Anti-money laundering

Economic crime levy draft legislation – joint Law Society and City of London Law Society response

The proposals

On 21 September 2021, the UK government published the outcome of its consultation on the economic crime levy.

The levy seeks to raise £100 million from the anti-money laundering (AML)-regulated sector to help fund reforms outlined in the 2019 economic crime plan.

The government’s outcome document comes to the following key conclusions in terms of the design of the levy:

  • the levy will be charged on a fixed fee system and calculated for all in-scope entities on entity size based on UK revenue
  • the levy will be paid by medium, large, and very large AML-regulated entities
  • small entities (all regulated entities with UK revenue below £10.2 million) will be exempt from paying the levy

This technical consultation seeks views on the draft legislation that introduces the levy. It seeks comments “to ensure the legislation operates as intended”.

Our view

On principle, we’ve strongly opposed the imposition of the levy since the government first announced it.

The levy is effectively an additional tax on the regulated sector and will be used to fund the public sector’s role in the AML system.

The levy is not based on the concept of ‘polluter pays’. In this case, it’s those who are already part of the fight against economic crime that are being asked to fund other parts of the system.

Given our contribution to the levy, it’s important that the views of the legal sector are given greater weight in the design of relevant policies, procedures, and systems in relation to financial crime.

Although the levy is being imposed on the legal sector, we will make sure the government is held to account, both in ensuring that:

  • the levy is used only to fund initiatives aimed at tackling money laundering
  • it does not increase dramatically in future years

What this means for solicitors

An entity that carries on any AML-regulated business at any point during a levy year will be an in-scope entity for the purpose of the levy.

Such entities will need to determine whether their UK revenue for the levy year is medium, large, or very large. If so, they will be charged the levy at the relevant rate.

Entities for the purpose include partnerships and limited liability partnerships, as well as companies.

Law firms that have one or more entities that are doing any AML-regulated work will therefore need to consider the application of the levy.

Next steps

We expect:

  • the legislation introducing the levy will be included in the 2021-22 Finance Bill
  • that AML-regulated entities will first be charged the levy during the year 1 April 2022 to 31 March 2023 (meaning the first set of levy payments will be made in the year 2023/24).

Read the consultation on the GOV.UK website

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