Niall Hearty of financial crime specialists Rahman Ravelli considers the fears some have voiced about the plan.
Eight freeports planned for the UK have prompted concerns about the risk of money laundering they may create.
Chancellor Rishi Sunak used his Budget to announce that freeports are to be established at East Midlands Airport, Felixstowe and Harwich, the Humber, Liverpool, Plymouth, the Solent, the Thames and Teesside.
The Chancellor believes the favourable tariffs, VAT and duties associated with freeports, combined with tax breaks to encourage construction, private investment and job creation, can provide a boost to the UK economy.
Yet a number of commentators have warned that the potential benefits of freeports can be overshadowed by the money laundering risk that they can pose. Free trade zones that have operated elsewhere have reportedly attracted criminals, who have seen the low levels of scrutiny as an opportunity to move their illicit wealth undetected.
Freeports allow companies to import goods tariff-free - only paying once those goods are sold on the domestic market – or export goods without paying UK tariffs. Five years ago, Rishi Sunak wrote a paper for the free market-supporting Centre for Policy Studies, outlining the case for freeports to be created after the UK had left the European Union.
But even some of those who agree with the Chancellor’s arguments in favour of freeports want to see proper precautions put in place. A risk-based approach, with proper systems of checks and due diligence on all companies –and their beneficial owners and key executives – is being argued for by those who believe this is the only way to ensure freeports do not unwittingly facilitate financial crime.
With the surge in Covid-related criminality, the Chancellor faces the task of convincing sceptics that his planned freeports will not open the door to more fraud and money laundering in the UK. While freeports may well assist the post-Brexit UK economy come out of the pandemic, there is certainly a vulnerability to the risk of money laundering that has to be addressed.