State of Financial Crime 2023 Report

UK Treasury Committee: Economic Crime Not a Priority for Law Enforcement

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Delays by the UK government in introducing legislation to combat economic crime are being questioned in a major new report.

The Treasury Select Committee is calling for a raft of measures, including the creation of a new government department to oversee all economic crime, reforms to the SAR program and greater consistency in how crypto firms are registered.

“Economic crime seems not to be a priority for law enforcement. The number of agencies responsible for fighting economic crime and fraud is bewildering,” the report states. 

“Each of the enforcement agencies has other crime-fighting or regulatory objectives, and the Government needs to consider whether there should be a single law enforcement agency with clear responsibilities and objectives to fight economic crime.” 

Lord Agnew – who quit his ministerial post at the Treasury and Cabinet Office over the government’s failure to prevent more than £4.3bn in fraudulent claims for Covid business loans – has revealed that an eagerly awaited economic crime bill has been rejected for consideration during the next parliamentary year. Writing in the Financial Times, he described the decision as “foolish”.

Meanwhile, a forthcoming government review of the regulatory and supervisory regime for anti-money laundering and counter-terrorist financing, is expected to conclude by June 2022.

At the US Summit for Democracy at the end of  2021, British Prime Minister Boris Johnson said that 2022 would be a “year of action” for Britain to take stronger measures against illicit finance.

“We will bring more openness to the purchase of properties in the UK by overseas entities and take forward new laws to safeguard our democratic processes and institutions from those who would do us harm,” said Mr. Johnson.

But these stronger measures are not moving fast enough according to the report, which urges the government to “push harder and act faster”.

Companies House Reform

Media attention has focused on the report’s call for changes to Companies House, the UK’s registrar of companies, in relation to procedures and payments, in an attempt to deter criminals from setting up shell companies. This would include increasing the cost to register a business in the UK by around 700%, from the current £13 to £100. 

“Reform of Companies House is essential if UK companies are no longer to be used to launder money and conduct economic crime…The low costs of company formation, and of other Companies House fees (such as filing fees), present little barrier to those who wish to set up large numbers of companies for dubious purposes,” the report states.

Key Takeaways from the Report 

Reforms highlighted by the committee in their report include:

  • Corporate Criminal Liability – failure to prevent money laundering is still not an offense in the UK, though it has been adopted in the European Union’s 6AMLD.
  • New measures to address online fraud. This includes the need for urgent legislation to make reimbursement for victims of ‘authorized push payment fraud’ mandatory.
  • Ensuring law enforcement has capacity to implement the SAR reform program, which aims to improve anti-money laundering systems, including:
  • IT transformation and an increase in analytical resources and capabilities for the UK Financial Intelligence Unit (UKIFU) and for Regional Organized Crime Units. 
  • Addressing the Financial Action Task Force’s (FATFs) criticisms regarding the role and resourcing of the UKFIU.
  • Disappointment that the program is not yet complete and that no timetable or target date for its completion has been published.
  • The effectiveness of SARs might be increased if banks are allowed to share information with the National Crime Agency and other law enforcement agencies, before the suspicion threshold required under existing anti-money laundering legislation is reached.
  • Improvements to Office for Professional Body Anti-Money Laundering Supervision (OPBAS) and suggestions to consider a radical reform following limited forward steps in compliance that OPBAS has so far secured.
  • Recommendations that the Financial Conduct Authority (FCA) monitors the de-risking of customers through the firms it supervises.
  • Lack of consistency in the registration of crypto firms – as of October 21st 2021 only 12 firms have been registered and 90% of firms assessed have withdrawn their applications for registration. 
  • All cryptoasset firms should be registered for anti-money laundering (AML) purposes. The FCA should not extend the deadline for registration again beyond March 2022.
  • Institute measures specifically to protect consumers from fraud and scams relating to cryptoassets.
  • Disappointment that the Registration of Overseas Entities Bill is still awaiting introduction, more than five years after it was promised.
  • Recommendation that the government publishes an annual account of its spending on economic crime.

The 86-page report’s summary (pg3), conclusions and recommendations (pg71) provide useful indicators as to the main recommendations. This may also indicate where the government will focus its future efforts to reform the UK’s anti-money laundering program.   

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Originally published February 10, 2022, updated May 3, 2022

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