HMRC will compel documents after one ignored informal request

HMRC-supervised businesses that ignore an initial informal information request during an anti-money-laundering compliance check will now face compulsory information powersGOV. Where a business does not respond to an initial informal request, HMRC will use statutory powers to require documents or information, or to require attendance to answer questionsGOV. A regulation 66 notice should be used after one informal voluntary request has failedGOV. That replaces the previous position where a notice was expected in the majority of cases after previous voluntary attempts had failedGOV, and where compulsory powers in the absence of cooperation were described as something HMRC may use in some cases.

The power remains subject to the reasonably-required testGOV. Regulation 66 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 may be used only for information or documents reasonably required for HMRC supervisory functions, and only when necessary and proportionateGOV. Officers must record what is requested and why in the decision and evidence log, so the rationale can evidence lawful exercise if challenged. Demands must be reasonable, with a reasonable compliance period reflecting factors such as a third-person recipient with no prior awareness, translations, or bulk due diligence material.

A notice may be given to a person who is or was at any time a relevant person, a payment service provider or a connected person, including ceased businesses and former directorsGOV. A money service business or trust or company service provider awaiting a registration decision, before starting relevant activity, cannot be given a notice while the application is processed. Where a required document appears to be held by a third person, the power may be used against that person under regulation 66(8), but only for specified documents: a third person cannot be required to supply information of a specified description or to attend for interviewGOV. Since 1 September 2022 the power includes copies of suspicious activity disclosures made to the National Crime Agency.

HMRC must make each demand in writing, with the reasons the material is required unless those reasons cannot be disclosed. Officers must identify precisely what is required, set a reasonable deadline, say where and how to deliver, and specify acceptable forms including reasonably required translations. For attendance, the time and place set must be reasonable with reasons given, accounting for normal availability and travel. Computer-held material may be required in visible and legible form, normally supplied by email or Dropbox.

Only EC-S officers may issue noticesGOV, and as a matter of policy only those who have completed or are undertaking the relevant learning pathway with an acceptable capability level, normally Quality Assurance Framework sign-off, unless a manager agrees otherwise. HMRC notices are issued under regulation 66(1), not regulation 66(3).

Failure to comply in whole or part may bring type 4 penalties under regulation 76, with an initial penalty, daily penalties up to 30 days and a final penaltyGOV, plus possible suspension or cancellation of registration; it is also a criminal offence for regulation 86 purposes. Non-compliance can alternatively lead to warrantless entry and inspection under regulation 69 or entry with a warrant under regulation 70. Material that does not exist or is not held cannot be pursued under regulation 66, though the underlying gap such as a missing regulation 18 risk assessment may attract a type 1 penalty. Production does not affect any lien, and privilege claims follow the dedicated privilege guidance.

The powers sit under regulations 46, 66, 69, 70, 76 and 86 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.