The Treasury Committee meeting examined the issue of economic crime, with four fraud prevention experts giving evidence to MPs.
Witness Helena Wood from the RUSI Centre for Financial Crime suggested the UK should look to increase the fee Companies House charges to set up a limited company because by international standards the £12 fee is low.
“By way of comparison, if you look at our near-neighbours in France, it's around £50. In Germany, it's around £100. Our Commonwealth partners in Australia charge about £200,” Wood pointed out.
“I think the arguments are gone that if we raise the fee, it reduces our competitiveness,” she added. “Twelve pounds is a low bar of entry into the UK corporate system. But what would we do with that money? I think it's desperately needed to fund the huge transformation in Companies House to make them a real beating heart of intelligence on abuse of the corporate registry.”
Wood believes that Companies House clearly wants to play this role. She added that by looking at their five-year plan, they’re absolutely setting up that they want to play this role in the AML system. However, they're not resourced to do so sustainably over the long term.
“For those working on enforcement actions in a forensic financial investigation, it doesn't matter where the money is coming from, as long as they have the resources and the teams and the confidence to be able to take on difficult cases,” said witness Duncan Hames, Director of Policy at Transparency International UK.
Economic crime levy: where are we?
Treasury Committee Member and Conservative MP for Kensington, Felicity Buchan turned the conversation towards the economic crime levy.
In the 2020 Budget, it was announced the AML-regulated sector is to be subject to an economic crime levy from 2022 to fund anti-money laundering efforts, potentially contributing £100m a year. A consultation for the levy finished back in October 2020, but final confirmation or details have yet to be announced.
Hames was supportive of the financial crime levy, but was unsurprised that many respondents to the government consultation were against it due to the increased regulatory cost and burden.
RUSI Centre for Financial Crime’s Helena Wood stated that she thinks the levy will go ahead, although working out the formula for how it will work does come with its complexities.
“How do you square that very difficult circle of making it fit for a global bank as well as a small local accounting firm in a way that's fair and proportionate and doesn't disadvantage small businesses. I think that's where the problem lies - it's a very difficult levy to work out a formula for,” explained Wood.
‘Stealth tax on business’
However, not every witness was in favour of the levy. David Clarke, Chairman of Fraud Advisory Panel and Group Head, Integrity & Multilingual Due Diligence at Guildhawk described it as a ‘stealth tax on businesses’. He expressed concerns about the lack of costing attached to the project and the lack of detail of how the levy will work
“There are other ways to raise these funds,” said Clarke. “For example, we have got huge amounts taken from criminals which could be used towards more anti-money laundering efforts.”
Clarke mentioned that another solution could be to endorse technology such as AI. With the type of frauds considered by the committee meeting (fraudsters corrupting start-up companies to hide in plain sight), “it's like searching for Cleopatra's Needle in a bale of hay,” said Clarke.
“But you can't do that if you're on your own and you've got no access to tools or technology. We could switch that technology on, increase fees, and I don't think honest businesses would mind a hoot”.
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