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Regulation:

The UK’s second Economic Crime Plan and how AI can help

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Nick Morgan, Head of Legal Professionals Sales• December 12 2023

For the last four years, the UK’s Economic Crime Plan has aimed to equip both the public and private sectors with information and tools needed to ‘detect, deter and disrupt’ financial crime.

The plan particularly emphasised the need for better public-private sector collaboration and highlighted the responsibility held by private companies to combat fraud as “the first line of defence”. It committed to prioritising the development of regtech tools and promoting their adoption so that firms could better identify criminal activity. It also suggested that regulatory bodies needed to take a more consistent, risk-based approach to anti-money laundering supervision.

While the first Economic Crime plan laid the foundations for clamping down on financial crime – including understanding the threats and improving information sharing – the newly introduced Economic Crime Plan 2 focuses on achieving concrete outcomes.

It aims to address developments over the last few years which have seen a dramatic increase in financial fraud, particularly during the pandemic, and the evolving sanctions landscape following Russia’s invasion of Ukraine.

Alongside the plan, the government is also reforming corporate criminal liability with new legislation to hold companies liable for failure to prevent financial crime.

The Economic Crime Plan 2 lays out three broad action pillars: reduce money laundering, combat kleptocracy, and cut fraud with specific outcomes within each pillar.

Rising economic crime in the UK

The National Crime Agency (NCA) estimates over £12bn in criminal cash is generated annually in the UK, and suggests that it’s a ‘realistic’ possibility that more than £100bn is laundered every year through the UK or corporate structures in the UK.

A major concern is that money laundering and other financial crime undermines trust in financial systems and, by enabling unfair business practices, erodes fair competition and damages the market. 

The impact goes beyond the world of finance. Since the majority of financial crime in the UK is linked to illicit drugs and illegal smuggling according to the NCA, there are significant knock-on effects on society more generally.

Without further action, it’s clear that financial crime will continue to grow. The number of fines and other sanctions imposed for money laundering increased by 56% in 2021/2022 compared to the previous year, while the number of reports to the National Fraud Intelligence Bureau increased by 157% in 2022.

What’s new in the second plan?

Changes introduced by the new plan fall under the three overall action pillars: reduce money laundering, combat kleptocracy and and cut fraud.

To tackle money laundering through the misuse of UK corporate structures, the Economic Crime and Corporate Transparency Bill grants Companies House with enhanced powers and an expanded role. 

As a result, Companies House will be able to proactively verify identities of key people, reject and remove information if flagged as inaccurate or suspicious, and proactively share evidence of suspicious activity with enforcement bodies.

The plan commits to a new phase of reforming the Suspicious Activity Reporting framework with technological and data improvements. And a new programme aims to increase intelligence, investigative capabilities, and resources for criminal asset recovery.

Increasing the effectiveness of the UK’s anti-money laundering regime will also build on the success of existing Public Private Partnerships (PPPs) for reporting money laundering, which have seen more than 300 arrests and the seizure of £146m. The new plan proposes more partnerships tackling specific criminal activity like money mules.

Under the ‘combatting kleptocracy’ pillar, the plan sets out concrete measures including sector-specific assessments of the threat relating to financial sanctions, and enhancing cooperation with international jurisdictions to ensure those sanctioned experience the full impact due to widespread implementation. 

A new Fraud Strategy detailed in the plan aims to cut fraud with a three-pronged approach: improve processes to bring fraudsters to justice, block fraud at the source by intercepting fraudulent communication before it reaches the intended audience, and empower the public to detect and report fraud.

How can AI help?

The Economic Crime Plan 2 increases the emphasis on private companies proactively contributing to national crime-prevention efforts. This includes thorough due diligence to be able to flag unusual activity, map relationships which may be relevant to sanctions, and identify assets and asset movement to aid asset recovery.

But the ability to continuously gather and use this information is beyond what a compliance team can do manually. That’s where AI tools like Xapien come in. 

Built with cutting-edge AI and machine learning technology, Xapien enables organisations to search clients against licensed data sets, official registries, and trillions of web pages to comprehensively gather available data about them. 

It then summarises the information in concise sections, allowing compliance teams to focus on the strategy based on the findings. This not only enables informed decision-making for a firm’s own compliance team but also equips firms to contribute to collaborative efforts to combat financial crime.

Need more reading material? Our Head of Legal Professionals Sales wrote a blog on how to strengthen AML risk management with deep contextual research on clients and third parties.

To learn more about Xapien, book a chat with our team of experts.

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