Deeds Not Words: Making the Economic Crime Plan Matter in the Real World

In July 2019, amid a climate of self-congratulation following the positive evaluation of the UK’s anti-money laundering (AML) regime by the Financial Action Task Force (FATF) – the international standard setter for money laundering and terrorist financing controls – the UK government launched its first ever Economic Crime Plan, covering the 2019–2022 period.

In its opening statement, the government noted that the 52 actions in the Plan represented ‘a step-change in our response to economic crime’. The government went on to state that they would ‘do all in our power to combat economic crime’ in order to ‘ensure the integrity of our financial system, protect our vulnerable people and communities, and attract business to the UK’. Two years into the three-year plan, and with the government itself having issued its own progress report, it is perhaps a good time to reflect on whether the high-minded promises of 2019 are having real-world impact in 2021.

Looking at the picture in aggregate, there may be cause for continued self-congratulation. As highlighted on RUSI’s Economic Crime Plan Tracker, 80% of the actions are either completed or in progress and, despite the seismic disruptions of the coronavirus pandemic, only 15% of actions are overdue (with all of these well in progress). Furthermore, major progress has been made on a number of important fronts, including the development of public–private risk assessments and action plans (actions 1 and 22), reviews of the barriers to information-sharing (action 6) and considerations on the role of digital ID (action 40).

Words, Not Deeds

However, the keen-eyed observer may note that most of the major areas of progress relate to arguably easier (and cheaper) to achieve policy initiatives, rather than the sort of grand-scale, systemic changes which deliver real-world operational impact against economic crime.

While some operational reforms, such as an overhaul of the UK’s antiquated Suspicious Activity Reporting IT system (action 30), are on the road to delivery, two years into the Plan a cynical observer might question whether the promised ‘step-change in our response to economic crime’ is really underway.

With only a year to go until the end of the current Plan, some major operational aspects remain undelivered. This is particularly evident under three of the seven themes, namely ‘Transparency of Ownership’, ‘Risk-based Supervision’ and ‘Enhanced Capabilities’.

Who’s Who? Transparency of Ownership

As noted by the Economic Crime Plan, ‘identifying who owns and ultimately controls a corporate entity is vital to expose wrongdoing and disrupt economic crime’. With successive global laundromats exposing the continued abuse of UK corporate vehicles by criminals and the corrupt, reform in this area is vital to reducing the centrality of the UK to global money laundering.

Companies House (the UK’s corporate registry) has made clear its strong desire to play a more active role in disrupting economic crime. However, the government continues to postpone the ‘oven-ready’ Registration of Overseas Entities Bill, and has made no firm commitments on the timetable for introducing the legislation needed to unleash Companies House’s potential. As we note in our recent video commentary, inclusion of this much-delayed legislation in the 2022 Queen’s Speech – introducing the government’s legislative programme – would do much to signal the government’s real commitment to reform.

Furthermore, it is critical that Companies House receives the funding it needs to perform this role properly. Given the inevitable constraints on public funding over the next decade, identifying more sustainable funding streams is essential; for example, even raising the UK incorporation fee from £12 to £20 (a figure still low by international standards) would provide £5 million a year.

Who Guards the Guards? AML Supervision

It is well-observed in the Plan that ‘the preventive measures that businesses deploy to detect and prevent economic crime are the system’s first line of defence’, and it is the job of the UK’s 25 AML Supervisors to ensure that they do.

However, the well-documented failure of parts of the UK AML supervisory regime to produce the so-called credible deterrent needed to induce businesses to comply with their regulatory obligations led to a significant focus on reforming the regime under the Plan.

In the initial stages, the signs of a significant reform process were encouraging, particularly as regards the work of the so-called ‘Supervisor of Supervisors’ – the Office for Professional Body Anti-Money Laundering Supervision – established in 2019.

However, two years into the Plan, there is limited evidence that the changes to the regime have delivered on its initial intentions – to ensure a level playing field between state supervisors and private-sector Professional Body Supervisors (PBS). It remains the case that many of the PBS continue to lack access to the sophisticated intelligence assets and investigation capabilities increasingly relied upon by state supervisors. With a review of the Money Laundering Regulations scheduled for 2022, it is perhaps time to reflect on whether the UK’s AML supervision model requires more fundamental reform.

Who Goes There? The Law Enforcement Response

Finally, while preventative measures have their place in tackling economic crime, they have limited weight without a commensurate law enforcement response. It is here, when compared to other global financial centres, that the UK’s poorly resourced law enforcement response to economic crime falls glaringly short. With great size comes great responsibility – a responsibility the UK government has been shirking.

The launch of the National Economic Crime Centre (NECC) in 2018 offered much promise in this regard. However, despite playing a transformative role in coordinating the response to fraud during the early stages of the pandemic, the NECC continues to lack the resources it needs to properly drive the national operational response to all economic crime. Furthermore, a failure to properly resource and restructure the policing response to fraud and wider economic crime (action 26) limits the pipeline of cases under investigation.

With commitments made in the May 2021 ‘Statement of Progress’ demonstrating some real ambition as regards fraud policing in particular, the outcome of the 2021 Comprehensive Spending Review – the government’s spending programme – will be a clear signal of intention from the government on the level of its commitment to doing ‘all in our power to combat economic crime’.

The Tide is Turning

However, measuring the UK government’s progress against the Plan purely in terms of a binary analysis of actions delivered masks the real issue at hand: that of a lack of political leadership. It should not be forgotten that the Economic Crime Plan was born in the dying days of Theresa May’s government and is not an issue on which the current prime minister, Boris Johnson, has ever voiced any great enthusiasm.

However, there are early indications in the UK’s Integrated Review of Security, Defence, Development and Foreign Policy that the political winds of change blowing in from Washington may be beginning to rock the UK boat; with the administration of Joe Biden placing a strong focus on anti-illicit finance, the UK government is likely to face pressure to match words with actions.

The clearest way for the UK government to signal to transatlantic partners a renewed commitment to this issue would be to prioritise the legislative reforms already waiting in the wings, deliver a reasonable spending review settlement for operational economic crime initiatives and pledge to produce a second Economic Crime Plan in 2022.

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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