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The Economic Crime Levy consultation seeks views on the levy principles, what the levy will pay for, how government can ensure transparency over levy spending, how the levy liability will be calculated, and which business should be paying the levy and how the levy will be collected and enforced.  

This consultation directly affects you because the government is seeking to charge a levy on the AML-regulated sector, which includes accountancy firms.
Spending the levy funds & transparency
The proceeds from the levy will pay for enhanced government action to tackle money laundering. This will consist of the new and recently introduced reforms and capabilities jointly committed to by public and private sectors in the Economic Crime Plan.

The capabilities that could initially receive funding through the levy include:

•        SARs Reform Programme

•        UK Financial Intelligence Unit (UKFIU) uplift

•        National Economic Crime Centre (NECC) costs

•        National Assessments Centre (NAC) and National Data Exploitation Centre (NDEC) costs

•        Financial Investigator (FI) uplift

•        Awareness raising campaigns

•        Companies House reform

The levy will also recover levy administration and collection costs.

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* 1. What do you believe the levy should fund? Are there any other activities the levy should fund in its first five years?

The government will explore the most effective way to plan and deliver this portfolio of activity, so funds can be reprioritised if under or overspends are identified.

To provide transparency and confidence in the administration and application of the levy we propose:

•        Publishing an annual report on the use of the levy

•        Undertaking a review of the levy five years after it first comes into effect

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* 2. Do you agree with the government’s approach to publish a report on an annual basis? What do you think this report should cover other than how the levy has been spent?

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* 3. What are your views on what the proposed levy review should consider and when it should take place?

UK revenue as a levy base
HM Treasury   have considered numerous potential levy bases against the following levy principles: (1) proportionality; (2) solidarity, i.e. applicability across all sectors; (3) predictability and objectivity; and (4) the avoidance of unintended consequences.

Options considered include: charging the levy through existing supervisor fee structures (i.e. by asking supervisors to raise their fees by a fixed percentage increase); a fixed charge per business; a levy proportionate to number of SARs submitted; a levy proportionate to number of employees; a levy proportionate to UK revenue; and a levy proportionate to profitability.

Overall, using revenue as the levy base aligns most with the design principles. Revenue provides some proportionality as it relates to scale of activity undertaken. Businesses should be able to readily report their revenue and revenue provides a levy base which most businesses should be familiar with. Using revenue also helps to reduce the risk of unintended consequences.

However, defining revenue can vary across parts of the AML-regulated sector and some parts of the regulated sector (e.g. financial institutions) use alternative metrics as part of their financial statements. There is a further tension between basing the levy on a business’ total UK revenue, or the revenue made from regulated activity.

Other challenges with revenue include: it doesn’t fully account for money laundering risk; and it can be unpredictable. 

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* 4. Do you agree with our proposal that revenue from UK business should form the basis of the levy calculation? Would other levy bases provide a better basis for the levy calculation?

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* 5. Should the levy be based on total UK revenue, or AML-regulated activity revenue?

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* 6. Should a fixed percentage or banded approach be taken to utilising revenue as a metric? Please explain your reasoning.

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