Economic Crime Bills – once in a generation opportunity to drive dirty money out of the UK
By Paul Monaghan
Fair Tax Foundation, Chief Executive
It’s a sad truth that the UK has been a global hub for illicit financial flows for decades, but there is an opportunity for this to change with today’s announcement of a pair of Economic Crime Bills.
What has become known as the ‘London Laundromat’ contributes to suffering across the world, but it also inflicts pain closer to home – with the UK’s National Crime Agency estimating that hundreds of billions of ‘money laundering’ is flowing through the UK each year and that this costs the country more than £100 billion pounds per annum.
In particular, the deplorable invasion of Ukraine by Russia has brought the issue of ‘Londongrad’ to a head as never before. It feels like there could be a once in a generation opportunity to drive dirty money out of the UK. Sanctions that have long been called for are at last being talked about in a substantive way, via a pair of Economic Crime Bills announced on 28th February 2022.
The Fair Tax Foundation’s focus is to encourage responsible tax conduct, with an underappreciated key component of our Fair Tax Mark accreditation standards being the requirement that a business disclose its beneficial owners (which is taken to include persons with significant control, politically exposed persons and trust beneficiaries). Anonymously owned companies are one of the key tools used by money launderers and tax dodgers alike, with opaqueness allowing them to hide illicit gains and taxable assets from law enforcement and tax inspectors.
Which is why, for the last couple of years, we have been quietly working with our friends in the tax justice and anti-corruption movements to press for:
- much better resourcing of the UK’s Companies House repository of corporate information and the instigation of a monitoring and investigations regime (which, to be blunt, is currently laughable, with obviously false directorships regularly posted, including an ‘Ali Babba’ who resides at the ‘Street of the 40 Thieves’)
- extensions of the information a company needs to file and that is available to the public (in particular, that a full set of financial statements are made available every year, as set out in a recent submission)
- extension of reporting requirements to overseas owners of property in the UK (something promised by the then UK Prime Minister some seven years ago)
- ensure that corporate transparency requirements apply to UK Overseas Territories and Crown Dependencies as soon as possible (and we move past the current foot dragging by what are essentially tax havens)
- a requirement that all overseas companies bidding for public procurement contracts disclose their beneficial owners and that municipalities be allowed to factor ‘tax conduct’ into their decision making (it cannot be right that a bidder based in the UK or an EU Member State is effectively subject to a higher ethical threshold than overseas entities, as set out in another recent submission)
The Fair Tax Foundation is now an organisation with an international remit. However, we are based in the UK, and the UK is currently a hotbed for criminals from around the world who want to set up companies to launder their profits. Criminals exploit the ease with which companies can be established, the raft of unethical enablers on hand and the access UK systems provide to even higher-risk tax havens and secrecy jurisdictions (such as the Cayman Islands and British Virgin Islands). We therefore feel it is incumbent on us to undertake best efforts to help clean up our backyard, so to speak.
It also needs to be emphasised that illicit financial flows and tax avoidance hurt all those businesses who quietly get on with doing the right thing, not least as they are forced to compete on an unlevel playing field.
The Fair Tax Foundation will do our best to keep pressing these points, that will benefit responsible businesses not just in the UK, but across the world. Working with wonderful organisations such as Transparency International, Spotlight on Corruption and the All-Party Parliamentary groups on ‘Fair Banking’ and ‘Anti-Corruption and Responsible Tax’ (all of whom offer great additional resources for people who would like to get more involved), we will seek to influence the forthcoming Economic Crime Bills in the coming days and months.