The Economic Crime Levy: a fair contribution towards tackling economic crime or a further tax on the overburdened regulated sector?
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The Government's consultation ran between July and October 2020 and focussed on how the levy should be calculated and collected, and what it should be spent on, but not the fundamental principle as to whether a levy should be imposed across the whole of the regulated sector in the first place.
The regulated sector encompasses around 90,000 hugely varied businesses including banks, investment firms, insurance firms, accountants, book-keepers, estate agents, law firms, company formation agents, casinos and auction platforms The risks of economic crime in each of these types of business is clearly very different and thus the "contribution" each makes to the risk of economic crime in the UK economy is also different. A number of ways of calculating and applying the levy were discussed in the consultation but the Government's favoured method was a blanket approach based on revenue. A number of industry bodies expressed concern about this model, on the basis that it would impact certain parts of the regulated sector far more than others.
Nonetheless, in its response to the consultation and draft legislation, as published on 21 September 2021, the Government has confirmed that it is intending to proceed with a model whereby all regulated entities are liable to pay the levy calculated on the basis of UK revenue. Concerns regarding the lack of a link between the amount a business will pay under the levy and the money laundering risk it creates have not been addressed, with the Government seemingly prioritising ease of calculation over fairness. The levy will be calculated on the basis of bands, with small entities (with revenue under £10.2m) exempt. These bands are yet to be finally confirmed but are expected to be as follows:
| Size | Small | Medium | Large | Very large |
| UK revenue threshold | Under £10.2m | Between £10.2m - £36m | Between £36m - £1bn | Over £1bn |
| Levy fixed fee ranges | Exempt | £5,000 - £15,000 | £30,000 - £50,000 | £150,000 - £250,000 |
Alongside concerns about the arbitrary way the levy will be imposed are concerns about how the money will be spent. Although the Government's response to the consultation acknowledges that "respondents were consistent in their views that funds from the levy should only be used for initiatives intended to tackle money laundering" the Government has not explicitly confirmed that this will in fact be the case, stating that "decisions on how funding is allocated will be made through, and form part of, existing government spending processes". The Government has committed to an annual report on the operation of the levy and a 3-year review to take stock of how the levy is performing against its original purpose but there are obvious concerns that businesses are being told they must pay a levy to tackle the risks of the economic crime they contribute towards but at the same time there is no guarantee this money will actually be used to do that. This accordingly looks a lot like a tax on regulated businesses, which are already required to spend significant sums on compliance, monitoring and reporting, rather than a levy designed to tackle a specific issue caused by those businesses.
The levy will be collected by HM Revenue and Customs (HMRC), the Financial Conduct Authority and the Gambling Commission and the first payments are to be made in 2023/24 (a year later than originally planned). The legislation will be implemented in the Finance Bill, which is due to be introduced to parliament in autumn.