Most types of organized crime are supported and enabled by illicit financing and money laundering. This action allows criminals to develop their activities and hide their assets, endangering the United Kingdom’s national security. The United Kingdom is committed to combating financial crime more effectively and efficiently. It is actively investing in initiatives and policies to strengthen the UK’s financial system and ensure it is resilient to financial crime. In January 2023, the UK Government is considering the following initiatives and policies to tackle economic crime.
The UK is improving collaboration between the private and public sectors to tackle financial crime more effectively. The government encourages financial institutions to share information and cooperate to identify and prevent financial crime. The government is establishing a Financial Crimes Centre of Excellence, which will focus on improving the private-private collaboration between the financial sector and other stakeholders in the fight against financial crime. The FCC will provide a platform for sharing best practices and knowledge and facilitating joint projects and collaborations between the sectors. The government is also strengthening Regulatory Cooperation between the public and private sectors, aiming to increase cooperation in the fight against financial crime. The government will also consider introducing new regulations and legislation requiring the financial industry to take an active role in the fight against financial corruption.
The UK has established a Financial Intelligence Unit (FIU) to foster financial firms and constabulary agencies working together. The unit is tasked with collecting and analyzing financial intelligence, identifying suspicious activities, and providing advice and guidance to financial institutions. The National Economic Crime Centre of the National Crime Agency (NECC) houses the UKFIU (cms-user27). Its collaboration with SARs is vital in informing law enforcement about suspected money laundering and terrorism funding. Private persons who suspect or have knowledge of money laundering or terrorist funding may also submit Suspicious Activity Reports (SARs) (Loh). SARs alert authorities to possible concealment or terrorist financing: SARs are issued by financial organizations and professionals such as attorneys, bean counters, and property agents. SARs are a requisite source of information on a wide range of criminal activity, not merely economic crimes. They are essential in identifying fraud victims, sex offenders, murder suspects, missing individuals, people traffickers, fugitives, and terrorist financiers.
The UK has implemented the Anti-Money Laundering Directive (AMLD), which requires financial institutions to conduct customer research, monitor unusual activity, and notify authorities of any questionable transactions. This helps to ensure that financial institutions comply with anti-money laundering regulations and are better able to identify and prevent financial crime. The Money Laundering Financing and Transfer of Funds Regulations 2017 are amended in this regulation to reflect the existing UK anti-money laundering (AML) legislation (the MLRs). Following feedback from industry and supervisors, changes are being made to ensure that the UK continues to meet international AML and refute financing criteria while strengthening and clarifying how the UK’s AML system operates.
The UK is strengthening collaboration between the private and public sectors to tackle financial crime. The government is investing in initiatives to enhance public-private partnerships and to increase information sharing between the two industries. The government is also investing in initiatives to strengthen law enforcement agencies’ capabilities and ensure they are equipped with the instruments to investigate and penalize financial fraud. The initiatives include using a task force, including JMLIT, to strengthen public-private collaboration in the fight against financial corruption. The Joint Money Laundering Intelligence Taskforce (JMLIT) is a joint public-private body that brings together constabulary and private sector firms to identify, disrupt, and prevent concealment and other financial fraud. JMLIT is housed by the National Economic Crime Centre (NECC), which the UK government promised to bolster. It aims to improve economic crime enforcement capacities by enabling information exchange between law enforcement and the financial industry and allowing for real-time intelligence sharing (Group). The NECC strives to make the United Kingdom a hostile environment for money laundering by targeting persons involved in money laundering (to ensure their prosecution and conviction), reclaiming and seizing assets, and educating financial investigators.
The government also uses The Financial Conduct Authority’s (FCA) Financial Crime Strategy, which sets out a range of measures to improve the capability of the FCA, law enforcement, and the private sector in tackling financial crime. The Serious Fraud Office (SFO) investigates and prosecutes serious or complicated fraud or corruption claims, which may entail money laundering. Conversely, the Financial Conduct Authority (FCA) conducts investigations and prosecutions concerning regulated businesses or activities. The FCA actively enforces money laundering laws after significant enforcement actions in 2023. FCA focuses, in particular, on reporting lines and compliance team staffing, effective continuing surveillance of client conduct about their declared business objective, and, increasingly, digital assets like crypto-currencies and NFTs.
Central Bank Digital Currency (CBDC)
The UK is exploring the potential of CBDCs and how they can be used to combat financial crime more effectively. The Bank of England has set up a task force to investigate the potential use of CBDCs and to assess the risks and benefits of introducing them. The task force is considering the implications of CBDCs on the financial system, including how they could be used to track and trace transactions and prevent money laundering. The UK is exploring the practicability of a CBDC as part of its policy to combat financial crime. It is working with the Bank of England and the Financial Conduct Authority to develop a framework for a CBDC system.
One of the main initiatives the UK is taking is to explore the possible advantages of Central Bank Digital Currency (CBDC). The Bank of England is currently undertaking a Digital Currency Research Programmed to understand how a CBDC could work and what potential risks and benefits it would bring (Mnohoghitnei et al.). The Bank of England is also actively engaging with other central banks, the private sector, and international organizations to understand the implications of CBDCs and to ensure the UK is well-positioned to make the most of these new technologies. The UK is also exploring the potential of using distributed ledger technology (DLT) to help enhance the financial system’s resilience and reduce financial crime risk. DLT is a type of technology that has the potential to provide a secure, immutable, and auditable record of transactions. The UK government is working with the Bank of England and other domestic and international partners to evaluate the potential for DLT to reduce the cost and speed of money transfers, improve the accuracy of records, and reduce the risk of fraud.
The UK is committed to ensuring that any CBDC system meets security, privacy, and resilience standards. It is working with international partners to ensure the system’s safety and that the currency is interoperable across different jurisdictions. The country is also exploring the potential benefits, such as the ability to facilitate faster and more efficient payments, improved financial inclusion, and increased resilience of the financial system, and potential risks associated with a CBDC system, such as the potential for Terrorist funding and concealment and developing measures to mitigate these risks, such as improved client due diligence and anti-money fraud systems, and enhanced scrutiny of digital asset exchanges. Finally, The United Kingdom is pursuing a proactive technique for anti-money laundering (AML) and counter-terrorism funding (CFT) by introducing several initiatives to strengthen the existing AML/CFT framework (fatf-gafi.org). These include more substantial customer due diligence, enhanced information sharing between the public and private sectors, and introducing the UK’s first national AML/CFT strategy. These initiatives are aimed at helping to reduce the risk of financial crime and ensure the UK remains an attractive place to do business.
The UK is also taking a proactive approach to digital currencies and is exploring the potential of CBDCs. The Bank of England is researching the potential risks and benefits of CBDCs and is considering launching a digital version of the British pound. A CBDC could create a new payment infrastructure that would reduce costs and provide more access to financial services for individuals and businesses. Finally, the UK is looking to strengthen its AML and CFT framework by establishing a new anti-financial crime strategy. This strategy will focus on improving the effectiveness of the existing legal framework, increasing public-private collaboration, and developing more effective international cooperation.
The UK government is promoting the application of blockchain technology by the financial sector to help combat financial crime. Blockchain technology can potentially improve the efficiency and security of financial transactions and reduce the risk of fraud and concealment. The government is supporting research and development in this area and working with industry partners to explore potential uses of the technology. The government has also set up a working group to explore the possible use of blockchain for financial services and develop blockchain-based solutions to tackle concealment, terrorist funding, and other financial frauds.
The United Kingdom is introducing a new Financial Crime Prevention Strategy focused on using blockchain technology. The strategy will focus on sharing data across sectors, creating a more secure and transparent financial ecosystem, and utilizing blockchain to detect and prevent financial crime. The design will also include a framework for collaboration between the government, industry, and other stakeholders to ensure that the financial sector can benefit from using blockchain technology in a secure and compliant manner. The government is also working with the financial industry to create a national blockchain strategy (Alsubaei). This strategy will include a framework for using blockchain technology in the financial sector, including data sharing, privacy, and security standards. The process will also focus on developing and implementing blockchain-based solutions for financial crime prevention.
Law enforcement Approach in the Crypto ecosystem
The emergence of electronic currencies and their potential value to people doing concealment have grown in popularity and are recognized by the imposition agencies in charge of prosecuting violations of the Regulations. Notably, the FCA barred cryptocurrency trading from conducting regulated services in the UK in June 2021 owing to money laundering concerns. Regarding regulatory changes or initiatives to address developments in the crypto ecosystem, the UK government is not making any significant changes to its regulatory approach. The government did not change its law enforcement approach for the regulations amended on January 2020 to bring crypto-assets exchange and wallet providers to rule. They focus on ensuring that crypto assets are regulated to protect consumers and prevent concealment and other financial fraud. The UK government is considering introducing a new set of regulations that would govern the use of crypto assets. The UK is also considering introducing a new enforcement and compliance system in the crypto sector. This system would ensure that all crypto exchanges, wallets, and other services comply with the regulations and that appropriate anti-money laundering measures are in place. The plan would also include provisions for sanctions and penalties for those who violate the statutes and laws. The government also changed rules to implement the Fifth EU Money Laundering Directive, bringing crypto-asset exchange companies and custodial wallet providers into the purview of the regulated sector. These regulations would aim to ensure that crypto assets are being used safely and securely and that the crypto ecosystem is not used for criminal activity. The rules would also include measures to ensure that crypto assets are only being used for legitimate purposes and that appropriate anti-money laundering measures are in place.
The Financial Conduct Authority (FCA) regulates crypto assets in the UK, and they have issued guidance on how crypto assets should be controlled. UK Government is also considering introducing a comprehensive set of laws that would hold the crypto industry. These laws would protect consumers and investors by guiding the responsible use of crypto assets and ensuring that the crypto ecosystem is not used for criminal activity. The rules would also include measures to ensure that appropriate anti-money laundering measures are in place. A crypto asset may be subject to financial regulation in the UK if it comes inside the FCA’s regulatory perimeter defined by FSMA, the UK Anti-Money Laundering legislation, and the Payment Services Regulations 2017 (globallegalinsights). Finally, the UK is considering increasing its resources for financial crime investigations and enforcement. This would include increasing the number of investigators and prosecutors dedicated to financial crime investigations and increasing the resources available to law enforcement to ensure that crypto assets are not being used for criminal activities.
These regulatory changes and initiatives are intended to mitigate the risks and make significant progress associated with financial crime in the UK. They aim to increase transparency and cooperation in the financial sector while staying abreast of emerging technologies and trends to detect better and prevent criminal activity. The government is committed to improving collaboration between the private and public sectors and strengthening the UK’s financial system. The government is also committed to investing in initiatives to improve data sharing between the two industries and to develop better systems and processes to detect and report suspicious transactions.
Overall, the UK is taking a multi-pronged approach to combat financial crime more effectively and efficiently. The government is encouraging collaboration between private actors in the financial sector, as well as between private and public actors. It also explores the potential use of CBDCs and promotes blockchain technology for financial services. These regulatory changes and initiatives are designed to mitigate the risks associated with the most prevalent economic crimes in the UK, including money laundering, terrorist financing, and fraud. The government is working closely with the financial sector and other partners to develop effective strategies for detecting and preventing financial crime and is committed to staying ahead of the latest developments in the field.
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