On Tuesday 12 April, Sir David Amess was a panellist in the Parliamentary Intelligence-Security Forum webinar on anti-money laundering and counter terrorist financing. The webinar was hosted by Robert Pittenger, Chairman of the Parliamentary Intelligence-Security Forum, and the other speakers included members of the U.S. Senate and experts in the fraud and intelligence industries.
Sir David Amess said:
The types of crimes we read about in the newspaper or see on the news rarely include financial crime, unless it involves a large sum of money or a high-profile company or individual. Even though fraud is now one of the most common crimes in the United Kingdom, with one in fifteen people falling victim each year, economic crime is more often than not left off the list when thinking about serious crimes. It is difficult to assess the extent of economic crime in the United Kingdom, but the Treasury Select Committee stated that it could reasonably be in the tens of billions of pounds, and probably the hundreds of billions.
Even though their purposes differ, both terrorist groups and criminal gangs launder money. Terrorists ultimately need money to recruit and grow their organisations to commit terrorist acts. Criminal gangs, on the other hand, are usually more interested in generating more money and more wealth. Both groups are dangerous to society and undertake highly illegal activities that, whilst centred around violence, are supported by money laundering and illegal funds.
Recently, the Financial Action Task Force found that the United Kingdom had one of the toughest systems for combatting money laundering and terrorist financing. Using the Basel Anti-Money Laundering Index which measures the risk of money laundering and terrorist financing in countries across the world, the United Kingdom ranks 116th out of 141 in 2020 with a score of 4.02. That is an improvement from a score of 4.13 in 2019. Despite having a relatively low risk score worldwide, the United Kingdom is average for the 32 European countries that have been analysed. Perhaps this is the case because the United Kingdom is one of the world’s leading international financial hubs with a large and open economy and its size exposes itself to a higher money laundering risk than smaller economies.
Economic crime has long been an issue in societies, starting with low level fraud and bribery and escalating to the highly sophisticated money laundering operations and terrorist financing that unfortunately take place today. Action plans have been put in place by previous Governments and subsequently amended to adjust for the criminals’ adapting methods and circumstances. However, one of the major changes in circumstances that will need adjusting to is our departure from the European Union.
There have already been disparities in anti-money laundering laws between the United Kingdom and the European Union when we were a member state. The European Union introduced six anti-money laundering directives and the United Kingdom implemented the first five, but not the sixth which came into effect in December 2020 when we were still a member. The first five regulations are set in domestic law for the United Kingdom and therefore will be more difficult and complicated to change as a result of Brexit, if the Government wants to at all.
One change in the small print, as it were, is the definition of “third country”. Under the Money Laundering and Transfer of Funds Regulations 2019, it has changed from referring to a state other than a European Economic Area state to referring to a state other than the United Kingdom. That means that financial institutions that have a relationship with another institution in the United Kingdom must satisfy further criteria and requirements which will involve more comprehensive financial checks. The same is true of the reverse. If a company has branches established in a European Economic Area state, they must make sure that those branches impose anti-money laundering and anti-terrorist financing requirements as strict as those in the United Kingdom.
Although most European Economic Area states should have implemented the anti-money laundering directives into national law, it cannot be assumed that they already have requirements as strict as those in the United Kingdom. After all, the European Commission has previously commented on the wrong application of EU law by member states. Additionally, some countries may choose to implement the minimum to just comply with EU law, thereby not necessarily ensuring equivalence of anti-money laundering and anti-terrorist financing requirements between all member states and the United Kingdom.
Our Government is committed to tackling money laundering and economic crime after leaving the European Union and has not announced any proposals to deviate from the requirements of the five anti-money laundering directives. The United Kingdom also continues to be an active member of the Financial Action Taskforce, which it co-founded at the G7 summit in 1989, and will continue to follow its guidelines and recommendations on global standards.
Provisions in the EU–UK Trade and Cooperation Agreement commit both sides to a number of anti-money laundering standards and procedures and facilitate information sharing between the two parties. As internationally recognised financial hubs with influential economics, both the European Union and the United Kingdom have committed to continuing to adhere to international efforts to tackle money laundering.
Our exposure to new markets as a result of Brexit is both a risk and an opportunity. The risks occur when British companies do 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. They will want favourable trade agreements with Britain after Brexit, but we can request higher standards of anti-corruption and anti-money laundering from them. As part of the terms for us fostering greater business with these countries, we can require existing conventions to be upheld, such as the UN Convention against Corruption.
Preventing instead of reacting to money laundering and terrorist financing is the ideal situation. Not giving these criminal organisations an opportunity to commit economic crimes and therefore fund their other, usually more violent activities is the goal for the United Kingdom. There currently is collaborative action between the public sector and the private sector, but there needs to be more cooperation with incentives to share information. Tackling a problem when you don’t know where it is coming from or how it is happening is incredibly difficult and with the increasing popularity of the dark web and cryptocurrencies such as bitcoin, economic crime is becoming even more difficult to trace.
If we want the United Kingdom to be the safest and most transparent place in the world to conduct financial business, then stronger deterrents for economic crime are needed. Currently, the punishment doesn’t fit the crime. If we encourage more reporting and review the anti-money laundering supervision more frequently then perhaps more criminal organisations will stop on their own accord and more will be caught and given harsher punishments, setting an example to the rest.
To conclude, the United Kingdom has shown that despite leaving the European Union, we are still committed to reducing money laundering and terrorist financing. Our departure from the Union has mean that we are able to take control of our legal system and implement the necessary anti-money laundering laws that best suit our country and our economy. As one of the largest economies worldwide that attracts high level investments, we do have a responsibility to tackle economic crime and set an example internationally. The Government’s Economic Crime Plan is a good step in the right direction and with the increased sharing of information and cooperation between private businesses and the public sector, we can make a noticeable difference in tackling money laundering and terrorist financing.