Money Laundering: Now it’s getting serious

Aziz Rahman outlines the significance of HMRC imposing its largest-ever money laundering fine.

The fact that HM Revenue and Customs has imposed a £23.8m fine on a UK payments business for breaching money laundering rules is certainly newsworthy. Yet there may be significance to it that goes beyond the initial headlines.

There is little doubt that the fine’s size makes it notable, especially when it is considered that this is the record such penalty that HMRC has imposed. MT Global, the Luton-based money transfer company that has been ordered to pay it, must now be regretting what HMRC called the “significant breaches of money laundering regulations” between July 2017 and December 2019 that prompted the fine.

But this is arguably a case that is about more than one company and one very large financial penalty. It is worth noting that the MT Global fine dwarfs the total value of all fines issued by HMRC in the previous financial year. In 2019-20, HMRC issued fines totalling £9.1m – less than half the amount that this one company has been ordered to pay. And this latest fine is by some way the largest fine imposed by HMRC for such failings. The largest before this was £7.8m, against Touma Foreign Exchange in September 2019. And before Touma, the biggest such penalty imposed was £266,000 – a figure that seems now minuscule – against Purplebricks PLC.

While the size of the MT Global fine can obviously be seen as an indicator of the serious nature of the company’s failings, it also needs to be viewed as the most obvious sign yet of HMRC’s intention to tackle such wrongdoing. The size of this latest fine and the apparent move towards larger fines send out a very clear message that HMRC is not prepared to tolerate money laundering failures.

HMRC is never going to be the organisation handing down the largest money laundering fines. That is because it focuses more on the second-tier of financial services providers; it is the Financial Conduct Authority (FCA) that concentrates on the major financial institutions and finance service providers, such as banks. To give an idea of the difference, it should be remembered that the biggest fine for money laundering failings ever imposed by the FCA (or its predecessor the Financial Services Authority) was the £163m the FCA fined Deutsche Bank in January 2017, for failing to maintain adequate AML control frameworks over a three-year period.

HMRC does, however, supervise approximately 30,000 businesses for anti-money laundering purposes, including estate agents and financial services businesses not already supervised by the FCA or their own professional bodies. That is a lot of companies facing money laundering obligations. It would be lax of any of them to fail to take heed of the size of this latest HMRC fine. It would also be a mistake for any of them to view the MT Global case as something that has little direct relevance to them. It could prove to be a very costly mistake.

HMRC has shown with this latest fine that it has the bit between its teeth when it comes to tackling money laundering. Those 30,000 under its supervision have been given the clearest indication yet that HMRC cannot be accused of being all bark and no bite. Each one of them needs to make sure they are complying with all of their money laundering obligations.

If any such companies are unsure how to go about meeting these obligations, they must seek advice from the relevant experts. Some may be reluctant to do so. They may view this as an unnecessary expense or see little or no need in ensuring those obligations are met. But taking such an approach is dangerous.

The HMRC has shown that it will not be lenient with those who fail or refuse to meet their money laundering responsibilities.

• Aziz Rahman is a Senior Partner at financial crime specialists Rahman Ravelli. See https://www.rahmanravelli.co.uk/

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