MLR1PP9010 - Penalties Guidance: Applying the scale charges

For example, breaching the regulations meant that 400 clients in a 7 month period handled funds which were potentially the proceeds of crime. The scale charge for this number is £5,000. The business however only had 900 relevant clients in a 12 month period. This means that an additional scale charge must be considered. The additional scale charge would be £3,000 for this number of clients in a 12 month period. The total scale charge should therefore be £8,000 (£5,000 plus £3,000). The uncapped starting penalty in this case would therefore be £13,000, which is the scale charge plus the minimum penalty of £5,000.

In this case the low numbers are simply because it is a small business and not a large business with a small number of high risk clients.

On average the gross profit generated by each client was only £90. In other words the gross profit was £81,000 in total. The penalty will therefore be capped at £8,100. This means that not only has the additional scale charge of £3,000 been cancelled out by the built in taper in the penalty cap; an additional £1,900 from the cumulative scale charge has been cancelled by the penalty cap taper.

To put it simply, the starting penalty will be 10% of the gross profit or £8,100. After deducting the minimum penalty of £5,000 the scale charge penalty is capped at £3,100. Because this is less than the scale charge for 400 clients of £5,000 neither the scale charge nor additional scale charge will apply.

This illustrates why it is always best to calculate the maximum or capped penalty first. See MLR1PP9150