It’s a Wrap: Reflections on the UK’s Economic Crime Plan (2019–2022)

They say a week is a long time in politics, and three years – the duration of the UK government’s first ever Economic Crime Plan (ECP), which wrapped up in July – is a lifetime, and one which has seen a change of prime minister, four chancellors of the exchequer, a general election and a global pandemic. Despite these distractions, as shown in the RUSI ECP tracker, 48% of the Plan’s 52 actions have been delivered, 34% are in progress (or have no due date) and 15% are overdue.  

However, as the dust settles on ‘ECP1’ and plans are made for ‘ECP2’ it is a good time to reflect on the extent to which the original effort has delivered on its vision of the public and private sectors jointly delivering ‘a holistic plan that defends the UK against economic crime, prevents harm to society and individuals, protects the integrity of the UK economy, and supports legitimate growth and prosperity’?

First, the positives. The UK has a plan for bringing the Money Laundering Regulations into line with the technological landscape, and new mechanisms have been introduced to achieve greater cooperation between the anti-money laundering (AML) supervisors charged with policing adherence to these rules. We have finally seen the introduction of the long-delayed register of overseas entities to limit anonymous property ownership by overseas shell companies, and we have legislation in place to introduce a levy on the regulated sector to fund much-need capacity across the system.

However, can the activity over the past three years be said to have achieved the overall vision? In short, no. Reforms to date have merely kept the system ticking over, and a large number of big-ticket actions promised back in 2019 have not been delivered.

First, we are yet to see reform of the UK’s corporate registry, Companies House, to respond to the industrial-scale abuse of UK corporate vehicles in global money laundering. Although legislation has (finally) been promised for the autumn, this has been long-delayed, and it took the high-profile resignation of a government minister and a war on European soil for the government to finally make this commitment.

Second, despite a year-long consultation by HM Treasury, we are yet to see a plan for reforming the UK’s patchwork of 25 AML supervisors – long seen as an Achilles’ heel of the UK’s preventative defences.

Third, despite some investment in new capabilities within policing, including new ‘Proactive Economic Crime Teams’ at the regional policing tier, the policing response remains critically underfunded and lacks the clarity of roles and responsibilities needed to drive it going forward.

Finally, a sustainable, long-term funding solution to prime the system remains elusive. Although the levy will raise around £100 million per year, such an amount will merely bring the system to a standing start rather than driving it forward.   

A Long Road Ahead

However, all is not lost. The government has committed to delivering an ‘ECP2’ in autumn 2022, with a more outcomes-focused approach. There is some cause for optimism that this Plan will have greater weight behind it, given the considerable shift in the political optics on this issue over the past 12 months – including recognition of the UK’s spiralling fraud problem, the Russia–Ukraine crisis placing a spotlight on ‘dirty money’ in the UK, and an increasingly agile and vocal backbench campaign on this issue. Given this shift in salience, what should the UK’s second ECP focus on?

Enforcement, Enforcement, Enforcement

As we’ve previously highlighted, the main areas of progress under the ECP were in the policy domain. The second ECP must put forward a credible (and costed) plan for operationalising the response. This should include a more coherent framework for AML supervision enforcement, reform of the policing response to economic crime (as we have noted here), and clarity over the future form and role of the National Economic Crime Centre and its partners in the National Crime Agency (NCA) in the response. In short, credible deterrence must be a key watchword for ECP2.

Asset Recovery

The Asset Recovery Action Plan (2019–2022), which was published in parallel with the first ECP, also comes to an end this year, with mixed results. As highlighted by the authors in previous commentaries, asset recovery in the UK is often a problem not of law, but of enforcement. ECP2, which will include the government’s new tranche of asset recovery commitments, should commit to a significant expansion in specialist asset confiscation capacity within the NCA, policing and Crown Prosecution Service, and should explore ways to overcome the evidential barriers highlighted in multi-jurisdictional kleptocracy cases, against which the much-vaunted Unexplained Wealth Orders have proven impotent. All of this should position the UK as a global leader in asset recovery, including through support to the Financial Action Task Force’s work on this issue.

A Better Understanding of the Risks

A common theme in the post-implementation review of the Money Laundering Regulations and the recent government consultation on the UK’s AML framework, as well as numerous regulatory actions, is the lack of understanding – on all sides – of where the biggest money laundering and terrorist financing risks are. An effective AML framework relies on such an understanding to ensure the response is directed at the highest-impact activities. Underpinning ECP2, therefore, should be a commitment to a thorough, robust and data-driven approach to understanding how well the UK’s AML system is working, including in the next iteration of the UK’s National Risk Assessment of Money Laundering and Terrorist Financing. The output from that should be used to shape both the approach to AML supervision and the activities of the private sector. 

Illicit Finance as a Foreign Policy Concern

Finally, it is tragic that it took a war on European soil to truly elevate illicit finance to the status of national security threat in the UK. However, ECP2 should capitalise on this renewed focus to strengthen the UK foreign policy dimension of the response. ECP2 should commit to improving the systematic gathering of information on the international dimensions of the threat. It should develop a ‘whole of system’ response to international illicit finance that recognises both the UK domestic harms and the role of the UK in fostering illicit finance abroad. In doing so, ECP2 must leverage the capabilities of the Foreign, Commonwealth and Development Office network to deliver opportunities for the UK response to illicit finance upstream, and ensure that its actions deliver on commitments made in the UK’s 2021 Integrated Review and via multilateral fora such as the G7.

Actions Speak Louder than Words

In summary, if the first ECP delivered some basic system maintenance in the form of legislative and policy reform, ECP2 needs to be about converting those reforms into tangible, real-world outcomes. This won’t be easy and will require bigger systemic reforms, particularly in the fields of AML supervision and law enforcement, with the necessary interim disruptions this will bring. In short, the first ECP brought together the machinery of government into a single response. Now the machinery needs to deliver the goods.

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

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