Employment Update - January 2020

FCA authorised firms and other persons within the ‘regulated sector’ for AML purposes may be subject to an economic crime levy as from 2022/23.

The Government has approved in principle the introduction of an economic crime levy (Levy) in 2022/23, according to the Chancellor of the Exchequer in his March 2020 Budget. The intention is that the Levy will be raised on all firms within the ‘regulated sector’ as defined in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MRLs).

This will include firms authorised by the Financial Conduct Authority (FCA) and Prudential Regulation Authority as well as crypto-asset exchanges, crypto-asset wallet providers and many professional services firms.

The Levy is to provide part of the funding required for the Government’s Economic Crime Plan (ECP), published in July 2019.

The proposals will potentially affect the vast majority of FCA authorised firms.

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Consultation

There will now be a consultation on the Levy. This is expected to cover a number of issues, in particular:

the firms within scope; and
how the Levy would be calculated and collected.

The regulated sector under the MLRs includes a wide range of entities whose business activities and clients vary significantly. Key issues will therefore include whether the Levy will differentiate between firms carrying on different types of business (for example, whether firms with ‘higher risk’ business will pay proportionately more) and the nature of the revenues on which the Levy will be based. Other areas of interest will include how much the government is seeking to raise through the Levy and how the funds raised will be used.

If introduced, the Levy will need to be implemented by primary legislation.

What is the Economic Crime Plan?

The ECP was developed in partnership with private sector organisations and sets out how public and private sectors will work together to tackle economic crime. It has seven strategic themes and fifty two specific actions.

The strategic themes include:

better sharing and usage of information to combat economic crime;
strengthening the capabilities of law enforcement, the justice system and the private sector to detect, deter and disrupt economic crime; and
building greater resilience to economic crime through enhancing the management of economic crime risk and the risk-based approach to supervision.

The specific actions include supporting innovation in regulatory compliance for AML/CTF, reviewing the criminal market abuse regime, launching a flagship economic crime court in London and introducing reforms to increase transparency of ownership of companies and property.

How we can help

Our Financial Services and Markets Department has extensive experience in advising on the UK's anti-money laundering regime. If you would like further information or assistance in understanding the proposals and their potential impact, please speak to your usual Travers Smith contact or any of the partners below.

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