Are HMRC AML late registration penalties fair?

I've written a blog article ....

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Hi guys, I have written a blog article about HMRC AML late registration penalties.  There is a complicated process for calculating these, which I have explained in the blog.  It is an attempt to be fair by laying down a detailed process to be followed, but it can result in some serious penalty figures.

There is a wider point.  HMRC do not want to be seen as a 'soft touch' as far as AML supervision is concerned. They are not keen on accepting for AML supervision sole practitioners or firms who have been refused AML supervision by one of the private sector bodies.  So while you may not love your AML supervisory body, do think carefully before jumping out of the frying pan!

The article by the way is at https://mlrosupport.co.uk/are-hmrc-aml-late-registration-penalties-fair/ .

David

Replies (14)

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By Justin Bryant
22nd Jun 2024 10:14

The PBs and HMRC just love this sort of thing. Picking on very easy soft targets and overzealously punishing them harshly (where essentially no harm has been done to anyone at all and no harm is likely to be done), rather than directing their resources and punishing powers at more difficult and deserving targets like tax evaders and R&D tax credit cowboys etc.

It's all just so they can then appear to be "tough" of course (and divert attention from being blamed for not actually picking on the above tough targets).

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Replying to Justin Bryant:
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By Justin Bryant
24th Jun 2024 13:20

To prove my point, here's a good recent example of this by a PB: https://www.lawgazette.co.uk/news/sra-liable-for-189000-costs-after-igno...

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Replying to Justin Bryant:
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By FactChecker
24th Jun 2024 13:45

... and the moral is ... if you're going to take a business to court, you need to think even harder than usual before proceeding if that business is a law firm!

But I do like the concluding comment from the tribunal:
‘It did not follow that the firm, having been found not culpable, should, in some way, have to pay costs for the SRA to make a point to the profession.’

.. almost as much as my fevered imagination was kicked into overdrive by the first 5 words of the next article: "Senior partner suspended over sex (on a desk with junior colleague)"!

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Replying to Justin Bryant:
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By Justin Bryant
26th Jun 2024 13:35
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By Sandnickel
22nd Jun 2024 11:03

"Are HMRC AML late registration penalties fair?"

No.

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By FactChecker
22nd Jun 2024 12:18

"HMRC do not want to be seen as a 'soft touch' as far as AML supervision is concerned. They are not keen on accepting for AML supervision sole practitioners or firms who have been refused AML supervision by one of the private sector bodies. So while you may not love your AML supervisory body, do think carefully before jumping out of the frying pan!"

Q1: Are HMRC really unable to distinguish between a person/business that has been "*refused* AML supervision" (by their PB) and the perfectly valid decision to *choose* registration via HMRC?

Q2: Is avoiding being seen as "a soft touch" their real concern, or more that they don't have the resources (possibly competence) to perform supervisory duties for a growing volume?
If the latter, how does that square with their bid to be THE overarching regulator (by cutting out the PBs)?

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Replying to FactChecker:
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By FactChecker
22nd Jun 2024 13:39

And having now read the Article (which is as always clearly set out and easy to follow), the answer is of course:
"Fair?
Well, consistent .. yes.
But, easy to understand (given that by definition most people will only investigate this once) .. no.
And, justifiable (as in is the penalty merited?), absolutely not!"

And, although these are civil penalties, it is ludicrous that each body can make up its own rule for calculation of penalties.

BTW to where are these fees (sorry, penalties) distributed?
Presumably not the operation of the 'police' supposedly enforcing it (otherwise they wouldn't need an extra 'admin' charge)?

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Replying to FactChecker:
David Winch
By David Winch
23rd Jun 2024 08:56

HMRC can and do contact the professional bodies where one of their members (or former members) seeks AML supervision from them - and will refuse to register anyone who they think would not comply with MLR if they were registered by HMRC. This can make it difficult to get AML supervision if you have 'fallen out' with a previous supervisor.

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Replying to davidwinch:
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By FactChecker
23rd Jun 2024 13:30

Thanks for the clarification.
So when you referred to "sole practitioners or firms who have been refused AML supervision by one of the private sector bodies" you intended to refer to "anyone who they (HMRC) *think* would not comply with MLR if they were registered by HMRC"?
I take your point about this being one of the (many) dangers of falling out with your PB, but if it's not restricted to those who have been formally refused by their PB then it's even more worrying - in that HMRC then have a life or death power over your business, even when you've done nothing wrong.

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Replying to FactChecker:
David Winch
By David Winch
23rd Jun 2024 14:52

FactChecker wrote:

HMRC then have a life or death power over your business, even when you've done nothing wrong.


Yes.
It is not immediately obvious but under Reg 59 MLR 2017 (amongst other things) "the registering authority [HMRC] may refuse to register an applicant for registration in a register maintained under regulation 54 [trust or company service providers, high value dealers, etc] or 55 [accountants, tax advisers, estate agents, etc] if ... the registering authority suspects, on reasonable grounds ... that the applicant will fail to comply with any of its obligations under ... these Regulations".
So if HMRC has reasonable grounds to suspect that in future your business will not satisfy its obligations under MLR 2017 then it can refuse to register you for AML supervision.
If you are not registered with a supervisory body then you cannot operate a business undertaking work which falls within the 'regulated sector'.
As an accountant or bookkeeper you might be able to get around this (legally) by getting yourself supervised by one of the professional bodies (if you can), but if you are, say, an estate agent I believe HMRC is your only option - so a refusal puts you out of business.
David
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Replying to davidwinch:
DougScott
By Dougscott
23rd Jun 2024 17:02

Presumably there would be a right of appeal against such an HMRC decision?

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Replying to Dougscott:
David Winch
By David Winch
23rd Jun 2024 18:22

Dougscott wrote:

Presumably there would be a right of appeal against such an HMRC decision?


Yes, the decision is subject to review and/or to appeal in accordance with MLR 2017, see Regs 94 and 99 in particular.
However I believe that HMRC's position is that if they refuse to register a business the application to register has been "determined" by them (albeit it may be subject to review and/or appeal) and so Reg 56(5)(b) no longer applies. Translating that into English - a person who has applied for AML supervision is effectively regarded as accepted (and so able to trade) pending a "determination" of their application. So this means the person has to cease trading while the review and/or appeal is conducted.
David
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Replying to davidwinch:
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By cbp99
24th Jun 2024 10:39

This seems fairly extraordinary. An estate agency could, it seems, be put out of business at the whim of an individual in that notoriously incompetent organisation, HMRC.

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Replying to cbp99:
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By Tom+Cross
24th Jun 2024 13:03

I'm quite definitely, with you, on this. I also find it extraordinary, although I am not at all surprised.
HMRC's record, in its "general activities" is quite appalling (along the lines of the proven misbehaviour of some of the incumbents, at The Post Office).
The very idea that HMRC can, at their whim, bring a business to its knees, seems quite perverse. However, having seen the decay in the civil service, during the last few years, as I say, I am not at all surprised. Just disgusted.

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