How Will the New Economic Crime Bill Help Businesses Battle Financial Crime?

If you want to win the fight, Victor Fredung, CEO of Shufti Pro, has ideas to make things right.

Economic crime costs the UK billions per year. These crimes include money laundering, fraud and corruption. It’s an ongoing problem, with London widely considered a ‘laundromat’ for corrupt money.

As recent as 2019, the Treasury Committee found that the UK lacked the necessary measures to effectively tackle financial crimes. According to Spotlight Corruption £852 million a year is spent fighting economic crime.

With the realisation that more is needed to be done to tackle this crime, the UK’s Office of Foreign Sanctions Implementation (OFSI) is now implementing several key measures from the newly passed Economic Crime Bill.

The Bill’s stated aim is to register overseas entities and their beneficial owners and require those who own land to register in certain circumstances; to make provision about unexplained wealth orders; and to make provision about sanctions.

However, the question remains as to whether the newly passed Bill will put an end to money laundering. Looking back at the previous efforts made to clamp down on financial crime, it is clear that the progress was not always satisfactory.

For instance, in 2016, former Prime Minister David Cameron stated at an anti-corruption summit that the government would pass a Bill to reveal offshore companies and assets of corrupt politicians.

However, this Bill was never introduced. In 2018, the Sanctions and Anti-Money Laundering Act was passed to allow the UK to issue its own sanctions after Brexit. The Act was formulated to identify, investigate, and prevent financial crimes like money laundering and terrorist financing. It would thereby implement the international AML standards set by the Financial Action Task Force (FATF).

The next year, the Treasury Committee found that the UK still lacked the necessary measures to effectively tackle financial crimes. It was not until Russia’s invasion of Ukraine that the UK government finally began taking serious steps toward the Economic Crime Bill. Resultantly, the UK’s new Economic Crime Bill has been formulated at a fast pace and is aimed at creating a transparent system of foreign ownership of property.

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With the Economic Crime Bill, aside from making it easier to prosecute people for breaching sanctions, the government is hoping to address three crucial areas.

The first is to increase transparency of who owns property in the UK, so that it is harder for foreign criminals to launder money through UK property markets by preventing them from hiding their identities behind shell companies.

The second is the strengthening of powers to confiscate unlawfully obtained wealth. This expands the scope of existing legislation to tackle some of the barriers that have previously discouraged law enforcement agencies from pursuing cases.

Lastly, the Bill makes amendments to the Anti-Money Laundering Act 2018 to make it easier for the government to impose sanctions.

The Bill’s sanctions enforcement measures, which reflect the UK’s attitude to ongoing Russian aggression in Ukraine, are perhaps the most important piece of the legislation that businesses should pay attention to.

The UK has long had a reputation as a financial haven for Russian oligarchs, including members of the Russian government’s inner circle. This has resulted in a huge amount of Russian assets being held in UK banks and financial institutions. In response, the OFSI now has powers to act more decisively against organisations and individuals that are likely to flout sanctions.

The OFSI’s new sanctions rules, and in particular the introduction of strict liability, require UK businesses to carefully review their approach to sanctions. New designations are added and withdrawn from watchlists regularly, meaning that businesses need to continuously review and amend their approach.

As with any law or piece of regulation, there are bound to be loopholes and criminals invariably find ways to circumvent the rules. Common criticisms of the Economic Crime Bill are that it still leaves space for companies and individuals to still hide the property or land they hold.

Spotlight on Corruption, claims that without addressing the serious issues that law enforcement face from shrinking budgets or decrepit IT systems, the new legislation won’t make any difference at all.

However, broadly speaking, the UK’s Economic Crime Bill will help businesses to counter money laundering and win the fight against financial crime. However, in order to give themselves a fighting chance, businesses should equip themselves with the right tools and technology. For example, AI-powered AML screening solutions and means to ensure identity checks are key.

Organisations need to strengthen their know-your-customer (KYC) strategies in order to comply with current requirements and to carry out the corresponding checks on politically exposed persons (PEPs) who may also be subject to blocking. This should involve monitoring the sanctioned firms and individuals, as well as the links they may have with other companies with which they are likely to be doing business.

To achieve this, businesses need to have access to the right data and technology. This should include identity verification tools, KYC, AML and KYB. This will allow businesses to help better identify suspicious and high-risk customers by cross-checking them against reputable data sources.

Many welcome measures are included in the Government’s Economic Crime Bill. However, for these measures to be truly effective, businesses and institutions need to implement fit for purpose systems that can stay on top of sanctions lists in order to keep themselves protected – and ultimately help to battle financial crime.

By Victor Fredung, CEO of Shufti Pro.

Shufti Pro is a London-headquartered AI-powered identity verification and AML screening company.

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