UT-2022-00097 - [2024] UKUT 00352 (TCC)

DEPP 6.5A (3) sets out a list of factors that may have the effect of aggravating or mitigating the breach. The only relevant factor in this regard is that set out in sub-paragraph (k) of this provision, namely whether guidance or other published materials had already raised relevant concerns, and the nature and accessibility of such materials.

The Authority considers that it is a factor aggravating the breach that the Authority and the JMLSG have published numerous documents highlighting financial crime risks and the standards expected of firms when dealing with those risks, in particular the JMLSG Guidance which was first published in December 2011. This guidance sets out good practice examples to assist firms, for example in managing and mitigating money laundering risk by (amongst other things) conducting appropriate customer due diligence, monitoring of customers’ activity and guidance of dealing with higher-risk situations. At paragraph 6.18 of the Decision Notice, the Authority stated that given the number and detailed nature of such publications, and past enforcement action taken by the Authority in respect of similar failings by other firms, the Applicant should have been aware of the importance of appropriately assessing, managing and monitoring the risk that it could be used for the purposes of financial crime.

At paragraph 6.19 of the Decision Notice, the Authority stated that it did not consider there to be any mitigating factors. Mr Mansell submitted that the fact that the Applicant took expert advice from external compliance consultants should be regarded as a mitigating factor, insofar as it was not taken into account at Step 2.

Mr Mansell submits that the failure to take into account the JMSLG Guidance should not be a relevant factor in this case and therefore there is no aggravating factor to take into account. He submits that an aggravating feature must be a feature outside the ordinary. Non-application of the JMLSG Guidance would not be a particular feature aggravating the Applicant’s misconduct; it would apply in every case of non-compliance in relation to financial crime system and controls.

We reject that submission. In our view, JMLSG Guidance clearly falls within the scope of sub-paragraph (k) referred to at [110] above. There is nothing in the wording of that provision which demonstrates an intention to confine its application to specific as opposed to general guidance. In any event, the JMSLG Guidance does provide specific and focused guidance on how to mitigate risk of financial crime and is directly relevant to the failings identified by the Authority in this case. We therefore agree with the Authority that the failure to follow this guidance is an aggravating factor in this case.

For the reasons given above, we do not consider the Applicant’s engagement of external compliance consultants to be a sufficient mitigating factor to reduce the penalty here.

Accordingly, we agree with the conclusions of the Authority at Step 3. We therefore conclude that the Step 3 figure should be £74,025, that is 110% of the Step 2 figure.