Money transfer firm MT Global has received a record fine of £23.8m after it failed to carry out risk assessments or adequate due diligence procedures in the period between July 2017 and December 2019.
Each year HMRC publishes a list of businesses who have failed to comply with their MLR obligations in the previous 12 months. In addition to issuing significant fines HMRC can also suspend or cancel a business’s anti-money laundering registration, which in most cases will mean they can no longer trade.
The latest list is the third such report issued by HMRC and clearly shows that level of penalties for regulatory failures is increasing, as total penalties in the initial period from 26 June 2017 to 31 July 2018 were only £2.4m.
A delay in application of maximum penalties can often be expected when a new regime is introduced. This could explain the significant increase in MLR penalties issued over the three years since their 2017 introduction.
Similarly, up to this point we have yet to see HMRC fully engage all the provisions of the corporate criminal offence (“CCO”) of failure to prevent tax evasion, which came into force on 30 September 2017. A failure to prevent facilitation of tax evasion constitutes a strict liability criminal offence and can result in an unlimited fine for the company or partnership, as well as a criminal prosecution.
In the last six months, HMRC’s tone in relation to CCO has changed. It is moving forward with criminal prosecutions, and up-to-date statistics are being released on a regular basis. Although the prosecutions are yet to reach the courts, and therefore the identity of the prosecuted entities remains unclear, we know that they range from small business to some of the largest in the UK, operating in a variety of sectors.
Given the size of the penalty issued to MT Global it is clear HMRC is now intent on seeking penalties under the MLR. We may therefore see a steady stream of larger fines for those businesses that are found to be non-compliant with the anti-money laundering provisions. It also seems likely that we will see HMRC pursuing more criminal convictions and issuing penalties under the CCO legislation.
HMRC’s latest estimates show the tax gap to be at £31bn. This together with national debt levels, suggests HMRC will be looking to maximise all opportunities to charge financial penalties where appropriate in future. It is therefore more important than ever that all businesses have adequate policies and procedures in place to ensure they are fully compliant with their regulatory obligations.