Frances Ball 8 May 2019 12:37pm

Government backs Treasury's economic crime report

The government has welcomed several of the recommendations made in the Treasury Select Committee’s report on economic crime in the UK

It supported select committee chair Nicky Morgan MP’s call for a more precise estimate of the scale of economic crime in the UK, while acknowledging that criminal activity is inherently hard to measure.

It also agreed that Companies House should have powers to combat economic crime, after the committee pointed out that its lack of powers presents a “weakness” in the UK’s economic defence system.

Morgan said she was “pleased to see that the government has listened to the Committee’s conclusions and taken up many of the Committee’s recommendations, in particular, on the ability of Companies House to carry out its duties.

“The recent announcement of a consultation into the reform of Companies House is timely, and the government should be ambitious in the new powers and resources that it proposes to provide to this vital component of the UK’s defence against economic crime,” she added.

Sanctions and security post-Brexit was highlighted by both sides.

Leaving the EU could allow “additional flexibility in its use of sanctions”, while ensuring a multilateral approach, the committee said in its report.

The government responded by saying that “the UK is seeking a strong security partnership with the EU after exit, including close consultation and cooperation on sanctions.

“Beyond the EU, the UK will also develop closer cooperation on sanctions with its allies and partners active in the use of sanctions, including, but not limited to, the United States, Canada, and Australia,” it wrote.

Broadening the scope of global sanctions was a key element in the original report. The committee noted that, “There has been, without a doubt, a malign influence on the UK financial system from certain elements of Russian money.”

However, it also made the point that “the UK must achieve a balance between focussing on financial flows from one country, while not distorting the AML system, and creating a risk that other criminals slip by while attention is focussed on individuals with a specific nationality.”

Although the committee welcomed much of what the government said, Morgan expressed disappointment that it did not endorse the recommendation for a register of politically exposed persons (PEPs).

“The reality for many firms is that they lack the resources to identify all those who may be considered to be a PEP. By not endorsing a central register, the government is making the work of especially smaller firms in preventing economic crime more difficult,” she said.

The government argued that a centralised database for PEPs would be “at odds with the UK’s risk-based approach to AML,” resulting in too much focus being placed on a PEP’s origin as opposed to its level of risk.

It is yet to give its final response to some areas highlighted by the committee, including the corporate criminal liability framework and the Economic Crime Plan.