Monday, October 26, 2020

Failure to Comply with Money Laundering Regulations Sees 91% Rise in HMRC Fines

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The value of fines imposed by HMRC for failures to comply with anti-money laundering obligations jumped 91% last year, says fscom, the financial services regulatory consultancy.

Research by fscom says the value of fines imposed on businesses increased to £2.3m last year, up from £1.2m in 2016/17 (see graph below). The average size of fines increased to £3,450, up from £1,310, over the same period.

fscom says HMRC, other AML supervisory bodies and law enforcement are under growing pressure to be seen cracking down on money laundering and businesses can expect fines to continue to rise. Recent figures from the Home Office estimate that as much as £90bn is laundered through the UK each year.

HMRC made 1,300 ‘interventions’ into businesses last year

HMRC has made over 1,340 interventions into businesses suspected of money laundering failures over the last year, and 5,000 in the last five years (an intervention involves HMRC visiting or calling a business to check it is complying with Money Laundering Regulations). During an intervention, HMRC will assess the anti-money laundering controls in place and make suggestions for improving them. An intervention could result in a HMRC imposing a fine or possibly rescinding the firms registration effectively prohibiting them from operating.

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HMRC and the FCA, as well as other supervisory bodies, are responsible for ensuring businesses comply with Money Laundering Regulations. HMRC is the supervisory body for money service businesses in general although some are supervised by the FCA due to their increased regulatory permission profile.

AN INTERVENTION COULD RESULT IN A HMRC IMPOSING A FINE OR POSSIBLY RESCINDING THE FIRMS REGISTRATION EFFECTIVELY PROHIBITING THEM FROM OPERATING.

Jamie Cooke, Managing Director at fscom, says: “Cracking down on money laundering is at the top of the Government’s agenda and HMRC is responding by increasing the value of fines it hits businesses with.”

“Businesses that deal with a high volume of transactions and can remit payments globally; such as money service businesses, look exposed to anti-money laundering enforcement action due to the increased risk of the service they provide.”

“If HMRC finds compliance failures at businesses it supervises then it will not hesitate to issue fines. Although the average size of these fines may seem small, they can be crippling for early-stage fintech businesses that have limited cash reserves.”

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Cooke adds: “Simple steps can be taken to ensure businesses don’t fall foul of regulations. A regular review of the anti-money laundering controls and checks in place during a client onboarding process is an obvious starting point. It is always preferable to prevent the problem coming into the business than dealing with it later, hence the importance of strong onboarding measures.”

Since April 2010, a total of 101 individuals have been convicted of money laundering under the Proceeds of Crime Act as a result of HMRC’s investigations.

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