The ‘London laundromat’ has provided corrupt individuals with an easy route to wash money through property, with very little protections or deterrents in place to safeguard against such misuse.
A recent study even estimated that a staggering £88bn is laundered every year through the UK, highlighting the sheer scale of the issue.
Amid the fallout of the war in Ukraine, the government has tried to make amends, scrambling to save its reputation.
Without resources at the coal face, there is a real risk that the UK will become a toothless tiger. Over the past few months, we have witnessed a raft of measures being unveiled to curb white-collar crime and money laundering, which are likely to somewhat stem an ever-rising tide and have certainly shown promise.
However, the question now on everyone’s mind is whether this action is too little, and too late.
2022: the year of mitigation
After receiving Royal Assent in March, the Economic Crime (Transparency and Enforcement) Act 2022 was billed as the government’s flagship policy to crack down on illicit finance and drive dirty money out of Britain.
The act unveiled a selection of measures to curtail financial malpractice and corruption. Measures taken include the establishment of a Register of Overseas Entities to increase transparency surrounding ownership, empowering the use of unexplained wealth orders, and strengthening the UK’s sanction regime.
The act was vital in addressing the yawning gap of current legislation and is a key deterrent to those who would seek to hide and launder the proceeds of bribery, corruption and organised crime in the UK.
However, many of the key tools needed to clamp down on economic crime in the UK were still absent and there is certainly a question mark looming as to why it took a war in Europe for the government to finally act on the issue.
The current UK whistleblowing regime offers no protection or incentive to shine the light on wrongdoing.There is a strong argument that many of these measures should have been introduced some years ago.
To help plug the gaps not addressed in the Economic Crime Act, the government announced at the recent Queen’s Speech the economic crime and corporate transparency bill, which is to be a priority this year.
While we are still awaiting the concrete the details of the bill, much of the focus seems to centre on tackling digital crime alongside the reform of Companies House.
The introduction of powers to make Companies House a more effective investigation and enforcement body and improve data-sharing between businesses are to be warmly welcomed, however, there has yet to be any mention of increased investment and resources going to the body to support it in counteracting fraud.
Without resources at the coal face, there is a real risk that the UK will become a toothless tiger attempting to crack down on economic crime.
Action still required
Whistleblowers play a fundamental role in exposing economic crime, yet the current UK whistleblowing regime offers no protection or incentive to shine the light on wrongdoing. In fact, in the current landscape whistleblowers are far more likely to end up in jail themselves.
The current legislation offers very little protection to workers, fails to hold employers to account and is far less robust than the comparative EU and US regimes that exist.
If the government really was serious about tackling white-collar crime that occurs up and down the country, then reform of the existing whistleblowing regime would be an absolute priority.
Altogether the recent measures announced will undoubtedly increase the amount of due diligence that financial advisers need to undertake as part of their day-to-day operations – particularly those with international clients.
Unless the government goes through with its promises, this could all end up being a rather lame duck exercise.It is therefore vital that the government ensures that additional resources to fight economic crime are delivered to the bodies tasked with doing so.
This will ensure issue that financial advisers will not be encumbered with additional reporting requirements for no effective output.
With billions of pounds having reportedly been lost to fraud through the various government loan schemes, and the government now looking to recoup additional revenue to make up for the high levels of public spending during the pandemic, there is no better time than now to finally put an end to the corrupt business practices that are robbing Britain of cash.
However, unless the government goes through with its promises and ensures that greater powers to pursue fraudsters and white-collar criminals are matched with greater resources for the bodies tasked with pursuing such individuals, then this could all end up being a rather lame duck exercise.
Financial advisers could be left burdened with supplementary red tape, without the UK actually catching those it is finally seeking to bring to justice.
Rachel Adamson is head of fraud and regulatory at Adkirk Law
