UK Unveils New Economic Crime Plan to Tackle Money Laundering, Kleptocracy, and Sanctions Evasion

On March 30, 2023, the UK Government published its three-year economic crime plan. Building on the foundations of the previous strategy published in 2019, the updated report takes a “more comprehensive” approach to improve the effectiveness of UK money laundering regulations and refine the structure of the country’s supervisory regime.  

While concern has been raised about no additional funding being allocated to underpin the plan – the total amount of investment remaining at £400 million – Home Secretary Suella Braverman and Chancellor of the Exchequer Jeremy Hunt said the plan “reflects the Budget’s commitments to strong and sustained economic growth”. 

Overview of the Economic Crime Plan 2

Below is an overview of the 2023-2026 strategy, highlighting its main objectives and the actions the government has committed to take to achieve them.

Reduce Money Laundering and Recover More Criminal Assets

The report notes that “it is a realistic possibility” that over £100 billion is laundered through and within the UK annually using “high-end money laundering methods”. To combat this, the government has committed to developing an improved “end-to-end” plan that includes: 

• Limiting the abuse of corporate structures: Action will be taken through the Economic Crime and Corporate Transparency Bill, reforming the role of Companies House and creating a more reliable Companies Register to underpin business activity.
• Increasing the effectiveness of the UK’s anti-money laundering and combatting the financing of terrorism (AML/CFT) regulatory and supervisory regime: While the long-term reform model has not yet been decided, the government plans to work with supervisors to achieve short-term improvements to the regime’s effectiveness. Supervisory reform is also ongoing.
• Combating criminal abuse of cryptoassets: Law enforcement capacity and capability will be enhanced to pursue and prosecute the use of crypto/virtual assets to launder illicit funds. 
• Improving intelligence, feedback, and analysis through suspicious activity report (SARs) reform: Continued action will be taken to complete the delivery of the SARs reform program that began in 2019.
• Recovering more criminal assets: A performance framework will be developed for asset recovery agencies, with the addition of a new social research team to review the impact and share best practices. 

Combat Kleptocracy and Drive Down Sanctions Evasion

Since the UK’s last Economic Crime Plan, the global geopolitical landscape has changed significantly. Following Russia’s invasion of Ukraine in February 2022, the most comprehensive sanctions were imposed against a major power since the end of the Second World War, with the US, European Union (EU), and others coordinating their actions in new ways. Responding to a range of new and growing threats identified in the government’s Integrated Review Refresh 2023, the report outlines the following commitments: 

• Continuously improve the design, implementation, and enforcement of financial sanctions: Cooperation with the US, EU, and other jurisdictions will be enhanced to increase the effectiveness of economic sanctions. An assessment of sector-specific threats and vulnerabilities relating to financial sanctions will also be published. 
• Strengthen operational and international response to kleptocracy: Support will be given to the ongoing work of the NCA’s Combatting Kleptocracy Cell, and international coalitions will be strengthened to tackle long-term enablers of kleptocracy and enhance operational cooperation. 

Cut Fraud

In February 2023, the government announced that fraud would be reclassified as a national security threat, giving it the same status as terrorism. Estimated to account for 40 percent of all crimes committed nationwide, fraud is the most commonly experienced crime in the UK. According to the 2022 cross-government fraud landscape report, public sector fraud and error loss is estimated at £33 billion annually.

According to the Economic Crime Plan 2, the new strategy to cut fraud will:

• Pursue fraudsters
• Block fraud at the source
• Empower people to recognize, avoid, and report fraud 

One of the main actions outlined in the plan revolves around modernizing the response to fraud through the use of leading practices, tools, and technology. Additionally, the government plans to work with ministerial departments and public bodies to improve their understanding of the risks and threats they face.

Compliance staff should also take note of the government’s “forthcoming” strategy for cracking down on fraud. While the strategy was initially due to be published in July 2022, it will “establish a coordinated response from the government, law enforcement, and the private sector to better protect the public and increase the disruption and prosecution of fraudsters,” according to the Home Office. 

Reduce the Threat of International Illicit Finance

The government’s commitments to minimize the threat international illicit finance poses to the UK its interests build on the actions laid out in the first plan. As such, the government intends to:

• Lead efforts to strengthen international standards to improve cross-border asset recovery outcomes
• Work with partners to ensure the effective implementation of international standards
• Strengthen partnerships with other financial centers, particularly the US, United Arab Emirates (UAE), and the UK’s crown dependencies (CDs) and overseas territories (OTs)
• Champion and support increased transparency of beneficial ownership registers in CDs and OTs

Cross-Cutting System Reforms and Capabilities

The report notes that while the above commitments focus on tackling specific threats, numerous “cross-cutting reforms” are required for the actions to succeed. These include:

• Strengthening the role of the National Economic Crime Centre (NECC) as the system leader responsible for informing priorities for the economic crime system and defining a single view of financial crime threats
• Producing and implementing a new public-private economic crime data strategy to better prevent, detect, and pursue economic crime 
• Reviewing and improving data sharing to support the response to public sector fraud
• Introducing 475 new financial crime investigators to boost the country’s response to economic crime 
• Launching City of London Law Court

Key Takeaways

When reviewing the Economic Crime Plan 2, compliance staff should take note of the seven case studies scattered featured the document in yellow and blue boxes. These studies provide context to some of the government’s existing actions and highlight best practices for firms relating to reporting standards and general compliance best practices.

Compliance teams should also take note of delivery dates assigned to each action point and the milestones that have occurred thus far. For example, the SAR’s reform program is due to be completed by Q3 2024. Reporting staff should keep up-to-date with the program’s developments over the coming year.