Wednesday 11 March 2020 4:27 pm

Budget 2020: Government to tax financial services firms to pay for economic crime fight

The chancellor said today that the government would bring forward a levy on financial services firms to help pay for the fight against economic crime.

It said businesses subject to the money laundering regulations would be subject to the tax which would aim to deliver reforms laid out in the government’s economic crime plan.

Businesses the regulations apply to include credit institutions, financial institutions, auditors, insolvency practitioners, external accountants and tax advisers, independent legal professionals, trust or company service providers, estate agents, high value dealers and casinos.

“These reforms will help safeguard the UK’s global reputation as a safe and transparent place to conduct business,” the government said.

The government said it would begin consulting on the tax this spring.

Edward Sparrow, chair of the City of London Law Society, said: “City law firms have, with other professionals, been at the forefront of the fight against economic crime.

“They support the government’s commitment to that fight and commit significant resources to it.

“However, a levy on one section of the private sector to help fund a public function, such as fighting crime, which has previously been funded by government out of general taxation, is a highly unusual and surprising development.

“We await the promised consultation with interest.”

Alun Milford, formerly the Serious Fraud Office’s general counsel and now a partner at law firm Kingsley Napley, said: “Only with investment across the system will the authorities really be able to boast about a significant ramping up of the war on dirty money and financial crime and to meet the objectives set out in the economic crime plan.”

Howard Cooper, managing director in the business intelligence and investigations practice at Kroll, said: “This funding will hopefully make a positive difference in detecting the proceeds of crime which either pass through or result in the acquisition of assets in the UK.”

But added: “For this announcement to be more than just a soundbite, it’ll need to be as good in practice as it seems to be on paper.”

Christopher David, counsel in law firm Wilmer Hale’s white collar defence and investigations practice said: “The government must be careful to ensure that this is not just another tax on the financial services sector and law firms, the proceeds of which are distributed in an opaque and unfocused manner.”

Susan Hawley, executive director of Spotlight on Corruption, said: “Given the role that banks and other professions in the City of London play in making the UK such an attractive hub for illicit finance, it’s right that they should all contribute financially to the fight against economic crime. They clearly should have an interest in ensuring that the UK is a clean and reputable jurisdiction.

And added: “It is essential that these professions however do not get to dictate government policy in this area as a result of contributing funding and that this funding is clearly designated to build up public sector expertise and skills. It is also essential that the government contributes matching public resource to show that it is serious about tackling economic crime.”