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IFA invites members to have their say on the economic crime levy consultation

The IFA has invited its members engaged in public practice to complete a survey that will inform the body’s response to the economic crime levy consultation.

IFA invites members to have their say on the economic crime levy consultation
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  • Staff Reporter
  • September 24, 2020
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While the IFA will be responding to this consultation by deadline 13 October 2020, members can also respond directly.

"This is your opportunity to influence policy, in particular whether there should be a small firm exemption to the levy. In this case, silence is not golden – so please take the time to have your say," the IFA has said. 

Background

The Economic Crime plan 2019-22 acknowledges the need for a long-term and sustainable resourcing model to transform the UK’s response to economic crime. As detailed in the plan, the government believes that:

  • resourcing should come from contributions from both the public and private sectors that participate in, and benefit from, the agenda to reduce economic crime; and
  • it is right that those who contribute towards the risks within the UK economy should pay towards the costs of addressing those risks.

The March 2020 budget confirmed the government’s intention that part of the funding model take the form of a levy paid for by the AML-regulated sector, which includes accountancy firms. The levy is another financial burden on firms that already contribute through their compliance with the requirements in the Money Laundering Regulations that ‘aim to deter, detect and prevent money laundering and through reporting obligations under the Proceeds of Crime Act 2002.’

Size of levy and timescales

This levy will complement other sources of funding, including continuing public sector contributions. The levy aims to raise approximately £100 million per year from entities regulated for AML purposes and support reforms to the “sustainable resourcing of economic crime". We are told in the consultation that the levy will increase capacity to tackle money laundering and support delivery of the Economic Crime Plan.

The government intends for the first set of levy payments to be made in the financial year 2022-23, although the timelines may be influenced by findings from the consultation and time needed to develop the necessary collection infrastructure and to go through the legislative process.

Benefits

The consultation states that the AML-regulated sector will benefit directly from delivering the actions set out in the Economic Crime Plan such as:

  • the Suspicious Activity Reports (SARs) Reform programme;
  • an expanded and enhanced UK Financial Intelligence Unit (UKFIU);
  • expanding and enhancing the Joint Money Laundering Intelligence Taskforce (JMLIT); and
  • improving education.

Questions asked

Having set out the proposals, the consultation invites views on the design principles of the levy, and how this levy could operate in practice – namely what the levy will pay for, how it should be calculated and distributed among the regulated sector – and how to ensure that it is proportionate and effective.

The consultation also includes a call for evidence on current levels of private sector investment on counter-fraud measures, as well as gauging private sector views on contributions towards funding the fraud response.

The IFA's view

The consultation focuses on a private sector levy only – it is only one part of the investment needed to prevent economic crime. Public sector funds also need to be considered. A more holistic approach to prevention of economic crime is needed, looking at all potential sources of funding and how this funding will be used across all areas, including policing, the CPS and courts.

While we are told in the consultations that the private sector will benefit directly from specific improvements set out in the Economic Crime plan, these benefits are not obvious nor are they quantifiable.

Furthermore, this policy consultation needs to be considered alongside other policies and priorities and not in isolation from one another. The National risk assessment of money laundering and terrorist financing 2017 assessed the accountancy sector to be a high risk of money laundering since accountancy services ‘due to the ability to use them to gain legitimacy, create corporate structures or transfer value’.

The NRA also states that the accountancy sector is high risk because there are low barriers to entry for some parts of the accountancy sector since the term ‘accountant’ is not a protected term, and qualifications are not required to offer accountancy services. So, perhaps this is an area that also needs to be considered as part of the overall framework for reducing risk, preventing economic crime as well as raising standards in the tax advice market, which was a recent call for evidence by HMRC.

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