The UK's Second Economic Crime Plan - An Increasing Burden on the Private Sector?
4 min read
The UK's second economic crime plan builds on the previous plan (2019-2022) and addresses issues that have risen to the fore i.e. the dramatic increase in fraud, the new sanctions landscape, reform of corporate criminal liability and the UK's continuing focus on anti-money laundering ("AML"). The second economic crime plan sets out how the UK government intends to bring about a reduction in economic crime for the period 2023 to 2026. In this alert, we will highlight some of the key elements of the plan (Economic crime plan 2023 to 2026).
The plan recognises that the growth of economic crime is unabated, with a possible £100 billion laundered each year through the UK. Fraud accounted for just under half of all crime experienced in the UK as at September 2022. The plan aims to address this and is built upon an investment of £400 million. Half of this investment is funded by the private sector via the Economic Crime Levy - an annual charge imposed on businesses which are regulated under the UK's AML regime and which have an annual revenue of more than £10.2 million.1
The UK has been very focused over the last few years on a public-private partnership in relation to combatting economic crime, and this is predictably a theme of the new plan.
Actions set out in the plan include:
- Cutting fraud: The plan contains the promise of a fraud strategy that contains three elements: The pursuit of fraudsters; the interdiction of fraudulent communications before they reach the public; empowering the public to spot, avoid and report fraudulent activity.
- Combatting kleptocracy and impeding sanctions evasion: The Russian invasion of Ukraine has led to a significant increase in sanctions. As a consequence, the Office of Financial Sanctions Implementation ("OFSI") has recently grown to over 100 full-time employees. A specialist Combatting Kleptocracy Cell within the National Crime Agency ("NCA") has also been created. The government says it will build on this by improving collaboration between the public and private sector and by providing guidance and support to all relevant sectors. It also says it will work to enhance cooperation with the US, EU and other jurisdictions, with delivery of this expected as the first half of this year draws to a close.
- Corporate criminal liability reform: The plan refers to the need to develop the law on corporate criminal liability, which has hampered the prosecution of corporates in the UK regarding economic crime. The government has re-stated its aim to introduce offences of failing to prevent wider economic crime through the medium of the Economic Crime and Corporate Transparency Bill. It has also stated that it intends to introduce legislation to expand the "identification principle" for holding corporates liable for offences committed in their name. This is in accordance with recommendations made by the Law Commission in June 2022 and is an early indication of the government's intentions. However, no firm timeframe has been given for this.
- Reducing money laundering: The misuse of UK corporate structures plays a large part in money laundering and the plan aims to address this through the Economic Crime and Corporate Transparency Bill. This proposes to empower Companies House to verify the identities of beneficial owners and company officers and is expected to become law later this year. The plan further aims to reduce money laundering by improving the supervision of businesses that are regulated from an AML perspective. A consultation on the nature of these improvements should be expected.
- Combatting criminal misuse of crypto-assets: The UK wants to grow its cryptoasset industry and, in tandem, will introduce greater regulation in an effort to protect firms and consumers. For example, the Financial Action Task Force's "Travel Rule", requires crypto firms to obtain, hold and transmit originator and beneficiary information immediately and securely when conducting virtual asset transfers. This rule allows crypto firms and banks to effectively apply sanctions screening and transaction monitoring. Pursuant to the plan, the Travel Rule is to be implemented regarding cryptoassets this year.
- Improving the system for Suspicion Activity Reports ("SARs"): The steps outlined include the rolling out of a new electronic SARs portal and an expansion of the Financial Intelligence Unit. which sits within the NCA and is responsible for analysing and processing SARs.
- Increasing confiscation of the proceeds of crime: The government has said it will increase the headcount of the Crown Prosecution Service and that it will respond in the latter part of this year to the Law Commission's review regarding confiscation.
A public-private partnership approach is indicative of an increasing burden in the fight on economic crime in the private sector. This burden arises not only via the Economic Crime Levy - in 2021, when a study concluded that AML compliance costs UK financial institutions £28.7 billion a year,2 with that figure only expected to trend upwards. To put this in perspective, the combined budget for the NCA and Serious Fraud Office is less than £1 billion. While the economic crime plan flags significant investment, and focuses on a public-private partnership model and the disruption of financial crime, law enforcement would benefit from additional funding to allow for a greater number of prosecutions to be brought regarding fraud, bribery, money laundering and sanctions evasion.
1 Get ready for the Economic Crime Levy – GOV.UK.
2 Cutting the costs of AML compliance - LexisNexis report from June 2021.
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