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Economic crime: The Treasury Committee’s vision for the future

On 2 February 2022 the Treasury Committee published their report on economic crime (the “Report”). [1] Against the backdrop of frankly alarming levels of fraud and economic crime, the Committee was asked to report on the progress made by the Government in tackling economic crime.

The conclusion of the Report is quite simply that not enough is being done, and that what is being done is “…not urgent enough to stem the rise, let alone start to bring it under control.” The recommendations of the Committee are comprehensive and, if implemented, will completely change the landscape in the UK for those that seek to exploit its weaknesses.

What is economic crime?

Economic crime, also known as financial crime, refers to illegal acts committed by an individual or a group of individuals to obtain a financial or professional advantage.[2] The term covers a wide range of offences including fraud, money laundering, counterfeit currency, bribery and corruption. The principal motive in such crimes is economic gain.

Economic crime is a major and rapidly growing problem in the UK. According to the Crime Survey for England and Wales[3] there was a 43% increase in fraud and computer misuse in the year ending June 2021, compared to the year ending June 2019. In November 2021, Action Fraud reported a 36% rise in fraud offences for the year ending June 2021, compared with the year ending June 2020. The data showed a 51% increase in financial investment fraud.

As solicitors on the frontline of advising on disputes and compliance issues arising from fraud and financial crime, we know and see through our work that much more needs to be done to tackle this widespread issue.

Report observations

The Committee was united in its view that economic crime is not only a problem for individual consumers but is also a threat to national security, and the prosperity and international standing of the UK. The Report makes a number of observations with regard to economic crime and the way it is currently dealt with in the UK. In particular, the Committee refers to the number of agencies responsible for fighting economic crime as “bewildering” leading to a fragmented approach to both regulation and enforcement. The current status of economic crime in the UK has been described as “…everybody’s problem and nobody’s priority…”.[4] The Committee observes that each of the agencies responsible for tackling economic crime also has other crime-fighting or regulatory objectives and suggests that law enforcement agencies are under-resourced and therefore feel unable to tackle what is a hugely complex and demanding issue.

Report recommendations

The Report’s recommendations are divided into 5 policy areas as follows:

  • Online economic crime
  • Authorised push payment (“APP”) fraud
  • Anti-money laundering (“AML”)
  • Cryptoassets and economic crime
  • Companies and economic crime

The Committee’s headline recommendations can be summarised as follows:

Online economic crime

  • The Online Safety Bill should be amended to include fraud offences in the list of “relevant offences”
  • The Government should include measures to address fraud via online advertising in the Online Safety Bill
  • Online platforms / social media companies should be required to do Know Your Customer checks on their advertisers
  • The Government should ensure that financial services advertising regulations apply also to online companies, and that the FCA has the necessary powers to effectively enforce the regulations
  • The Government should consider introducing a responsibility for online companies to reimburse consumers who are victims of online fraud perpetrated through their platform

Authorised push payment fraud

  • The Government should urgently legislate to give the Payment Systems Regulator (PSR) powers to make the current voluntary reimbursement model mandatory
  • The Treasury should be ready to bring forward any legislation which is needed to improve data-sharing between banks

Anti-money laundering

  • A timeline showing when the SARs reform programme milestones are expected to be met, and an annual progress report on the programme, should be provided to the Committee
  • The Government must make available all the resources needed by the Homes Office, regulators and crime-fighting agencies to enable a meaningful impact on the criminal activity indicated by SARs
  • The effectiveness of SARs might be increased if banks are permitted to share information with the National Crime Agency and other law enforcement agencies, before the suspicion threshold required under existing anti-money laundering legislation is reached
  • The Government needs to ensure that the Office for Professional Body Anti-Money Laundering Supervision is properly resourced to enable it to do more checks and allow it to take punitive action against professional body supervisors
  • The Committee recommends that the forthcoming Government review of the regulatory and supervisory regime for AML and counter-terrorist financing should not shy away from considering radical reforms, including a move away from the self-regulatory model and the creation of a new supervisory body, potentially independent of the FCA, which takes more direct responsibility for policing professional body compliance with anti-money laundering regulations
  • HMRC’s role as a supervisor ought to be reviewed, and in the meantime HMRC should seek to be more proactive in preventing Trust and Company Service Providers (TCSPs) from facilitating the use of UK companies for money laundering and should aim to drive up significantly the numbers of SARs from that sector

Cryptoassets and economic crime

  • The Committee welcomes the announcement by the Treasury that the Government will legislate to bring advertising of cryptoassets into line with that of other financial services and products, and that the FCA is strengthening financial promotion rules, including those for cryptoassets
  • The Government should set out in the Economic Crime Plan its intention that all cryptoasset firms should be registered for anti-money laundering purposes
  • The FCA should not extend the deadline for registration again beyond March 2022
  • The Government should consider instituting measures specifically to protect consumers from fraud and scams relating to cryptoassets

Companies and economic crime

  • The Law Commission should proceed with its review of corporate criminal liability speedily, and the Government must act quickly in bringing forward any legislation flowing from the Law Commission’s review
  • Reform of Companies House is essential if UK companies are no longer to be used to launder money and conduct economic crime. Given the urgency of the problem, the Government should seek ways to implement as many reforms as possible sooner, before embedding a full transformation
  • The Government should significantly increase the costs of company and Limited Liability Partnership incorporation, including Scottish Limited Partnerships, and should review other Companies House fees to bring them closer to international standards. A fee of £100 for company formation would not deter genuine entrepreneurs, and would raise significant additional funding for Companies House and for the fight against economic crime
  • The Government should include a Registration of Overseas Entities Bill in the Queen’s Speech for the next Parliamentary session

Key take aways

Amongst the many recommendations for change are a number of key suggestions which could have a profound impact on the ability of criminals to carry our economic crime in the UK. These key recommendations relate to the “enablers” of fraud and economic crime, i.e. the platforms and vehicles which enable criminals to carry out their activities.

The first of these key drivers are the measures recommended around online platforms, in particular the recommendation to include measures to address fraud via online advertising in the Online Safety Bill, and to introduce a reimbursement model for victims of fraud perpetrated through online platforms.

The second area is the Companies House reforms and the focus on greater transparency in the ownership of corporate vehicles, together with the increase in fees to incorporate a company in the UK. These changes will impact on the ability to remain hidden and under the radar whilst carrying out economic crime and will hopefully give law enforcement a better chance of bringing the perpetrators to justice.

Conclusion

The Committee recognises the huge and constantly evolving challenge of economic crime and acknowledges that there is no ‘silver bullet’ solution.

However, the Committee urges the Government to consider a more wholistic approach to the issues and hopes that the Report will help us all to tackle the ongoing and ever-increasing issue of economic crime with a clearly focussed action plan and clear responsibilities going forward.[5]

Those responsibilities ought to be noted by companies and Government alike as both are seen as having to do more to combat economic crime, be that voluntarily or via pro-active legislation increasing the obligations for regulated sectors.

The Report has been described as a “how-to-guide” on tackling economic crime[6] and it is hoped that the Government will take its recommendations very seriously. We urge companies conscious of their financial crime compliance obligations to note what the report states as it is in essence, the horizon scanning for the landscape in the UK for economic crime for the future.

Should you suspect that you are a victim of fraud or other wrongdoing, or if you wish to discuss your organisation’s financial crime compliance obligations, please do not hesitate to get in touch at arun.chauhan@tenetlaw.co.uk, esther.phillips@tenetlaw.co.uk or hello@tenetlaw.co.uk

[1] https://committees.parliament.uk/work/726/economic-crime/publications/

[2] https://www.europol.europa.eu/crime-areas-and-statistics/crime-areas/economic-crime

[3] https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/bulletins/crimeinenglandandwales/latest

[4] Helena Wood, Head of UK Economic Crime Plan Programme, RUSI and witness to the Committee at the Treasury Committee’s Economic Crime inquiry report launch hosted by Which? On 2 February 2022

[5] Closing remarks of the Rt Hon Mel Stride at the Treasury Committee’s Economic Crime inquiry report launch hosted by Which? on 2 February 2022

[6] Helena Wood, Head of UK Economic Crime Plan Programme, RUSI and witness to the Committee at the Treasury Committee’s Economic Crime inquiry report launch hosted by Which? On 2 February 2022

Published on February 3, 2022

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