NCA’s Annual Report 2019-20: a focus on recovering the proceeds of crime and asset denial
The levy aims to raise approximately £100 million per year from entities regulated for AML purposes and support reforms to the “sustainable resourcing of economic crime."
In setting the context for the consultation we are told that “Economic crime represents a significant and ever-changing threat to the UK that has a harmful impact on our economy, competitiveness, citizens, and institutions”. Indeed, concern at the impact of economic crime was reflected in the recent National Crime Agency Annual Plan 2019-20 which stated that “criminal enterprises undermine the UK economy, our integrity, infrastructure and institutions by, for example: laundering the proceeds of crime; defrauding businesses, the state and private individuals; and engaging in acts of bribery, corruptions and sanctions contravention.”
Figures from 2018 suggest that the overall scale of economic crime is estimated to be £14.4 billion per year, with the cost to businesses and the public sector from organised fraud no less than £5.9 billion per year. More recently, the National Strategic Assessment 2019 estimated the possible scale of money laundering that impacts the UK as being in the hundreds of billions of pounds annually.
The consultation paper underlines the dangers of the UK and the City of London being used - as described in the House of Commons 2018 Economic Crime and Sanctions Inquiry - as a “destination of choice to launder the proceeds of overseas crime and corruption – so called “dirty money”. The introduction elaborates on this, charting how the UK’s “business friendly environment, openness to overseas investment, reputation for the rule of law, and world class financial and professional services industries all contribute to the UK being one of the world’s major global financial centres”. It then goes on to describe how in turn these features also make it an appealing destination for perpetrators of economic crime.
We are told that the Economic Crime Levy has been developed to help realise the public and private sectors’ shared ambition to improve the UK’s response to economic crime. Such Public-Private Partnership is a key focus on the Economic Crime Plan and the Economic Crime Strategic Board (dubbed Taskforce) launched in January 2019.
See our related blog: Working in Partnership: a new public/private approach to tackle economic crime.
The proposal for an Economic Crime Levy puts this partnership front and centre, re-stating the government’s belief that “successfully combating economic crime can only be achieved by a public-private partnership”. It acknowledges that the private sector spends substantial sums to prevent economic crime and, referring to the “prevent” limb of the Serious and Organised Crime Strategy, places it in the first line of defence against it. As the paper puts it, “by preventing this illicit activity from occurring in the first place, we can have a more efficient and effective response to economic crime."
Ultimately the goal is to “harness and co-ordinate the capabilities, expertise and information of both the public and private sectors” so that the UK will strengthen its position as a world-leader in the global fight against economic crime. To that end, we are reminded how the private sector, particularly major financial institutions, holds significant amounts of information and data that enables law enforcement to pursue economic crime investigations.
The government recognises the need for a long-term and sustainable resourcing model to transform the UK’s response to economic crime: resourcing that it believes should comprise contributions from both the public and private sectors that participate in, and benefit from, the agenda to reduce economic crime. The government’s starting point is that “it is right that those who contribute towards the risks within the UK economy should pay towards the costs of addressing those risks. ”It argues that it is fair that those whose business activities are exposed to money laundering risk pay towards the costs associated with responding to and mitigating that risk. “The costs of further action to tackle money laundering should not be borne solely by the general taxpayer."
So, businesses paying the levy will fund an expansion of the UKFIU’s capacity and an increase the number of financial investigators able to deal with Proceeds of Crime Act investigations. But not all the money raised would be spent on front-line activity: some would be spent on SARs reform, boosting the budgets of the National Economic Crime Centre, the National Assessment Centre and the National Data Exploitation Centre and, finally, the administrative costs occasioned by the levy.
Having set out the proposals, the consultation invites views on the design principles of the levy, and how this levy could operate in practice – namely what the levy will pay for, how it should be calculated and distributed amongst the regulated sector – and how to ensure that it is proportionate and effective.
The consultation also includes a call for evidence on current levels of private sector investment on counter-fraud measures, as well as gauging private sector views on contributions towards funding the fraud response.
We are told that the government intends for the first set of levy payments to be made in the Financial Year 2022/23, although this may be subject to the findings of this consultation and the time needed to develop the necessary collection infrastructure and go through the legislative process.
The proposed levy is a way of increasing investment in only one part of the nation’s defences against economic crime. Properly to respond to the problem of economic crime as a whole requires investment across the system, including in policing, the CPS and the courts so that economic crime cases generally can be investigated and prosecuted effectively. Only with investment across the system will the authorities really be able to deliver the significant impact on dirty money and financial crime generally envisaged in the Economic Crime Plan. A targeted levy will not fund this kind of investment. Rather, the government needs to take decisions about its priorities as a whole and, if it is really serious in dealing with economic crime, provide the long term and sustainable resources it recognises the problem needs.
For further information on the issues raised in this blog post, please contact a member of our criminal litigation team.
Alun Milford is a partner in the Criminal Litigation team and specialises in serious or complex financial crime, proceeds of crime litigation and corporate investigations. He has particular knowledge and experience of issues surrounding corporate crime and deferred prosecution agreements. He joined Kingsley Napley from the public sector where, over a twenty-six year career as a government lawyer and public prosecutor, he worked in a wide variety of roles including General Counsel at the Serious Fraud Office, the Crown Prosecution Services’ Head of Organised Crime, its Head of Proceeds of Crime and Revenue and Customs Prosecutions Office’s Head of Asset Forfeiture Division.
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