Economic Crime - Anti-money laundering supervision and sanctions implementations Contents

1The threat of economic crime

The scale of the threat

4.The National Crime Agency states that economic crime covers a range of crime including:

• Money laundering;

• [Those covered by the] International Corruption Unit (ICU);

• Fraud; and

• Counterfeit currency.2

5.The scale of such crimes is, however, difficult to ascertain and official estimates of the scale of economic crime are highly uncertain. Looking first at published documents, the National Strategic Assessment of Serious and Organised Crime 2018 suggested that the scale of money laundering impacting the UK annually could be in the hundreds of billions of pounds,3 whereas in its Serious and Organised Crime Strategy, the Government put it in the tens of billions of pounds.4

6.When the Committee asked Mark Thompson, then interim director of the Serious Fraud Office, to describe the scale of the threat from economic crime, and whether it could be quantified, he responded “the short answers would be ‘big’ and ‘no’”.5 He went on to say:

My view after 20-odd years in this field is that I am pretty sceptical of most attempts to quantify economic crime. [ … ] My view is that it is extremely difficult to quantify in practical terms. That said, the UK is a major financial centre. Therefore, plainly, whatever percentage of transactions might be tainted in some way, it is a large number. I would not really want to say much more than that.6

7.Donald Toon, Director of Prosperity (Economic crime and cyber crime) in the National Crime Agency said that they “see the hundreds of billions figure as a realistic possibility”.7 He added:

We are talking about a very large amount of money, but we need to be really cautious about impacting on the UK. That is into the UK, through the UK and facilitated by UK structures. We have certainly seen cases where UK company structures have been used to facilitate large-scale money laundering. The money itself has never touched the UK.8

He also noted that:

In terms of the scale of the money laundering problem, we have been reasonably clear that it is really, really difficult to put a figure on this. We are essentially in a situation where people are trying to move money through a series of transactions that of course look very, very similar to millions upon millions of other transactions. We have said that it would be realistic to say that hundreds of billions are laundered through the UK annually.

That sounds like a huge figure, but, to put that in context, if you simply look at foreignexchange trading, the daily value of foreignexchange trading in the UK is around £1.8 trillion. You are talking about a lot of money moving and a significant amount of illicit money moving. But that pales into insignificance if you look at the overall scale of money that is moving through the financial sector.9

8.Rt Hon Ben Wallace, the Security Minister, could also only give a ballpark figure, saying “it is safe to say that we are talking about billions, not hundreds of millions”10 and said that the previous £90 billion figure was “a conservative estimate”.11

9.The expert witnesses also provided their view on the scale of the problem and were critical of the Government for not having a better assessment of the magnitude. Naomi Hurst, Senior Campaigner, Global Witness, told us that:

As an NGO, we conduct investigations, so naturally we see corruption happening on a case-by-case basis. There is certainly nothing that we have seen to indicate that the scale of money laundering is diminishing. In the cases that we see, absolutely breath-taking sums are being stolen and integrated into the legitimate financial system.12

10.Tom Keatinge, Director, Centre for Financial Crime and Security Studies at the Royal United Services Institute (RUSI), was unforgiving of the Government’s uncertainty around the scale of the problem:

How can we tackle something when we do not actually have the situational awareness to target our resources at it? To us, that is the key issue that we need to be getting at. I think we have to accept that, as a leading global financial centre, the UK will be dealing with dirty money. There is no escape from that, but situational awareness is lacking, data is lacking, evidence is lacking, and until we fix that we cannot possibly have a credible response.13

11.Despite not having a robust assessment of the scale of economic crime, the Government and agencies could demonstrate that combatting such crime was a priority. Mark Thompson noted that: “the fact it is difficult to quantify does not mean you cannot attempt to tackle it. We deal with fraud”.14 He later added:

[ … ] Roughly 50 per cent to 55 per cent of our work is on international corruption cases. They tend to be high-profile and involve large companies. From the point of view of ensuring a level playing-field and fulfilling our international commitments in terms of the UK being a safe place to do business, those are important public-interest factors that we would take into account. On the fraud side, again, we would be looking at the most impactive frauds. We would be looking at the particularly large-value and pernicious investment frauds, which harm lots of pensioners and thousands of investors. Those are the ones that are notoriously difficult to investigate, and those are the ones we should be doing.15

12.Donald Toon gave detail of some of the NCA’s responses to economic crime.

At the moment, our investigative resource around economic crime is focused most heavily on money laundering, because it is the identified strategic priority in this space and because it also has that impact on wider serious and organised crime. That includes the other strategic priorities we have, which are in cyber, firearms supply, child sexual abuse and exploitation, modern slavery and human trafficking. That is the principal focus of our investigative capability at the moment in relation to economic crime. That is supported by some of the work we are doing using civil investigation and civil litigation on the recovery of assets from those who may have been involved in serious crime and our use of unexplained wealth orders as part of that process.16

13.While Alison Barker, Director of Specialist Supervision, Financial Conduct Authority, noted that the FCA didn’t have any more information to challenge the assertions of the NCA on the scale of economic crime, she did note that:

In terms of which sectors that may be flowing through more than others, we do not have any information that would help us define that in any more detail. The banking sector is the place in which you would expect that. That is why we supervise it and want strong defences, because that is seen as a high-risk sector, in terms of where the risks sit.17

14.The Security Minister noted that London’s position as a financial centre presented difficulties to law enforcement. He said:

[…] it is a very large haystack, which is why money launderers are attracted to centres such as this. […] The estimates we have heard, when there have been estimates—about £90 billion or hundreds of billions—are correct. It is partly because of the scale of the City. It is also because dirty money is attracted to clean places. […] Some of it will transit here and one of the areas I am keen to target is where it harbours here. In other words, once it has been cleaned, those people who are busy out enjoying it in London, because they like to live in Britain, are of concern. Yes, it is an awful lot of money, but the scale of global dirty money is staggering. That is what I would say. It is no longer the gangster fencing his goods from a bank robbery. It is cybercrime, sometimes by hostile states, that is producing hundreds of millions of pounds.18

15.The scale of economic crime in the UK is very uncertain. It seems that it can reasonably be said to run into the tens of billions of pounds, and probably the hundreds of billions. We note that those who gave evidence regarded it as being small in comparison to the total amount of financial activity in the UK, and especially the City of London—for example the daily value of foreign-exchange trading in the UK at around £1.8 trillion. Such a comparison provides no comfort to the Committee. Rather, it suggests that the upper bound of the estimate is unknown.

16.It is exceptionally difficult to measure economic crime, given those undertaking it are actively trying to hide it. The Committee does not doubt the will of the authorities to combat economic crime. However, it considers there to be merit in attempting to measure its extent, since greater understanding of the scale of the problem will allow those responding to provide sufficient resources to tackle it, and potentially highlight where those resources should be targeted. The Committee therefore recommends that the Government undertakes more analysis to try and provide both more precision on the potential estimate of the size and scale of economic-related crime in the UK, as well as the exposure of different sectors to it.

London as a financial centre

17.The UK, and especially the City of London, is a worldwide hub for financial services. Naomi Hirst, from Global Witness, explained that London is attractive because “not only can you avail yourself of all the services to park your money and draw your money, use lawyers, use our courts and our PR firms, but you can also spend your money here very easily”.19

18.Tom Keatinge, of RUSI, argued that the UK response to financial crime was insufficient, given its position in the global financial system, saying “we will never succeed if we treat financial crime as if we are a country of 65 million people. We are not. From that perspective, we are a global centre and we need to be resourced accordingly”.20 Comparing the UK position with the US, he noted that:

If you look at another global financial centre across the Atlantic, New York, the US, yes, of course it is a much bigger country, much bigger economy, but when it comes to financial position we are not that dissimilar, yet look at the resources they put against this issue, compared with the resources we put against this in the UK.21

19.Mr Keatinge felt that this position has developed over time:

London has benefited from 20 or 25 years of—call it what you want—light-touch regulation. The UK benefits when other countries over-regulate. [ … ] We are now facing the consequences of not having asked sufficient questions about money that has come into the country over the last 20 or 25 years. If you are a major financial centre, yes, of course you will get your fair share of corrupt money and laundered money through your system. I would suggest we get more than our fair share in the UK because of successive policies over the last 25 years.22

20.When asked about political support for combatting economic crime, Mark Thompson, then interim director of the SFO, noted that:

Going after the top end of economic crime does not necessarily make you popular in all quarters. In fact, if we were entirely popular, we would probably not be doing our job properly. […] in the economic crime review, the Home Secretary said the SFO would remain independent. We had our core budget increased by the Treasury in March. My successor takes over in August. She has been appointed on a five-year term. Taken together, that shows a degree of political support for the work of the SFO.23

Complementing that point, Donald Toon of the National Crime Agency, told us that:

In terms of political support, the commitment to the National Economic Crime Centre makes the Government’s commitment on economic crime very clear. We have had no issues with political support for the work on tackling economic crime whatsoever.24

21.The UK holds a prime position in global financial services, with the City of London a dominant financial centre. Despite Brexit challenges, the UK must work to keep it that way. A ‘clean’ City is important, so the Government must recognise the responsibility to combat economic crime that comes with that position. Recent moves by the Government in this area are welcome, but must be sustained, and match the UK’s ambitions to continue to be a global leader in financial services.

The UK leadership role and the UK’s exit from the European Union

22.The Committee heard evidence that the UK had acted as a leader in combatting economic crime internationally, though as Naomi Hirst explained, performance had not been uniform.

The UK has demonstrated brilliant leadership on big-ticket items: beneficial ownership transparency, Companies House and now what we are hopefully going to be supporting the overseas territories to do. Where that has been quite patchy, as we have discussed, has been over global financial centre issues, and with regulation and supervision. It is a story of ups and downs, really.25

23.The Committee considered what impact the UK’s exit from the European Union might have on Government’s efforts to combat economic crime. For example, the National Crime Agency’s National Strategic Assessment of Serious and Organised Crime 2018 noted that:

As the UK moves towards exiting the EU in March 2019, UK-based businesses will almost certainly look to increase the amount of trade they have with non-EU countries. We judge this will increase opportunities for criminals to carry out [Trade Based Money Laundering].26

This was not the only area where the National Strategic Assessment highlighted risks from the UK’s exit from the EU, and firms potential move to look outside the EU to trade:

[…] We judge this will increase the likelihood that UK businesses will come into contact with corrupt markets, particularly in the developing world, raising the risk they will be drawn into corrupt practices.27

24.When asked about the risks and opportunities of the UK’s exit from the European Union, Duncan Hames, Transparency International, told us that:

Our exposure to new markets is both a risk and an opportunity. The risk is evident. British businesses are going to be doing more business with Governments and companies in jurisdictions where there are high levels of corruption. The opportunity comes from our economic engagement. We cannot ignore these countries any longer if we need to do trade with them. Therefore, the opportunity comes with using that engagement—they will want good trade agreements with Britain after Brexit—to leverage higher standards of anti-corruption and anti-money laundering in those jurisdictions; requiring existing conventions to be upheld in these countries, such as the UN Convention against Corruption, as part of the terms for us fostering greater business with these jurisdictions. Trade brings risk and opportunities.28

Duncan Hames also emphasised the balancing act the Government would face in promoting trade following the UK’s exit from the European Union, while maintaining a focus on combatting economic crime:

In terms of political will […] Britain needs countries in a way that it might not have done before, and so it is harder. […] It is one thing to say we are going to have a hostile environment to the proceeds of corruption, and then have the President of Azerbaijan in Downing Street within a matter of weeks. The challenge, both in terms of risks and opportunity, is whether Britain after Brexit can be a beacon in the world for the high standards we aspire to, or will our need for business outside of the EU create an attraction to a more buccaneering and deregulatory role?29

25.Simon York, Director, Fraud Investigation Service, HM Revenue and Customs, noted that a number of the practical arrangements that support the fight against economic crime and which may be impacted by the UK’s exit from the European Union.

There is a range of intelligence sharing and co-operation arrangements currently linked to the EU, which we would very much want to retain. […] Lots of things, like the European Arrest Warrant and, from an HMRC perspective, Naples II, which is about the sharing of customs information, are currently tied up with EU-type processes. It is probably in everybody’s interest—both our European partners’ and ours—to continue to share information and intelligence on serious criminality.30

He added that “a law enforcement agency will always want the maximum amount of information, data and intelligence. The more we have, the better. We would very much be looking to retain and build the capability on that”.31

26.The UK’s departure from the European Union will inevitably result in a change in international trading relationships. Such new trading relationships may also provide opportunities to those wishing to undertake economic crime in countries that are more vulnerable to corruption. The UK must remain alert to that risk, including when it conducts trade negotiations. The Government must be consistently clear about its intention to lead in the fight against economic crime, and not compromise that in an effort to swiftly secure new trading relationships.

27.We recommend that the Government retains, or replicates, the arrangements with the EU to maintain the flow of information between the UK and EU member states’ law enforcement agencies on economic crime. We recommend that the Government work to develop strong relationships with other countries and strengthen mutual information sharing and law enforcement powers.

Financial Action Task Force

28.The Financial Action Task Force’s (FATF) mutual evaluation review of the UK’s anti-money laundering and counter-terrorist financing systems was published on the 7 December 201832 after the Committee had taken its oral evidence. It has been over a decade since the last such report.33

29.It is notable that, as the FATF publication approached, the pace of reform in this area has increased. Simon York, Director, Fraud Investigation Service, HM Revenue and Customs, highlighted that:

Government have been very responsive recently with the recent money laundering regulations, the corporate criminal offence, the National Economic Crime Centre. There is an awful lot happening and a lot of that is quite new. It is about us getting to grips with that and making the most of it.34

However, there is concern that the UK may lose focus on this area now that FATF has reported. Tom Keatinge, RUSI, was quoted as saying: “There’s a lot of work to do […] The question is, having put so much energy and resource into the process, what will replace the steel of FATF in the UK’s back?”.35

30.The importance of the then ongoing FATF process was emphasised by the Economic Secretary during the Public Bill Committee of the Sanctions and Anti-Money Laundering Bill in March 2018:

[…]. The FATF is the international standard setter in this area and will report publicly later this year on its findings. The report will consider matters, including the effectiveness of how the UK prevents the misuse of legal persons, such as companies, for money laundering purposes. Hon. Members will appreciate that this report will greatly inform the future of the UK’s anti-money laundering regime […].36


Once the FATF has reported, the Government will actively consider its conclusions, including those in relation to any areas in which the UK’s anti-money laundering framework can be improved. […] It would be more sensible to allow the review to identify specific areas where action is necessary before making further changes to our AML regime.37

31.Ben Wallace, the Security Minister, noted the need for a dynamic process around money laundering policy:

[…] because the adversaries move to the vulnerabilities as they appear. It will never be that we can put our arms round and say, “There we are; this is now sorted”, because they are deliberate, and they have the resources to work out and exploit our systems as they change and develop. Any Government, if they are honest, will always sit here and say, “We could do more” or “We are doing this now, but maybe we should have done more two years ago”, because it is a dynamic process and they move to where the weaknesses are in the system and will continue to do so.38

32.Following the conclusion of the Committee’s oral evidence, the Government announced the formation of the Economic Crime Strategic Board on 14 January 2019. It will be jointly chaired by the Chancellor and the Home Secretary.39 Its role will be to “set priorities, direct resources and scrutinise performance against the economic crime threat, which is set out in the Serious and Organised Crime (SOC) Strategy”, and a mixture of public and private members will sit on the Board.40

33.The Committee may consider taking further evidence on the findings of the Financial Action Task Force (FATF) mutual evaluation in due course. The Committee does, however, note the zeal with which the Government has considered reform in this area as the FATF mutual evaluation has approached. With the previous full mutual evaluation occurring over a decade ago, the UK should not solely rely on prompting by FATF to ensure its economic crime prevention, detection and enforcement systems remain fit for purpose and it should not rely on FATF alone to identify areas where improvement is needed. The Committee therefore recommends the Government institutes a more frequent system of public review of the UK’s AML supervision, and law enforcement, that will ensure a constant stimulus to improvement and reform. This review should take a holistic view of the entire system, rather than be undertaken by each individual component supervisor or agency. There may be a role for the recently announced Economic Crime Strategic Board in this work.

2 National Crime Agency, Economic Crime Command, Accessed 4 November 2018

4 HM Government, Serious and Organised Crime Strategy, November 2018, p14

5 Q174

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7 Q192

8 Q254

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12 Q1

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17 Q380

18 Q440

19 Q8

20 Q2

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22 Q7

23 Q208

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25 Q55

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30 Q360

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34 Q424

35, UK Defenses Against Money Launderers Overwhelmingly Effective: FATF, by Koos Couvée, October 19, 2018, Accessed 31 October 2018

36 Sanctions and Anti-Money Laundering Bill Committee, 6 March 2019, col 167

37 Sanctions and Anti-Money Laundering Bill Committee, 6 March 2019, col 167

38 Q481

39 HM Treasury/Home Office, News story: New taskforce to tackle economic crime, 14 January 2019

40 HM Treasury/Home Office, News story: New taskforce to tackle economic crime, 14 January 2019

Published: 8 March 2019