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UK ‘Vulnerable’ To Organized Financial Crime

Britain’s status as a global financial hub may have many economic benefits, but a new report has warned it also makes the country a target for organized financial criminals such as money launderers.

The Global Organised Crime Index report highlighted the way an open economy has created such opportunities by stating: ”The UK is a global financial center with an extremely open business environment. “

On the one hand, it noted, this openness does reduce the scope for some kinds of crime, observing: “The ease with which one can establish a business in the country is a key factor in the relative lack of motivation to operate in the informal sectors.”

However, at the same time, the report added: “These strengths also leave the country vulnerable to financial secrecy, money laundering, and other forms of economic crime.”

Indeed, the report went on to claim that Companies House is a “prime example” of an institution set up with the aim of preventing financial crime but which actually manages to “facilitate astronomical levels of financial fraud”.

While “on paper” the UK has a very strong anti-money laundering network and legislation that exceeds international standards, the report said the actual extent to which funds are recovered is “sporadic and ineffective” and Britain remains a “global hub” for financial crime.

Notwithstanding further new legislation such as the Magnitsky Act sanctions, the report said there is still a lack of transparency, law enforcement, and “apparent political will” to deal with the problem.

These words amount to stinging criticism for the UK’s apparatus for dealing with financial fraud and money laundering and would provide strong reasons for any firms dealing in the UK to seek extra fraud prevention solutions to protect their assets.

It should be noted that this was not a report that set out to knock Britain; regarding other crimes, it stated that UK civil society is “extremely robust” on organized crime. Moreover, Britain has a better overall crime rating than some countries with more secure financial sectors.

A case in point is France. Marked down as having the worst overall crime in western Europe, the country’s financial sector is nonetheless listed as “highly resilient” to money laundering, with several recent pieces of legislation strengthening the regulation of banks and other institutions, as well as cracking down on fraud and tax evasion.

The US emerges from the assessment on a positive note. The report acknowledged that the dominance of the dollar creates money laundering opportunities, but, it noted: “Towards the end of 2020, the US was on the cusp of implementing the most significant changes to its anti-money laundering framework in decades,” a move that has bipartisan support.

Despite the evident need to deal with money laundering in Britain, firms in some sectors have had to spend heavily on compliance without always feeling they are seeing the benefits.

A new study of law firms by LexisNexis has found the typical UK firm has had to spend nearly £1 million on implementing the Fifth Anti-Money Laundering Directive, which came into force last year, but only 42 percent of compliance professionals believe it has had much beneficial effect.

This was originally EU legislation, but the UK government has incorporated it into UK law despite Brexit.

To find out how our use of AI and the blockchain can help provide you with the most up-to-date security, compliance, and AML assurances possible, head over to our Innovation section.

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