On January 14, the United Kingdom Government announced that Home Secretary Sajid Javid and Chancellor of the Exchequer Philip Hammond would jointly chair the Economic Crime Strategic Board, a new government taskforce that “will work with senior figures from the UK financial sector to tackle economic crime.” The Board, which is scheduled to meet twice a year, is to “set priorities, direct resources and scrutinise performance against the economic crime threat, which is set out in the Serious and Organised Crime (SOC) Strategy.”
Members of the Board include Chief Executive Officers and chief executives from three leading banking institutions (Barclays, Lloyds, and Santander), and senior representatives from UK Finance, the National Crime Agency (NCA), and the Solicitors Regulation Authority, Accountants Affinity Group, and National Association of Estate Agents.
Note: The formation of the Board should be taken as a salutary development by financial-sector firms and other service sectors. The United Kingdom Government’s SOC Strategy, issued in November 2018, contains four key objectives, on each of which financial-sector expertise and data can be particularly beneficial.
First, Objective 1 calls for “[r]elentless disruption and targeted action against the highest harm serious and organised criminals and networks.” One of the key points of this objective is to “put data and intelligence at the heart of our law enforcement approach.” On that point, the financial sector can assist not only by timely filing Suspicious Activity Reports (SARs), but by providing the Government with timely and meaningful guidance when the Government embarks on SARs reform, as promised in the SOC Strategy. The Government’s statement about the Board noted that the Home Office, with the private sector, law enforcement, and regulators, is already “is co-designing a new [SARs] system which is more efficient and effective, and which will benefit business and the public sector.” It also reported that at the Board’s meeting, the Home Secretary would confirm that the Home Office will commit £3.5 million in 2019/20 to support work on SARs reform.
Second, Objective 2 calls for “[b]uilding the highest levels of defence and resilience in vulnerable people, communities, businesses and systems.” Under this objective, the Government stated that
we will develop technical online solutions to strengthen our systems and better integrate our response with the private sector to ‘design out’ crime. Building on work to date, we will also look to expand global partnerships with industry and like-minded countries. We will improve regulatory frameworks and make sure businesses and public sector bodies have the advice they need to better protect their organisations.
On both of these points, the private sector, including the financial and information-technology sectors, should be prepared to provide timely guidance on how best to conduct “target hardening” of key networks and technologies, and to expand the exchange of information through public- and private-sector organizations in other countries. Although the Government’s statement that it will ensure companies and agencies “have the advice they need” is well-intentioned, the Government itself should welcome receiving advice from the private sector, which will likely have more current experience and greater expertise regarding key online threats.
Third, Objective 3 calls for “[s]topping the problem at source, identifying and supporting those at risk of engaging in criminality.” Under this objective, the Government stated that
[i]mproving our understanding of offending pathways for professional enablers is a key priority due to their critical role in enabling the illicit finance which underpins serious and organised crime and allows serious and organised criminals to hide their profits and diversify their criminal activity. The Home Office will undertake work with HM Treasury to better understand the pathways for professional enablers with the aim of developing interventions for those at risk.”
On this point, the Government and the financial sector should share data and collaborate in setting expectations about the extent to which intervention can be effective at disrupting money-laundering professionals and organizations. It is one thing to target young people for intervention to discourage them from involvement in drug trafficking, cybercrime, or child sexual exploitation and abuse – three of the Government’s stated intervention priorities. Professional enablers, on the other hand, come from a variety of disciplines and expertise that young people are not likely to have, which makes the Government’s strategy of intervention more challenging.
Finally, Objective 4 calls for “[e]stablishing a single, whole-system approach.” This objective appears to be the one on which the Government will count most heavily for financial-sector support. Recognizing that “[c]urrently there is no dedicated serious and organised crime funding stream,” the SOC Strategy indicated that the Government intends not only to “explore a new funding model that is able to commit investment over multiple years,” but also to “look to the private sector to invest jointly in developing new capabilities, notably in those areas of the commercial and financial sectors that are particularly affected by economic crime.”
On this latter point, private-sector representatives should explore with Government representatives whether private-sector companies’ participation in such development will be taken favorably into account when Government agencies such as the NCA or Financial Conduct Authority are reviewing companies’ compliance programs. As a point of comparison, in 2018 the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and federal bank supervisory agencies issued joint statements encouraging bank and credit unions to collaborate in sharing Bank Secrecy Act (BSA) resources, and to take innovative approaches to combating money laundering, terrorist financing, and other illicit financial threats. The latter statement included assurances such as “innovative pilot programs in and of themselves should not subject banks to supervisory criticism, even if the pilot programs ultimately prove unsuccessful” and pilot programs that expose gaps in a [Bank Secrecy Act/Anti-Money Laundering] compliance program will not necessarily result in supervisory action with respect to that program.”
Similar assurances from the Government may be necessary to encourage financial firms to invest in development of new SOC capabilities. Such assurances, coupled with indications that the Government is taking private-sector input via the Board seriously, may augur well for future public-private partnerships to combat serious and organized crime.