1,500 penalty administration charge along with the penalty for breaches.

Non-compliance with the regulations means that businesses could be committing both civil and criminal offences and face fines, sanctions, being removed from business or a criminal charge.

HMRC does allow businesses to appeal against the decision of penalties. They will also carry out a review through an unrelated officer. During this time, the penalised business cannot carry out any regulated activities. If it does not agree with the review’s outcome, the business can also appeal to a tribunal.

Recent examples

HMRC regularly publishes lists of businesses that breached strict AML regulations. Among those names, a money transfer company, MT Global Limited, received a record highest fine issued by HMRC. According to the HMRC, the company had many breaches, the following are some examples of areas of concern.

–          Risk assessment and associated record-keeping.

–          Policies, controls and procedures.

–          Fundamental customer due diligence measures.

For these breaches, HMRC fined the company a record £23.8 million. MT Global Limited has had several significant breaches between July 2017 and December 2019. The company also faced a cancellation of its registration effective from 15th May 2020.

Apart from this specific company, the HMRC also completed 2,000 other interventions during the 2019-2020 period. It found a total of 89 non-compliant businesses and individuals and issued penalties totalling £9.1 million.

Some other companies that the HMRC fined for similar breaches during the period include Robert Holmes & Company, fined £6,591. Similarly, the list also consists of Landmark Sales and Letting Ltd Estate Agency Business, fined £5,250. Lastly, it also includes Company Address Services Ltd Trust, fined £2,500.

None of the four companies mentioned above has appealed against these fines.