Economic Crime Levy draft legislation published

Following a consultation between July and October last year on how funds could be raised to help the UK’s fight against economic crime, the Government has now published its proposals and draft legislation which will bring the levy in to effect.

The economic crime levy announced by the Government at the 2020 Budget in March hopes to raise £100 million per year from the anti-money laundering (AML) sector to fund reforms outlined in the Government’s 2019 Economic Crime Plan.

In July to October 2020, the government held a consultation, which sought views on what the levy will pay for, how transparency over levy spending can be ensured, how levy liability will be calculated, which entities should be paying the levy and how the levy will be collected and enforced.

Responding to the proposals, Law Society president I. Stephanie Boyce commented:

“The legal profession is at the forefront in supporting the fight against economic crime and takes its anti-money laundering responsibilities very seriously. On principle, we have strongly opposed the imposition of the levy from the start and are disappointed the UK government has decided to move forward with it.”

“Law firms play an important role in tackling money laundering, as demonstrated by the substantial resources allocated by the profession to comply with its anti-money laundering and financial crime obligations.”

“The levy effectively represents a tax on the provision of legal services, undermining the competitiveness of a key British industry, at a time when the sector should be championed. Imposing a levy based on a firm’s revenue, is an arbitrary measure, and means there is no link between the amount a business is required to pay and the extent of the risk it brings into the system”, she added.

Current proposals suggest that AML-regulated entities with over £10.2 million in UK revenue will be liable to pay the levy, and will be collected by the three public sector AML statutory supervisors, the Financial Conduct Authority, HM Revenue & Customs, and the Gambling Commission.

Expressing concerns around the tapered bands proposed for liable firms, I. Stephanie Boyce also stated that the three bands – medium (£10.2m-£36m), large (£36m-£1bn) and very large (>£1bn) – “are very broad indeed”.

“It is proposed that the smallest entities within each band will pay as much as the largest. This seems a very blunt instrument to use and we would have thought a more refined approach would be better”

Commenting on the proposed timing to take the first set of levy payments in the year 2023-24, to take into account the effects of the Covid-19 pandemic, I. Stephanie Boyce also added:

“Delaying the introduction of the levy is a welcome move, as many law firms are still recovering from the impact of the pandemic on their businesses. As is the fact the UK government listened to us and now small firms with a revenue of below £10.2 million will be exempt from paying the levy.”

“But I would stress the concern that we’ve repeatedly articulated: that the levy – coming on the heels of the adverse impact of the global pandemic plus the still to be realised effects of Brexit – will only compound a very difficult operating landscape for many firms.”

“It is disappointing the UK government has decided to penalise the profession when it is already devoting resources to prevent the system from being abused by money launderers. We will continue to lobby as the legislation makes its way through parliament, to ensure our members’ interests are represented.”

The deadline for response to the consultation on the draft legislation is Friday 15 October 2021, and the final legislation will be included in the 2021-22 Finance Bill.

The Economic Crime (Anti-Money Laundering) Levy draft legislation and explanatory notes can be found here.

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