Will 2022 be a Year of Action on Illicit Finance?

The US Strategy on Countering Corruption promises a step change in its response to illicit finance. Can the UK government step up too?

There was a time in the not so distant past when the UK was genuinely a leader in the global response to illicit finance. Yes, the country has been a magnet for dirty money and its beneficiaries for decades as a result of policy decisions (for example, investor visas) and neglect (such as underinvestment in the policing response, the national Financial Intelligence Unit and suspicious activity reporting system). But awareness of the challenges posed by illicit finance has at least led the previous two prime ministers – supplemented by broad-based energy among the civil service, with some notable ministerial support – to attempt to show leadership. The 2016 Anti-Corruption Summit; the opening up of Companies House; the creation of the National Economic Crime Centre, a focused centre of excellence within the National Crime Agency; and the introduction of new legislation all held out the promise of action.

I have frequently written on these pages about the importance of leadership when it comes to energising the UK’s response to illicit finance and taking advantage of various innovations. We can quibble about the effectiveness of David Cameron and Theresa May’s efforts in combating illicit finance, but at least the ‘tone from the top’ was clear. In contrast, to date, Boris Johnson’s government has been – charitably – becalmed. Some green shoots have appeared. The government’s Integrated Review made some useful passing acknowledgement of the security and foreign policy challenges of illicit finance; the recently announced UK–UAE illicit finance partnership holds some potential in addressing one of the key global illicit finance vulnerabilities; and the government’s intention to refresh its 2019 Economic Crime Plan (ECP) offers promise. But the articulation of a genuinely coordinated strategy, led with conviction by senior ministerial voices from around the Cabinet table in Downing Street, is absent.

Contrast this, then, with what emerged on the other side of the Atlantic in early December during President Joe Biden’s Summit for Democracy. The idea of the Summit attracted its fair share of scepticism. Would it be ‘another global talking shop full of high-minded notions and little action’? The president himself acknowledged that democracy is hard, hoping that the Summit would ‘seed fertile ground for democracies to bloom around the world’. But, to the surprise of many, it did act as an impressive catalyst for action on the part of various US government departments, bringing forward long-overdue proposed regulation, issuing sanctions and perhaps most importantly, laying out a clear strategy as to how the US is finally going to play its part in tackling global illicit finance via overdue actions both at home and abroad, in the form of the administration’s Strategy on Countering Corruption.

At this point, some UK boosters will rightly note that the government published its own anti-corruption strategy some time ago, in 2017. It contained some similarities: reducing the threat posed by corruption to national security; strengthening the integrity of the UK as an international financial centre; and ensuring anti-corruption efforts across government are joined up. The recently published annual update (curiously only being published now for the year ended December 2020) paints a rather technical picture full of charts and data that lacks the dynamism and ‘whole of government’ energy that pulses from the new US strategy. Of course, the White House document is a plan for action, and does not guarantee that action will indeed follow.

But two key elements provide hope that 12 months from now, the US will have filled the gap left by the loss of Downing Street leadership. First, the fight against corruption has been designated a core national security interest of the US. As the strategy details, this will bring to bear the full apparatus of the US government, including the intelligence, development and diplomatic communities. Second, and most importantly, the strategy is backed by the commitment of the president himself to target corrupt actors and ‘reduce their ability to use the United States and international financial systems to hide assets and to launder money’. The sense that Biden intends to do his utmost to drive forward activity in 2022 to meet his Summit for Democracy’s call for a year of action is palpable.

Returning to this side of the Atlantic, what lessons should the UK, and specifically the Johnson government, learn? What indicators are emerging from Whitehall that 2022 might be a year of action here, too? On the policy side, we know that the ECP will have run its course by mid-2022 and that the creation of a new strategy is underway. This will include a revamp of the 2017 anti-corruption plan that will also come to an end in the year ahead. This process offers an opportunity for the government to produce a more focused and clearly defined strategy than the scattered offering made in the first ECP in 2019.

And what of ‘tone from the top’? Can Johnson match the leadership of his White House partner in acknowledging the damage the UK’s reputation suffers from failing to address the domestic weaknesses that cause international harm? And, as US Treasury Secretary Janet Yellen candidly acknowledged that ‘there’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States’, can her UK opposite number Chancellor Rishi Sunak bring himself to articulate that the UK deserves a similarly unedifying accolade as a significant facilitator of global illicit financial flows?

A glint of hope emerged from the prime minister during his video address to the Biden Summit. In his short remarks, he acknowledged the need for the UK to take even stronger measures against illicit finance given its role in undermining democracy globally, and committed to advance long-overdue legislation to bring more openness to the purchase of properties in the UK by overseas entities, postponed thus far by his government.

From the industrialisation of fraud by organised crime groups, to the abuse of the UK’s financial infrastructure and asset markets by kleptocrats and the corrupt and the threat of malign finance undermining UK democracy, illicit finance deserves Johnson’s attention. If he chooses to provide the leadership and direction needed, he will find an illicit finance agenda that is ready and waiting to be driven forward.

2022 has the potential to be an impressive year of action for the UK. But it requires the prime minister to acknowledge the UK’s global illicit finance responsibilities and reverse his current irresponsible disinterest in a topic that – as it does the US – threatens the UK’s national security interests.

Article credit: https://rusi.org/explore-our-research/publications/commentary/will-2022-be-year-action-illicit-finance-uk