Regulatory Focus on Corruption, Deception, and Illegal Financing | United Kingdom's Financial Outlook, April 2023
The UK government has unveiled its Economic Crime Plan 2 (2023–2026), a comprehensive strategy aimed at tackling financial crime, including money laundering, kleptocracy, and fraud. The plan, published by the Home Office on March 30, 2023, pledges £400 million over the period to implement reforms targeting various aspects of economic crime.
The plan focuses on several key areas:
- Improving Companies House transparency: Measures will be taken to prevent the misuse of corporate structures, a common tactic in money laundering and hiding illicit assets.
- Enhancing cryptoasset regulation: The plan aims to oversee digital finance better, recognising the growing importance of cryptocurrencies in the financial landscape.
- Strengthening sanctions enforcement: The UK government intends to combat illicit finance more effectively by enhancing its sanctions enforcement.
- Expanding fraud prevention measures: The plan emphasises the need for expanded measures to prevent fraud, a significant issue in the UK's economic landscape.
- Promoting Suspicious Activity Reports (SARs): The government seeks to foster a culture that encourages internal reporting of suspicious activities without retaliation, recognising the crucial role SARs play in detecting and preventing economic crime.
- Addressing exploitation of the UK property market: The plan aims to improve oversight of offshore ownership and family-linked property holdings, targeting corrupt elites who exploit the UK property market.
- Collaborative efforts: The plan stresses the importance of collaboration across government, private sector, and individuals to collectively disrupt illicit finance networks.
The Economic Crime and Corporate Transparency Bill, while not detailed extensively in the search results, is expected to support these objectives by legislating reforms for enhanced transparency of companies and beneficial ownership. The Bill will improve corporate transparency to prevent misuse of company structures for money laundering and hiding illicit assets, strengthen enforcement powers and compliance requirements relating to corporate information, and support the plan’s goal of closing transparency gaps and tackling hidden financial crime risks.
The new legislation, to be introduced through the ECCT bill, will hold companies criminally liable if an employee commits fraud for the organization's benefit, provided there were no reasonable procedures in place to prevent it. Firms must collect an excerpt of the register of overseas entities and report to the registrar of companies any material discrepancy regarding their customer's beneficial ownership.
The government has also committed to introducing the "failure to prevent fraud" offence, supported by both the Serious Fraud Office and the Crown Prosecution Service. The updated guidance sets out the government's position on reporting obligations for banks and building societies when they are undertaking checks required under the 2014 Act, in conjunction with their existing money laundering reporting requirements under the Proceeds of Crime Act 2002.
Small and medium-sized organizations will be exempt from the new offence but will remain accountable under the existing legal framework. The PSR will continue to work on consumer protections against authorized push payment (APP) scams, while the new regulations will introduce a requirement for proliferating financing risk assessments.
The plan builds on a whole-system approach informed by the UK's National Risk Assessment on Money Laundering and Terrorist Financing and is backed by significant funding to transform the UK's response to economic crime. The plan also includes limiting the abuse of corporate structures through Companies House reforms in the upcoming Economic Crime and Corporate Transparency Bill (ECCT bill).
The Money Laundering and Terrorist Financing (Amendment) (No.2) Regulations 2022 will come into force on April 1, 2023. The Law Society has published revised anti-money laundering guidance to help legal professionals and firms comply with the MLRs. The Payment Systems Regulator (PSR) has published its annual plan for 2023/24, which includes the aforementioned measures to combat economic crime.
In conclusion, the UK's Economic Crime Plan 2 (2023–2026) represents a significant step forward in the UK's fight against economic crime. By enhancing transparency, strengthening regulations, and fostering a culture of reporting, the plan aims to create a more secure financial environment for all UK citizens.
- The Economic Crime Plan 2 (2023–2026) promises £400 million to implement reforms, focusing on improving Companies House transparency, especially in preventing the misuse of corporate structures, which is a common tactic in money laundering and hiding illicit assets, thereby addressing the business aspect of financial crime.
- In an effort to tackle the rising importance of digital finance in the business world, the plan aims to enhance cryptoasset regulation, recognising the growing significance of cryptocurrencies in the financial landscape.
