The UK government has introduced an Economic Crime (Anti-Money Laundering) Levy (ECL) to fund the fight against economic crime.
The objective of the ECL
The ECL is part of the government’s wider objective to tackle economic crime. The ECL will aim to raise £100 million per year from the anti-money laundering (AML) regulated sector to pay for government initiatives (outlined in their 2019 Economic Crime Plan) to help tackle money laundering.
Who is likely to be affected?
The ECL will be enforced on entities that are regulated for AML purposes under the Money Laundering, Terrorist Financing and Transfer of Funds Regulation 2017. The entities likely to be affected are those that are medium, large or very large in size based on their UK revenue.
An entity is classified as:
- medium if its UK revenue for the relevant accounting period is more than £10.2 million but not more than £36 million;
- large if its UK revenue for the relevant accounting period is more than £36 million but not more than £1 billion; or
- very large if its UK revenue for the relevant accounting period is more than £1 billion.
How will the ECL be charged?
The ECL will first be charged on entities that are regulated during the financial year from 1 April 2022 to 31 March 2023. The amount payable will be determined by reference to the entity’s size based on their UK revenue from periods of account ending in that year.
Amounts will be payable following the end of each financial year. Therefore, first payments will be made in the financial year from 1 April 2023 to 31 March 2024.
The ECL will be paid as a fixed fee based on the size band an AML-regulated entity falls into based on their UK revenue. The size bands are as follows:
- small (under £10.2m);
- medium (£10.2m – £36m);
- large (£36m - £1bn); and
- very large (over £1bn)
All small entities will be exempt, whilst medium entities will pay £10,000; large entities £36,000; and very large entities £250,000.
How will the ECL be collected?
The ECL will be collected by HM Revenue and Customs (HMRC), the Financial Conduct Authority (FCA) and the Gambling Commission (GC).
An entity will only need to provide information to, and pay, one collection authority, even if it is supervised under AML regulation by more than one supervisor.
If an entity is supervised only by HMRC, or by one of the 22 professional body supervisors, it must register with and pay the ECL to HMRC. HMRC is planning to publish more detailed guidance on how to register later in 2023.
If an entity is supervised by either the FCA or the GC, it must follow their ECL process. The entity must do this even if HMRC also supervises some of its business activities.
Guidance on how the FCA will collect the ECL can be found here. It appears that the GC is yet to release guidance on how it will be collecting the ECL.
Monitoring and evaluation
The government has scheduled a review of the ECL by the end of 2027. The review is expected to consider matters such as whether the ECL is meeting its original policy objectives; should continue; should remain based on just the AML-regulated sector; and, whether the ECL is still being calculated and collected appropriately.
You can read more about the Economic Crime (Anti-Money Laundering) Levy on the government website, here.
How can we help?
Frances Murray, the financial crime partner of Russell-Cooke has a wealth of experience in financial crime and is uniquely placed to support clients that are the subject of a criminal investigation or prosecution.