Economic crime levy: how we got here
David Greene, president of the Law Society, sets out the background of the government’s proposed economic crime levy and explains the representations we’ve been making on behalf of our members.
Tackling economic crime has long been a key focus for the government, the legal profession and the wider private sector.
To help introduce a step-change in how economic crime is tackled in the UK, the government and the private sector – including the legal profession – developed the Economic Crime Plan 2019-2022 (ECP) which was published in July 2019.
The plan is a joint public-private partnership approach with a series of recommended actions aimed at improving the UK’s capabilities in tackling economic crime, particularly money laundering.
Off the back of the plan, there was a view from government that the private sector needed to be doing more to help contribute financially towards the fight against economic crime, specifically anti-money laundering (AML).
The chancellor of the exchequer subsequently announced a levy on all businesses in the AML regulated sector in the budget last March, with the aim of funding new government and law enforcement action and capabilities to tackle money laundering.
The announcement was followed up by a consultation. In response to the consultation we argued strongly against the levy, arguing:
- it’s effectively an additional tax on the regulated sectors in order to fund the public sector’s role in the AML processes
- the proposals go against the ‘polluter pays’ concept, instead penalising those who are part of the fight against economic crime with another tax
- if there is to be a levy, then it should not be based on revenue, which decouples if from risk, but instead be based on the number of suspicious activity reports (SARs) a firm submits from the previous year. This would be simpler, cheaper and fairer than an income-based levy
- for an exemption for small firms with a revenue of less than £10.2 million, given the disproportionate impact the levy would likely have on these firms
The government is due to respond to the consultation in early April.
We’ve continued to argue strongly against the levy since the consultation was closed with both officials and ministers and wider stakeholders to ensure the profession's voice is heard in the debate.