Author: Syedur Rahman
7 October 2021
2 min read
Syedur Rahman of Rahman Ravelli assesses the government’s plan to raise funds to tackle financial crime
The Economic Crime (Anti-Money Laundering) Levy has been proposed by HM Treasury as a new charge for professional firms and financial institutions.
If it becomes reality, collection of the Economic Crime Levy (ECL) will be the responsibility of HM Revenue and Customs, the Financial Conduct Authority and the Gambling Commission.
The levy is being proposed as part of the UK’s battle against economic crime. HM Treasury published its plans for the levy - and for the draft legislation to bring it into force – after a consultation on how funds could be raised to tackle financial crime. The consultation generated 119 responses.
Under the proposals, all organisations that are subject to the Money Laundering Regulations (MLRs) that have UK revenue above £10.2 million will be subject to the ECL. ECL fees are not expected to exceed 0.1% of an organisation’s UK revenue. Only bodies that are classed as medium-sized (with UK revenue of £10.2 million to £36 million), large (£36 million to £1 billion) and very large (over £1 billion) will be expected to pay the ECL, although the exact turnover figures that will be used for the levy are yet to be finalised.
The levy is set to be applied from 2022-23, with the precise final fixed fees to be included in the Finance Bill. With the ECL to be set according to the size of the organisation, it is likely to mean medium-sized organisations paying between £5,000 and £15,000 per year, large ones paying £30,000 - £50,000 and very large entities facing a levy of £150,000 to £250,000.
The UK government expects the ECL to raise approximately £100 million a year to help fund its efforts to combat money laundering.
The Institute of Chartered Accountants for England and Wales told HM Treasury during the consultation that it was important that the money raised by the ECL had to be spent on “the right activities to effectively counter-economic crime’’ and should not only be imposed on companies supervised by the larger professional bodies, such as itself.
The government is now holding a technical consultation on the Economic Crime (Anti-Money Laundering) Levy draft legislation ahead of its inclusion in the 2021-22 Finance Bill. The deadline for response to the consultation on the draft legislation is October 15.
The idea of imposing an additional tax on businesses who already have to spend significant amounts on compliance, monitoring and reporting issues may well prompt many to question why those in the regulated sector should be having to contribute any more they do already.
The revenue model that is being suggested is concerning. There are many businesses that only carry out a small amount of regulated activity. But the current proposal is that the levy should be based on all revenue as opposed to only the anti-money laundering regulated activity. This could lead to many businesses finding themselves paying a disproportionate amount towards combatting a risk that has very little to do with their activities.
If the government does want regulated businesses to support the levy, then significant work will be required to ensure it is reasonable, relates to actual risk and is calculated on a fair basis.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.