2023 reflections and 2024 predictions for the financial crime landscape

I wanted to take a few moments to reflect on the key developments in the financial crime world from last year, and consider what the next 12 months may have in store. 

The UK Government’s second Economic Crime Plan, published in March 2023, promised to cut money laundering and fraud, increase asset seizure resulting from criminality, and tackle kleptocracy. This led to the Economic Crime and Transparency Act (ECTA) in October 23 which introduced sweeping changes to Companies House, such as introducing measures to verify company directors and improve financial information available on the register to provide more reliable and accurate information. (It’s astonishing that this wasn’t the case already, but better late than never, I guess!). 

Information sharing
The ECTA also boosts anti-money laundering powers by enabling businesses, in certain circumstances, to share information for the purposes of preventing, detecting or investigating economic crime. 

New fraud and ML offences introduced
Also included in the ECTA were the new “failure to prevent fraud” and “failure to prevent fraud and ML” offences, meaning an organisation will be criminally liable if an employee or agent of the company commits fraud (or fraud or money laundering) for the benefit of the organisation. Like the existing “failure to prevent” offences of money laundering and bribery, the only defence will be that the firm had reasonable procedures in place at the time. The government is expected to publish further guidance on “reasonable procedures” in 2024.

Sanctions Legislation amended
The ECTA also amended Sanctions Legislation, removing the requirement that anyone breaching sanctions laws should know or suspect that they breached the law in order to result in a monetary penalty.

Fines
The FCA continued their strategic objective to reduce and prevent financial crime through a variety of means. Their pursuit of firms who failed to fight financial crime resulted in more fines: Guaranty Trust Bank (UK) Ltd were fined £7.6m, Al Rayan Bank were fined a little over £4m and ADM Investor Services International Ltd were subject to a £6.47m fine, all for AML systems and control failings.

Review of PEPs
In September, the FCA also launched a review into how firms treat PEPs, with a call for evidence around the number of accounts refused or closed as a result of PEP status. The results, published a couple of months later, concluded that no accounts had been closed as a result of customer’s political views, however their focus in this area will continue. This is likely to continue as a hot topic into 2024, with amends being made to the Money Laundering Regulations making clear that firms must treat UK PEPs as lower risk than non-domestic PEPs, unless other risk factors are evident. 

As with a number of things from 2023, we eagerly await further guidance.

FCA fraud reviews
In November the FCA published two fraud reviews: one on detecting and preventing money mules, and one on fraud systems and the treatment of fraud victims. 
Both reviews are well worth a read, if you haven’t seen them already. There are examples of good practice as well as some shocking examples of poor practice, especially around the lack of support encountered by victims of fraud.

Looking ahead… 
I believe that fraud prevention is the hottest topic on the financial crime agenda. 2024 will see the introduction of the new APP fraud reimbursement model, the implementation of which has been confirmed by the Payment Systems Regulator as 7 October 2024. 
Change is clearly needed to combat the astronomic levels of fraud in the UK but it’s important to remember that the crime doesn’t start and end with financial services. The announcement of the Online Fraud Charter is a welcome piece of the puzzle, and coupled with the new information sharing gateways introduced within the ECTA, there is hope that fraud can be tackled more effectively than ever before. 

However, the introduction of the reimbursement model and the implementation timeline is likely to be challenging for many firms and further guidance from the PSR and Pay.uk are needed to ensure that people, systems and processes are ready to tackle the increase in fraud being reported, which is likely to land at the same time as (and indeed be driven by) the new model being introduced.

It feels to me as though many of the changes introduced or proposed in 2023 could be the building blocks towards a tangible reduction in financial crime from 2024. As ever with fighting financial crime, collaboration will be key to success.