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Currency and a judge's gavel. Courtesy of George Hodan/Publicdomainpictures.net

The UK’s Economic Crime Plan: A First Step on the Road to Progress

Helena Wood and Isabella Chase
Commentary, 24 July 2019
Centre for Financial Crime and Security Studies, AML/CTF, UK, Law and Ethics, Financial Crime 2.0, Organised Crime
The government’s first-ever comprehensive Economic Crime Plan is a step in the right direction, but requires adequate funding.

The UK government recently launched its first-ever comprehensive public–private Economic Crime Plan (ECP). The creation of a plan is a welcome development; the past decade has seen a slew of government initiatives covering disparate aspects of economic crime, from money laundering to company formation reform, but with little holding these initiatives together. For the first time, therefore, the current plan seeks to draw these endeavours into a single document which clearly lays out the government’s priorities for the rest of this parliamentary mandate (theoretically until 2022).

To oversee the delivery of the ECP, the government has established  a cross-ministerial, public–private governance board, the ‘Economic Crime Strategic Board’ (ECSB), with representatives from major banks and other regulated sectors, mandated to oversee the delivery of the 52 actions within the seven strategic priorities found in the plan.  

Credit Where Credit is Due

Although the plan bears the hallmarks of having been pushed through the system at (for the government) breakneck speed, with limited detail on funding and how success will be measured, it does at least lay the foundations for a more coordinated and accountable approach to grappling with the myriad issues at the heart of the UK’s entrenched economic crime problem.

 The following themes in the plan are particularly welcome:

  • Focus on understanding the problem: The government acknowledges that there are gaps in its knowledge of the scale and nature of economic crime. It says it will engage with civil society and academia to fill these gaps but is light on the detail of how this will be done in practice.
  • Recognition of the tension between economic crime and data protection and a willingness to face these head-on: The difficulty of sharing information at scale and speed has held back many attempts to modernise the anti-money laundering (AML) and counterterrorist financing regime and the government should be applauded for attempting to overcome this fundamental barrier.
  • Tackling AML supervision: Among other things, there is a willingness to recognise that Her Majesty’s Revenue and Custom’s approach to AML supervision needs reform.
  • Fraud receives prominent coverage throughout the plan. For a long time, fraud was viewed as the ‘poor cousin’ (in policymaking terms) of money laundering and corruption. No more. Fraud is the most commonly experienced crime in the UK and is a growing security concern for this reason.
  • Commitment to reforming the Suspicious Activities Reporting (SAR) regime: After years of stagnation and having missed the previous deadline of October 2018 initially promised in the government’s April 2016 Action Plan for anti-money laundering and counterterrorist finance, the current plan looks at SAR reform within the wider ecosystem of AML reforms and commits to designing a target operating model built for the future by the end of 2020.
  • Innovation and technology are necessary to tackle financial crime: Despite not explicitly stating their support for the use of new technology in financial crime prevention, a number of the action points nod to the necessity of new technology.
  • Financial crime as an international problem requiring an international solution: The government recognises that the UK infrastructure is a key enabler for financial crimes in other countries and that a global approach is needed to deal with a problem which is inherently cross-border.

Raining on the Parade?

The plan was greeted with a rather less optimistic response in the media, in part linked to the reactions of some civil society advocacy organisations and parliamentarians, who have raised concerns about both the public–private joint governance of the newly created ECSB and the omission of corporate liability legislation from the plan.

As regards governance of the ECSB, the concerns raised highlight the risk of corporate capture inherent in the inclusion of senior figures from the financial, legal and accountancy sectors on the ECSB and the establishment of a private sector forum to support delivery of the plan. Although perhaps overplayed in the media, these concerns should not be disregarded. The government should meet this concern head on by appointing a non-governmental figure onto the ECSB to act as an independent check to ensure that decisions being taken are not subject to undue private sector influence and that civil society concerns are being appropriately represented and addressed.

Secondly, the ECP would have been a good opportunity for the government to finally take a definitive position on the issue of whether they will introduce a corporate liability offence for economic crime failures to mirror developments in the anti-bribery space. In 2017, the government consulted on the issue of how to ensure that corporate entities are properly held to account for economic crime failures, including considering the implementation of vicarious liability provisions. Since the consultation, the position has been caught between the government’s financial crime and business-friendly policy imperatives, with work still ongoing at the Ministry of Justice. The government’s decision not to take this opportunity to clarify their position has left the goal wide open for criticism from parliamentarians and civil society alike. The government should make a decision either way and live with the response.

The Elephant in the Room

Despite the media commentary focusing on corporate liability legislation, the real barrier to the plan’s success has yet to make the headlines – the lack of public sector funding. The plan notes £48 million in previously announced funding for the National Economic Crime Centre, a body which continues to lack a firm plan for its role and scope. However, there is no mention of a properly funded response within UK policing and wider law enforcement and supervisory structures to execute the enforcement elements of the plan.

Although it is impossible to compare like with like, £48 million is an insignificant amount when contrasted with the £816 million allocated to counter-terrorism policing for 2019–20. With the UK’s forthcoming spending review in mind, the success or otherwise of the plan is more likely to depend on the agility of HM Treasury’s economic crime reform policymakers to do battle with their spending review compatriots than it is on new laws being drafted.

The Way Forwards

In conclusion, despite the less optimistic view of the media and others, the authors take a ‘glass half full’ view of the ECP. Although there is room for the glass to be topped up, the very fact that the plan exists after years of prevarication should be a cause for celebration and a starting point for collaboration (rather than conflict). However, the government needs to push forward with a plan to engage with the civil society concerns regarding the real (or even perceived) risks of the policy agenda in this space being unduly influenced by the private sector interests due to the public–private make-up of the ECSB.

The government also need to continue to engage with civil society to aid delivery of the plan. Despite the recent tensions fuelled by the media coverage of the ECP’s launch, civil society has something important which the government lacks – thinking time. Civil society must recognise the good intentions contained within the plan and treat it as a first step on a longer journey.

Either way, now that there is a plan, there is also a means for civil society and other anti-financial crime campaigners in Parliament and the media to hold government to account for delivery. It is important, with other distractions in government, that they do so.

BANNER IMAGE: Currency and a judge's gavel. Courtesy of George Hodan/Publicdomainpictures.net

The views expressed in this Commentary are the authors', and do not represent those of RUSI or any other institution.

Author

Helena Wood
Associate Fellow

Helena Wood’s areas of research will focus on the efficacy of Proceeds of Crime Act (POCA) powers in the fight against organised crime... read more

Isabella Chase
Isabella Chase
Research Analyst

Isabella Chase is a Research Analyst at RUSI's Centre for Financial Crime & Security Studies. Her work predominately concentrates on... read more

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