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Background

Where there has been a contravention of a relevant requirement, see ECSH82575, of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), HMRC may impose a financial penalty on a business, or an individual officer or a number of officers of that business.

Note:聽this can only be applied for any contraventions arising from 26 June 2017 when MLR 2017 came into effect and altered the previous position whereby a penalty could only be issued to the business.

Which officers of a business might be subject to sanctions?

鈥極fficer鈥� here has the meaning described in聽聽of MLR 2017. This is covered in ECSH45791.

When should this power be used?

Any sanction that HMRC takes under MLR 2017 must be effective, dissuasive and proportionate, see聽ECSH82575. MLR 2017 provides specifically for sanctions against an individual officer in the form of a prohibition of management. Other sanctions can also be applied when necessary.

Where an individual is an officer of the business at the time the contravention took place and is knowingly concerned in that contravention, HMRC may hold that individual liable for some or all of the financial penalty. Where there is more than one officer so concerned, we may find a group of individuals liable, equally or in accordance with their roles (their degree of culpability). For example, we may conclude that the board of a business are all liable, but the nominated officer (NO) and chairman in particular were at fault and are therefore subject to higher sanctions.

Therefore, depending on the circumstances it may be appropriate to:

• Impose the calculated penalty, either in full or only in part, on an officer or officers, or

• Apportion the calculated penalty between the business and an officer or officers.

Some circumstances in which the decision maker (DM) may find it appropriate to sanction officers could include:

• A non-compliant business is insolvent and/or unable to pay the penalty, it may be appropriate to seek to impose a penalty on those officer(s) knowingly concerned in the non-compliance. This is consistent with the principle that no-one should profit from non-compliant activity.

• There is a risk of contrived insolvency聽often known as 鈥榩hoenixism鈥� where a new business rises from the ashes of the old one with a new set of officers (or new corporate identity) but is effectively controlled by the same people. If this seems to be a risk, it may be more dissuasive to levy the whole or part of the penalty on the individual officers to dissuade others from getting involved.

• There is a history of non-payment聽if the business has a record of not paying penalties or their fees, it may be more effective and dissuasive to levy the whole or part of the penalty on the officer(s) knowingly concerned.

• There has been a personal gain聽where an officer has made a personal gain because of the contravention, consideration should be given to levying the penalty/part of the penalty against them as well as prohibiting them from management of any supervised business. 聽 MLR 2017 allows HMRC to issue a financial penalty as well as a prohibition on management.

How to calculate the penalty

Once the DM has decided that it is appropriate to impose a penalty (in full or in part) on an officer or officers, the starting point is to calculate the penalty in accordance with the framework for the relevant breach. 聽

Having determined whether, or not, an apportionment is appropriate and which officers are to be penalised the DM will then need to consider the degree of culpability of each officer and/or the business involved, in order to determine the amount to be apportioned.

The initial penalty calculation should have already been undertaken, which will have taken into account all the relevant factors within regulation 83. Therefore, any amount apportioned to the business is unlikely to need further adjustment.

The DM then needs to consider whether the amount apportioned to each officer is appropriate, taking into account all the factors within regulation 83. The penalty amount to be imposed can be increased or decreased as necessary.

The amount of the penalty imposed on an officer does not need to be equal to or lower than the penalty that would be charged on the business or another officer.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)