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How to prepare for the UK’s Economic Crime Levy 2023

Jun 28, 2023 Erin Fogarty Updated On: June 28, 2023
How to prepare for the UK’s Economic Crime Levy 2023

The recently launched Economic Crime Levy (ECL) is a new regulation from HM Treasury, aiming to raise £100 million per year to tackle issues associated with money laundering within the United Kingdom.

The Economic Crime Levy is an annual charge on entities that are supervised under the Money Laundering Regulations (MLR) and whose United Kingdom revenue is greater than £10.2 million per year.

As this is the first levy year, there is a shroud of confusion surrounding the ECL. Below we break down the key points you need to know.

What is the UK Economic Crime Levy?

Led by HM Treasury, the levy will typically be collected by HMRC, the FCA and the Gambling Commission, depending on your sector. Similar to a tax, the economic crime levy is a monetary amount firms must pay depending on where they rank on the different band thresholds.

  • Less than £10.2 million – small firm
  • Between £10.2 million and £36 million – medium firm
  • Between £36 million and £1 billion – large firm
  • More than £1 billion – very large firm

Firms pay a fixed fee based on entity size as determined by UK revenue. As it is based on annual turnover, small firms are exempt from the levy. The other bands each pay:

  • £10,000 – medium firm
  • £36,000 – large firm
  • £250,000 – very large firm

The funds are stated to aid in the fight against financial crime such as money laundering and focuses on industries where this is a specific and widespread issue. The first payments are due by 30th September 2023.

How to prepare for the Economic Crime Levy

The Economic Crime Levy is an annual charge on companies that have ongoing supervision through the Money Laundering Regulations. These entities are legal persons that have potential liabilities to ECL. This includes individuals, companies, LLPs, or the responsible partners in a partnership. Not all entities have to register and submit a return on ECL, so it’s important to know who your relevant collection is so you can understand the ECL processes, including how and if you need to register and submit an ECL return.

It’s vital to understand how to pay the levy, particularly which ECL band you fall into so you can calculate the fee you need to pay.

You must register online with HMRC for the ECL if:

  • You’re supervised by HMRC for MLR at any point in the financial year or you are supervised by one of the professionally supervised listed in the annexe for MLR at any time in the financial year.
  • And you’re not supervised by FCA or the GC for MLR, and your UK revenue is equal to or greater than £10.2 million in the financial year (pro-rated).

HMRC-supervised entities will have to register for the ECL, then submit a return and pay a fee annually.

After going through whichever is your relevant collection authority’s process, your ECL will then be collected by them, this will be one of the following:

What are the funds used for?

HM Treasury states that the levy will raise £100 million per year from around 4,000 AML-regulated entities.

John Glen – the Chief Secretary to the treasury recently confirmed the allocation of £300 million from the Economic Crime (Anti-Money Laundering) Levy to combat economic crime over the next three years

The funds will be used for:

  • state-of-the-art technology
  • hiring investigators
  • establishing specialist intelligence teams
  • strengthening the Suspicious Activity Reporting system
  • improving Companies House and the Insolvency Service,
  • accelerating AML supervision reform.

He also assured us that transparency and accountability will be ensured through annual reports and a comprehensive review in the future.

What are the latest updates to the Economic Crime Levy in 2023?

Since this is the first economic crime levy year, expect changes as the framework transitions from theory into practice. The three most recent updates were:

  • April 2023 – the first levy year began.
  • March 2022 – the government laid the secondary legislation that sets out the framework for key levy processes including notification, payment, and returns.
  • February 2022 – the levy was introduced by the finance act 2022, which gained royal assent on 24 February.

The only incoming update we have currently is that the first payments will be collected by HMRC, the financial conduct authority and the gambling commission in September 2023.

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Published by Erin Fogarty June 28, 2023

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