Are you prepared for the Economic Crime Levy?

The Economic Crime Levy (ECL) is being introduced by the UK Government to address the increasing issue of economic crime conducted for financial gain within the country. This includes, fraud, money laundering, bribery and corruption. It is estimated that this type of crime costs the UK economy approximately £14.4billion per year.

The ECL will be paid by businesses supervised under the Money Laundering Regulations (MLRs) (AML-regulated entities), with revenue of at least £10.2million per year. It is hoped that the money collected from the ECL will fund £100million a year for ‘enhanced’ anti-money laundering measures and efforts to tackle economic crime outlined in the Government’s 2019 Economic Crime Plan.

The Levy will impact firms subject to UK MLR between 6 April 2022 and 5 April 2023 and will be reflected in their invoices from July 2023 administered by the FCA, or the Gambling Commission and HMRC for all other AML-regulated entities.

Who will the ECL impact?

The Economic Crime Levy (ECL) applies to a wide range of businesses regulated under MLRs, including:

credit institutions,
financial institutions,
auditors, insolvency practitioners, external accountants and tax advisers,
independent legal professionals,
trust or company service providers,
estate agents and letting agents,
high value dealers, casinos, auction platforms and art market participants, and
cryptoasset exchange providers and custodian wallet providers.

The Levy is an annual fixed fee determined by the size band of the AML-regulated entity, based on their total UK revenue. It encompasses individuals, partnerships, and companies falling within the “medium,” “large,” or “very large” revenue brackets, irrespective of their exposure to financial crime.

Entity size	Criteria	ECL charge
Small	Under £10.2million UK revenue	£nil
Medium	£10.2million to £36million UK revenue	£10,000
Large	£36million to £1billion UK revenue	£36,000
Very large	More than £1billion UK revenue	£250,000

What does this mean for you?

If you will be paying the Economic Crime Levy then it is important to know that the first payment is due on the 30 September 2023, with subsequent payments due at the same time each year. The first payment will be based on UK revenue reported from the accounting period ending in the financial year 1 April 2022 to 31 March 2023.

HMRC’s registration portal is now open and can be found here. Businesses are not required to register with HMRC if they are already supervised by the FCA or Gambling Commission or if their revenue is below £10.2million in the relevant financial year. Businesses that are registered by the FCA or Gambling Commission will need to follow their regulators ECL process.

Anthony DeMartino, a Director in our Compliance and Corporate teams:

Unfortunately, the use of turnover bands to determine the ECL charge indicates the Government have chosen to prioritise simplicity over fairness. There has been no consideration of the fact that not all businesses are exposed to the same risks of financial crime and many businesses will find themselves paying the same levy as companies with significantly higher turnovers. It should also be noted that the levy is not a deductible business expense for tax purposes.

If you have a question relating to anything mentioned in this article, you can contact our team using the form below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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