This week was a stark reminder that the price of economic crime is on everyone, and financial advisory firms are no exception.
The FCA confirmed this week that the new economic crime charges will start in July. Some large companies face claims of £250,000 a year.
Financial advisory firms are not immune to taxation, but fortunately only large firms are affected. At least for now.
The new levy is intended to boost efforts to tackle economic crimes such as money laundering, terrorist financing and illicit fund transfers.
Criminals have an overwhelming desire and need to launder their dirty money, and the financial services sector is the perfect conduit. .
Anyone watching the pretty good new BBC TV series The Gold about the Brink’s-Mat bullion heist will attest to the need for organized crime to get rid of dirty money, usually pretty quickly.
FCA is really half-hearted on this subject. It works with HMRC and the Gambling Commission to collect new taxes on behalf of the government.
The regulator expects around 20,000 regulated companies, about a third of the total, will be affected by the new tax that applies to companies with UK revenues above £10.2m.
New dues raise millions of dollars to fight organized crime and its toxic interests.
The net impact: The future is going to be tougher for financial firms that can’t properly check where their customers’ money is coming from and where it’s going. Good records and good compliance are the best solutions.
Unfortunately, we all end up paying fines, which increases the cost of fighting financial crime. Providers and other financial firms facing new charges are most likely to incur fees and costs to cover additional charges.
A bit like the Financial Services Compensation Scheme, professionals, providers and the broader financial sector pay for the actions of minorities.
It is important that the FCA treats new levies with caution. If it were extended to smaller businesses, there would be protests. Smaller advisory firms have suffered enough from the increasing regulatory costs and penalties of recent years that they deserve to be treated proportionately.
There is a clear danger that new levies will be widened and increased, and more will be caught in the net. This should be avoided.
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Kevin O’Donnell is the editor of Financial Planning Today and has worked as a journalist and editor for over 30 years.