UK Economic Crime Bill: Unfit For Purpose

Just a couple of tube stops away, in leafy Kensington and Chelsea, is the centre of a property empire belonging to close allies of Vladimir Putin. Over 100 properties in the UK, totalling more than £1.1bn, belong to Russian oligarchs behind this war. And that’s just the ones we know about.

The invasion of Ukraine shone a spotlight on Britain’s unwanted position as the jurisdiction of choice for oligarchs and kleptocrats looking to launder ill-gotten gains. Since the start of the war, the UK has sanctioned over 1,200 individuals and frozen more than £18bn of assets belonging to suspected cronies of Putin. But if the UK is serious about dealing with dirty money, it must clean up its financial sector. Lawyers, company service providers, accountants and real estate agents are part of an ecosystem that has, for too long, enabled tainted cash to wash ashore here in the UK.

For years, I have worked to build a consensus on how to tackle the flow of dirty money in the UK. The Economic Crime Bill tabled by the Government, and currently under review, felt like our watershed moment. Yet, after weeks in Committee and dozens of considered and practical amendments rejected, we are left with a timid bill, riddled with flaws and loopholes, which does little more than tinker around the edges.

The Bill centres on long-delayed reforms of Companies House, improved information sharing between banks and new intelligence gathering powers for law enforcement. I arrived full of optimism with a whole host of pragmatic proposals to improve the legislation: calling for greater transparency, vigorous enforcement, more accountability and smarter regulation. All were in our cross-party Economic Crime Manifesto, yet all were ignored by Ministers.

On transparency, we know that money launderers take advantage of our financial structures to provide the secrecy that allows them to move, hide and spend their money. We must lift this cloak of anonymity. We want to turn Companies House into a proactive agent in preventing and detecting economic crime by obliging it to actively check the information it receives, and funding it to do so effectively. This should be underpinned by an annual report to Parliament. Sunlight is the best disinfectant, after all.

Our law enforcement agencies are outspent and outgunned by criminals and the corrupt. Without the threat of real consequences, there is no credible deterrent to wrongdoers engaging in economic crime. We must ensure that our agencies are properly resourced, without overburdening taxpayers. Along with allies, I have called for an increase of incorporation fees to £100. The cash raised from this, with money brought in from enforcement action, should then be re-invested into a ringfenced economic crime fighting fund. We would also cap court costs to protect law enforcement bodies from the financial risks which at present deter them from taking on deep-pocketed and well-lawyered suspects. Most important of all, we must create criminal liability for directors and senior executives who fail to prevent fraud, false accounting and money laundering, as we already have for bribery. Only the threat of prison will change corporate behaviour.

We need stronger accountability of law enforcement. A new parliamentary committee to hold agencies accountable for their activities would raise standards and highlight inadequacies. A dedicated Office for Whistleblowers would ensure that that those who lift the lid on corporate misconduct, who are so crucial in a huge number of cases, are properly incentivised. It is also high time we ended the use and abuse of our courts by the rich and powerful to muzzle legitimate criticism through vexatious legal threats. New rules protecting free speech from this ‘lawfare’ would ensure that journalists and activists are able to shine a light on the criminal and the corrupt.

Finally, since the 2007-08 global financial crisis prudential regulation for banks has improved, but regulation against illicit finance is still woefully lacking. Those responsible need more funding to catch up with new technologies like cryptocurrency and better, smarter rules to prevent our defences against dirty money from being overrun, without overburdening business with red tape. We want the Treasury to overhaul its supervisory regime, giving new powers to sanction supervisors and ensuring consistency of implementation. The current system of reporting suspicious activity does not work, with hundreds of thousands of alerts made annually but only a fraction closely examined. We should introduce a new rating system to ensure quality over quantity. Meanwhile, HMRC must be empowered and resourced to plug some of the gaps in our armour, ensuring that professions like estate agents and art dealers are properly regulated and face consequences for non-compliance. 

It is tragic that it has taken the war in Ukraine to bring the dirty money crisis to a head, but this must be a historic turning point, where the UK steps up alongside its allies to drive out dirty money once and for all.

Time and again, the United Kingdom has shown itself to be a world leader in tackling global problems. The Government can and must act now with greater ambition to match the scale of the threat by taking the necessary steps to fix Britain’s economic crime problem and secure long-term prosperity.

Dame Margaret Hodge
Dame Margaret Hodge is a UK Labour Member of Parliament, representing the constituency of Barking since 1994. Dame Margaret held several government positions in the last Labour government, holding portfolios across education, work and pensions, business and culture. In 2010 Dame Margaret became the first woman elected Chair of the Public Accounts Committee, serving until 2015. She is currently Chair of the UK’s APPG for Anti-Corruption & Responsible Tax.