Without Statutory Oversight, the UK’s Progress on Economic Crime Will Fail


Main Image Credit Accountability gap: greater government scrutiny is needed if the UK is to face up to its economic crime challenges. Image: William / Adobe Stock


As the government calls for improvements in private sector supervision, it must also improve its own scrutiny. Here’s how.

Before the summer, the UK Treasury dropped a holiday project in the laps of all those that care about the country’s lagging response to economic crime. Acknowledging the significant weaknesses in the UK’s regime for ensuring that financial institutions, professional services and others comply with global economic crime standards, the government has proposed a series of options for reform. While there is fevered speculation as to which of the four models proposed in the consultation will come out on top, the ultimate aim of all of the options is to ensure that the private sector is doing all that it can – and more – to reduce the level of economic crime in the UK.

Weak supervision – particularly of regulated non-banking sectors – is a festering sore of financial system oversight around the world. Just look at the data produced by the global watchdog, the Financial Action Task Force (FATF). Not a single country has achieved a ‘highly effective’ rating when it comes to supervising the private sector to ensure compliance with global anti-money laundering (AML) standards, and a mere handful have achieved a substantial level of effectiveness. The UK scores even lower, judged as only ‘moderately’ effective when it comes to its AML supervision. As David Lewis, former Executive Secretary of the FATF Secretariat, memorably noted in 2020, ‘everyone is doing badly, but some are doing less badly than others’.

Of course, supervision presupposes that those doing the supervising are effective – and the FATF’s review demonstrates that this is not the case. The FATF hopes that by highlighting these national shortcomings, countries will be spurred into action. But given these reviews occur at intervals of as much as 10 years, long periods of neglect are often interspersed by panics of activity as a review approaches – and then nothing.

The UK is no exception when it comes to the ‘boom and bust’ response to economic crime failings. For all the energy and activity since Russia’s full-scale invasion of Ukraine, the UK’s response to economic crime is tired; the necessary Parliamentary time was only found to bring forward the Economic Crime (Transparency and Enforcement) Act 2022 and its successor, the Economic Crime and Corporate Transparency Bill 2022–2023, once the Kremlin’s tanks crossed the border into Ukraine and Russia’s war of aggression was underway.

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Weak supervision – particularly of regulated non-banking sectors – is a festering sore of financial system oversight around the world

Yes, we have seen the new Economic Crime Plan emerge, filled with actions and milestones. Yet despite the call from the Treasury Select Committee for this second plan to ‘push harder and move faster’, many feel it has ended up as an exercise in looking busy rather than achieving progress. The latest Economic Crime Bill has limped over the line with the government rejecting a range of sensible amendments proposed by the House of Lords and opposition MPs. The private sector is also being asked to pay more to support the UK response. The Economic Crime Levy is set to collect £100 million a year from the private sector for the fight against economic crime, and yet there is little to show for this contribution, as the UK’s response remains under-resourced and directionless. Moreover, it is not clear who is holding the government to account for how this money is spent.

So, what is to be done?

For all the clever legislative amendments and policy ideas, there is a fundamental and systemic issue confronting the UK. The UK’s defences against economic crime are manned by an army of strategic boards, delivery boards, steering groups and taskforces. Economic crime is in lots of people’s portfolios, but it is nobody’s specific priority. Just look at the unenviable list of responsibilities on the desk of the security minister. Economic crime sits alongside some meaty competition, including countering terrorism, domestic state threats, cybercrime, and serious and organised crime.

If greater prioritisation of economic crime is needed – as it is – then it seems unlikely this is going to occur voluntarily, given the competing priorities in the responsible minister’s diary. Thus, a better way of identifying areas for impact and prioritising actions is needed. Put crudely, heads must be knocked together to ensure that those working in the economic crime arena get the resources, support and direction they need.

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For all the clever legislative amendments and policy ideas, there is a fundamental and systemic issue confronting the UK

As a recent report from Wilton Park noted, a figure with ‘sufficient seniority and resource to work across Whitehall and engage effectively outside of government’ is needed – a position that the government cannot ignore, with the access and statutory footing necessary to genuinely hold the government to account, influence change and thus support the need for much greater system leadership and accountability.

This is a point echoed by the Economic Crime Manifesto produced by the UK Parliament’s All Party Parliamentary Groups on Fair Business Banking and Anti-Corruption and Responsible Tax, which notes that ‘Stronger accountability coupled with greater transparency can mitigate the effects [of illicit finance]. Yet there is little scrutiny of the enforcement and regulation of economic crime by bodies such as Parliament’.

At the Labour Party conference last week, Shadow Chancellor Rachel Reeves announced Labour’s intention to appoint a Covid Corruption Commissioner. This would be a start – but why stop there? Why not appoint an Economic Crime Commissioner, statutorily empowered to ensure that the cracks in the current government system are addressed and that the dither and delay that has afflicted the UK’s response to economic crime is no more, regardless of which party is in power? A commitment by the leading parties in their manifestos for next year’s general election to appoint such a Commissioner would be a powerful statement of intent – a statement that acknowledges that just as the private sector needs enhanced scrutiny to play its part, so too do governments of all stripes if the UK is to address its longstanding failure to truly face up to its economic crime challenges.

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

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WRITTEN BY

Tom Keatinge

Director, CFCS

Centre for Financial Crime and Security Studies

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Kathryn Westmore

Senior Research Fellow

Centre for Financial Crime and Security Studies

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