The UK's Economic Crime Plan 2: Progress, Pitfalls and Prospects

This month marks one year since the UK government finally rolled out its Economic Crime Plan 2 (‘ECP2’), as part of its ongoing battle against economic crime. This is a follow-up to the first Economic Crime Plan that ran from 2019 to 2022. Aimed at fortifying the country’s defences against ‘criminals, kleptocrats, and enablers of economic crime’, ECP2 sets out some essential building blocks to safeguard the UK from economic crime abuses. A key part of this is getting the right people in the right places, and giving them the right data and tools.

On its first anniversary, it is time to assess its impact, identify areas of success, and confront ongoing issues. An analysis of the progress of the actions, informed by conversations with representatives of civil society and the private sector, suggests a mixed picture of achievements and challenges. Companies House, the Office of Financial Sanctions Implementation (OFSI), the Public Sector Fraud Authority (PSFA) and the Financial Conduct Authority (FCA) have been notably proactive and transparent in reporting their achievements. However, for a plan that was built on an ‘outcomes-focused approach’, it still feels like too much of a box-ticking exercise rather than a comprehensive framework that is made to have a lasting impact.

Progress in Perspective

In terms of outputs, the UK government has been busy. Of the milestones set out in the plan, the vast majority are either in progress or have been completed. This is a great achievement, especially considering the first Economic Crime Plan completed only 48% of the planned actions over three years.

ECP Milestones 2023

The completed ECP2 milestones reflect, in part, the priorities of the current government: the need for effective implementation of sanctions, particularly in light of Russia’s full-scale invasion of Ukraine; the emergence of new technologies including crypto assets; the exponential increase in fraud; and the need for legislative reform, primarily, but not exclusively, in relation to Companies House.

First, good progress has been made in relation to Companies House. The first measures under the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) came into force early this month and Companies House's enhanced powers will bolster corporate transparency. The registrar now has greater powers to query information and request supporting evidence, can perform better checks on inaccurate information, and share data with other UK government departments and law enforcement agencies. The commitment to raising incorporation fees and introducing identity verification requirements for persons of significant control will also go a long way to addressing some of the well-known issues with the quality of information on the register and the ability of criminals to abuse UK corporate structures. That said, many would like to see faster progress in these areas.

Similarly, efforts to strengthen the sanctions response through OFSI underscore the government's commitment to maximising the impact of UK resources, powers and capabilities, and improve the effectiveness of the UK’s sanctions regime. It expanded its sectoral guidance and established new partnerships with industry and other jurisdictions. Some may perhaps see these as baby steps, but OFSI has come a long way in a short period of time.

On crypto assets, mostly under the lead of the FCA, the government has worked to close almost all vulnerabilities that enable their illicit use. This has been achieved through improvements to its legislative and regulatory regimes. Actions 8 and 9 of ECP2, seeking to strengthen and enhance technological capabilities and the response to the threat, are almost all completed, with some time to spare.

Fraud has been a prominent issue in recent years. It was therefore not a surprise that cutting fraud is a central pillar of ECP2. Here, too, good progress has been made both in terms of the development of the PSFA and the delivery of the government’s Fraud Strategy. In particular, the latter has introduced a voluntary online charter with the big tech firms. This aims to reduce fraud that originates from their platforms. While it is too early to see the impact of this, it is a unique achievement particularly when coupled with the Online Safety Act that introduces responsibilities for the big social media platforms on certain types of fraudulent content. The progress is borne out in the figures from the Crime Survey of England and Wales. These show that the ambition to cut fraud by 10% from pre-Covid levels has been met and sustained.

There are other areas of progress, too. A recent consultation was issued on changes to the Money Laundering Regulations (MLRs) to allow for their more effective implementation, the introduction of a new corporate offence of failure to prevent fraud and reforms to the ‘identification doctrine’ – the mechanism to hold companies to account for their criminal actions. This last measure is something that has been called for since the Law Commission’s review of corporate criminal liability, if not before. The move has been welcomed, particularly by civil society and law enforcement.

Potential Pitfalls

ECP2 was built upon the foundational principles of effective collaboration and resource allocation. It emphasised the importance of deploying the right people with the right data and tools to effectively combat economic crime. Chapter 2 of the Plan established that success was not about the number of completed actions but ensuring that the response to economic crime is responsive to developments, sustainable in the long term in terms of funding and capacity, and based on data. At its core, the plan was focused on outcomes – as opposed to outputs.

While progress has been made on an initial outcomes framework, as outlined in the last action of the plan, little has been communicated publicly. If the focus of ECP2 is people, while there have been some welcome investments in resources across the system (the milestone of recruiting 160 new personnel by 2023 was met), there are still concerns over the sufficiency of planned increases in the number of personnel dedicated to fighting economic crime. If the outcomes rely on good data and a whole-of-system response, important strategies that underpin ECP2, such as the Anti-Corruption Strategy and the Economic Crime Data Strategy, are still in the making and expected to be published only later in the year.

Looking at the expected outputs themselves, there are some other important absentees, too. A response to last year’s consultation on anti-money laundering (AML) supervision is still pending. This might fundamentally change the structure of the UK’s AML framework and the government’s commitment to ambitious reform remains to be seen. On corporate transparency, Gibraltar is currently alone among Crown Dependencies and Overseas Territories (CDOTs) to have a public beneficial ownership register. The UK government is clear on its policy on CDOTs registers but deadlines to introduce pubic registers have been missed and postponed.

And while the UK has always had a fairly robust legislative and regulatory framework, ECP2 has not yet addressed some of the concerns from civil society and industry about the lack of enforcement. While it may be too early to assess its impact, enforcement has always been a sore point for the UK. From a private sector perspective, it is also still felt that there is a need for more public–private collaboration on economic crime.

Prospects for the Plan

Credit should be given for the good progress that has been made so far. Companies House and OFSI have stepped up their response to economic crime and deserve recognition. However, some other parts of the machinery are either too quiet about their achievements, or have not been active enough.

More generally, even though ECP2 has made commendable progress in certain areas, challenges persist. The focus should be on enforcing existing measures and ensuring a sustainable and lasting impact, rather than generating new policies. Looking ahead, the UK's economic crime landscape is poised for further evolution. 2024 should be the year of asset recovery, with a new database and intelligence hub to be established soon, finally providing much-needed data. Likewise, the Economic Crime Data Strategy and the Anti-Corruption Strategy are expected to emerge before the end of the year. As noted, the hope is that this will be the year of the long-promised reform of AML supervision in the UK as well as improvements to the effectiveness of the MLRs. Combined with new resources, this is the kind of comprehensive response required.

With a general election looming, there is no guarantee that that ECP2 will continue in its current form. A new government will not be obliged to complete the actions envisaged in the plan. However, the imperative of combating economic crime should remain undiminished, regardless of political transitions. Hanging over the UK is the prospect of its next evaluation by the Financial Action Task Force that will assess the effectiveness of the UK’s response to money laundering and terrorist financing. Steering resources and focus away from the delivery of ECP2 towards a focus on achieving a ‘best-in-class’ score may make further progress challenging.

Maintaining momentum in the UK’s fight against economic crime must remain a priority for policymakers and stakeholders across industry, law enforcement and civil society. Some of the ECP2 actions could repair part of the damage to the UK’s reputation done by years of neglect but that will require a real focus on the effectiveness of delivery of the actions.

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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