Global Hub or Laundromat? The UK’s Struggle to Tackle Financial Crime

The UK holds a pivotal position in the global fight against financial crime due to its status as a leading international financial centre. With London consistently ranking near the top of the  Global Financial Centres Index (GFCI), the UK commands both the opportunity and the responsibility to influence global AML and CTF standards.

Yet, while the UK has a well-developed framework to counter financial crime, its financial system remains a prime target for abuse. It has long been accused of acting as a conduit for illicit finance, particularly in the form of money laundering, fraud, and the misuse of corporate structures.

Strengths in the UK’s Financial Crime Response

The UK possesses several strengths in combatting financial crime, and its global influence remains a core pillar of this capability.

• A Financial Giant with Global Reach

  London’s dominance as a global finance hub gives the UK immense influence in shaping financial crime policy. The Global Financial Centres Index (GFCI) ranks London as one of the top global financial centres, underscoring its role in attracting capital, setting standards, and driving regulatory development.

  
  

• Leadership on the International Stage

  The UK continues to play a central role in shaping global AML and CTF standards through its involvement in the Financial Action Task Force (FATF) and the Egmont Group. Its influence was further underscored by the UK's leadership on beneficial ownership transparency commitments at the G7 and G20. According to FATF’s latest Mutual Evaluation Report on the UK (2018), the country demonstrates a high level of effectiveness in some areas, including international cooperation and risk understanding. However, the same report noted weaknesses in the UK's supervision of certain non-financial sectors.

• Technical Expertise & Capacity Building

  The UK government and law enforcement bodies, such as HM Treasury and the National Crime Agency  (NCA), regularly deliver technical assistance to help developing countries build their AML and CTF capacity. For example, the UK-funded Global Illicit Finance & Anti-Corruption Programme has provided support to over 30 jurisdictions in recent years, targeting vulnerabilities exploited by transnational crime networks.

  
  

• Strong Legislative Foundations

The UK has a well-developed, risk-based regulatory system aligned with global standards, primarily shaphttps://www.jmlsg.org.uk/ed by:

• The Proceeds of Crime Act 2002 (POCA).

• The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) and its amendments (MLR 2019 & MLR 2022).

• The Sanctions & Anti-Money Laundering Act 2018.

These laws are supported by guidance from the  Financial Conduct Authority (FCA), HM Treasury, and the Joint Money Laundering Steering Group (JMLSG).

• Public-Private Collaboration 

  The UK is often regarded as a global pioneer in fostering collaboration between government, law enforcement, and financial institutions. Initiatives include:

  
  

  • Joint Money Laundering Intelligence Taskforce (JMLIT): Established in 2015, JMLIT is a flagship model of information sharing between major banks, law enforcement agencies (e.g. NCA), and regulators. It has been lauded internationally and has inspired similar initiatives in other jurisdictions.

  • National Economic Crime Centre (NECC): Hosted by the NCA, the NECC acts as a coordinating body bringing together multiple agencies including the FCA, Serious Fraud Office (SFO), and HMRC, alongside key private sector actors.

  • UK Financial Intelligence Unit (UKFIU): The UKFIU plays a critical role in collecting and analysing Suspicious Activity Reports (SARs), although it has faced criticism for being under-resourced given the high volume of reports (over 900,000 annually).

  
  

  Public-private partnerships in the UK have achieved successes in disrupting organised crime, identifying high-risk sectors, and responding to emerging threats such as crypto-based money laundering. However, challenges remain around ensuring smaller firms and non-bank sectors are included meaningfully in collaboration efforts.

  
  

Where the System Falls Short

The UK also faces several weaknesses and challenges in its efforts to combat financial crime:

• A Destination for Dirty Money

  The UK has frequently been described as a magnet for ‘dirty money’. Investigations such as the FinCEN Files and Panama Papers have exposed how British-registered companies and UK property are routinely used to launder criminal proceeds. The so-called “Londongrad” phenomenon exemplifies the risks of kleptocratic capital entering the UK, particularly from Russia and other high-risk jurisdictions.

• Corporate Transparency Gaps

  For years,  Companies House  has enabled the easy formation of companies with limited scrutiny of the true beneficial owners. The NCA estimated that £100 billion pounds is laundered every year through UK-registered entities involved in high-end money laundering schemes. Reports have also criticised the UK for facilitating laundromat operations through its offshore territories, such as the British Virgin Islands. Reforms initiated through the Economic Crime and Corporate Transparency Act 2023 seek to address these weaknesses but remain in early stages of implementation.

• Fraud at Crisis Levels

  Fraud now accounts for over 40% of all reported crime in England and Wales. According to UK Finance's Annual Fraud Report 2023, total fraud losses exceeded £1.2 billion in 2022. The rise of Authorised Push Payment (APP) scams, investment fraud, and romance scams, often enabled by social media platforms, has overwhelmed law enforcement capacity.

• Underfunded Enforcement Agencies

  Despite its leadership ambitions, the UK suffers from underfunding of enforcement bodies. In 2023, the Serious Fraud Office (SFO) faced criticism for dropped cases and staff shortages, including its failed prosecution of individuals in the Serco fraud case. According to a Transparency International UK briefing, investigative and prosecutorial agencies are trying to fight 21st-century financial crime with 20th-century budgets and tools.

  
  

What Needs to Change: Short-Term Priorities

To address immediate vulnerabilities and build momentum in combating financial crime, the UK should consider prioritising the following actions:

• Strengthen Corporate Transparency

To strengthen corporate transparency, Companies House should be reformed to introduce robust identity verification measures for company directors and beneficial owners. Whilst the Economic Crime & Corporate Transparency Act 2023 has initiated reforms, it is essential to accelerate its implementation. Additionally, offshore loopholes must be closed by enhancing oversight of British Overseas Territories and Crown Dependencies to ensure greater transparency in financial transactions and mitigate misuse.

• Enhance Law Enforcement Capacity

Law enforcement resources must be enhanced by increasing funding for the NCA, the SFO, and regional police forces to enable them to investigate and prosecute financial crimes more effectively. It is also crucial to improve skills and technology by investing in cutting-edge tools such as artificial intelligence, blockchain analytics, and advanced data analysis to address emerging threats, including cryptocurrency-related crimes.

• Expand Public-Private Partnerships

Public-private partnerships should be expanded by strengthening the JMLIT to include more financial institutions and fintech companies in its operations. Specialised task forces should also be established to address specific challenges, such as online fraud and cross-border money laundering.

• Tighten AML Enforcement

AML enforcement must be tightened by conducting more frequent audits of financial institutions and imposing stricter penalties on those failing to comply with AML regulations. Enhanced regulatory scrutiny of high-risk sectors, such as real estate, legal services, and luxury goods, is also necessary to prevent their exploitation for financial crimes.

• Launch a National Fraud Strategy

To target the fraud epidemic, a national campaign against fraud should be launched, including public awareness programmes to educate individuals about common scams and preventive measures. Additionally, banks and payment platforms must be mandated to implement stronger anti-fraud protocols to protect consumers and businesses.

By focusing on these strategic areas, the UK can strengthen its defences against financial crime and enhance its position as a global leader in combating illicit financial activities.

Building a Resilient Financial Crime Framework

To achieve sustained impact, the UK must address systemic challenges and develop a more resilient framework for preventing financial crime. This requires action across several critical areas:

• Modernise Laws for a Digital Economy

To modernise AML laws, it is essential to continuously review and update legislation to address emerging threats, such as decentralised finance (DeFi) and virtual assets. A beneficial ownership registry must also be implemented to ensure that beneficial ownership data is accurate, verified, and easily accessible, thereby enhancing transparency and accountability.

• Lead Globally, Act Locally

International collaboration should be strengthened by leveraging the UK’s influence in organisations like the FATF, the G7, and the G20 to advocate for global standards on cryptocurrency regulation and beneficial ownership transparency. Additionally, the UK should support developing countries by providing technical assistance and capacity-building programmes to help under-regulated jurisdictions strengthen their financial crime frameworks.

• Tackle Professional Enablers

To tackle professional enablers of financial crimes, stricter regulations and tougher penalties should be introduced for professionals such as lawyers, accountants, and estate agents who facilitate these activities. Oversight of Designated Non-Financial Businesses and Professions (DNFBPs) should also be increased to prevent their exploitation by criminals.

• Focus on Technology & Innovation

Focusing on technology and innovation, a national financial crime innovation hub should be established to encourage collaboration among regulators, technology companies, and academic institutions. Resources must be allocated to advanced tools, such as blockchain analytics, to enhance the ability to track illicit financial flows, particularly in cryptocurrency markets.

• Cultural Shift in Enforcement

A cultural shift in enforcement is necessary, with a greater focus on prosecuting individuals involved in financial crimes rather than relying solely on fines for institutions. Accountability within organisations should be promoted, especially at the senior management level, through frameworks like the Senior Managers & Certification Regime (SMCR).

• Combat Online & Payment Fraud

To combat online and payment fraud, collaboration with technology companies and telecom providers is crucial to minimise opportunities for such crimes. Enforcing stronger authentication measures for online payments and account access will further enhance security and protect consumers.

By addressing these systemic issues and embracing innovative approaches, the UK can build a stronger, more effective framework for preventing financial crime and ensuring long-term resilience.

Conclusion: Reform or Regress?

The UK remains a global benchmark for financial regulation, yet its defences against financial crime are under pressure. Without bold reforms, its reputation as a responsible financial centre could erode further.

By investing in technology, tightening enforcement, and driving systemic change, the UK can reclaim its leadership in the global fight against illicit finance—and turn the tide on the billions laundered through its institutions each year.