MLR1PP6100 - Penalties Guidance: When to issue a warning letter: Introduction

There is no legal requirement to issue warning letters. This means that a penalty may be appropriate even on the first occasion that a business has failed to comply, if the impact of the non-compliance is serious or the non-compliance was deliberate.

Under all other circumstances a warning letter should be issued to advice businesses what steps they are expected to put in place in order to become compliant before a penalty is issued.

In practice a warning letter will normally be issued for the first breach of the 2007 Regulations when the specific requirement in these Regulations was not in the 2003 Regulations. For example, failure to fully identify risks and apply risk based customer due diligence measures.

If a warning letter was previously issued under the 2003 Regulations and a parallel breach of the 2007 Regulations has occurred then a penalty rather than a warning letter should be considered. For example where there was a failure to keep records before 15 December 2007 and this continued despite a warning letter being issued. Parallel breaches are fully explained in MLR1PP7400 

If the weaknesses which have lead to a breach are not corrected the severity of the continued failure must be considered together with all the other relevant facts to determine if a penalty warning or penalty is the most effective way to encourage future compliance.