Economic crime is costing the UK billions, claim campaigners

The report comes from the All-Party Parliamentary Group (APPG) on Anti-Corruption and Responsible Tax, the APPG on Fair Banking and the UK Anti-Corruption Coalition, whose members include organisations such as Transparency International and Spotlight on Corruption.

In their report, the groups suggest that the costs of economic crime and financial opacity are ‘staggering’, with some studies estimating it costs the UK £350 billion a year. With the government emphasising that economic crime poses a significant threat to both national security and economic prosperity, the report argues that a secure financial system is ‘inherently’ more attractive to investors.

While the government seeks to accelerate economic growth to restore stability, increase investment and reform the economy, the report explores a number of issues and proposes solutions to contribute to this mission.

Tax gap

ISSUE: The tax gap in Britain remains stubbornly high. While the government is taking action, these additional powers will not act as a “deterrent to tax avoidance and evasion if they are enforced as infrequently as existing powers”. HMRC investigations into serious tax fraud are at a six-year low, and the extent of offshore tax dodging remains unknown, with less than 5% of HMRC’s casework on wealthy non-compliant taxpayers involved in pursuing offshore income and assets.

RECOMMENDATIONS: The report suggests that the government could create a real deterrent to enabling tax dodging by increasing penalties, proactively using existing powers, and requiring tax advisers to register with a regulatory body. They could also publish a comprehensive offshore tax gap and implement publicly accessible registers of beneficial ownership in the overseas territories and crown dependencies, with legitimate interest registers as an interim step.

Tax reliefs

ISSUE: The UK tax system is “too complex”, and the scrutiny of existing tax reliefs is “inadequate”. The report states that tax reliefs have an important role to play in incentivising desired behaviour and, without regular reviews, “we do not know if these reliefs are delivering on their stated policy objectives, or how much they are costing the public purse”. With the total cost of the 104 non-structural tax reliefs in 2022–23 costing £204 billion, the UK must realise the intended benefit of these reliefs.

RECOMMENDATION: The report recommends that the government publish costings for all tax reliefs, reclassify reliefs as government spending, and institute five-yearly reviews to allow for proper accountability and oversight.

Asset recovery

ISSUE: The report highlights that seizure of criminal assets and issuing of fines for economic crime offences brings in significant revenue for the Exchequer. It notes the existence of the Asset Recovery Incentivisation Scheme (ARIS) but that in the last six years agencies have kept less than half of all criminal assets recovered.

RECOMMENDATION: The government needs to review both the existing mechanism to redistribute recovered funds (ARIS) and the merits of creating an Economic Crime Fighting Fund to provide multi-year sustainable funding and incentivise ambitious asset recovery.

Economic crime levy

ISSUE: With the fraud epidemic costing UK businesses over £1 billion in 2024, fighting economic crime could improve public sector efficiency and revenue. Tackling dirty money could also save businesses billions, unlocking investment capital, whilst creating fair and clean business environments conducive to growth.

RECOMMENDATION: The government could extend the Economic Crime Levy to technology, social media and telecoms firms, and mandate centralised data sharing across stakeholders in the counter-fraud ecosystem.

Property ownership

ISSUE: The report argues that the use of trusts creates a disparity between the transparency of owning property via trusts versus other structures and that this impacts house prices, risk-taking and asset allocation, as well as providing an incentive for criminals to own property in this way.

RECOMMENDATION: Improve transparency of property and land ownership via trusts on the three different registers that currently collect trust information.

Anti-money laundering (AML) regime

ISSUE: The report states that “HM Treasury has noted that the UK’s AML regime, composed of 25 supervisors —including 22 professional body supervisors —results in fragmented oversight and inconsistent enforcement across sectors”. It argues that there is an inefficient allocation of resources across “a multitude of small supervisors, who cannot efficiently dedicate the specialist resources needed”.

RECOMMENDATION: The government could consolidate and strengthen the web of siloed professional body supervisors into a strengthened statutory body for the non-financial regulated sectors. Additionally, the government could broaden the scope of AML regulations to ensure consistency of treatment across the enablers of economic crime.

The report concludes that prioritising anti-corruption as a key pillar of the government’s economic growth mission represents a “huge strategic opportunity” for the UK. Fighting economic crime, although only one part of the bigger growth puzzle, is crucial for laying the clean foundations for growth.