The Economic Crime Plan is a really welcome set of commitments from the government but needs to be matched by much more ambitious public investment, including in training, if the UK is to get serious on economic crime enforcement.
Today’s Economic Crime Plan announced a wide range of important measures to tackle the UK’s burgeoning economic crime problem. This includes an additional 475 financial investigators, and an expansion of the Combatting Kleptocracy Cell which the government has said will lead to “more cases investigated, more criminals prosecuted and more assets recovered” and the recovery of an additional £1 billion of criminal assets over the next decade.
There can be no doubt new capacity is desperately needed. Economic crime costs the UK around £350 billion (equal to 17.5% of the UK’s GDP). In 2022, 64% of UK businesses experienced fraud, corruption or other economic crime, much higher than the global average of 46% and second only to South Africa. Public sector bodies in the UK meanwhile lose £33-58 billion a year from fraud.
Yet the UK currently spends the equivalent of just 0.042% of GDP (at a very generous estimate) on funding national law enforcement agencies to tackle economic crime. In 2021, the main inspectorate of police found that just 1% of police personnel were involved in fraud investigations despite the fact that fraud represents 41% of all reported crime.
UK law enforcement outcomes for economic crime meanwhile have been in freefall. Prosecutions for fraud have fallen by 67% since 2011 and for money laundering by 35% since 2016.
The new ‘sustainable’ resource model for the plan
The government has announced a package of £400 million to fund the three year Economic Crime Plan, which runs from 2023-2026. This consists of:
- £200 million from the new £100 million a year Economic Crime Levy on the private sector beginning in 2023/24; and
- £200 million of existing government investment announced in the 2020 and 2021 Spending Reviews.
This means that there is no new government investment in economic crime being announced with the launch of the new Plan. Furthermore this package only funds the first two years of the plan (the government’s Economic Crime Levy announcement this week that preceded the Plan confusingly talked about a £500 million investment, with the discrepancy likely to result from this figure including an additional £100 million of Levy funds which may allocated for 2025/26, but which is likely to be decided at the next spending review).
The private sector Levy can only be used for tackling money laundering. So the £200 million of existing government investment must cover the rest of economic crime. From correspondence with the Treasury, this £200 million appears to include £30 million per year for the Home Office to tackle money laundering and fraud as allocated in the 2020 spending review, and a further £110 million provided in the 2021 spending review.
To be fair, the government has committed in the Plan to “explore and assess” options to reinvest money from criminal funds suspended in bank accounts and to reinvest more assets recovered from criminals back into tackling economic crime. But there is no estimate in the Plan of how much additional money this may bring in and exploration of reinvestment of more assets will not begin until the end of 2024.
How does this compare to what’s needed?
The £42 million increase in Home Office funding for 2022-25 was half of what law enforcement had requested and represented just 1% of the budget increase the Home Office received for 2022-25.
In 2019 former head of the National Crime Agency (NCA) Lynne Owens said that the law enforcement system needed £2.7 billion to tackle serious and organised crime, of which economic crime is a significant part.
In 2022, the Social Market Foundation estimated that the UK needs 30,000 more police officers and civilian staff for fraud alone to tackle the scale of the problem. The Royal United Services Institute meanwhile argued for an annual investment of £250 million to fund a minimum of 2,000 additional new police officers working on economic crime by 2030. There is no mention in the Plan of any uplift for policing or any increase in the number of police officers tackling economic crime.
Meanwhile it is very hard to compare what difference any new money will make to enforcement budgets because of the real lack of transparency in what law enforcement spends on economic crime. It is almost impossible to get accurate or public figures on:
- the NCA’s budget for fighting economic crime,
- the budget for the new Combatting Kleptocracy Cell, and
- the budget for the Office of Financial Sanctions Implementation.
The government argues that providing public information on the budget and staffing levels of these bodies would help criminals. The result is that government spending on economic crime enforcement is shielded from any meaningful scrutiny or oversight.
Where will all those investigators come from?
The government’s ambition to recruit 475 new financial investigators may also be harder to achieve than it looks. The Serious Fraud Office is running vacancy rates of between 20-25%, the NCA of around 20%, while Companies House staff costs in 2021/22 were underspent by a total of £6.2m due to a “large number of unfilled staff vacancies”.
The UK currently lacks a dedicated training programme for economic crime. The College of Policing for instance has no professional programme for fraud, corruption and economic crime. For many law enforcement officers in the NCA, training can consist of just one week.
Meanwhile, rather than useful career rotations between different public agencies, some public bodies in effect poach the best staff by paying higher salaries, and rotation between the police and national enforcement agencies like the NCA is minimal.
Until the UK establishes financial investigation and economic crime enforcement as a specialist career path across law enforcement and invests in training, it isn’t clear how it’s going to create the stream of new investigators to match the ambition of the Plan. The commitment to develop a people and skills strategy for economic crime enforcement will be absolutely critical to delivery of the Plan.
Missing a trick on Companies House
£20 million of the new Levy will be spent on new intelligence teams at Companies House, and over a quarter of the government investment into the Plan is going into Companies House reform.
However this is money that could easily be raised instead by increasing the Companies House registration fee from its current absurdly low level of £12. This would help fund enforcement and implementation of the new powers Companies House will be getting later this year in the Economic Crime and Corporate Transparency Bill as well as stem the flow of bogus companies.
There is as yet no transparency about what calculations Companies House has made on the level of resourcing it needs to proactively exercise its new powers which would help establish what a sensible registration fee should be. The plan’s silence on this is a missed opportunity.
To sum up
If the government is serious about a sustainable resource model, we recommend that it:
- Commit to much greater transparency about public sector investment in – and budgets for – economic crime enforcement to allow greater public scrutiny and oversight.
- Commit to developing a much more ambitious funding settlement to deliver the Plan, as well as the forthcoming Fraud and Anti-Corruption Strategies.
- Make Companies House self-funding as soon as possible by raising registration fees in order to release funds being backed by the taxpayer for law enforcement instead.
- Bring forward a review of how more assets recovered can be reinvested in law enforcement to report by the end of 2023.
- Commit to creating an attractive economic crime career path in law enforcement by undertaking a comprehensive review of salaries, training pathways, and how to recruit and retain the best expertise.
This blog was updated on 23.05.2023