FRA Senior Associate Niamh Fitzsimons attended the Royal United Services Institute HM Government Economic Crime Plan Publication breakfast seminar last week in London, to hear about the government’s agreed Economic Crime Plan, which sets out in detail the cross-government and law enforcement plan for tackling economic crime from 2019-2022.
Below are the key insights from the seminar.
Panel of speakers:
Ken Menz, Head of Economic Crime Reform – HM Treasury
Richard Riley, the Home Office
Sue Hawley, Corruption Watch UK
Sarah Pritchard, Director, National Economic Crime Centre
John Thompson, UK Finance
The Economic Crime Plan, a cross government and law enforcement plan for tackling economic crime from 2019 – 2022, is a joint public and private sector initiative created by the newly established inter-ministerial “Economic Crime Strategic Board” which consists of the Home Office, Treasury and UK Finance.
Reasons for the plan
- Although the Financial Action Task Force (“FATF”) found that the UK had one of the toughest systems for combatting money laundering and terrorist financing of over 60 countries that it has assessed to date, economic crime is still a significant threat that is ever changing and evolving and the UK at present is “disjointed” within the public and private sectors and between them in their response to economic crime.
- Recent serious organized crime publication revealed that economic crime equated to 8.4 billion GBP a year with 3.6 million incidents of fraud reported which is now a third of all crimes.
- New additional economic crime threats are expected from Brexit as a result of changes in trading arrangements with countries with heightened corruption risk.
- The success of the Joint Money Laundering Intelligence Task Force (“JMLIT”) has shown that harnessing the capabilities, resources and experience of both the public and private sectors working together can develop better quality intelligence and produce a collaborative response to economic crime.
Reason for public/private collaboration
- Economic crime is a public/private threat so the private sector must be active participants and the government should work with the private sector rather than against them.
- The recent successes of JMLIT, a public-private partnership which has supported over 600 law enforcement investigations, has directly contributed to over 150 arrests as well as the seizure of £34 million in illicit funds, demonstrates the effectiveness of a public-private partnership.
- Collaboration between public and private can overcome barriers in information sharing. The private sector, particularly major financial institutions hold significant amounts of information and data that can facilitate law enforcement identifying activity and pursuing economic crime.
- The public sector can benefit from the share of private sector expertise and resources, in particular, technology. If innovative technology is not used, criminals will be one step ahead.
Content of the Economic Crime plan
The plan focuses on seven priority areas:
- Develop a better understanding of the threat posed by economic crime and our performance in combating economic crime.
- Pursue better sharing and usage of information to combat economic crime within and between the public and private sector across all participants.
- Ensure the powers, procedures and tools of law enforcement, the justice system and private sector deter and disrupt economic crime.
- Build greater resilience to economic crime by enhancing the management of economic crime risk in the private sector and the risk-based approach to supervision.
- Improve systems for transparency of ownership of legal entities and legal arrangements.
- Deliver an ambitious international strategy to enhance security, prosperity and the UK’s global influence.
These elements are split across 52 action points uniquely targeted at the public and/or the private sector with specific timeframes including both ongoing and harsh deadlines over the three year plan.
It is intended that by reforming these seven interrelated elements through 52 measurable action points, the overall system response to economic crime will be improved, in particular:
- Suspicious Activity Reporting (SARs) regime and the UK Financial Intelligence Unit which ensures we have the right information to combat economic crime.
- By improving our understanding of the threat, powers and capabilities, we can enhance our law enforcement response to economic crime.
- Enhanced risk-based supervision and private sector risk management and reforms to Companies House can prevent economic crimes from occurring and better enable their detection.
- Reforming the UK’s internal regime gives a better platform to combat economic crime internationally.
Panel perspectives on the plan
There is a concern that there is too much weight from the bank for a plan of its type which could lead to “policy capture”. The banks’ voice will be unduly loud in any policy discussions for example new requirements to be imposed upon the financial sector in a revised SARs regime. The private sector need to be at the table to ensure policy making is fair but if the private sectors influence compromises impartiality, the Government could risk reputational damage.
The lack of corporate liability reform within the plan undermines its credibility. The plan makes no mention of expanding corporate-criminal liability rules beyond bribery and tax evasion but merely states that the response to the Call for Evidence on Corporate Criminal Liability will be published “shortly”.
In order to effectively tackle economic crime, the corporate-criminal liabilities rules require reform to bring large financial organisations before the court. Without reform, these financial institutions are operating above the law which runs the risk of reputational damage.
The plan is too general in its presentation of “economic crime” as one issue. Instead economic crime should be broken down focusing on different typical types of economic crimes that affect different stakeholders.
Action 23 of the plan states, “Develop a sustainable, long-term resourcing model for economic crime reform” but the plan omits to identify what resources are required. The sustainable, resourcing model will only be as good as how it is resourced.