There was a stark reminder this week that the cost of economic crime is hitting everyone in the pocket and financial advisory firms will be no exception.
The FCA confirmed this week that its new Economic Crime Levy will begin in July, with some regulated large firms facing bills of £250,000 a year.
While financial adviser firms will not be immune from the levy thankfully only the larger firms will be affected, at least for now.
The new levy is designed to boost efforts to tackle economic crimes such as money laundering, fund raising for terrorism, illicit transfers of funds and the like.
Criminals have an overwhelming desire and need to launder their dirty money and the financial services sector is the perfect conduit. There is no question it needs to do more to tackle the baddies.
As anyone watching the rather excellent new BBC TV series The Gold, about the Brink’s-Mat bullion robbery, will attest organised crime needs to get rid of dirty money and usually pretty quickly.
The FCA, in this matter, is really piggy in the middle. It, along with HMRC and the Gambling Commission, is collecting the new levy on behalf of the government.
The regulator expects about 20,000 regulated firms, about a third of the total, to be affected initially by the new levy which will apply to firms whose UK revenue exceeds £10.2m.
The new levy will raise millions to fight organised crime and its toxic gains.
The net effect: expect a much tougher regime in future for financial firms who fail to check properly on where client money is coming from and going to. Things will be much tougher in future. Good records and decent compliance will be the best solution.
The pity in all this is that ultimately we will all pay for the levy and the cost of fighting financial crime will go up. Providers and other financial firms facing the new levy will most likely put up their fees and costs to cover the extra bills.
A bit like the Financial Services Compensation Scheme, the profession, providers and the wider financial sector will pay for the actions of a minority.
It will be important for the FCA to tread carefully with the new levy. If it is extended to smaller firms there will be an outcry. Small adviser firms have suffered enough from increased regulatory costs and levies in recent years and deserve to be treated proportionately.
There is obviously a danger the new levy will be expanded and increased, with more caught in the net. This should be avoided.
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Kevin O’Donnell is editor of Financial Planning Today and has worked as a journalist and editor for over three decades.
