AMLG1400 | Guidance for all sectors: Imposing civil penalties on officers of a business &

4. Imposing civil penalties on officers of a business

The definition of an officer of the business is set out in regulation 3 but includes the following:

• Directors

• Nominated officers

• Company secretaries

• Chief executives

• Persons controlling the company

• Members of the management committee of a corporate body

• An officer or governing body member of an unincorporated association

• Partners and secretaries or similar officers of a partnership

• Any person acting or claiming to act in any of the above roles

HMRC’s expectations of officers are that they should be aware of all relevant requirements imposed on them by the Regulations.

Where there has been a contravention of a relevant requirement under the Regulations it is not only the business that can face a civil penalty. HMRC may also impose a civil penalty on any officer of the business, who held their position during the period of the contravention,if HMRC considers they were knowingly concerned in the contravention. Such officers may be personally subject to an appropriate financial penalty or a management prohibition.

In order for an officer to be considered knowingly concerned in the contravention the officer must have:

(i) had knowledge of the facts on which the contravention depends; and

(ii) been actually involved in the contravention. The circumstances in which an officer will be considered to be involved in the contravention include the following:

• They assisted in the contravention;

• They agreed to, approved, allowed or encouraged the contravention; or

• They turned a blind eye and did not act to prevent the breach. An officer could therefore be found to be knowingly concerned in a breach where they were aware of what was going on (so they knew of the material facts) and let it continue, even though they had not actively agreed or encouraged it.

HMRC will take into account both acts and omissions in deciding whether an officer is “knowingly concerned”. Some examples are set out in the below non-exhaustive list:

• Approving the establishment of a business relationship or entering into a transaction without conducting proper customer due diligence (CDD) or enhanced due diligence (EDD) measures

• Approving/endorsing inadequate risk assessments (RAs) and policy, controls and procedures (PCPs)

• Failure to communicate PCPs throughout the business, subsidiaries and agent network

• Failure to ensure maintenance of and compliance with PCPs

• Failure to appoint a nominated officer when required

Where a business that has contravened the Regulations subsequently becomes insolvent, HMRC may still consider whether to impose a civil penalty on an officer of that business.

4.1 Criminal investigation of officers

Where a business is a body corporate, partnership or unincorporated association and commits a criminal offence for contravening a relevant requirement, HMRC may also pursue a criminal investigation against any officer of the business who held their position during the period of the contravention. An officer will also be guilty of that offence if it is shown that the offence was committed with the officer’s consent or connivance or was attributable to any neglect on their part.

HMRC will consider the following factors when deciding whether an offence has been committed with the officer’s consent or connivance or was attributable to their neglect:

(i) Whether the officer was directly involved in the contravention;

(ii) Whether the contravention was committed with the agreement, encouragement, approval or with the assistance of the officer;

(iii) Whether the officer connived in the contravention. An officer is likely to be considered to have connived in a contravention where they were aware of what was going on but let it continue, even though they had not actively agreed or encouraged it; and

(iv) Whether the contravention was attributable to any neglect on the part of the officer. An officer does not have to know about the facts of contravention to be held responsible for it. They may not know the facts of the contravention but due to the surrounding circumstances, would be expected to have ensured that appropriate relevant safeguards, controls and procedures were in place and maintained to prevent the contravention occurring.

Please see AMLG1700 for HMRC’s expectations of senior managers which equally apply to the business’s officers.

Where a business that has contravened the Regulations subsequently becomes insolvent, HMRC may still consider whether to criminally investigate an officer of that business.