Civil penalty definition
/What is a Civil Penalty?
A civil penalty is a financial penalty imposed by a government entity. The penalty is imposed because the recipient of the penalty has breached one or more government laws or regulations. The penalty is intended to compensate the government, as well as to ensure that there is a strong incentive for the recipient of the penalty not to engage in the same behavior again.
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The Burden of Proof for Civil Penalties
For a government entity to enforce a civil penalty, the burden of proof is less onerous than for a criminal penalty; thus, the accused party can be found guilty if it is more than 50% likely that the party is responsible. The usual requirement is that clear and convincing evidence must be present in order to impose a civil penalty.
Examples of Civil Penalties
Here are several examples of civil penalties:
Tax-Related Civil Penalties
Late tax filing. Tax authorities (such as the IRS) impose a penalty on taxpayers who fail to file their tax returns by the due date. For example, the IRS imposes a penalty of 5% per month (up to a maximum of 25%) on unpaid taxes for late-filed returns.
Underpayment of taxes. Penalties for underpayment or miscalculation of estimated taxes. For example, the IRS imposes interest and penalties for substantially understating your tax liability.
Environmental Civil Penalties
Pollution violations. Penalties for violating environmental protection laws, such as illegal dumping of hazardous waste, exceeding emissions standards, or improper disposal of chemicals. For example, a manufacturing company is fined $50,000 by the Environmental Protection Agency (EPA) for exceeding allowed air pollution emissions.
Noncompliance with waste disposal regulations. Improper disposal of medical waste, hazardous materials, or wastewater. For example, a hospital receives a civil penalty of $75,000 for improper disposal of medical waste.
Securities and Financial Regulation Penalties
Insider trading or misleading disclosures. Penalties imposed by financial regulators (e.g., Securities and Exchange Commission—SEC) for insider trading or fraudulent financial statements. For example, a corporation is fined $1 million by the SEC for misleading financial disclosures to investors.
Failure to follow regulatory procedures. Failing to adhere to required compliance measures or reporting obligations. For example, a brokerage firm receives a penalty of $250,000 from the Financial Industry Regulatory Authority (FINRA) for failing to implement proper anti-money laundering procedures.
Workplace Safety Penalties
Occupational safety and health violations. Civil penalties imposed by safety regulators (such as OSHA) for failing to comply with workplace safety standards. For example, OSHA imposes a fine of $100,000 on a construction company for failure to implement required fall protection measures.
Consumer Protection and Fair Trading Penalties
False advertising or misrepresentation. Penalties by consumer protection authorities (e.g., Federal Trade Commission—FTC) for deceptive marketing practices. For example, a retailer is fined $500,000 by the FTC for misleading customers about product quality.
Data privacy violations. Penalties imposed for unauthorized disclosure of personal data or inadequate protection of consumer information. For example, a social media company receives a civil penalty of $5 million from regulators for failing to adequately secure consumer data.
The Difference Between Civil Penalties and Criminal Penalties
A civil penalty results in the imposition of a financial penalty, while a criminal penalty can result in an individual being required to serve time in jail.