“Power to impose civil penalties: fines and statements 76. —(1) Paragraph (2) applies if a designated supervisory authority is satisfied that any person (“P”) has contravened a relevant requirement imposed on that person. (2) A designated supervisory authority may do one or both of the following— (a) impose a penalty of such amount as it considers appropriate on P; (b) publish a statement censuring P. … (4) A designated supervisory authority must not impose a penalty on P under this regulation for contravention of a relevant requirement if the authority is satisfied that P took all reasonable steps and exercised all due diligence to ensure that the requirement would be complied with. … (6) In deciding whether P has contravened a relevant requirement, the designated supervisory authority must consider whether at the time P followed— … (b) any relevant guidance which was at the time— (i) issued by the FCA; or (ii) issued by any other supervisory authority or appropriate body and approved by the Treasury. … (8) For the purposes of this regulation— (a) ‘appropriate’ means (other than in references to an appropriate body) effective, proportionate and dissuasive; (b) ‘designated supervisory authority’ means the FCA or the Commissioners.” (a) impose a penalty of such amount as it considers appropriate on P; (b) publish a statement censuring P. … (b) any relevant guidance which was at the time— (i) issued by the FCA; or (ii) issued by any other supervisory authority or appropriate body and approved by the Treasury. … (a) ‘appropriate’ means (other than in references to an appropriate body) effective, proportionate and dissuasive; (b) ‘designated supervisory authority’ means the FCA or the Commissioners.”
“The Commissioners: disciplinary measures (procedure) 83. —(1) When determining the type of sanction, and level of any penalty, to be imposed on a person (“P”) under regulation 76 or 78, the Commissioners must take into account all relevant circumstances, including where appropriate— (a) the gravity and the duration of the contravention or failure; (b) the degree of responsibility of P; (c) the financial strength of P; (d) the amount of profits gained or losses avoided by P; (e) the losses for third parties caused by the contravention or failure; (f) the level of co-operation of P with the Commissioners; (g) previous contraventions or failures by P; and (h) any potential systemic consequences of the contravention or failure. … (2) Where the Commissioners decide to impose a penalty or publish a statement under regulation 76….the Commissioners must give P a notice in accordance with paragraph (3). (3) A notice must be given of— (a) the Commissioners' decision— (i) to impose a penalty, and the amount of the penalty; (ii) to publish a statement, and the terms of the statement;…” (a) the gravity and the duration of the contravention or failure; (b) the degree of responsibility of P; (c) the financial strength of P; (d) the amount of profits gained or losses avoided by P; (e) the losses for third parties caused by the contravention or failure; (f) the level of co-operation of P with the Commissioners; (g) previous contraventions or failures by P; and (h) any potential systemic consequences of the contravention or failure. … (a) the Commissioners' decision— (i) to impose a penalty, and the amount of the penalty; (ii) to publish a statement, and the terms of the statement;…”
“Publication: the Commissioners 85. —(1) Where the Commissioners give a notice under regulation 83, the Commissioners must publish on their official website such information about the matter to which the notice relates as they consider appropriate, subject to paragraphs (2) to (8)….”
“(4) The tribunal hearing an appeal under paragraph (1) has the power to— (a) quash or vary any decision of the Commissioners, including the power to reduce any penalty to such amount (including nil) as the tribunal thinks appropriate; and (b) substitute the tribunal's own decision for any decision quashed on appeal.” (a) quash or vary any decision of the Commissioners, including the power to reduce any penalty to such amount (including nil) as the tribunal thinks appropriate; and (b) substitute the tribunal's own decision for any decision quashed on appeal.”
“The next step is to look at the business’s gross profit. The figure required is the most recent annual gross profit as penalties will be capped depending upon the amount of this figure. The purpose of this step is the meet the requirements within Regulation 83(1)(c) MLR 2017 to consider the financial strength of the business.”
“In determining whether the penalty amount is appropriate the decision maker (DM) needs to take into account the remaining factors within Regulation 83. If the DM considers the penalty amount is not appropriate, then they should adjust the amount of the penalty accordingly.”
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“Our client believes that the level of penalty is out of proportion to the failure to re-register for AML, and also that HMRC sent reminders by the Government Gateway which is not the way any of (sic) clients would expect to be contacted, instead of by post or email which is the normal method for businesses They are also concerned that any publication of this will have a detrimental and financial affect (sic) on their business in the local community.”
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of the state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
“78. A1P1 does, as it states clearly, permit the state to enforce laws to secure the payment of taxes or penalties. It is well established however that any interference with property which is justified on those grounds must satisfy the requirement of proportionality, that is that there is a reasonable relationship of proportionality between the means employed and the aim sought to be realised. 79. The Upper Tribunal has previously considered the question of proportionality in the context of the VAT default surcharge regime in HMRC v Total Technology (Engineering) Limited[2012] UKUT 418 (TCC) . In that case the Upper Tribunal referred at [11] to what Simon Brown LJ had said in International Transport Roth GmbH v Home Secretary[2003] QB 728 at [26], setting out the test for assessing proportionality in the context of a scheme which imposed significant penalties on lorry drivers and haulage companies who intentionally or negligently allowed clandestine immigrant entry into the United Kingdom as follows: “…. it seems to me that ultimately one single question arises for determination by the court: is the scheme not merely harsh but plainly unfair so that, however effectively that unfairness may assist in achieving the social goal, it simply cannot be permitted? In addressing this question I for my part would recognise a wide discretion in the Secretary of State in his task of devising a suitable scheme, and a high degree of deference due by the court to Parliament when it comes to determining its legality. Our law is now replete with dicta at the very highest level commending the courts to show such deference.” 80. The Upper Tribunal made further observations on Simon Brown LJ’s judgment at [53] to [55] as follows: “53. It is, however, important also to read what Simon Brown LJ said about proportionality later in his judgment. He referred at [51] to the speech of Lord Steyn in R (Daly) v SoS for the Home Department[2001] 2 AC 532 at [27], referring to the three-stage test adopted by the Privy Council in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing[1999] 1 AC 69 in relation to determining whether a limitation (by an act, rule or decision) is arbitrary or excessive: “whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective”. 54. Then, at [52] Simon Brown LJ said this: “It is further implicit in the concept of proportionality, however, that not merely must the impairment of the individual’s rights be no more than necessary for the attainment of the public policy objective sought, but also that it must not impose an excessive burden on the individual concerned.” 55. He went on to cite from James at [50]: “Not only must a measure depriving a person of his property pursue, on the facts as well as in principle, a legitimate aim ‘in the public interest’, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised. This latter requirement was expressed in other terms in the Sporrong and Lönnroth judgment by the notion of the ‘fair balance’ that must be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights. The requisite balance will not be found if the person concerned has had to bear ‘an individual and excessive’ burden.” adding that that principle seemed to him to be of the first importance.” “…. it seems to me that ultimately one single question arises for determination by the court: is the scheme not merely harsh but plainly unfair so that, however effectively that unfairness may assist in achieving the social goal, it simply cannot be permitted? In addressing this question I for my part would recognise a wide discretion in the Secretary of State in his task of devising a suitable scheme, and a high degree of deference due by the court to Parliament when it comes to determining its legality. Our law is now replete with dicta at the very highest level commending the courts to show such deference.” “53. It is, however, important also to read what Simon Brown LJ said about proportionality later in his judgment. He referred at [51] to the speech of Lord Steyn in R (Daly) v SoS for the Home Department[2001] 2 AC 532 at [27], referring to the three-stage test adopted by the Privy Council in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing[1999] 1 AC 69 in relation to determining whether a limitation (by an act, rule or decision) is arbitrary or excessive: “whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective”. 54. Then, at [52] Simon Brown LJ said this: “It is further implicit in the concept of proportionality, however, that not merely must the impairment of the individual’s rights be no more than necessary for the attainment of the public policy objective sought, but also that it must not impose an excessive burden on the individual concerned.” 55. He went on to cite from James at [50]: “Not only must a measure depriving a person of his property pursue, on the facts as well as in principle, a legitimate aim ‘in the public interest’, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised. This latter requirement was expressed in other terms in the Sporrong and Lönnroth judgment by the notion of the ‘fair balance’ that must be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights. The requisite balance will not be found if the person concerned has had to bear ‘an individual and excessive’ burden.”
“82. In our view, the principles identified in Total Technology are equally applicable in this case. In considering whether the imposition of a significant penalty for failure to file a return in circumstances where no tax is due infringes the taxpayer’s A1P1 rights it is necessary to determine the aim of the penalty regime, and whether the aim is a legitimate aim in the public interest. It is then necessary to determine whether there is a reasonable relationship of proportionality between the means employed and the aim sought to be realised, ascertained by establishing whether there is a fair balance struck between the public interest and the requirements of the protection of individual’s fundamental rights.”
“15. A wide discretion is conferred on the Government and Parliament in devising a suitable scheme for penalties, and a high degree of deference is due by courts and tribunals when determining its legality. The state has a wide margin of appreciation, so wide as to allow the imposition of taxes, contributions and penalties unless the legislature’s assessment of what is necessary is devoid of reasonable foundation: see Gasus Dosier-und Fördertechnik GmbH v Netherlands(1995) 20 EHRR 403 , [1995] ECHR 15375/89, ECt HR, at [60]. A court or tribunal must be astute not to substitute its own view of what is fair for the penalty which Parliament has imposed”. and at paragraphs 62 and 63 that “62. In our judgment, it is not appropriate for the courts or tribunals to seek to set any maximum penalty, or range of maximum penalties. That would in effect be to legislate…. 63. The correct approach is to determine whether the penalty goes beyond what is strictly necessary for the objectives pursued by the ... regime, as discussed … and whether the penalty is so disproportionate to the gravity of the infringement that it becomes an obstacle to the achievement of the underlying aim of the [legislation]. To those tests we would add that derived from Roth in the context of a challenge under the Convention to certain penalties, namely “is the scheme not merely harsh but plainly unfair, so that, however effectively that unfairness may assist in achieving the social goal, it simply cannot be permitted?”
“…financial penalties framework: type 2 (trading whilst unregistered)”