If your firm is authorised by the Financial Conduct Authority (“FCA”) but is not within scope of the Money Laundering Regulations 2017, you may want to check your FCA fee statement. This is because your firm may have been charged the Economic Crime (Anti-Money Laundering) Levy (“ECL”) when it is not required to pay it.
What is it?
The ECL was introduced by the Autumn Budget in 2021 as part of a long-term initiative to tackle economic crime in the UK. It is envisaged that it will raise around £100 million per year from firms regulated by the MLRs to fund government plans to tackle money laundering and deliver the reforms committed to in the 2019 Economic Crime Plan.
The ECL is an annual charge and has started being included on FCA invoices from July 2023 (seeking to cover firms who were subject to the MLRs between 6 April 2022 and 5 April 2023). The FCA amongst others, is responsible for collecting the ECL, starting to do so in this new FCA fee year.
Who is required to pay the ECL?
Under the Finance Act 2022, the ECL is applicable to any entity carrying on “regulated business”, meaning “a business carried on…by a relevant person within the meaning of the MLRs”. Practically speaking, if a firm carries on an activity that makes it a “relevant person” under the MLRs, it is required to pay the ECL. If a firm does not fall within this definition, it is not required to pay the ECL.
Therefore, only if your firm is:
- authorised by the FCA; and
- regulated by the MLRs,
will the ECL be payable to the FCA.
The value of a firm’s ECL is not an insignificant number; it is a fixed annual amount, with different bands depending on UK revenue of a firm as a whole (rather than just its revenue from activities falling within scope of the MLRs):
| UK Revenue | Fee amount |
| Under £10.2 million | No ECL liability |
| £10.2 million – £36 million | £10,000 |
| £36 million - £1 billion | £36,000 |
| More than £1 billion | £250,000 |
Has your firm been charged the ECL incorrectly?
While the ECL is intended to be charged to FCA authorised firms required to comply with the MLRs, we understand that several firms have been incorrectly categorised as such and are being charged the ECL as part of their annual ‘Regulatory Fees & Levies’ payment. Although it is unclear as to why this has happened, it may be because FCA permissions do not map exactly to the activities subject to the MLRs (for example, only ‘finance leasing’ will bring a firm within the scope of the MLRs, but all forms of consumer hire can trigger the relevant FCA permissions), causing the FCA to adopt a broader approach than the legislation intended when administering the ECL.
What should you do if your firm is affected?
If your firm has either been charged the ECL or received an invoice stating that it is due, when you do not think it is applicable, we recommend reviewing your activities against the MLRs in the first instance to confirm that you do not carry out “regulated business”. If this is established, then firms can reach out to the FCA to challenge the application of the ECL. When doing so, we recommend firms:
- state the regulated activities your firm carries out;
- detail the reasons why you believe your firm is not subject to the MLRs;
- request a refund or cancellation and reissuance of the invoice, removing the ECL entry; and
- ask about what steps the firm should take to prevent the ECL appearing on future invoices.
How can we help?
Having already assisted firms with challenging the FCA’s application of the ECL to them, we can support at all stages of this process – from helping firms map their activities to the MLRs and establishing the specific rationale for why the ECL is not applicable, through to drafting correspondence to the FCA in relation to the challenge. We are also able to support firms when liaising with the FCA on an ongoing basis, responding to queries it may have of your firm in relation to the ECL and financial crime or its permissions. Please do not hesitate to get in touch if you have any queries.
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