The UK's government is introducing an 'economic crime levy' (ECL) to fund its efforts in the fight against financial crime and boost anti-money laundering (AML) activities. Brokers of contracts for difference (CFDs), including foreign exchange (FX), as well as cryptocurrency exchanges and digital asset wallet providers, are among the list of companies that will be required to pay the levy.

UK Introduces Economic Crime Levy

The latest financial contribution will be collected by the Financial Conduct Authority (FCA ), HM Revenue and Customs (HMRC), the Gambling Commission and directly by the government, depending on the regulated business type and industry in which it operates. In general, the 'economic crime levy' has been imposed on all UK-licensed businesses that are subject to the Anti-Money Laundering (AML) Act.

Starting from July 2023, affected firms that were regulated under the money laundering regulations from 6 April 2022 to 5 April 2023, will notice the new levy on their invoices. This levy will be calculated based on a firm's UK revenue and must be paid annually.

The entities required to pay ECL include credit companies, finance companies, auditors, tax advisers, independent legal advisers, trusts, lettings and estate agents, casinos, auction platforms and cryptocurrency service providers.

"To ensure firms are charged the right amount all impacted firms must submit their data via new Reg Report from 1 April. Those firms registered an Annex 1 financial institutions only will receive letter to report their data," the FCA stated in the press release.

EVL was presented in October 2021. The official announcement proclaimed that the first payments would be made in the fiscal year from 1 April 2023 to 31 March 2024.

Even £250,000 per year

The British Government website states, "the levy will be paid as a fixed fee based on the size band an AML-regulated entity falls into based on their UK revenue." The government has set four size bands: small (under £10.2m UK revenue), medium (£10.2m to £36m), large (£36m to £1bn) and very large (over £1bn).

Small entities will be excluded, while medium entities will incur a fee of £10,000, large entities £36,000, and very large entities £250,000 on a yearly basis.

The FCA takes AML breaches seriously, as evidenced by the recent £7.67 million fine imposed on Guaranty Trust Bank (UK) Limited (GT Bank). GT Bank was fined for its AML systems and controls deficiencies from October 2014 to July 2019. The FCA imposed a £10.9 million penalty, but a 30% discount was granted for not challenging the findings, resulting in a settlement.

Last year, Santander UK paid a fine of £108 million for similar offences. According to the statement at the time from the FCA, Santander UK unit's AML systems were inadequately managed for almost five years, from December 2012 to October 2017, affecting oversight of 560,000 business clients.

The FCA's 'Dear CEO' letter to trade finance firms on 9 September 2021 highlighted the need for a financial crime risk assessment based on significant issues. This implies increased surveillance and monitoring, making it crucial for firms to address concerns by implementing effective policies, procedures and anti-money laundering controls.