The UK House of Commons Treasury Committee published a report on "Economic Crime – Anti-money laundering supervision and sanctions implementation" on March 8, 2019. Interestingly, this includes comment in respect of the long-mooted failure to prevent economic crime offences.
Following its launch on March 29, 2018, an inquiry has been undertaken into the first of the following two strands
- The anti-money laundering (AML) and the sanctions regime
- Consumers and economic crime
The Committee received written and oral evidence from a number of individuals, including from the National Crime Agency, the Serious Fraud Office and financial institutions. The report makes a number of disparate recommendations, including
- The scale of economic crime in the UK is highly uncertain and analysis should be undertaken to better understand this and any sector specific exposure.
- Brexit will provide risks and opportunities, and the UK should ensure it safeguards the reputation of the City of London as a "clean" financial centre and maintains the flow of information between the UK and EU member states.
- A more frequent public review of the UK’s AML supervision and enforcement regime should be introduced.
- A review of the scope to increase information-sharing between banks should be carried out.
- The approach to AML supervision in the UK is fragmented. Currently, there are three statutory bodies with AML supervisory responsibilities: HM Revenue & Customs (HMRC), the Financial Conduct Authority (FCA) and the Gambling Commission, as well as the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). The Committee considers that a single organisation should be given the ‘supervisor of supervisors’ role in order to have oversight of the system as a whole. The Committee recommends that OPBAS should take on this role, although this may require some restructuring of responsibilities within the FCA.
- The Committee recommends that OPBAS should be given a firmer statutory footing, akin to the Financial Ombudsman Service.
- Moving the supervisory responsibilities of HMRC to OPBAS was also mooted for consideration
- It was noted that estate agents submitted 0.15 per cent of the total Suspicious Activity Reports (SARs) between April 2017 and March 2018. The Committee recommended greater scrutiny of estate agents by HMRC to ensure better levels of registration and to embed best AML practice.
- It was noted that Companies House is not required to carry out AML checks and has no powers to verify information on the register. Urgent consideration should be given to ensuring Companies House has the statutory duties and powers to tackle economic crime.
Legislative reform – progress of failure to prevent economic crime offence
- The Committee noted that the government’s proposals to reform the law on corporate liability in relation to economic crime do not appear to have progressed since the call for evidence closed on March 31, 2017. The government should progress this domestic priority, including by setting out a timetable for bringing forward legislation and undertaking consultation on proposed legislation to help get the detail right, instead of delaying consultation until the proposed legislation is in near final form.
- It was noted that, at the time of receiving oral evidence, the Office of Financial Sanctions Implementation (OFSI) was yet to bring enforcement action, and this was viewed as necessary if OFSI was to be recognised for its deterrent effect. While not considered a significant enforcement action in terms of value, the report noted that OFSI had subsequently announced its first monetary penalty of £5,000 against Raphaels Bank for a violation of EU sanctions. Nonetheless, the Committee recommended a review of OFSI’s effectiveness two years after its formation.
A second report on consumers and economic crime is expected to follow later in 2019.