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A Muddled Mosaic: The UK Still Lacks a Coherent International Illicit Finance Strategy
27 Jul 2021

The international dimension of the Economic Crime Plan is a patchwork of aspirations. A clearer, achievable vision is needed.

On the face of it, the UK government has made good progress implementing the actions of its 2019 Economic Crime Plan. According to RUSI’s Economic Crime Plan Tracker, fully 80% of the actions are either complete or in progress. All is well, you might think. Yet, not only is there a divergence between policy and operational progress – as my colleague Helena Wood has recently pointed out – but there are also questions about the effectiveness and appropriateness of these actions – notably as relates to the ‘international’ strand of the plan.

The international dimension is important, as while much of the Economic Crime Plan focuses on the home front, the domestic reforms it seeks to drive should have international impact. In fact, given that the UK is a global financial centre and that it is acknowledged by the government to be a destination or facilitator of a considerable portion of the laundered proceeds of corruption, kleptocracy and other financial crimes around the world, these reforms must have international impact if the UK is to address its reputation as part of the global financial crime problem. For example, passing the legislation to reform Companies House is not just of benefit to the UK; it should equally benefit citizens of those countries whose kleptocratic leaders take advantage of UK companies to launder their ill-gotten gains.

Efforts to Date

For those urging the UK to leverage its central position in global finance to be a force for good, the Economic Crime Plan held some hope.

The ministerial foreword to the published plan highlighted the importance of the proposed national reforms, noting that ‘strong domestic action will underpin our efforts to combat economic crime and illicit financial flows at the international level’. Underlining this point, the plan notes that ‘If one area [of the UK economic crime system] fails, it will undermine success of other areas and the effectiveness of the system as a whole’ and suggests that tackling illicit financial flows ‘is a top priority for the UK’.

The reputational damage the UK suffers internationally also appears to be well understood. The plan observes that ‘illicit financial flows harm [the UK] economy, as well as the integrity and reputation of [the UK] financial system’ – a point reiterated by the Statement of Progress published earlier this year, which noted that ‘The volume of money laundered in and through the UK undermines our reputation as a fair, open, rules-based economy that instils business confidence, and gives our citizens assurance in their institutions’. This matters given the weight the government has placed on financial services as an engine of the post-Brexit economy.

Reflecting the importance of this international dimension, one of the plan’s seven strategic priorities commits to ‘Deliver an ambitious international strategy to enhance security, prosperity and the UK’s global influence’. So, how has this ambition fared over the past two years? Is the UK any closer to repairing its tarnished reputation?

And Work to be Done

The first thing that is striking about this international strategy is its lack of coherence and clear leadership. The five actions cover a wide range of government departments and agencies, the private sector and civil society, and comprise a pages-long laundry list of – at best – loosely connected aspirations that fail to reflect the interconnected nature of domestic and international illicit finance.

To some extent, this lack of coherence is unsurprising given the breadth of the three supporting objectives of this section of the plan, which include strengthening and ensuring the effective implementation of international standards and supporting sustainable development, all while ‘protecting and promoting the UK’s reputation’.

So, what does a closer look reveal?

Firstly, as already noted, the international strategy displays a lack of focus – less a plan or strategy and more like spaghetti thrown at the wall in the hope that something might stick. Two years on, what is left once gravity has played its part seems to be more a function of available funding and Whitehall politics than what is most appropriate for tackling the UK’s role in facilitating illicit finance.

Secondly, the Statement of Progress leans heavily on the UK’s 2021 presidency of the G7 as an opportunity ‘to strengthen the global response to illicit finance and combat priority threats to the integrity of the international financial system’. This is naturally a welcome commitment but lacks details and any sort of pathway to impact; it also relies on partners taking actions which are beyond the control of the UK. Furthermore, when the plan was originally announced in 2019, no reference to leveraging the G7 presidency was made, which adds to the sense that this is less an international strategy and more a series of opportunistic grabs.

And finally, the action update on the international strategy provided by the government is lightweight, suggesting all actions are ‘ongoing’ with little detail on what this means beyond the creation of a series of initiatives that suggest a ‘pass’ for effort but not much more. Overall, it really is not clear what the government’s strategy is. There is certainly no evidence that responding to the international dimension of economic crime – the threat to the UK from the rest of the world and the threat the UK poses – is indeed a top priority; and what cabinet-level leadership there is comes solely in the form of the foreign secretary’s virtue signalling via the introduction of his Global Human Rights and Anti-Corruption sanctions regimes.

What is Required

To be credible, the international strategy needs two core pillars.

Firstly, action should be ramped up on the role the UK plays in global illicit finance and asset sequestration. An international strategy needs to reflect the centrality of the UK to global illicit finance, so it must focus on what matters to partners. The UK’s role in facilitating illicit finance is a festering foreign policy issue for the country – just ask allies such as the US. Partners need to see clearly that the government is serious about addressing the UK-facilitated illicit finance that impacts their countries. Words must be turned into clearly demonstrated and committed actions. The pledge in the government’s Integrated Review to ‘reinvigorate’ the response to illicit finance was welcome, but what does it mean?

Greater investment should be made in SOCNet – the government’s network of international illicit finance advisors – and illicit finance should be a central feature in the portfolio of staff in embassies and high commissions around the world. Bright spots such as the National Crime Agency’s International Corruption Unit and International Anti-Corruption Coordination Centre should receive the investment they need to grow their impact, and the UK should leverage its leading intelligence capability to genuinely contribute to efforts to identify and seize illicit finance. Any reversal of these existing capabilities in the upcoming Spending Review would send a catastrophic signal of intent.

This additional investment would allow for a significant expansion in the focus on asset recovery. For many countries, the international commitment of the UK to combatting economic crime is measured in pounds returned to their national coffers. By that metric, the UK could clearly do better.

Secondly, leadership is needed in the multilateral space. The UK makes much of its membership of the global financial crime watchdog, the Financial Action Task Force (FATF), and has recently set up an Anti-Money Laundering and Counter-Terrorist Financing Technical Assistance Unit to support official development assistance (ODA) funded countries in implementing international financial crime standards. This may be worthy, but it does not represent value for money given the millions of dollars already provided in support of these issues by the World Bank and other governments. Could that money be better spent on initiatives – such as asset recovery – that equally support ODA-eligible countries?

In addition, the UK has made much of its G7 presidency, claiming it will capitalise on this ‘to strengthen the overall international response to illicit finance and anti-corruption’. Time is running out to grasp this opportunity. September’s interior ministers’ meeting must therefore be used to move beyond rhetoric to concrete operational and measurable commitments.

Ultimately, the UK must build credibility, and avoid the government’s predilection for ‘bold and ambitious’ plans that fail to deliver. Achievable and measurable objectives will suffice. Is the country to be a global problem-solver that supports other countries to address their individual shortcomings as identified by the FATF? Or would the UK be better served by prioritising addressing its domestic shortcomings that impact partners around the world?

These two ambitions can coincide and be mutually reinforcing, but until the muddled mosaic of ambition is provided with the dedicated senior leadership, funding and vision that it requires, the UK is destined to remain a very central part of the international illicit finance problem.

By Tom Keatinge, RUSI, 21 July 2021

Read the original article at RUSI

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