MLR1PP7100 - Penalties Guidance: When to issue a penalty

A penalty will be the most appropriate sanction for the majority of regulatory breaches. It therefore follows that when the option of a warning letter has been considered and rejected, but the breaches are not so serious as to warrant either withdrawing fit and proper status (for TCSPs and MSBs) or a criminal investigation, a penalty should be issued. The correct level of any penalty must be determined with reference to the following guidance to ensure all penalties are in keeping with the purpose of our penalty regime

All civil penalties are discretionary and we will decide when a penalty is appropriate.

Regulation 42 of MLR 2007 and Regulation 11 of the Transfer of Funds Regulations 2007 (referred to as the Payments Regulation) both say that the supervisory authority may issue a penalty. The use of the word "may" allows us the discretion in deciding whether to issue a penalty or not.

The application of discretion does not mean it is our policy to issue repeated warnings for the same breaches. In practice this means that for the majority of regulatory breaches a warning letter will be followed by a penalty, when no significant improvement has been made by the business. The level of the penalty will be calculated using the civil penalties framework and may consist of a penalty notice with or without a financial charge or fine depending, on the specific circumstances. The correct method of calculating penalties is fully explained in MLR1PP8000