Strengthening the UK's Response to Illicit Finance

Despite cross-party and cross-Whitehall support, despite the urgent necessity and opportunity to show global leadership as the US rolls backwards on anti-money laundering legislation, and despite the UK government’s declaration of turning the tide against kleptocrats, cross-sector stakeholders continue to have fundamental concerns around the UK’s system for tackling illicit finance.1.  Interviews conducted for this Policy Brief confirmed that ‘the system is ‘not effective’.2.  So, if the UK government is failing to shift the dial in the fight against the UK’s dirty money problem, why is this the case, what are the implications, and what should be done about it?

Constraints on the government’s general ability to deliver are manifold, but competing priorities, limited resources, short-term thinking and bureaucratic inertia are perpetual problems for government delivery. These problems can be overcome. So, what needs to change in government policy to enable the kind of breakthrough that everyone wants to see in the UK’s fight against illicit finance?

Research conducted for this Policy Brief identifies the lack of a shared vision across the government, unclear leadership, limited accountability and a lack of central support and guidance as four key issues leading to inadequate prioritisation of the illicit finance agenda versus other policy areas. A lack of government prioritisation has resulted in piecemeal approaches to illicit finance. Root causes include structural constraints, institutional incentives and a lack of sustained political attention. To drive meaningful change, interviewed experts recommend a range of actions. This Policy Brief concludes that these should include appointing a cross-departmental minister, strengthening central government coordination, building on the current economic crime governance system and reforming funding mechanisms. Longer term, a culture change and increased strategic alignment across government planning, resourcing and delivery are necessary.

Following an overview of the methodology, this Policy Brief presents an assessment of the current UK system to counter illicit finance, the identification of key missing elements, and an analysis of the implications and root causes of the UK’s approach. It concludes with short-term and long-term actions to drive improvement to the government’s illicit finance agenda.

This Policy Brief is based on a literature review combined with original qualitative research. The literature review, conducted between September and December 2024, was of academic and grey literature – material and research produced by organisation outside traditional commercial or academic publishing, such as by civil society and independent commentators – focused on public sector delivery and reform, relevant UK government official data, strategy and policy documents relating to the illicit finance agenda, and analysis of publicly available records of government decision-making (including government reviews and implementation reporting). The research involved 16 semi-structured interviews conducted with experts from the public and private sectors, UK-based civil society organisations and academia.3.  These interviews explored three core themes: how the current government’s illicit finance system functions, the strengths and weaknesses of existing arrangements and recommendations for improvement of existing arrangements. 

Three main research challenges were encountered during the literature review and qualitative research:

1. Complexity. Illicit finance is complex and cross-cutting, and variables affecting organisational outcomes are multifaceted and interrelated with complex causality chains, non-linear relationships, interaction effects, feedback loops and contextual dependencies. The research therefore deliberately focused on systemic and high-level issues, mitigating the risk of excessive detail blurring key findings.
    
2. Limited evidence base. While institutional analysis is widely recognised by public management and policy scholars as valuable for studying multi-sector policy implementation, there remains a significant research gap. Consequently, this paper relies heavily on expert insights rather than an established evidence-based framework.
    
3. Institutional sensitivities. This research navigated numerous interdepartmental dynamics, and civil servants were understandably reluctant to engage. Although assured anonymity helped mitigate some concerns, the potential for self-censorship and resulting bias remained an inherent challenge.

The research compared and contrasted insights from multiple sources by using triangulation to identify key themes and to verify conclusions, minimising potential bias. Additionally, a consultative roundtable with government officials served to validate preliminary findings of this Brief.

The research conducted for this paper indicates that the UK government's illicit finance architecture reflects years of incremental development, with almost all interviewees feeling that this has resulted in fragmentation and complexity. The agenda is split across numerous strands of Whitehall structure, thinking and management, with at least 20 government departments, committees, agencies and operational bodies bearing interrelated responsibilities. It is covered by multiple overlapping strategies,4.  each with a slightly different focus and a separate governance mechanism. The Home Office and the Treasury are generally seen as Whitehall co-leads of the agenda, with the recent sanctions imperative and the personal commitment of the foreign secretary driving an increasing role for the Foreign, Commonwealth and Development Office (FCDO).

Perhaps the most central of the various overlapping systems is the joint public–private economic crime system, centred on the Economic Crime Plan (ECP) and governed by the Economic Crime Strategic Board (ECSB). The majority of interviewees felt that this system has driven substantial progress since its establishment in 2018, yet it also demonstrates significant weaknesses. Interviewees noted that within the current system, there is no theory of change; it is heavily focused on the financial sector and anti-money laundering,5.  which is not the only tool in the box to fight illicit finance; transparency is very limited;6.  and, while the ECP does commit the government to a series of specific actions, the ECP includes other actions as vague as ‘identify[ing] any obstacles to [an] effective response'.

Key gaps in both institutional engagement and coordination also persist. The Department for Business and Trade, the Ministry of Defence and the Department for Science, Innovation and Technology are disconnected from Whitehall’s architecture for tackling illicit finance, despite having clear and important roles to play.7.  The Joint Anti-Corruption Unit in the Home Office, although well regarded,8.  does not have a cross-government role on illicit finance.9.  The National Economic Crime Centre, initially conceived to bring together government departments as well as law enforcement, prosecutors, regulators and the private sector, has not developed into a body that coordinates policy as well as enforcement.

Despite these structural challenges, the government's system for tackling illicit finance appears to benefit from one notable strength: its civil servants. Time-pressed civil servants have worked to build personal relationships across Whitehall which have helped them navigate institutional barriers.10.  As one interviewee put it, 'Officials make it work despite the system – it wouldn't be coherent at all if they didn't sort out the mess so well between them'.11.  This suggests that, while the system may remain flawed, civil servants play an important role in making it more effective than it might otherwise be.

The National Audit Office identifies nine requirements for effective cross-government working. Analysis of the interviews conducted for this paper suggests that four of these are missing from the government’s illicit finance agenda.12.

1. Shared vision. Effective delivery within multiple constraints requires absolute clarity on priorities, and this is currently lacking. As almost all interviewees observed, everything is a priority to the government; there is no shared understanding of what matters most. Effective delivery also requires a shared understanding of the problem the system is trying to solve; however, different departments have differing views on foundational questions. Departments disagree on issues such as whether illicit finance is the same thing as economic crime, whether compliance with standards set by the Financial Action Task Force (FATF) is the full and only objective of the illicit finance agenda, or whether a broader approach is required.13.
   
   This lack of a common vision has eroded external confidence in the government’s ability to manage the illicit finance agenda coherently. Interviewees cited government departments being unaware of relevant actions taken in other parts of government,14.  a lack of effective mechanisms to ensure coherence across interrelated agendas,15.  and disagreement on core policy positions16.  as factors affecting their confidence in the government’s approach. The result is a policy landscape where all perspectives remain incomplete, and the fundamental question of what really matters remains unanswered.
    
2. Strong leadership. Neither the Treasury nor the Home Office has the authority to lead the cross-government system, and political leadership is unclear.17.  One interviewee explained that, without a single empowered leader to take a systemic view, ‘We never take a step back to ask if there is another way of doing this. No one is asking “what are we trying to achieve as a system” rather than “how do we fill this specific gap”, because no one is empowered to do so’.18.  The system also lacks the means to identify win–win opportunities, effectively manage trade-offs, or establish clear priorities: ‘No one bites the bullet to say [that] some sorts of economic crime are more important than others’.19.
    
3. Proportionate and clear governance and decision-making. Multiple layers of reporting, across overlapping strategies, results in fragmented governance arrangements, which blur accountability for decision-making. The ECSB operates with very little transparency, and faces criticism for marking its own homework: as one government official noted, ‘Who cares if we don’t do what we say we will do? Who is accountable for whether or not all our actions come together to actually achieve something?’.20.  The little accountability there is comes via Parliamentary Questions, Select Committees and external multilateral reviews such as those conducted by the FATF and the United Nations Convention against Corruption Implementation Review Mechanism. Ultimately, however, ministers need to be held accountable for policy decisions, and there is currently no single ministerial point of accountability. Where does the buck stop? 
    
4. Central support and guidance. There is currently no central support mechanism to facilitate cross-government working on the illicit finance agenda.

The effects of these absences are interrelated, each further compounding the others. The lack of a common understanding about what illicit finance is contributes to a lack of consensus on how important it should be to address, enabling unclear governance arrangements to persist. The lack of clarity around accountability caused by the unclear governance arrangements undermines the prospect of strong leadership, while a lack of public or political demand for accountability – itself partly a result of the lack of a shared vision – further fragments the government response.

Every interviewee found it easy to provide examples of why and how the above omissions matter. Responses coalesced around three themes, each of which were highlighted by most interviewees:

1. Inadequate prioritisation of the economic crime agenda: As one interviewee explained, ‘The fact that economic crime is never the top priority for any one department means it doesn’t get the attention it should, because [the fragmented system means that] it’s impossible for anyone to properly assess aggregate risk’.21.  The result is insufficient allocation of resources and attention.
    
2. Preference for piecemeal reforms without prioritising impact: For example, in the Criminal Finances Act 2017, there was no enforcement of the new corporate criminal offence on failure to prevent tax evasion. Describing the approach taken here, one interviewee said: ‘Something bad happened, we need a new law to stop that happening again, oh good, we have a new law now’.22.
    
3. Issues falling between the cracks: One interviewee described that ‘the system struggles to coordinate responses to emerging challenges, such as China-related illicit finance, where it’s unclear whether to follow the domestic-led approach or the international-led approach’.23.  Another interviewee added that ‘trade-based money laundering flourishes unchecked just because it doesn’t fit anywhere neatly within the system’.24.  Significant issues such as these falling into organisational blind spots risks their being unintentionally sidelined within the system.

Analysis of the research findings informed by the literature review and the author’s own expertise suggest three root causes of the challenges identified hitherto:

1. Structural constraints. The system faces inherent tensions between vertical accountability lines within departmental hierarchies and the need for horizontal coordination between different departments, and there is limited central government capacity for managing cross-cutting issues.
    
2. Institutional incentives. The UK government creates powerful disincentives for civil servants to deliver long-term change: driven by the election cycle, the implicit preference is always for immediate incremental outputs over systemic reform and long-term impact. This is particularly challenging for the illicit finance agenda, given the challenge of demonstrating impact against a threat which is inherently difficult to measure.
    
3. Lack of sustained political attention. As one observer notes, ‘Such an incoherent system could not exist if anyone in charge had any idea that it did, and the best explanation for why they don’t know is that they don’t care’.25.  This pointed critique highlights how political disinterest enables dysfunctional systems to operate indefinitely, with leadership remaining conveniently unaware of problems they have little incentive to address.

This is a circular problem. Ministers are not fully aware of the government’s poorly conceived response to illicit finance because civil servants do not tell them, because a) doing so ‘would upset the applecart when everyone wants to play nice’,26.  and b) ministers do not ask. When political attention does materialise, it is focused on specific issues and favours quick wins – such as sanctions – over systemic improvement.

The interrelated nature of what is missing from the government's illicit finance agenda and the root causes of these absences means that no single solution can be the whole answer – the problem is deeper than that. Ultimately, the UK government should acknowledge the need for change and take responsibility for delivering it. The foreign secretary’s campaign against illicit finance, although welcome, is not sufficient to achieve and embed this across the government system. Informed by and tested through the interviews conducted for this research, this Policy Brief recommends four immediate steps, alongside two longer-term changes.

Short-Term Steps

1) Appoint a single cross-departmental minister

As the National Audit Office has identified, conflicting ministerial priorities are a significant barrier to effective cross-government working, whereas joint ministerial portfolios have proven to be effective at providing clear leadership and breaking down institutional silos across complex policy areas. Therefore, a joint minister with a comprehensive mandate27.  would be able to take hold of the system and manage divergent policy interests in a way that no one currently can. The role would have executive power and stronger statutory foundations than the Anti-Corruption Champion, and would provide a single point of accountability.

Recognising both the current locus of political will within the FCDO and the centrality of both the Treasury and the Home Office to this agenda, this joint minister should be based within these three departments equally, while maintaining one single private office (located within the Cabinet Office) and being answerable to the prime minister.

2) Build on the current economic crime governance system

The current economic crime governance system should be strengthened through a comprehensive review of ECSB participation and by dramatically improving transparency. Improving transparency will better enable public and parliamentary scrutiny. A new high-level governance and decision-making mechanism should also be developed, in the model of the government’s new Mission Boards. This mechanism should sit above the existing mechanisms governing the numerous overlapping strategies,28.  and enable meaningful prioritisation, oversee coherence and provide a unified accountability pathway. 

3) Strengthen the centre of government’s coordination capacity

Management and coordination of effective cross-cutting policy delivery requires a robust administrative function at the centre of government. Even before the recently announced Cabinet Office cuts, the UK’s central government coordination was relatively weak by international standards. The Cabinet Office focuses on political-level coordination rather than cross-departmental policy development and delivery. Although no doubt more difficult in the context of current cuts, enhancing the role of the Cabinet Office in relation to coordination of the illicit finance agenda would support delivery across the government system, through leveraging the Cabinet Office’s policy-neutral stance, convening power and expertise in managing complex, cross-cutting agendas. This could be achieved through building on the recently established Mission Delivery Unit.

4) Reform funding mechanisms to support cross-cutting delivery

Previous spending reviews and business planning processes have strengthened adversarial dynamics between departments, created barriers to effective collaboration, and perpetuated departmental silos. The government has indicated its intent to reform these processes so that the forthcoming Comprehensive Spending Review (CSR) better supports cross-departmental working. As argued by Olly Bartrum, Ben Paxton and Rhys Clyne, this is an opportunity for the Treasury to enable more effective working on cross-government agendas such as illicit finance. This could be done by developing joint spending plans, establishing cross-departmental budgets for shared priorities, and prioritising collaborative outcomes over departmental self-interest.

Long-Term Recommendations

1) Build on relationships to drive culture change

The mission-led approach requires new ways of working in government and is fundamentally about culture. Refining individual components within the system will not transform the government’s illicit finance agenda. Creating ever more meaningful connections between them, in support of a truly joint mission, will. This requires cultivating wider and more robust networks of trust in which stakeholders understand each other personally and share common perspectives. This takes time, and the new joint minister would need to incentivise this culture change. This process could be supported through strengthening strategic alignment.

2) Strengthen strategic alignment

Creating a single integrated system guiding strategic planning, resource allocation and delivery could ease the structural constraints currently affecting this agenda. The creation of a single unified illicit finance risk assessment framework would provide a comprehensive view of the threats – not just operational threats, but also a view to the full range of policy objectives. This should feed directly into a single, comprehensive national action plan which, in place of and unlike the current ECP, would be shaped to respond to the threats identified. The action plan, led by the joint minister, should be underpinned by fully costed budgets – creating a seamless cycle of risk identification, response and resource allocation. 

Implementation Approach

Three forthcoming moments offer opportunities to advance these solutions: the launch of the new Anti-Corruption Strategy, the CSR, and the development of the third ECP. Each of them will provide a window for change; the government should use these moments as opportunities to implement the above recommendations.

The UK government’s fight against illicit finance is hampered by systemic weaknesses that require decisive action. This Policy Brief has identified four areas missing from the government’s illicit finance agenda (the absence of a shared vision, clear leadership, robust accountability and central support and guidance) as constituting critical gaps undermining effective cross-government coordination. These gaps have resulted in inadequate prioritisation, inconsistent conceptualisation, reactive gap-filling rather than systemic solutions, and critical vulnerabilities falling between departmental responsibilities.

To address these challenges, the government must implement reforms – including appointing a cross-departmental minister, strengthening governance systems, enhancing central coordination capacity, and reforming funding mechanisms – while simultaneously investing in long-term culture change and strategic alignment. These reforms are not resource intensive and would enable greater effectiveness in the government’s efforts to address the UK’s persistent dirty money problem. With several upcoming policy moments offering windows for change, now is the time to bridge the gap between intention and impact in the government’s illicit finance agenda.