What does the Economic Crime Levy mean for housing associations?

The Economic Crime Levy (ECL) is a new annual charge affecting entities supervised under the Money Laundering Regulations (MLRs) with a UK revenue exceeding £10.2m per year.

It is part of the government’s wider objective, outlined in the 2019 Economic Crime Plan, to develop a long-term sustainable resourcing model to tackle economic crime.

Why is the ECL relevant to housing associations?

Any housing association supervised for anti-money laundering purposes under the MLRs which has a UK revenue exceeding £10.2m per year is liable to pay the ECL.

Many housing associations are subject to the MLRs because they carry out credit related activities or conduct ‘estate agency business’ – when acting as the estate agent for the co-owner on a shared ownership resale. They may also conduct other activities which fall within the scope of the MLRs and should ensure that they have identified all such activities (as detailed in clause 8 of the MLRs) and have registrations with the appropriate supervisor(s) in place.

Depending on the nature of the activities carried out, housing associations are required to register with, and be supervised by, either the Financial Conduct Authority (FCA) or His Majesty’s Revenue and Customs (HMRC) for anti-money laundering purposes.  

The application of the ECL is based purely on revenue, rather than risk, and so the fact that part of the business which is affected may be very small or low risk does not lessen the housing association’s liability to pay the ECL.

The ECL is based on an individual housing association’s revenue and not consolidated group revenue. Therefore, each entity within a group which meets the ECL requirements will need to separately register for and pay the ECL.

How much is the ECL?

The ECL will be paid as an annual fixed fee which will be determined by the band in which a housing association sits, based on its revenue for the relevant financial year.

Who will collect the ECL?

Housing associations will only need to provide information to, and pay, one collection authority, even if they are supervised under the MLRs by both the FCA and HMRC. The registration and payment procedures vary depending on which collection authority you need to pay the ECL to.

Housing associations supervised only by HMRC under the MLRs must register with, and pay, the ECL to HMRC.

Those supervised by the FCA under the MLRs must follow the FCA ECL process, even where HMRC also supervises some of their business activities.

HMRC ECL process

Where HMRC is the collection authority, housing associations will only need to register for the ECL once. “Small” entities are exempt from the ECL and are not required to register. Registration must be via the HMRC online portal.

Housing associations that have registered for the ECL are also required to submit an online return by 30 September each year, even if the entity does not meet the threshold for paying the ECL in that year. After submitting a return, housing associations will be able to pay their ECL liability online.

Payment is due by 30 September each year and will cover the previous financial year. The first ECL will be charged on entities that were supervised for anti-money laundering at any time during the financial year ending 31 March 2023. The payment for this period will be due on 30 September 2023.

FCA ECL process

All housing associations registered with, and supervised by, the FCA for anti-money laundering purposes (who were subject to the MLRs between 6 April 2022 and 5 April 2023) are required to submit their data via the new Reg Data Report (FIN074). The purpose of the form is for the FCA to determine which entities are liable to pay the ECL and place them in the correct levy band. FIN074 was due to be submitted by 2 May 2023. The form can still be submitted now, but the failure to submit in time may result in a £250 administrative fee.

Separately, entities registered with the FCA, as an Annex 1 financial institution should have received a letter from the FCA to report their data.

Invoicing will be conducted as part of the FCA's normal invoicing process and the ECL will be an additional line on the invoice. Housing associations will see the ECL appear on their FCA invoices from July 2023.

If you require more information or support around the ECL, please seek legal advice.