The first report on the Economic Crime Levy (ECL) published by the Treasury demonstrates both the strengths and limitations of this new funding mechanism. What questions come out of the report and what could be done to further bolster funding for tackling economic crime?
What the ECL gets right
The ECL is undoubtedly a critical source of much-needed funding for tackling the UK’s role in economic crime (and money laundering specifically). The Treasury report provides a very welcome breakdown of how the ECL was spent in 2023/24, with really encouraging examples including:
- £42.7 million on technology such as an online portal for submitting Suspicious Activity Reports (SARs), development of a new asset recovery database, and the National Crime Agency’s (NCA) Data Fusion initiative,
- £6 million to fund 100 staff across the UK’s Financial Intelligence Unit (UKFIU) and Regional Organised Crime Units (ROCUs) to analyse SARs,
- £12.7 million on increased resourcing of at least 120 staff across various teams in the NCA, GCHQ, City of London Police (CoLP), ROCUs, Crown Prosecution Service (CPS) and HM Revenue & Customs to detect and disrupt money laundering and recover criminal assets,
- funding (including the positions above) for an overall total of 396 new full-time equivalent staff across various investigatory, intelligence and policy roles.
All these investments will without a doubt enhance the UK’s ability to detect and tackle money laundering.
What we still don’t know
Some parts of the ECL report however leave more questions than answers.
Firstly, it’s hard to assess the success of the recruitment of the “at least 396” new roles funded by the ECL without taking into account chronic challenges with recruitment and retention at some agencies, particularly the NCA.
In recent evidence to the NCA Remuneration Review Body, the agency flagged “acute difficulties” in recruiting and retaining specialist and technical roles, noting that staff can seek salaries elsewhere in the public sector (let alone the private sector) which “dwarf” those the NCA offers.
This means there is a very real danger that the ECL is bringing in new recruits just as experienced staff leave – an unsustainable situation. We hope the government will set out what it is doing to mitigate this danger – for example through providing funding for NCA pay reform – in the forthcoming update on progress delivering the Economic Crime Plan 2023-2026.
Secondly, some of the data in the report is too vague to enable effective public scrutiny. For example, the report notes that the ECL enabled uplift in the NCA’s asset recovery and AML capabilities resulted in a 6% increase in the agency’s “highest impact AML disruptions”. But without a breakdown of what counts as a high impact AML disruption it’s impossible to assess what this really means.
Finally, it’s worth noting that the Financial Conduct Authority and Gambling Commission retained £700,000 to cover the costs of collecting the levy (including “one-off set up costs” such as IT). This is over double what the Treasury spent on accelerating AML supervisory reform – with this work held back while the new government considers its response to the 2023 consultation.
Once a decision is made on the future structure of the AML supervisory regime we’d hope to see a much larger portion of the ECL dedicated to making these reforms work effectively, and much less spent on the costs of levy collection.
Should Companies House get ECL funds?
There are further questions over whether the ECL is being spent in the right areas.
Companies House and the Insolvency Service are set to receive £20 million over three years from the ECL. But in May 2024 Companies House fees were raised significantly, including a new £50 company incorporation fee. The Insolvency Service has likewise announced a “new funding regime” for its corporate investigation and enforcement activity based on Companies House fees.
It would make more sense to redeploy the ECL funding currently destined for Companies House and the Insolvency Service to other areas, and require the two bodies to use Companies House fees – which may well need to be further increased if necessary – to fund their important work tackling economic crime.
Economic Crime Levy spending on deliverables, 2023-2026
Is this investment enough?
While this report shows the ECL is making an important contribution to the fight against economic crime, the challenge remains that our overall response still pales in comparison to the size of the UK’s money laundering problem.
As an international financial centre, the UK is especially vulnerable to facilitating money laundering. But our new anti-corruption enforcement tracker suggests that the UK’s response over the last decade or so has been inadequate, with a 36.1% decline in prosecutions of money laundering where it was the most serious offence that a defendant was dealt with for since 2013/14, and a 20% decline on the median.
And although total recovered criminal assets in 2023/24 were up 10.3% on the median, the £243.3 million recovered that year represents just 0.2% of the £100 billion a year the NCA assesses could realistically be laundered through the UK.
However, likely thanks to the welcome focus on increasing enforcement outcomes under the Economic Crime Plan 2 and some of the ECL funded projects, there was a noticeable uptick in money laundering prosecutions in 2023/24 compared to 2022/23. Prosecutions increased by 1.7% where money laundering was the most serious offence and (according to stats published just last week) by 10% for all money laundering prosecutions compared to 2022/23, hitting an 11 year high.
Time for an Economic Crime Fighting Fund
Government could seriously boost funding for tackling economic crime and build on this progress by creating an Economic Crime Fighting Fund, based on ECL funds as well as enforcement receipts from asset recovery and fines. There was certainly appetite to explore mechanisms to provide stable, multi-year funding for tackling economic crime – potentially through a version of this fund – at a roundtable we organised recently with the Royal United Services Institute attended by government and law enforcement officials.
At the very least, the government could make the Asset Recovery Incentivisation Scheme (ARIS) – the mechanism allowing the reinvestment of some recovered assets back into enforcement – much more effective by finding workarounds for the rigid annual spending rules that mean agencies often have to return large sums to the Consolidated Fund if they recover them near the end of the financial year. Addressing this issue would be a surefire way to deliver on the ECP2 commitment to reinvest more recovered assets through ARIS in tackling economic crime.
The need to deliver this commitment is made all the more acute by the failure to make progress on government plans to enable investment of illicit funds held in suspended accounts, which now appear to be out of reach for the foreseeable future after private sector objections. This means that the £220 million held in these accounts, plus the £35.6 million they accrue each year, cannot currently be relied upon to increase funding for tackling economic crime.
What next?
The ECL is making a critical contribution to the fight against economic crime and the projects detailed in the Treasury report show real promise. But this private sector contribution underscores the need for the government to up its game through public investment and much greater reinvestment of enforcement receipts if it’s truly serious about getting a grip on economic crime.
A fair settlement at the upcoming spending review which supplements the ECL with at least the same amount of public funding (£100 million a year), and lays the groundwork for an Economic Crime Fighting Fund based on reinvesting enforcement receipts from fines and recovered assets would, in our view, be a real game changer
