MLR1PP10400 - Penalty Guidance: Compliance history

In addition to considering the reasons why a breach has occurred, the compliance history of the business is another important criterion for determining the reductions we are prepared to allow. Because the penalty framework is based on escalating penalties, smaller reductions will be given when a second or third penalty is issued for related breaches. In general, where the failing was not deliberate, a warning letter will be issued for the first failing or breach. If this is not then corrected, a first penalty notice will be issued. Because this is the first penalty a 70% reduction to the starting penalty will normally be given. If the failings are still not corrected, a 50% reduction will normally be given for the second penalty, and a 30% reduction for the third. There will not be any reductions, if further penalties are required.

When determining the compliance history we will take account of any penalties and warnings issued under previous Money Laundering Regulations. If a business has already received penalty notices for parallel breaches under previously Regulations, they will be counted as breaches when considering the size of any reduction.

If however the failing is corrected but there is a subsequent breach of an unconnected Regulation, the unconnected breach will normally be treated as a new breach and the full reduction will be given.

Account must also be taken of when a period of non-compliance with related or parallel breaches is broken by a period of full compliance. The penalty escalator will be adjusted to account for this in accordance with the following table. This means that if a breach falls outside of these periods it should not be treated as a relevant breach.

For example, after the third Compliance Visit the second penalty was issued with a reduction of 50%. At the next visit, 14 months later, the business was compliant but at the following visit 6 months after this, the business had reverted to its non-compliant behaviour. Under these circumstances the penalty escalator will be frozen and even though this is the third penalty a reduction of 50% will be given because the business did become compliant for a period of time. If the gap when the business was compliant exceeds three years from the date of the last penalty notice, any new penalty will be treated as the first penalty. If the gap exceeds 5 years it should be treated as a new breach.