Small businesses: The fight against financial crime

The growing threat of financial crime was illustrated in 2019 by the publication of the UK’s first Economic Crime Plan. Sponsored by the Home Office, the plan outlines the growing list of threats to UK businesses of all types and sizes. It aims to bring together the various disparate bodies responsible for the detection, prevention, and enforcement of economic crime.

Under the plan, a number of mechanisms were introduced to try to join up the work of the various agencies and organisations tasked with anti-money laundering (AML) and other financial crime, which is estimated to cost UK business at least £14.4 billion per year.

This year has seen the formation of a new Economic Crime Strategic Board to set the direction of law enforcement effort. The board is made up of various representatives from the law enforcement agencies. It also features CEOs and chief executives from the banking world (Barclays, Lloyds, and Santander) as well as senior representatives from UK Finance, the National Crime Agency (NCA) and the Solicitors Regulation Authority, Accountants Affinity Group and National Association of Estate Agents.

One of the biggest issues that the new Board says it wants to tackle is how financial crime is reported. The UK Financial Intelligence Unit (UKFIU) reported that it received and processed a record number of Suspicious Activity Reports (SARs) (463,938), with 22,619 of those requests for defence against money laundering (DAML).

That’s an increase of nearly ten per cent. While it may look impressive, it presents a problem:  some observers feel overly defensive banks are churning out SARs at the slightest provocation, creating a blizzard of reports and making law enforcement’s job all the harder. The new board says, as a result, it will prioritise better, rather than more, reporting.

Every small business, no matter what sector it is in, is on the front line of the fight against financial crime.

So what will all this mean in practice for SMEs?

“Fundamentally, what’s happening now requires a culture change across the board,” Paul Beare explains. “Every business needs to understand the risks it faces; on top of that, they need to commit to best practice and vigilance. And that requires policies and procedures. And that does not mean a piece of paper stuffed in a drawer that only every gets looked at when someone asks for it.

“It means you have to constantly assess the risk,” Paul says. “Has it changed along with your business? You may have gone from dealing with one type of work to a broader, different type of work, or into different markets. Has that changed the risk you face? You must re-assess that risk each time.”

Your accountant is vital in the fight against crime. A good accountant is on top of the latest regulatory changes and can help you navigate through the various compliance and legal issues that you may face as a business. And those risks will intensify as new technology like Open Banking becomes mainstream. As a recent Deloitte report pointed out, “Regulators are likely to find it increasingly difficult to monitor a growing number of smaller players that may be using new and possibly anonymous transaction technologies.”

We’re here to help our clients get on top of the risks they face,” says Paul. “Whether it’s making sure they comply with anti-money laundering rules or setting up the right cybersecurity systems, we see our role as a vital partner. So just call us and we can help.”

In the meantime, you can contact us for help and support in a number of areas, from tax and payroll to accounting and banking.