Warning over money laundering obligations as HMRC reveals crackdown figures

HM Revenue and Customs revealed it issued 336 penalty notices to UK companies between April and September last year for breaches of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

The regulations form part of the UK’s anti-money laundering, counter-terrorist and counter-proliferation financing framework, and place obligations on private companies working in areas that present a higher money laundering risk.

These obligations include reporting requirements, registering for money laundering supervision, risk assessments and implementing procedures designed to mitigate money laundering risks, including customer due diligence measures and staff training, among others.

HMRC, which is responsible for monitoring compliance with the regulations, has the power to take enforcement action against companies that fail to comply with the regulations, including issuing warning letters, imposing civil penalties or, in more serious cases, referring the matter for criminal prosecution.

More than 300 penalties have been imposed for failures by companies to register for HMRC supervision at the required time, with the remaining 33 issued for (amongst other things) companies which failed to conduct risk assessments, did not have anti-money laundering controls or staff training in place, or had failed in their due diligence measures.

Tom Stocker, a corporate crime expert with Pinsent Masons, said the figures underlined how enforcement through fines rather than court action is HMRC’s preferred approach.

“While the breaches are all criminal offences under the regulations, data shows that HMRC’s preferred enforcement option is to proceed by way of civil penalty, rather than criminal prosecution,” he explained.

“Higher fines are increasingly evident for substantive failures in customer due diligence, including a fine of £28,126 for failing to conduct to diligence, as well as failing to have in place correct policies, controls and procedures and to apply for registration at the required time.”

The highest fine issued by HMRC during the enforcement period was £104,000 for a failure to apply for registration at the required time, with other large fines issued including ones for £36,400 and £52,000. On average, companies hit with penalty notices for failure to register faced a fine of £5,500, with three of those being appealed.

Rachel Trease, a regulatory risk expert with Pinsent Masons, warned the results showed the dangers for businesses in failing to register with HMRC properly in line with their AML obligations.

“The statistics published by HMRC show that that the vast majority of civil penalties relate to a failure by businesses to register with HMRC as an anti-money laundering supervisory authority, with eight of the top ten largest penalties relating to a failure to register,” she said.

“Trading in the regulated sector while unregistered is a criminal offence. The number of penalties imposed and the value of the penalties – in many cases in the tens of thousands of pounds and, in one case, in excess of £100,000 - serves as a reminder that HMRC takes non-compliance with the money laundering regulations seriously.

“Firms falling within the remit of HMRC supervision include estate agents, letting agencies, accountants, trust and company service providers, art market participants, high value dealers (those handling cash payments for goods totalling 10,000 euros or more on a single transaction or linked transactions), money services businesses, and telecommunications, digital and IT payment service providers.

“Business in these sectors are well advised to assess their registration requirements under the regulations.”