Changing the Game? Lammy’s International Financial Centre Summit

In a landmark speech in May this year, then-Shadow Foreign Secretary David Lammy set out his vision for tackling dirty money and, in doing so, set the course for the new government’s ambition to make the UK the ‘anti-corruption capital of the world’.

One of six plans he outlined foreshadowed the Labour Party’s manifesto commitment to ‘work with our allies and international financial centres to tackle corruption and money laundering’ by promising to host an international summit of ‘allies’ and international financial centres to coordinate action against financial crime and drive higher global ambition for regulation, enforcement, and transparency.

The fact that the new government’s ambition for tackling illicit finance in the UK and internationally was not reflected in the recent King’s Speech needn’t prove to be worthy of concern. This agenda has come a long way since the London Anti-Corruption Summit in 2016, and the priority now isn’t more legislation, but stronger action on reforms already introduced: implementation that closes loopholes, aligns approaches and enables the kind of impact on illicit finance globally that is so direly needed and yet remains to be seen.

The foreign secretary’s proposed Summit could be just the vehicle to galvanise and help deliver this shift in implementation effectiveness. But with only vague headlines and little substance set out so far, there are risks that the idea could wither under the pressures of the day-to-day business of government, or that plans could be captured by divergent interests or diluted to the point of obscurity. To mitigate these risks, the government should be thinking now about what a successful Summit would look like, and how to make it happen.

What Would a Successful Summit Look Like?

The 2016 Anti-Corruption Summit highlighted the global scale of the problem and secured international agreement on fundamental steps in response. It spawned initiatives which, despite the political upheaval caused by the Brexit referendum that followed hot on the heels of the Summit, have taken root and become part of the architecture of the anti-corruption system. It was a success.

Three approaches will be fundamentally important in giving this next Summit the best shot at becoming a worthy successor:

1. Set clear and unambiguous goals

As Keir Starmer attempts to reset the UK’s image with a reboot of relations with Europe alongside new trade and defence deals, and with preparations for the UK’s Fifth Round Mutual Evaluation by the Financial Action Task Force – the global financial crime watchdog – likely to begin in earnest before long, bolstering the reputation of the UK as a country that is serious about fighting financial crime is likely to be high on the agenda. But this Summit must not become a mechanism for reputation laundering, for the UK or for others. It needs to deliver tangible results.

This means ambition must be high but realistic, defined through a focused set of compelling policy objectives. These should tackle the key issues that are already on the agenda but which – in part because of their cross-cutting nature between finance and law enforcement and other strands of government – need a high-level political push to get them over the line to enable effective implementation. This includes agreement on a coordinated approach to regulation of the professional enablers who act as gatekeepers for the global financial system; information sharing between international financial centres, with platforms and protocols for real-time exchange of information as well as intelligence sharing on emerging threats and typologies; and renewed momentum and action on beneficial ownership transparency in light of the EU’s Sixth AML/CFT Directive.

2. Focus on international financial centres

The temptation will be to emphasise the ‘allies’ aspect of the potential invitees when building out the guest list. This should be avoided. There is real potential in the idea of establishing a ‘race to the top’ led jointly by the keystones of the global financial system: those international financial centres that together represent the greatest risk, and which have the greatest potential to build the integrity of the entire system. Too wide a cast list would dilute this potential. 

While the UK will obviously want to show leadership through making its own major commitments at the Summit, the international coalition potential will also depend on the UK adopting a partnership approach: less lecturing others, and more acknowledging a shared problem and responsibility, with shared potential for impact through common solutions to similar challenges. Getting a cohort of international financial centres to move in tandem towards unpicking the compliance versus effectiveness problem and addressing actual risk where it is greatest could be exactly the game-changer that’s needed.

3. Frame the benefits

While the focus of the Summit’s goals must remain on building financial integrity and tackling dirty money, a new and helpful framing would include the shared benefits that can accrue from being lynchpins in a robust and functional global financial system. The potential for stability and growth through, for example, harmonisation of financial regulations to facilitate cross-border transactions and reduce regulatory arbitrage, further integration of global capital markets, and the promotion of sustainable and green finance – all of which can be flip-side benefits of a more robust financial system – should serve as incentives for international financial centres.

Adopting this framing – bringing in a wider policy approach beyond the established economic crime and security agendas to include economic development, the interests of the Global South, and the environment – would also expand awareness and the case for tackling illicit finance to communities and actors beyond the established financial crime contingents. This is much needed.

Top Tips for Making It Happen

It won’t be long before Lammy’s team and civil servants across government start thinking about how to make this Summit happen, which would be an ideal summer recess ambition. They should bear three essential points in mind:

1. The Summit cannot be a quick win. It needs to have legacy, and lining up a legacy takes time. This might be the only meaningful shot they will have at this. The politics are complex, the interests can be divergent, and careful, sustained and targeted pre-Summit bilateral engagement will be needed. This must not be rushed.
    
2. Government must lead. Success will depend on skilful political engagement at the highest levels. Only government can deliver this. The Foreign, Commonwealth and Development Office should lead, but cross-government commitment, backed up by Number 10, will be essential.
    
3. Build momentum externally. A government lead does not preclude vital roles for civil society and the private sector. Voices from the Global South must be heard. A truly collaborative approach will be essential to build momentum, shape direction, enable accountability and support impact. 

Getting this Right Matters More Now than Ever

As the wider geopolitical context continues to polarise, it is now more important than ever that the global financial system holds together and works, not only for international financial centres and the West, but also for countries facing difficulties accessing the system as it is – often the same countries that are likely to be considering their geopolitical choices and alignments. They must not be pushed towards emerging financial systems which offer a new alternative. 

Lammy’s Summit could and should help address this vital imperative, strengthening the ability of the global financial system to act as a unifying rather than a polarising force in the world. 

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

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