Draft Economic Crime
(Anti-money Laundering) Levy (Amendment) Regulations
2023
The Economic Secretary to the Treasury ()
I beg to move,
That the Committee has considered the draft Economic Crime
(Anti-money Laundering) Levy (Amendment) Regulations 2023.
It is a pleasure to serve under your chairmanship, Ms
Elliott.
The risk posed by economic crime is severe, and threatens the
UK’s security, prosperity and resilience. Our openness and our
status as a global financial centre is vital to our nation’s
success. However, that great strength also exposes us to a range
of economic crimes and to those who wish to harm UK businesses
and individuals. In that context, there can be few objectives
more critical than delivering a comprehensive response to
economic crime.
That is especially important as we bear down on the Russian war
machine in the wake of Putin’s illegal invasion of our ally,
Ukraine. That is why the Government expedited the Economic Crime
(Transparency and Enforcement) Act 2022, which introduced key
reforms to crack down on dirty money and hostile actors. We have
gone further still by introducing the Economic Crime
(Transparency and Enforcement) Act 2022, which built on the
earlier Act to bear down further on kleptocrats, criminals and
terrorists.
The instrument we are considering today is the final step in
implementing the economic crime (anti-money laundering) levy,
which is a core component of the Government’s comprehensive and
continuing response to economic crime. Announced at Budget 2020,
the new levy aims to raise approximately £100 million a year to
help ensure a sustainable funding model for action to tackle
money laundering. The levy supplements approximately £200 million
of additional Government investment to tackle economic crime over
the 2021 spending review period. The funding will help to ensure
a step change in our response by supporting the delivery of
critical economic crime reforms, including commitments set out in
the economic crime plan.
It is right that those sectors that give rise to money-laundering
risk help contribute to countering that risk. That is why the
levy will be paid by firms subject to the money laundering
regulations only. I take this opportunity to thank the sector for
their engagement throughout the levy-design process. The
Government have worked closely with the industry and the levy
collectors, including through policy and technical consultations.
In doing so, we have ensured that the levy meets its objectives
while aligning as far as possible with the core levy-design
principles set out at consultation, including proportionality,
predictability, simplicity and cost-effectiveness. The Government
have delivered on those principles by ensuring proportionate levy
fees, with no business expected to contribute more than a tenth
of a per cent. of their UK revenue; by implementing a carve-out
for businesses whose annual revenue falls below £10.2 million so
that smaller businesses, who make up the vast majority of all
those otherwise in scope, are exempt; and by aligning levy policy
across the three collectors as far as possible, while adhering to
existing collector processes in places for the sake of
simplicity.
This instrument makes provisions for assessments and calculations
of levy due, levy enforcement through financial penalties,
information provision and record preservation obligations,
overpayments, reviews and appeals. It has been designed with
close regard to the core levy-design principles, including
proportionality. It is my hope that stakeholders will welcome the
clarity this instrument provides on remaining areas of levy
policy and implementation. I assure the Committee that each levy
collector will shortly publish information that outlines how
in-scope entities should engage with these processes and pay the
levy.
(Glenrothes) (SNP)
Could the Minister explain why all these amendments are being
made now? Why were they not made when the original regulations
were made last year?
Last year’s Act was the primary legislation that enabled the
levy. Subsequently, there has been extensive consultation with
stakeholders about the way in which we should proceed with that
levy. We are considering the detail of those procedures
today.
In the consultation, stakeholders emphasised the importance of
clarity and transparency throughout the development and
implementation of the levy. The Government share that view, and
that is one of the reasons why we are dealing with this in
stages. We are committed to delivering annual reports on the
operation of the levy, including a breakdown of how the levy is
being spent, and a comprehensive review by the end of 2027.
The new levy represents an integral part of the Government’s
comprehensive programme of work to ensure that economic crime
finds no home in the United Kingdom, preserving this country’s
security, resilience and prosperity. I commend the regulations to
the Committee.
2.35pm
(Hampstead and Kilburn)
(Lab)
It is a pleasure to serve under your chairmanship, Ms Elliott.
The Labour party is completely committed to tackling economic
crime. We welcomed the economic crime levy when it was first
announced and we will support the regulations today. I want to
raise a few questions and concerns with the Minister; they relate
to the scope, effectiveness and transparency of the levy.
First, while the increase in funding provided by the levy is
welcome, is the Minister confident that it will generate the
necessary step change in economic crime enforcement? For example,
as Spotlight on Corruption has highlighted, although it is called
the economic crime levy, in reality it only covers money
laundering. That means that the funds will not be invested in
fighting other forms of economic crime such as corruption, fraud
and sanctions evasion.
As the Minister may have seen, Transparency International has
proposed that the Treasury re-invest the money recovered in the
fight against economic crime, such as money seized by the Serious
Fraud Office through its deferred prosecution agreement fines,
back into enforcement to tackle fraud, corruption and money
laundering. What assessment has the Minister made of that
recommendation?
On accountability and transparency, the Government have failed to
publish any information on what proportion of the funds will be
assigned to law enforcement and how the effectiveness of the levy
will be measured against enforcement outcomes. I hope the
Minister can shed some light on that today. I would also be
grateful if he provided clarity on how the Treasury will ensure
full accountability of how the levy is used, and how decisions on
resource allocation will be made.
2.37pm
The SNP certainly supports these measures; our concern is that
they could have been in place a lot sooner. In some cases, they
possibly do not go far enough.
According to the note from the Select Committee on Statutory
instruments, of which I am now a member, two of the amendments
are required because of previous defective drafting. I am
becoming increasingly concerned about how often we see SIs being
revised and revised—in at least one case, revised for a third
time—because the attempts to draft them accurately had not been
successful. That is not a criticism of those who do the drafting;
it is simply the environment that the Government have created for
them, with potentially 4,000-plus SIs having to be revised before
the end of this year. It is certainly not possible to get them
all right, all the time. Sometimes, the consequences of getting
the drafting wrong can be quite serious.
These regulations could have been brought forward, and would have
been welcomed, a long time ago. In effect, on money laundering,
as with a lot of other problems with financial crime, the
Government are playing catch up. They have been asleep at the
wheel for far too long; for far too long, Russian dirty money
could flood into the United Kingdom. It was not exactly welcomed
by those in positions of power, but they certainly did not do
very much to try to prevent it. The Government are now choosing
to do something about it. They could have chosen to do something
about it in 2014, and perhaps Putin might not have felt quite as
invincible as he clearly does now.
London is recognised by almost everyone as a global capital for
fraud and other forms of financial crime, as the hon. Member for
Hampstead and Kilburn referred to. There is a lot in these
regulations about a levy to combat money laundering. There are
other forms of financial crime, particularly fraud against
individual members of the public, which is now a billion-pound
industry, and where we do not have the same arrangements to
anything like the same extent. I would appreciate some kind of
indication of when there will be a much more general compensation
scheme for the innocent victims of investment fraud, pensions
fraud and other forms of fraud, which are very much growing
industries in Britain.
My final concern is not so much about the involvement of the
Gambling Commission but about how effective it will be. Anybody
who has looked at the problem of severe addictive gambling in the
United Kingdom, which is becoming a health crisis almost as
severe as covid, knows that that the Gambling Commission has
proven to be absolutely toothless—whether because of a lack of
interest, funding, resources or legislative powers—in its current
main job, which is to regulate the industry and make sure it is
not dragging people into problem gambling against their will.
Will the Minister indicate what additional resources it will be
given to ensure it is resourced for the additional
responsibilities it will have through these regulations? Its
resources, which are already inadequate for dealing with problem
gambling, must not be spread even thinner because its members of
staff have to administer additional levies.
The amendments to the regulations are about three times as long
as the regulations themselves—always a sign that the regulations
may have been either rushed through or not adequately thought
about when they were first presented. I hope that neither I nor
anybody else will have to be on a Delegated Legislation Committee
in six to 12 months to agree further amendments to the
regulations because we still have not got the drafting right.
That is not a criticism of the people doing the drafting. They do
a good job, but they are only human, and they have only 24 hours
in a day and seven days in a week. They have been given far too
much work and far too little time to complete it.
2.41pm
I do not want to detain the Committee any longer than necessary,
but I ought to respond to one or two of the points raised by the
hon. Member for Glenrothes. I am slightly at a loss: are we
moving too fast or too slowly? One person’s revised SI is another
person’s reflection of consultation that results from listening
to the industry and a desire to get things right. I accept that
this was not his intent, but there was some implied criticism of
the hard-working officials who are doing their best to reconcile
the needs of transparency with this House and the desires of the
sector.
For clarification, the people drafting the legislation are having
to do it at pace because they have been lumbered with 4,500 bits
of legislation that they would not have had to revise were it not
for the Government’s political dogma.
We will let that matter rest. On one level, I share the hon.
Gentleman’s desire for a smaller state and less legislation, but
defending our country from money launderers is perhaps not the
best place to start that deregulatory zeal. We can come back to
that.
From his work on the Financial Services and Markets Bill, the
hon. Gentleman is aware that the Government are introducing
measures to protect customers and the victims of push payment
fraud, which is very concerning. The quicker that Bill completes
its journey in the upper House, the quicker we can get it on the
statute book. The £1 billion that he referred to concerns all of
us on both sides of the House.
I am not aware of the Gambling Commission having expressed
concern. It has been consulted throughout, and collecting levies
is within its core purpose. I will of course be open to
advisement on that. That is one of the reasons why a review is
baked into the regulations. It is a piece of good, proportionate
best practice that in 2027 there will be a formal review. I
undertake today that the outcome of that review will be brought
to the attention of the House.
It is always a pleasure to respond to the hon. Member for
Hampstead and Kilburn. She raised the important work of
Transparency International. Although this is the final piece of
this particular set of economic crime legislation, it is of
course not the whole of our anti-fraud strategy. My hon. Friend
the Security Minister has told the House that that will come to
this place very shortly. I ask all parties to look at that and
consider the strategy in the round, together with the
Government’s anti-fraud strategy.
The hon. Lady asked me to publish how the levy will be used. Of
course, the point of the levy is to build a fund to enhance the
overall level of resources available to crime fighters. That
could be for a range of purposes, including more intelligence,
better reporting infrastructure and more personnel devoted to
this area. It will only be in due course that we are able to see
where that money is spent. I undertake to the Committee that we
will publish an annual report on how the levy is spent. The hon.
Lady is right that it should attract proper scrutiny. As she
understands, it is only one part of the resources available to
our police, anti-fraud initiatives and crime fighters.
Question put and agreed to.
