Larger Law Firms To Face New Economic Crime Levy
Announced in the Budget in March, larger law firms will face a levy of between £100 and £200 per every £1m of revenue, that will go towards supporting the government’s economic plan.
Firms that are subject to the Money Laundering Regulations, will have to pay the levy so that the Treasury can raise £100m to supplement public funding.
A newly published consultation announced that:
“Businesses, such as banks, law firms, and casinos, are already required to take steps to address the risk that they are used by criminals to launder money.
“They work alongside the public sector to tackle money laundering. But, through the actions in the plan, both public and private sectors have committed to go further.”
The levy will be placed upon the roughly 90,000 organisations that are AML-regulated and may consist of three separate elements, a small business exemption, revenue based and possibly a money laundering risk weighting.
Following the Treasury seeking views on the levy, it is considering an alternative to small businesses having exceptions, such as a flat fee, as they still pose a money laundering risk. The Treasury also considered exempting small businesses that do not turnover more than £1m and those that meet the requirements under the Companies Act, those with balance sheet totals of not more than £5.1m and no more than 50 employees. Businesses would meet the requirements for the exemption if they fulfilled two of the three criteria. Whichever option the Treasury decided to take, finding a way to identify small businesses, has “proven challenging”.
The Treasury said:
“with a £10.2m small business threshold, our initial analysis suggests a levy rate of between £100 and £200 per £1 million of revenue for affected businesses would achieve the target of raising £100 million/year.
“This is based on the latest available data from HMRC and other supervisors. It would give a minimum levy payment of around £1,000 to £2,000.”
The first set of levy payments are to be made in the 2022/2023 financial year.
Law Society President Simon Davis said:
“Our sector devotes substantial resources to fighting financial crime. We have strong concerns that a further unjustified burden will fall on a sector already under strain.”
The publicly funded element details will be finalised at an upcoming spending review, which will explore “whether suspended funds can be unlocked to pay for economic crime reform” and updating the asset recovery incentivisation scheme.