14 Jan 2020
The UK’s first ever cross-government, public-private Economic Crime Plan, a collection of policy, legislative and operational commitments, was published just days before the passing of the baton from Theresa May to Boris Johnson. In this respect, the plan could be viewed as a cuckoo in Prime Minister Johnson’s policy nest, it being very much the brainchild of his predecessor convinced, from her time as Home Secretary, of the importance to national security of tackling the UK’s longstanding economic crime problems.
In the first months of Johnson’s tenure, the Economic Crime Plan seemed to have been brushed aside. It sat at odds with some of the new premier’s flagship policies such as freeports (a recognised economic crime risk); a key ‘oven-ready’ piece of financial crime legislation (the Registration of Overseas Entities Bill, a Bill aimed at ending anonymous ownership of UK real estate). The Economic Crime Plan was excluded from the Johnson cabinet’s first Queen’s Speech, which set out the UK government’s legislative agenda, and it also failed to make it into the Conservative Party’s 2019 election manifesto.
Despite this, we have seen early signs that economic crime hasn’t fallen completely off the agenda. The prime minister’s second Queen’s Speech, immediately after winning the 12 December elections, contained the previously omitted Registration of Overseas Entities Bill; a key piece of legislation tackling the use of real estate to launder illicit funds. However, one swallow does not a summer make. A busy legislative and wider policy agenda dominated by ‘getting Brexit done’ does not bode well for ‘getting the Economic Crime Plan done’. Yet the case for getting to grips with the UK’s economic crime problem remains as strong as ever.
THE CASE FOR TACKLING ECONOMIC CRIME
First, it has taken successive governments of all hues many years to wake up to the fact that the UK has been sleepwalking through the growth of economic crime as a systemic national security risk. Far from criminal proceeds flowing benignly into, out of and through the UK economy, it has finally been realised that economic crime facilitates other national security threats (such as organised crime and terrorism), has a corrupting influence on the economy and political institutions and undermines the integrity of the UK’s financial system.
Second, delivery of the actions in the Economic Crime Plan could repair some of the damage to Britain’s reputation in the world. As successive ‘laundromat’-style scandals unearth a web of UK companies and professional service providers at their heart and the scale of global corrupt wealth enmeshed in the UK’s real estate market becomes ever clearer, British financial crime finger-pointing has turned firmly back on itself. Promoting Britain as a bastion of fair play, the rule of law and integrity will ring hollow if it remains central to the financial crime and corruption woes of others. Showing Britain is tackling its own domestic economic crime problems would allow Johnson to stand tall behind his vision for a ‘Global Britain’.
Finally, and importantly, is the case for protecting the UK public from the crime which is more likely to befall them than any other – fraud. According to the Economic Crime Plan, one in 15 people in the UK fall victim to fraud every year, accounting for one third of crime experienced by individuals. Add to this the £5.9 billion annual economic cost of organised fraud against businesses cited in the Plan, the case for delivering on its fraud aspects alone has merit.
NOT ALL ACTIONS ARE MADE EQUAL
Whilst all 52 actions contained within the Plan have their place, there is an argument for a certain level of prioritisation due to the limited policy bandwidth available in government.
Top of the list should be tackling the extent to which UK companies have become the money launderer’s vehicle of choice, due in equal parts to the lack of scrutinising powers at the UK’s companies register, Companies House, and the lax supervisory regime for the Trust and Company Service Providers (TCSPs) that act as formation agents. Delivering the promised reform of the UK company formation process will make these vehicles less attractive. As will a display by Her Majesty’s Revenue and Customs – the UK’s tax-collecting authority and the anti-money laundering (AML) supervisor for many TCSPs – of its renewed and more robust supervisory approach to this particular sector.
Next on the list should be the continued reform of the UK’s fragmented AML supervisory regime, a regime that has failed to ensure a ‘first line of defence’ in many sectors (such as accountancy, the legal profession and estate agency). The so-called ‘supervisor of supervisors’, the Office for Professional Body AML Supervision (OPBAS) has made a good start at highlighting the scale of the problem in its first two years. However, OPBAS alone cannot solve the underlying structural issues in the UK’s approach and there is an argument for a more fundamental rethink of the system. In short, can 25 different supervisors really work effectively as a whole?
Ensuring reform of the UK’s beleaguered Suspicious Activity Reporting (SARs) regime also merits high priority. It is unfair to create a private sector ‘first line of defence’ (through robust supervision) if the ensuing suspicious activity they highlight to law enforcement authorities lies unactioned in an antiquated (some might say antique) IT system; a system which is ill-equipped to deal with the volume of information it now has to process. Delivering IT reform, though costly, should be more straightforward than dealing with the wider issues – namely, an understaffed central UK Financial Intelligence Unit, housed with the National Crime Agency and the lack of SARs’ analytical capacity within operational policing.
DEEDS NOT WORDS
Even if the above issues are prioritised alongside others in the plan (such as information-sharing and the international response), this action would be insufficient without dealing with the crucial issue on which the plan largely remains silent: the fundamental capacity and capability issues within the UK’s operational response to economic crime.
Although economic crime has always been the poor cousin of terrorism and organised crime in policing, this has been exacerbated by 10 years of policing austerity and the advent of a local agenda in policing driven by the imposition of Police and Crime Commissioners in 2012; an agenda which is not suited to the geographically diffuse nature of many economic crimes.
The National Economic Crime Centre (NECC), established just over a year ago, was set up ostensibly to add a level of bandwidth in this space. Whilst its multi-agency, coordinating role has undoubtably brought some coherence to the picture, with no operational capability of its own it does little to deal with the fundamental capacity issues in the wider policing landscape.
In short, a significant policing budget is needed to match the policy ambition of the plan. Six months after its launch, this remains absent.
NO GOING BACK NOW
Despite room for improvements in the delivery of the plan, the very fact of its existence marked an important step forward. However, it remains unclear where this sits as a priority under a Johnson-led government. In making the case for prioritising the plan, policymakers and civil society alike should draw on the national security and UK’s reputational arguments. When doing so, it is essential that they also make the case for a much-needed cash injection for the operational response.
By Helena Wood, RUSI, 13 January 2020
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