Anti-money laundering

Economic crime levy

HM Treasury has published draft legislation introducing an economic crime levy on anti-money laundering (AML) regulated businesses – including law firms – to fund the fight against economic crime.

The proposals

Firms would pay a fixed fee based on entity size as determined by UK revenue. There are four bands:

  • less than £10.2 million – small firm
  • between £10.2 million and £36 million – medium firm
  • between £36 million and £1 billion – large firm
  • more than £1 billion – very large firm

The exact fees will be specified in the Finance Bill, but the government has indicated the potential ranges for each band:

  • small firms to be exempt
  • medium firms to pay between £5,000 and £15,000
  • large firms to pay between £30,000 and £50,000
  • very large firms to pay between £150,000 and £250,000

The levy will be collected by HM Revenue and Customs (HMRC), the Financial Conduct Authority and the Gambling Commission, with HMRC collecting the levy from in-scope legal entities.

The first payments would be made in 2023/24, one year later than originally planned.

HM Treasury states that the levy would raise £100 million per year from around 4,000 AML-regulated entities. The exact allocation of the funds will be determined by spending review processes.

Our view

Although we're pleased the government has listened to our warnings and exempted small firms from paying the levy, we remain concerned about its impact on legal services.

Solicitors and firms already play an important role in tackling money laundering and economic crime, allocating substantial resources to comply with AML obligations.

Basing the levy on revenue is an arbitrary measure with no link between the amount a business must pay and the extent of money laundering risk it brings into the system.

We're also concerned that the bands proposed are too wide.

Under the proposals, the smallest firms within each band would pay as much as the largest. We would be more supportive of a more refined approach.

We welcome the delay to the introduction of the levy to 2023/24, which will allow firms more time to recover from the impact of the COVID-19 pandemic.

However, firms are still navigating a difficult operating landscape and the effects of Brexit are still to be realised.

I. Stephanie Boyce, president of the Law Society, said: “It is disappointing the UK government has decided to penalise the profession when it is already devoting resources to prevent the system from being abused by money launderers.”

What we're doing

Next steps

HM Treasury is holding a technical consultation on the draft legislation to ensure it operates as intended.

The consultation closes on Friday 15 October.

The legislation will be implemented in the Finance Bill, which is due to be introduced to parliament in autumn.

We'll continue engaging with members to help shape our influencing strategy on the legislation.

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