Compliance Alert! Regulated Entities Gear Up for the UK's Economic Crime Levy

If your organisation is both supervised under the UK Money Laundering Regulations (“MLR”) and your UK Revenue exceeds £10.2 million per year, if you are not already, you will need to prepare for the forthcoming Economic Crime Levy (the “ECL”). The ECL aims to raise approximately £100 million per annum to help fund new and uplifted anti-money laundering and economic crime capabilities.[1]

Affected HMRC-supervised entities will have to register for the ECL, submit a return and pay an annual fixed charge to the relevant collection authority (either the Financial Conduct Authority (“FCA”), the Gambling Commission (“GC”), or HMRC). The first payment is due by 30 September 2023 with reference to the financial year to 31 March 2023.

The Economic Crime (Anti-Money Laundering) Levy (Amendment) Regulations 2023 (the “Regulation”) makes provision about the assessment, payment, collection and recovery of the ECL. The ECL was introduced by Part 3 of the UK’s Finance Act 2022 (c. 3), which established that HMRC, the FCA and the GC are to be responsible for the collection and management of the ECL, and specifies which firms will be liable to pay the ECL, the amount which will be charged and how it will be calculated. There will be four bands for eligible firms, and all payments will be determined by a firm’s UK revenue, as follows[2]:

Not all entities will have to register and submit a return - it depends on which body is your collection authority, so it is important to understand which body is your collection authority and, therefore, which ECL process applies to you:

1. If your organisation is supervised by HMRC only, and your UK revenue is equal to or greater than £10.2 million in the financial year (pro-rated), you must register with and pay the ECL to HMRC.
2. If your organisation is supervised by one of the 22 professional body supervisors (listed in the Annex of Supervisory Authorities provided for by HMRC), and your UK revenue is equal to or greater than £10.2 million in the financial year (pro-rated) you must register with and pay the ECL to HMRC.
3. If your organisation is supervised by the FCA or the GC, you need to follow their ECL processes. You will not be required to register for the ECL with HMRC, submit yearly ECL returns to HMRC, or pay the ECL to HMRC.

HMRC will provide more guidance on how to register later in 2023 and has not yet stated the date by which registration will be required.

If you are registered with the FCA, the FCA has stated that businesses that were subject to the money laundering regulations between 6 April 2022 and 5 April 2023 will be impacted, their list of impacted businesses includes:

• Credit institutions 
• Financial institutions  
• Auditors, insolvency practitioners, external accountants and tax advisers; and
• Crypto asset exchange providers and custodian wallet providers.

The ECL will be payable to the FCA annually, and the FCA has stated that all impacted firms must submit their data via new Reg Data Report (FIN074) from 1 April 2023. A failure to submit in time may result in a £250 administrative fee. If you are registered as an Annex 1 Financial Institution with the FCA regime you should receive a letter to report the relevant data.[3]

We will all be watching this space for further details on registration and payment as it comes out later this year.

[1] Explanatory Memorandum to the Economic Crime (Anti-Money Laundering) Levy (Amendment) Regulations 2023: https://www.legislation.gov.uk/ukdsi/2023/9780348245240/pdfs/ukdsiem_9780348245240_en.pdf

[2] HM Revenue & Customs, Get ready for the Economic Crime Levy: https://www.gov.uk/government/publications/prepare-for-the-economic-crime-levy/get-ready-for-the-economic-crime-levy#annex

[3] FCA to collect Treasury’s economic crime levy (Anti-Money Laundering) from July, the Financial Conduct Authority: https://www.fca.org.uk/news/news-stories/fca-collect-treasurys-economic-crime-levy-anti-money-laundering-july