Can big banks be trusted with the fight against economic crime? The UK government seems to think so…

Sue Hawley, policy director of NGO Corruption Watch, examines the government’s approach to tackling economic crime and argues that its reliance on ‘public-private partnerships’ as regulators raises serious conflicts of interest and the threat of regulatory capture

When UK Prime Minister Theresa May came to power, she ditched her predecessor David Cameron’s language of fighting corruption in favour of a broader economic crime agenda. May’s government has consistently stated that achieving progress on economic crime is a real priority, and fortunately, anti-corruption has remained a key plank of that agenda (despite the all-consuming maelstrom of Brexit). But the direction that the government is taking on economic crime – by creating public-private partnerships to tackle it – is a cause for real concern and demands urgent scrutiny.

The clearest expression of the government’s economic crime agenda has been the creation of a new national authority, the National Economic Crime Centre (NECC), in November 2018, and an Economic Crime Strategy Board (ECSB) in January 2019. The NECC is an operational body whose goal is to “deliver a step-change in the UK’s response to serious and organised economic crime,” while the ECSB is a task force that is supposed to “set priorities, direct resources, and scrutinise performance against the economic crime threat.” Both initiatives have been created as a so-called public-private partnerships – a voluntary regulatory initiative between the state and the private sector – in what the government calls “the whole system” approach, yet this appears to be based on astonishingly little analysis of whether such partnerships are effective and what they are designed to achieve.

The NECC is touted as a public private partnership “particularly with those businesses at risk from economic crime.” It hosts the Joint Money Laundering Intelligence Taskforce (JMLIT) – an information-sharing platform between law enforcement and the private sector established in 2015 and regarded as ‘best practice’ by FATF. The ECSB meanwhile, chaired by the Home Secretary and the Chancellor, includes CEOs from three of the UK’s biggest banks, Barclays, Lloyds and Santander, and senior representatives of UK Finance (the finance industry’s ‘collective voice’), alongside the National Crime Agency, the Solicitors Regulation Authority, Accountants Affinity Group and the National Association of Estate Agents. Its first output will be an Economic Crime Plan jointly produced with the private sector, and specifically UK Finance, in July 2019.

Risk of policy and regulatory capture

There is no doubt that the UK’s “complex web” of enforcement bodies responsible for economic crime desperately needs a national coordinating body – a role the NECC will crucially fulfil. Nor can there be any doubt that the UK needs an overarching national economic crime strategy to address years of under-investment in economic crime enforcement. The question is whether the private sector has a legitimate role in either of these initiatives and, if so, what?

An operational information-sharing platform between public bodies and the private sector such as JMLIT clearly makes sense. But upscaling this model to give the private sector a significant presence within a national enforcement authority and a key role in formulating national public policy on tackling economic crime is a major step beyond. The latter approach creates real risks of policy and regulatory capture by the private sector, and potential conflicts of interest.

Who’s at the table?

The most significant private sector representation on the ECSB are the large London-based banks and their lobbying body, UK Finance. This excludes several key actors both within the private sector, such as the small and medium sized enterprises who are often severely impacted by economic crime as well as players in the RegTech industry, and outside it, such as whistleblower organisations, victim groups and voluntary or civil society organisations. It is also despite criticism from the National Audit Office in 2017 of an earlier public-private partnership, the Joint Fraud Taskforce, for its heavy focus on the banking industry at the exclusion of other private-sector players.

Nor are the banks (or other private-sector actors), merely victims of economic crime. They may also be perpetrators and facilitators of crime. The day the ECSB was announced, with Barclays on its board, the trial of a former Barclays CEO and other senior ex-employees started in London for alleged financial wrongdoing. A few months later, Lloyds, another board member, was facing scrutiny for its handling of the HBOS fraud that cost the bank £1 billion and damaged numerous small businesses. Why are those who should be being held to account by the UK’s economic crime regime being invited to help run and design it?

Developing a genuine and long-term strategy to tackle economic crime, whether it be fraud, money laundering or corruption, does require a multi-stakeholder approach. But it must not be captured by the private sector and particularly not by the big banks.

Who pays?

Despite stating that economic crime is a priority, the government has not committed any significant new public resource. The government has invested just £48 million since late 2018 in bolstering law enforcement, including the creation of the NECC – all reassigned from other departmental pots. In this context, the creation of public-private partnerships looks alarmingly like an attempt to avoid public investment in the economic crime infrastructure and get the private sector to pick up the bill.

The Treasury Select Committee in its Economic Crime Inquiry report in March 2019 noted that there had been “no cross-government assessment of public resources being brought to bear” on achieving a hostile environment and urged the government to make an assessment and rectify any short-falls. In May 2019, Lynne Owens, Director General of the National Crime Agency, effectively called the government out on this by making a bold bid for an extra £2.7 billion of public funds to tackle serious and organised crime (which includes economic crimes such as fraud, money laundering, tax evasion and corruption). The current Spending Review, and whether it results in real new public investment in bolstering the law enforcement response to economic crime, will be a key test of whether economic crime is indeed a government priority.

Meanwhile, a genuine debate about how and what the private sector can and should contribute, whether through increased regulatory fees or other means, needs to be had in the public domain and not behind closed doors. It is essential that those who pay do not get to set the terms of how they are regulated, and how public bodies are designed.

Who knows and who has oversight?

One of the most alarming things about the creation of the NECC and ECSB, and the development of the Economic Crime Plan is the lack of transparency and accountability. Again, the NAO highlighted these as key issues with the Joint Fraud Taskforce. Yet many of those failings risk being replicated with the ECSB.

There is no public oversight or transparency about how members of the ECSB are appointed, what is being discussed at meetings, and how the Economic Crime Plan is developed. Moreover, the NECC is hosted by the National Crime Agency, which is not subject to the UK’s Freedom of Information Act (FOI). Getting any information about its performance and output is going to be nigh impossible.

An accountable economic crime agenda which can command public confidence requires urgent development of oversight mechanisms. ECSB meetings should be fully transparent and the NECC (and the NCA) should be brought under the remit of the FOI Act .

Economic crime affects us all – when corrupt elites bring their stolen wealth into the UK and distort our economy and democracy, but also through local government and electoral fraud. The government’s strategy should concern us all and must not be left to the banks to determine.

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One comment on “Can big banks be trusted with the fight against economic crime? The UK government seems to think so…
  1. It is deeply worrying that I am the first person to comment on this excellent article. I suppose that the systematic dismantling of the anti-corruption structures in the UK is now so nearly complete that there are few who understand what has happened since 1997 and how this has been accelerated since 2010. Perhaps also too many people are paid to look at ‘fantastically corrupt’ countries ‘over there’ and simply haven’t noticed what has been done back here.

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