UK’s FCA to collect an economic crime levy to fight financial crime

The UK is introducing an “economic crime levy” that will be used to support the government’s fight against financial crimes and boost its efforts in combating money laundering. The Financial Conduct Authority will collect this levy.

UK introduces economic crime levy

This levy will be paid by brokerage platforms offering contracts for difference (CFDs) and foreign exchange services. Other companies contributing to the levy are cryptocurrency exchanges and digital asset wallet providers.

The FCA will be tasked with collecting this financial contribution. Other regulatory bodies involved in collecting this levy include the HM Revenue and Customs (HMRC), the Gambling Commission, and the government. The levy will be collected depending on the type of business and the industry under which it operates.

The economic crime levy targets all licensed businesses in the United Kingdom. These are the businesses subject to compliance with the Anti-Money Laundering act. The levy will start appearing on invoiced from July 2023, and it will affect firms regulated under the anti-money laundering guidelines between April 6 2022 and April 5 2023.

Financial service providers will pay the levy based on their revenues in the UK, with the regulator mandating that the amount be paid in full. This change will affect a wide range of entities, such as crypto exchanges, auditors, credit firms, tax advisors, casinos, and auction platforms.

This levy was first proposed in October 2021. At the time, the government had said that the first payments made by financial firms towards the levy would be in the fiscal year starting on April 1 2023 and ending on March 31, 2024.

A press release by the FCA said, “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 as Annex 1 financial institutions only will receive a letter to report their data.”

Fixed fee determined by revenue

The UK government has said that this levy will be paid as a fixed fee depending on a firm’s revenue. The government has classified firms into four: small with below £10.2M in revenues, medium with between £10.2M and £36M in revenues, large with between £36M and £1B in revenues, and very large, with over £1B in revenues.

The small entities will not be mandated to pay the levy. Medium entities will pay a fixed fee of £10,000, large entities will pay £36,000, while very large entities will pay £250,000. As aforementioned, this fee will be paid annually.

The imposition of this levy comes at a time when UK regulators, including the FCA, are battling a rise in financial crimes, in September 2021, the FCA penned a letter titled “Dear CEO.” The letter was directed to trade finance firms and addressed the need to assess the risk of financial crimes.

At the time, the FCA noted that monitoring such risks would require more surveillance and monitoring, making it important for firms to address their concerns by adopting the best policies, procedures, and controls.