Ad Hoc Committee

Draft Financial Investigations
(Northern Ireland) Order 2001

Report and Proceedings of the Committee

AD HOC COMMITTEE - FINANCIAL INVESTIGATIONS
(NI) ORDER 2001 : MEMBERSHIP

The Committee was established following a resolution of the Northern Ireland Assembly on 11 December 2000:-

"That this Assembly appoints an Ad Hoc Committee to consider the draft Financial Investigations (Northern Ireland) Order laid by the Secretary of State in accordance with section 85(4)(b) of the Northern Ireland Act 1998 and to submit a report to the Assembly by 5 February 2001.

Composition:
UUP 2
SDLP 2
DUP 2
SF 2
Other Parties 3

Quorum: The quorum shall be five.

Procedure: The procedures of the Committee shall be
such as the Committee shall determine."

The membership of the Committee is as follows:-
Mr Alban Maginness (Chairperson)
Mr William Bell (Deputy Chairperson)
Mr Fraser Agnew
Mr Seamus Close
Mr David Ervine
Ms Patricia Lewsley
Mr David McClarty
Mr Pat McNamee
Ms Sue Ramsey
Mr Mark Robinson
Mr Sammy Wilson

TABLE OF CONTENTS

Introduction

Background

The Committee’s Approach

Committee’s Consideration of the Draft Order

Conclusions and Recommendations

Appendix 1 Proceedings of the Committee

Appendix 2 Minutes of Evidence

Appendix 3 List of Witnesses

Appendix 4 List of Written Submissions to the Committee

Appendix 5 Written Submissions to the Committee

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INTRODUCTION

1. The Secretary of State wrote to Lord Alderdice on 22 November 2000 referring the draft Financial Investigations (Northern Ireland) Order 2001 to the Assembly for its consideration and comments no later than 12 February 2001. As a result of this letter the Assembly established an Ad Hoc Committee on 11 December 2000, to consider the draft Order and submit a report to the Assembly by 5 February 2001.

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BACKGROUND

2. The Ad Hoc Committee held its first meeting on 19 December 2000, Mr Alban Maginness was elected as Chairperson and Mr William Bell as Deputy Chairperson. The Committee agreed that all meetings would be held in public, not to have deputies, and that decisions requiring division would be determined by simple majority. The Minutes of Proceedings are in Appendix 1.

3. At the first meeting the Committee considered the draft Financial Investigations (Northern Ireland) Order 2001 and debated the purpose and changes to the legislation. The Committee agreed its overall approach, which is set out below.

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THE COMMITTEE’S APPROACH

4. The Committee decided, as a result of extremely tight deadlines, it would invite written and oral evidence from:

• Her Majesty’s Customs and Excise;

• Northern Ireland Bankers’ Association;

• Northern Ireland Human Rights Commission;

• Royal Ulster Constabulary; and

• The Law Society of Northern Ireland.

5. It was also decided to invite written evidence from:

• Association of British Insurers;

• Criminal Assets Bureau, Republic of Ireland;

• European Commission Representation in Northern Ireland;

• General Council of the Bar of Northern Ireland;

• Institute of Chartered Accountants in Ireland;

• Irish Council for Civil Liberties;

• Liberty;

• National Criminal Intelligence Service;

• Northern Ireland Association of Citizens Advice Bureaux;

• The Queen’s University of Belfast, School of Law; and

• University of Ulster, Faculty of Business and Management.

6. The Committee received 11 written submissions of evidence.

7. Representatives of the Royal Ulster Constabulary and Her Majesty’s Customs and Excise appeared before the Committee on 8 January 2001 to make presentations and answer questions about the provisions of the draft Order, Minutes of Evidence are given in Appendix 2. Her Majesty’s Customs and Excise officials agreed to forward supplementary written evidence to the Committee.

8. Officials from the Northern Ireland Bankers’ Association, Northern Ireland Human Rights Commission and The Law Society of Northern Ireland appeared before the Committee on 9 January 2001 to make presentations and answer questions about the provisions of the draft Order. The Northern Ireland Human Rights Commission agreed to send the Committee a final written submission to replace its provisional written submission. The Law Society also agreed to forward the Committee a written submission.

9. A list of witnesses is included in Appendix 3. A list of organisations who submitted written evidence to the Committee is included in Appendix 4 and the written submissions are included in Appendix 5.

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COMMITTEE’S CONSIDERATION OF THE DRAFT ORDER

10. The Committee carried out an Article by Article consideration of the draft Order on 16 January 2001.

11. Article 1 provides the title of the Order and states that the substantive provisions of the Order shall come into operation on a day to be appointed by the Secretary of State.

The Committee had no comment on this Article.

12. Article 2 attracts to the Order the provisions of the Interpretation Act (Northern Ireland) 1954.

The Committee had no comment on this Article.

13. Article 3 amends Article 49 of the Proceeds of Crime (Northern Ireland) Order 1996. The effect of the amendment would be to enable a Customs officer, of the rank equivalent to a police superintendent (ie surveyor or above) to apply for the appointment of a financial investigator to assist Customs and Excise investigations into financial benefit obtained as a result of serious crime. Additionally, it makes new provision for the authorisation by the County Court of named police and Customs officers to exercise two powers, namely the power to carry out a trawl of all financial institutions and of solicitors, ie general bank and solicitor circulars respectively.

The Committee had no objections to the appointment of police and Customs officers on the assumption that relevant officers would be sufficiently trained and au fait with the requirements of the Code of Practice governing the activities of financial investigators. The Committee noted the concerns expressed by the Northern Ireland Bankers’ Association in relation to the time period for compliance with general bank circulars. It recommended there be some mechanism whereby the Code of Practice for financial investigators could be amended to include an application for an extension of the time period for compliance with general bank and solicitor circulars. The Committee’s views on general solicitor circulars are given in 16 below.

14. Article 4 amends Article 50 of the 1996 Order to provide financial investigators with the same rights of access to material under a production order as are currently available to the police. It will also amend this procedure to include production of any property held by a person who has benefited from specified or serious criminal conduct, or transferred to or by such a person in the previous six years. It also makes consequential amendments to Articles 51 and 52 to reflect the amendments made to Article 49.

The Committee had no objections to these amendments.

15. Article 5 amends Schedule 2 to the 1996 Order. One of the changes relates to paragraph 3 of the Schedule which enables a financial investigator to require a bank to provide him with specified information. The amendment would broaden this power, so that such a requirement could instead be imposed on any person carrying out "relevant financial business", as defined by the Money Laundering Regulations 1993. It also broadens the range of information the bank must provide.

The Committee had no objections to this amendment.

16. Article 6 enables a financial investigator, where he believes a person has benefited from serious crimes, to require a solicitor to confirm whether during a specified period, the person was his client in respect of certain types of non-contentious business. These will concern transactions involving any land, business, company, firm, partnership, trust, bank account, savings account or investments. If so, the solicitor would be required to provide certain information about the client and the nature of any transaction relating to those matters.

The Committee noted that there was no definition of "non-contentious business" in the draft Order and recommended that this should be clearly defined. The members debated the supporting and opposing arguments for Article 6. The Committee’s majority view was to accept the amendment in the draft Order but some members had serious concerns reflecting those of Liberty, the Human Rights Commission and The Law Society of Northern Ireland on solicitor/client confidentiality and legal professional privilege. The Committee agreed to recommend that the Secretary of State enter into full and meaningful consultations with the relevant organisations before implementation.

17. Article 7 extends the time limit for bringing summary proceedings for offences under paragraph 5 of Schedule 2 to the 1996 Order. It introduces an exception to the standard period within which a prosecution of a summary offence should be brought – 6 months from the commission of the offence. In relation to summary offences under paragraph 5(1) or (2) of the Schedule (failing to provide, or falsifying, information) the time limit for prosecutions would become three months from the date on which sufficient evidence to prosecute becomes available or 12 months from the commission of the offence, whichever is the later.

The Committee had no objections to this extension.

18. Article 8 makes certain minor amendments to Schedule 2 to the 1996 Order which would be necessary as a consequence of the other provisions of this draft Order.

The Committee had no comment on this Article.

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CONCLUSIONS AND RECOMMENDATIONS

19. The draft Order was supported by the majority of the Committee. The Committee made the following recommendations:

• Full and meaningful consultation by Secretary of State before implementation.

• There is a need for a clear definition of "non-contentious business".

• There should be a mechanism to apply for an extension of the time period for compliance with general bank and solicitor circulars.

• Update the Code of Practice for financial investigators.

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APPENDIX 1

PROCEEDINGS OF THE COMMITTEE

MINUTES OF PROCEEDINGS

TUESDAY, 19 DECEMBER 2000
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr William Bell MLA (Deputy Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Pat McNamee MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis
Mr Hugh Widdis

Apologies: Mr David Ervine MLA
Ms Sue Ramsey MLA

Meeting opened at 10.05am in closed session.

The Clerk in the Chair.

1. Apologies

Apologies are listed above.

2. Election of Chairperson and Deputy Chairperson

The Clerk opened the meeting and notified the Committee that the two Democratic Unionist Party nominations had been changed to Mr Mark Robinson and Mr Sammy Wilson. Nominations for Chairperson were sought. Mr Close proposed that Mr Maginness take the Chair; Ms Lewsley seconded this. There were no further nominations. The question was put that Mr Maginness do take the Chair. Mr McNamee questioned if this was allowed as Mr Maginness is Chairperson of the Regional Development Committee. The meeting was suspended at 10.10am for the Clerk to seek advice on this matter.

Mr Bell joined the meeting at 10.11am.

The meeting resumed at 10.15am.

The Clerk informed the Committee that it was in order for Mr Maginness to chair the Regional Development Committee and the Ad Hoc Committee – Financial Investigations (NI) Order 2001 if elected. The Clerk put the question that Mr Maginness do take the chair. This was carried unanimously.

Mr Maginness in the Chair.

Nominations for Deputy Chairperson were sought. Mr Wilson proposed Mr Bell take the position of Deputy Chairperson; Mr Close seconded this. There were no further nominations. The question was put that Mr Bell take the position of Deputy Chairperson. This was carried unanimously.

3. Declaration of Interests

The Chairperson reminded members that they were required to declare any specific or other interests related to the work of this Committee. He asked each member to declare any interests. There were none in addition to those published in the Register of Members’ Interests, Second Edition, June 2000.

4. Terms of Reference

The Chairperson outlined the Terms of Reference for the Committee.

5. Committee’s Procedures

The members agreed to hold future meetings in public session and that voting would be by simple majority as in Standing Order 47(9). It was agreed not to have deputies.

6. Committee’s Work Programme

The Committee debated the purpose and changes to the legislation following a brief presentation from the Assembly Research and Library Service and requested a research brief on the comparison of the proposals within the Financial Investigations (Northern Ireland) Order 2001 with other countries.

Action: Clerk

As a result of the extremely tight deadlines set out in the Secretary of State’s letter to Lord Alderdice, the Committee agreed to invite written and oral evidence from:

Her Majesty’s Customs and Excise
Law Society of Northern Ireland
Northern Ireland Banker’s Association
Northern Ireland Human Rights Commission
Royal Ulster Constabulary

The Committee agreed to invite written evidence from:

Association of British Insurers
Criminal Assets Bureau, Republic of Ireland
European Commission Representation in Northern Ireland
General Council of the Bar of Northern Ireland
Institute of Chartered Accountants in Ireland
Irish Council for Civil Liberties
Liberty
National Criminal Intelligence Service
Northern Ireland Association of Citizens Advice Bureaux
Queen’s University of Belfast, School of Law
University of Ulster, Faculty of Business and Management

Action: Clerk

7. Any other business

None.

Mr Bell and Mr Close left the meeting at 10.54am.

8. Dates of future meetings

The members agreed that the next two meetings of the Committee would be held on Monday, 8 January 2001 at 2.00pm in Room 135, and Tuesday, 9 January 2001 at 10.30am, in Room 144, Parliament Buildings.

The Chairperson adjourned the meeting at 10.59am.

Alban Maginness MLA
Chairperson, Ad Hoc Committee - Financial Investigations (NI) Order 2001
8 January 2001

MINUTES OF PROCEEDINGS

MONDAY, 8 JANUARY 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Mr David Ervine MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis

Apologies: Mr William Bell MLA (Deputy Chairperson)
Ms Sue Ramsey MLA

Meeting opened at 2.07pm in public session.

1. Apologies

The apologies are listed above.

2. Approval of draft minutes of previous proceedings

The minutes were agreed and signed by the Chairperson.

3. Matters arising from meeting of 19 December 2000

The Chairperson reminded the members of the Secretary of State’s letter to Lord Alderdice outlining that comments should be received from the Assembly no later than 12 February 2001.

4. Evidence from the Royal Ulster Constabulary (RUC)

Evidence on the Financial Investigations (NI) Order 2001 was taken from Detective Superintendent David Thompson and Detective Chief Inspector Alan Mains from the RUC.

2.13pm Mr Ervine joined the meeting
2.16pm Mr Robinson joined the meeting
2.21pm Mr Agnew joined the meeting

5. Evidence from Her Majesty’s Customs and Excise

Evidence on the Financial Investigations (NI) Order 2001 was taken from Mr Bill Logan and Mr Donald Toon from Her Majesty’s Customs and Excise. It was agreed that they would forward additional information.

Action: Clerk

6. Any other business

The Chairperson informed members that The General Council of the Bar of Northern Ireland would not be able to provide a written submission until after their meeting of 17 January 2001 and the Northern Ireland Association of Citizens Advice Bureaux would not be submitting a written response.

The Committee agreed to ask the Criminal Assets Bureau, Dublin for an oral presentation.

Action: Clerk

7. Dates of future meetings

The next meeting of the Committee is to be held on Tuesday, 9 January 2001 at 10.30am in Room 144 in Parliament Buildings. A further meeting for Tuesday, 16 January 2001 at 10.30am was agreed.

The Chairperson adjourned the meeting at 3.28pm

Alban Maginness MLA
Chairperson, Ad Hoc Committee – Financial Investigations (NI) Order 2001
9 January 2001

MINUTES OF PROCEEDINGS

TUESDAY, 9 JANUARY 2001
ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr William Bell MLA (Deputy Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Mr David Ervine MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Pat McNamee MLA
Ms Sue Ramsey MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis
Mr Hugh Widdis

Meeting opened at 10.38am in public session.

1. Apologies

None.

2. Approval of draft minutes of previous proceedings

The minutes were agreed and signed by the Chairperson.

3. Matters arising from meeting of 8 January 2001

The Chairperson informed members that the Criminal Assets Bureau, Dublin had provided a copy of its Annual Report 1999. This together with written submissions from the Association of British Insurers and the Queen’s University of Belfast School of Law were issued to members.

4. Evidence from Northern Ireland Bankers’ Association

Evidence on the Financial Investigations (NI) Order 2001 was taken from Mrs Patricia Beckett, Mr Robert Irvine, Mrs Irene Martin, Mr Bill McAlister and Mr Dennis Power of the Northern Ireland Bankers’ Association.

5. Evidence from Northern Ireland Human Rights Commission

Evidence on the Financial Investigations (NI) Order 2001 was taken from Professor Brice Dickson and Ms Maggs O’Conor of the Northern Ireland Human Rights Commission. A final written submission will be sent to the Committee.

11.43am Mr Ervine left the meeting.
12.10pm Ms Lewsley and Mr McClarty left the meeting.

6. Evidence from The Law Society of Northern Ireland

Evidence on the Financial Investigations (NI) Order 2001 was taken from Mr John Bailie, Mr Nigel Broderick, Mr Patrick Kinney and Mr John Neill of The Law Society of Northern Ireland. A written submission will be forwarded to the Committee.

7. Format of Report

A draft report will be prepared and distributed to members on Monday 15 January 2001.

Action: Clerk.

8. Any other business

The Assembly Research and Library Service provided a research brief on the comparison of the proposals within the Financial Investigations (NI) Order 2001 with other countries.

9. Date and time of next meeting

The next meeting of the Committee is to be held on Tuesday, 16 January 2001 at 10.30am in Room 152 in Parliament Buildings.

The Chairperson adjourned the meeting at 1.00pm.

Alban Maginness MLA
Chairperson, Ad Hoc Committee – Financial Investigations (NI) Order 2001
16 January 2001

MINUTES OF PROCEEDINGS

TUESDAY, 16 JANUARY 2001
ROOM 152, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr William Bell MLA (Deputy Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Mr David Ervine MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Pat McNamee MLA
Ms Sue Ramsey MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis
Mr Percy Johnston

Meeting opened at 10.37am in public session.

1. Apologies

None.

2. Approval of draft minutes of previous proceedings

The minutes were agreed and signed by the Chairperson.

3. Matters arising from meeting of 8 January 2001

No further information was received from the Criminal Assets Bureau, Dublin.

4. Update of Written Submissions

Members were given an update on written submissions received; 10 organisations provided written submissions.

5. Minutes of Evidence

All members were reminded to return amendments to the Minutes of Evidence by Tuesday, 16 January 2001.

6. Consideration of the Draft Report

The Committee examined the draft Report and it was agreed to carry out an Article by Article consideration of the draft Order.

Article 1 – The Committee had no comments on this Article.

Article 2 – The Committee had no comments on this Article.

Article 3 – The Committee was content with this Article but recommended there be some mechanism whereby the Code of Practice for financial investigators could be amended to include an application for an extension of the time period for compliance with general bank and solicitor circulars.

11.05am Mr Bell joined the meeting.

Article 4 – The Committee had no objections to this Article.

11.12am Mr Robinson joined the meeting.

Article 5 – The Committee had no objections to this Article.

11.17am Mr Agnew joined the meeting.

Article 6 – The Committee engaged in considerable debate about supporting and opposing arguments for Article 6. It recommended that "non-contentious business" should be clearly defined.

11.55am Ms Lewsley left the meeting.

12.12pm Mr McClarty and Mr Wilson left the meeting.

As regards the substance of Article 6 the Committee’s majority view was to accept the amendments in the draft Order. To some extent the Committee shared the concerns of Liberty, the Northern Ireland Human Rights Commission and The Law Society of Northern Ireland. It was also cognizant of those concerns and recommended that the Secretary of State enter into full and meaningful consultations before implementation.

Article 7 – The Committee had no objections to this Article.

Article 8 – The Committee had no comments on this Article.

Conclusion

The Committee agreed the format of the draft Report and that it should be amended to take account of today’s debate.

7. Agree Motion

The Committee agreed the following motion:

"That the Report of the Ad Hoc Committee set up to consider the draft Financial Investigations (Northern Ireland) Order 2001 referred by the Secretary of State should be submitted to the Secretary of State as a Report of the Northern Ireland Assembly."

Action: Clerk

8. Any other business

None.

9. Date and time of next meeting

The next meeting of the Committee is to be held on Monday, 22 January 2001 at 11.00am in Room 152 in Parliament Buildings.

The Chairperson adjourned the meeting at 12.20pm.

Alban Maginness MLA
Chairperson, Ad Hoc Committee – Financial Investigations (NI) Order 2001
16 January 2001

MINUTES OF PROCEEDINGS

MONDAY, 22 JANUARY 2001
ROOM 152, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr William Bell MLA (Deputy Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Mr David Ervine MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Pat McNamee MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis
Mr Percy Johnston

Apologies: Ms Sue Ramsey MLA

Meeting opened at 11.02am in public session.

1. Apologies

Apologies are listed above.

2. Approval of draft minutes of previous proceedings

The minutes were agreed and signed by the Chairperson.

3. Matters arising from meeting of 16 January 2001

The Committee agreed that a letter received from the Police Ombudsman for Northern Ireland to the Northern Ireland Office and copied to the Committee should be included as a written submission in the Report.

11.03am Mr McClarty joined the meeting.

11.04am Ms Lewsley joined the meeting.

11.04am Mr Agnew joined the meeting.

11.05am Mr Wilson joined the meeting.

11.08am Mr Ervine joined the meeting.

4. Agree draft Report

Mr Bell proposed the Committee should agree the Report subject to minor amendments. This was seconded by Ms Lewsley.

5. Order Report to be printed

Mr Wilson proposed that the Report be printed. This was seconded by Mr Close.

Action: Clerk

6. Any other business

The Committee agreed to place a copy of the Criminal Assets Bureau 1999 Annual Report in the Assembly Library.

Action: Clerk

Members agreed that the Minutes of Proceedings will be agreed and signed by the Chairperson.

The Chairperson concluded the meeting at 11.24am by thanking members and staff for their assistance in enabling the Report to be completed on time.

Alban Maginness MLA
Chairperson, Ad Hoc Committee – Financial Investigations (NI) Order 2001
22 January 2001

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APPENDIX 2

MINUTES OF EVIDENCE

MONDAY 8 JANUARY 2001

Members present:

Mr A Maginness (Chairperson)
Mr Agnew
Mr Close
Mr Ervine
Ms Lewsley
Mr McClarty
Mr M Robinson
Mr S Wilson

Witnesses:
Detective Supt D Thompson
Detective Ch Insp A Mains

1. The Chairperson: I welcome everybody back from the Christmas holidays and wish you all a happy and peaceful new year. We are providing a good example to the rest of the Assembly by starting fresh and early in the year.

2. The main item of business of the Ad Hoc Committee-Financial Investigations (NI) Order 2001 is to take evidence from the RUC and from Customs and Excise. There are two apologies — one from Ms Ramsey and another from the Deputy Chairperson, Mr B Bell. Are there any others?

3. The evidence being given today will be recorded, and, in order to assist the note takers from Hansard, I ask you to address formally other Committee members or witnesses, so that the note taker knows exactly who is speaking and to whom. Also, please ensure that mobile phones and pagers are actually switched off and not left on standby, because apparently if a call comes in, that disrupts the tape recording.

4. I am happy to invite Detective Superintendent David Thompson and Detective Chief Inspector Alan Mains to address us. Thank you, gentlemen. I welcome you here today.

5. We are grateful for the briefing note you sent us. Members have had an opportunity to read it. The Committee is obviously very interested in the subject and we are grateful to you for coming along to assist us in our deliberations.

6. Det Supt Thompson: Thank you very much, Chairperson. The submission I am about to put to the Committee is an extension of the written note. Unfortunately, you received the note late, but I was given this to put together on my return from Christmas leave.

7. The proposals in the Financial Investigations (Northern Ireland) Order 2001 strengthen or amend powers provided for in The Proceeds of Crime (Northern Ireland) Order 1996, and are intended to prevent criminals profiting from unlawful activities. Before examining the proposed new powers, it is important to be aware of those already in existence. The 1996 Order brought Northern Ireland broadly into line with the rest of the United Kingdom in respect of the law relating to the confiscation of the proceeds of drug trafficking and other serious crime. However, by virtue of article 49, additional investigative powers were introduced, which are unique to Northern Ireland. Article 49 permits the appointment of a person who is not a police officer as a financial investigator, provided a County Court judge is satisfied that certain criteria have been met.

8. Once appointed, a financial investigator has his or her own investigation powers. Those are quite detailed and — working on the premise that the Committee may have some knowledge of them — unless otherwise requested, I would propose only to summarise the powers.

9. Essentially, a financial investigator may, by notice in writing, require (a) a person to attend before him or her to answer questions or furnish information; (b) require a person to furnish information; (c) require a person to produce documents; and (d) require a bank to furnish information. Details requested must of course be relevant to the investigation for which appointed.

10. Under the proposed new legislation, the application for appointment of a financial investigator is no longer confined to the police but can be made by a senior officer of Her Majesty’s Customs and Excise. Suitable police officers or customs officers can also be appointed as financial investigators, although they do not command the same range of powers as are given to non-police or customs officers. Their powers are confined to those conferred by paragraphs 3 and 3A of schedule 2 of the 1996 Order, as amended.

11. New powers are also proposed in respect of solicitors gaining specified information, within a specified time and in a specified manner. The information sought must relate to a specifically named person, such as a client who is suspected of having benefited from serious crime.

12. Two other noteworthy changes have been proposed. First, under article 49 of the 1996 Order, the proceeds of any such conduct will read ‘any relevant property’. This is important as the actual proceeds of a criminal act can be altered or disguised to hide their provenance. Secondly, in paragraph 3 of schedule 2 of the 1996 Order "the business of banking, (the bank)" becomes "relevant financial business: (the respondent)." The amendment widens the application of the requirements to include all relevant financial business as defined by the Money Laundering Regulations 1993. It also increases the level of information that must be furnished to the investigator.

13. In terms of usage of the financial investigation powers between 26 August 1996 and 31 December 2000, financial investigators were appointed in respect of 28 cases; 97 notices to attend interview were issued; 781 notices to produce material were issued; 23 general bank circulars were issued, these resulting in the identification of 1,232 accounts. Seven persons have been prosecuted with failing to comply with financial investigator requirements.

14. It is the RUC’s submission that, since their introduction in 1996, financial investigation powers have been used to good effect. They are only used in selected cases, following a determination that the appointment of a financial investigator could substantially enhance the investigation. The criteria for appointment, as previously indicated, must satisfy a County Court judge.

15. An example of their assistance is the identification of 1,232 previously unknown accounts connected to those persons under investigation. We would contend that the proposed new powers will enhance the effectiveness of the existing powers. In particular, the ability to trawl all financial institutions, the ability to require a solicitor to confirm if a person was his/her client and to obtain details of transactions carried out on his or her behalf in respect of certain types of businesses should prove beneficial.

16. The ability to have selected police or customs officers appointed as financial investigators in order to issue general bank circulars or general solicitor circulars will obviate the need to seek the services of a person outside of the two principal law enforcement agencies.

17. The effects of drug trafficking, and acquisitive crime of a highly profitable nature, must not be underestimated. Their impact on society in general and on individual victims, particularly where organised criminality is involved, has been widely publicised. No good argument can be advanced as to why individuals should profit from their illegal activities. As well as bringing perpetrators to justice, it is only right that their ill-gotten gains are taken away. Unfortunately, with the assistance of professional advisors, those ill-gotten gains can often be hard to identify and retrieve. Therefore, it is important for law enforcement to have the necessary tools to combat such activity. This proposed new legislation will go a considerable way to meeting those needs.

18. The Chairperson: Chief Inspector, do you wish to add to that?

19. Det Ch Insp Mains: I will be here for question and answers from an operational viewpoint.

20. The Chairperson: Thank you very much, Superintendent. You talked about article 49, which provides additional investigative powers and for the appointment of a financial investigator. You said that that was unique to Northern Ireland. Is there any reason for that, or how did that arise?

21. Det Supt Thompson: It originates from the previous Northern Ireland (Emergency Provisions) Act, when an authorised investigator, which is very similar to a financial investigator, could be appointed for a terrorist finance investigation. The powers in article 49 emanate from that. I should say, on appointment in Northern Ireland, a financial investigator’s powers do have a remit throughout the rest of the United Kingdom; they are not solely confined to Northern Ireland.

22. The Chairperson: In your experience, has the appointment of a financial investigator been profitable, in terms of advancing investigations into the proceeds of criminality?

23. Det Supt Thompson: Absolutely. As indicated, financial investigators are only used in a select number of cases. Obviously, in investigations where the police have, or can gain, the evidence without the assistance of a financial investigator, we would not go to a County Court judge to seek an application for appointment. It is most unlikely that a County Court judge would appoint a financial investigator if we could advance the case without such assistance. We must satisfy the criteria, and satisfy the judge that the investigation could be enhanced by his or her assistance.

24. The Chairperson: I have one final question before throwing it open to the other members of the Committee. What sort of evidence would you need to have in order to satisfy the County Court judge?

25. Det Supt Thompson: At this time, only a financial investigator can apply for a general bank circular. In circumstances in which we are pursuing a proceeds of crime investigation, it is important to be able to trawl the banks, where accounts may be hidden, for information. We can only do that with a financial investigator. That is an example of when we go to the judge to seek an appointment.

26. The Chairperson: What evidence would you have to present to a County Court judge if you want to investigate a man’s affairs?

27. Det Supt Thompson: The judges, as you can well imagine, ask us very detailed questions. We have to go into considerable depth on what we have already done in the investigation, what evidence we have gleaned so far, and what is absent in the evidence trail to try and bring the individual or individuals to justice. It is very detailed and we are accountable to the judge.

28. The Chairperson: Is this done in private?

29. Det Supt Thompson: Yes. It is generally done in chambers.

30. Mr S Wilson: I have a couple of questions for Mr Thompson. First, you identified 1,232 previously unknown accounts. When those accounts were identified, were the proceeds seized or confiscated, or is there a further procedure? In how many cases have confiscation orders been imposed by the courts?

31. Det Supt Thompson: There is a further procedure. A bank may identify an account simply by the name and address of the account holder. To get details of that account, a production order has to be sought from the courts. That depends on whether there is anything in the account at that time, because money can be transferred in and out in a short space of time.

32. If we had evidence on which we could arrest and charge an individual with a serious crime under The Proceeds of Crime (Northern Ireland) Order 1996, we would be in a position to seek a restraint order on that account, if funds were in it. On conviction, we would then seek a confiscation order against the individual concerned.

33. Mr S Wilson: In how many of those 1,232 accounts has a restraint order and then a confiscation order been made?

34. Det Supt Thompson: I do not have that information with me today.

35. Mr S Wilson: That brings me to my second point. I would have liked to know how effective it was. It is one thing to identify an account, but there might be a legitimate reason why that account is held. In relation to the Order that the Committee is examining, are there additional powers that should be included in it to make more effective your investigations into crimes with a financial aspect?

36. Det Supt Thompson: Overall, there is much legislation that allows the police to conduct their investigations. The difficulty that we invariably encounter is finding that final piece of evidence proving a criminal offence. Currently, confiscation can only take place following conviction, and that, as you may be aware, is why the National Confiscation Agency may be created in the near future. Although it is called the National Confiscation Agency, to some degree that is a misnomer, because it will deal with civil forfeiture cases. It will not be necessary to secure a conviction. Confiscation will occur on the balance of probability that an individual’s assets are derived from their criminal activity. Therefore, the proposed new powers enhance the legislation for criminal matters by extending the previous general bank circular to all the relevant financial businesses under the Money Laundering Regulations 1993. That is very useful.

37. Also, for the first time, it will allow us to issue a general solicitor circular. As you are probably aware, organised criminals are capable of receiving professional advice — be that from accountants, solicitors or independent financial advisors. They have the wherewithal to seek assistance from these individuals. In case anyone thinks that I am castigating people in those particular professions, I should say that many people work innocently on behalf of a client.

38. Det Ch Insp Mains: With regard to the figures quoted by Mr S Wilson, it is not uncommon for an investigation, under the general bank circular, to establish one, two, or three people working in a criminal partnership who have thirty or forty accounts. They are obviously trying to spread their assets. While there is a figure of 1,300 — Interruption

39. Mr S Wilson: They are not all individuals.

40. Det Ch Insp Mains: That is correct.

41. Mr Close: I want to follow up the last reply to Mr S Wilson. There were 1,232 previously unknown accounts and seven people were prosecuted. That is about 176 accounts per person.

42. Det Supt Thompson: No. They do not relate to each other.

43. Mr Close: However, the bold statistics show that 1,232 previously unknown accounts were discovered. Are you saying that there were seven prosecutions in the same period?

44. Det Supt Thompson: There were seven prosecutions against people failing to comply with the requirements of financial investigators. That could be a requirement to appear at a certain time and place, which they failed to do, or they may have failed to furnish requested information. It is not necessarily connected to the accounts. Indeed, it is not related to the accounts, because, by and large, those accounts were provided by the banks and building societies, and they have never failed to comply with a requirement.

45. Mr Close: Are there any direct statistics available to respond to Mr S Wilson’s question about what those 1,232 accounts actually produced?

46. Det Supt Thompson: There may be, but I do not have them.

47. Mr Close: Is it possible to supply the Committee with details of the assets that were confiscated as a result of those accounts?

48. Det Ch Insp Mains: Many of our current investigations are protracted. Investigations into money laundering and similar offences take a long time to complete. During those investigations we issue general bank circulars, and those are probably the statistics that we are discussing. It would be necessary to wait for several trials to conclude before it was possible to obtain accurate figures.

49. In answer to your question — and the Committee must understand this — we are talking about a mindset against the criminal fraternity. They continually try to be one step ahead of us when it comes to money laundering.

50. Mr Close: Until we get to the civil forfeiture position, we are scratching on the surface. The proverbial dogs in the street could identify and point out individuals, and would have question marks over how they can afford such a lifestyle. Any of us in our towns and cities throughout Northern Ireland could effectively do that and pose the question: how can they manage to have such a lifestyle because x, y or z? That is one example.

51. For the other example, one only has to look at the drug scene. There are obviously numerous people profiteering and benefiting from the drug scene. The current legislation is effectively ineffective and if it were cracking down on drug trafficking, we would not be seeing these sort of statistics. We would not be seeing the increase of drug abuse that is destroying our society and the increased numbers of confiscations. There must be more coming in to have such a large volume being confiscated. In many respects, we are losing the battle. I hope you can correct me and tell me I am wrong.

52. Det Supt Thompson: The vast majority of criminals in Northern Ireland are what we would class as "spend as you go" criminals. In other words, they get money in, and it quickly goes out to drink, gambling, fast cars and holidays. The money goes through the system very quickly. They virtually have no assets when caught and you can only confiscate if someone has assets. It is not necessarily the picture that you portray. As a previous head of the RUC Drug Squad, I can assure you that when individuals who have been caught for drug trafficking offences have assets, we will then seek confiscation. But we can not seek what a person does not have.

53. In addition to confiscation, if an individual caught in possession of cash at the time he is caught with drugs, that money is generally forfeited under section 27 of the Misuse of Drugs Act. It is a straightforward forfeiture, and we do not have to go through a procedure of doing an investigation to satisfy a confiscation order. When some of them are caught with for example, £27,000 cash and 3 or 4 kilograms of cannabis, that cash would simply be forfeited at the trial.

54. Mr Close: What sort of connections are made with Social Security computer data, for example? When people are on the dole, everybody knows what they are getting per week or per month because the figure is fixed. When those same individuals are driving round in flashy cars worth £15,000 to £20,000 there are questions to be asked. Yet it is happening and to the man, or proverbial dog on the street, their only source of income is the dole. Are there computer checks to provide the data that this individual is registered as unemployed and this is his only source of income, so that questions can be asked on how he gets x, y or z?

55. Det Supt Thompson: Of course that happens, but we have got to be investigating a criminal offence, and have to get the evidence to prove the criminal offence before we can satisfy the courts that a confiscation order should be put into effect. The difficulty is to get that evidence, although I know what type of individuals you are talking about.

56. Ms Lewsley: Obviously there is co-operation between yourselves and Customs and Excise. Can you explain the difference on how you will maximise the potential with the powers you will get in the draft Order?

57. Det Supt Thompson: As regards this particular draft Order, Customs and Excise were not previously involved in the application of this particular legislation. Only a police officer could apply for the appointment of a financial investigator. For the first time it now allows a senior Customs and Excise officer to apply for the appointment of a financial investigator, who is not a customs officer. Equally it allows for the appointment of a suitable customs officer as a financial investigator, with reduced powers. It is difficult to speculate on how Customs and Excise will use these powers. Perhaps my colleague from Customs and Excise will be able to inform the Committee about that.

58. In terms of what assistance we provide to Customs and Excise and vice versa, we work very closely as regards proceeds of crime investigations, particularly in those crimes which come under the remit of Customs and Excise. These could involve the importation of drugs or any other illicit goods, or the smuggling of goods such as alcohol, petroleum and tobacco products to avoid excise duty.

59. Ms Lewsley: What mechanisms will you be adopting to ensure that the powers contained in the draft Order will be exercised fairly and with due consideration to human rights?

60. Det Supt Thompson: That is fairly evident given that with the overall number of investigations, we have only sought 28 applications over a three-and- a-half year period. We are quite discriminating in the occasions when we seek appointments. As indicated before, we have to satisfy the County Court judge on certain criteria for the appointment of a financial investigator.

61. Det Ch Insp Mains: It is also fair to say that we have a mechanism within our own particular department to apply certain criteria before deciding to go forward to the County Court judge.

62. The Chairperson: Is it a type of last resort power?

63. Det Supt Thompson: It very much depends on the evidence we have gleaned at a particular point in the investigation. In certain circumstances, after examining the evidence, we would determine that the investigation could be enhanced by the appointment of a financial investigator. Conversely, we might determine that there would be no merit in such an appointment.

64. Det Ch Insp Mains: Even though in some circumstances we would feel that an investigation could be enhanced by an appointment we would then have to go forward together to prove that to the County Court judge. We really have to get it right. There is a safety net throughout the process.

65. Det Supt Thompson: I would stress to the Committee that we would not approach a judge on a wing and a prayer. There is very detailed questioning by the County Court judge, which is right and proper, as to why an appointment should be made. Ultimately, the judge would be responsible for the appointment should any review of that appointment take place.

66. The Chairperson: Have any applications you have made to a County Court judge been refused?

67. Det Supt Thompson: No.

68. Mr McClarty: What degree of co-operation exists between yourselves, other police forces within the UK, and the Gardaí?

69. Det Supt Thompson: We have excellent relationships with all UK police forces and the Garda Síochána, and we work with many forces depending on where investigations lead us. These relationships are not confined to the British Isles; they extend to European law enforcement agencies and to other agencies throughout the world. We have to operate under certain mechanisms. As one of 52 UK police forces, a lot of our work has to be routed through the National Criminal Intelligence Service because that is the method adopted in the UK for channelling certain enquiries to Europol or Interpol. We cannot go to those organisations directly.

70. Mr McClarty: If the proceeds of criminal activity are within the UK or the Republic of Ireland then the draft Order will make it easier to seize those assets. How difficult is it to seize offshore assets?

71. Det Supt Thompson: It depends on where the offshore assets are located and what agreements the UK Government has with those jurisdictions. In some places it is absolutely impossible to seize assets.

72. Mr Ervine: I would preface my comments by wishing you all the best and greater productivity in the future. Hopefully the legislation will be advantageous to you.

73. As I assess the situation at the moment, if I am "Mr Big" — the drug dealer — but I do not actually handle drugs or place myself in the company of drug dealers, then you are unlikely to catch me. In fact, even though we are concerned about achieving the removal of finances that were gained by crime, we effectively need a crime in order to carry out the investigation properly. Is that correct?

74. Det Ch Insp Mains: That is correct.

75. Mr Ervine: What do you do if someone says "I got a bet up on the horses, and of the £5,000 that I had when I had those drugs only £500 of it was related to those drugs"? How do you prove him wrong, if you need a crime to deal with the proceeds of crime — which may be more than one crime?

76. I will roll all my questions into one because I fear that they may be interlinked. You have mentioned that you have a department, how convinced are you that your department will achieve the resources that it requires? Can we expect a commentary in the future that you are perhaps only going to do two-thirds of the things you could do, on the basis that you are inundated? It is a bit like the parking tickets situation. I am conscious that there are things that you cannot say at a public meeting, but at what point are we dealing with political policemen?

77. That brings me to the second point. As head of the Drug Squad, Mr Thompson, this will be an interesting question for you. Are you absolutely convinced that you are the sole arbiters of whether you prosecute or go for those people whom you believe are involved in criminal activity? Within the police service, are you the sole arbiters of that — the experts? That is why you have that department.

78. Det Supt Thompson: I was previously head of the Drug Squad. The department which operates this legislation is the Financial Investigation Unit, of which Mr Mains is head. I am head of the overall Economic Crime Bureau, which consists of a number of units, one of which is the Financial Investigation Unit.

79. That unit does not investigate the criminal offences per se. Those investigations are carried out — for instance, if it is a drug trafficking offence — by drug squad or drugs liaison unit personnel attached to subdivisions. If it is major crime such as armed robbery, extortion, or kidnapping, those investigations are carried out by regional CID. Our work is referred to us by regional heads of CID, the head of Drug Squad or by other specialist units who conduct the principal investigation.

80. Our work is to conduct the financial investigation and ascertain the assets that an individual has for the purpose of providing a financial profile and statement to the investigating police officers of the main criminal offence — to say "This is the amount of assets that your target has". It is up to them to prove the criminal case to the satisfaction of the courts, and it is then our function to provide the necessary material for the confiscation order to be applied for.

81. Mr Ervine: On the basis that everything is referral, is there no likelihood of proactivity from your department?

82. Det Ch Insp Mains: There were quite a few questions in your overall deliberation. If I could first take you back, and then I will come to what you have just asked. Regarding the £5000 through the bookmakers, there is a certain trend within the laundering of money and proceeds of crime, and you would be naïve to think that we do not know 99% of them. In fact, it is probably one of the few situations where we are well ahead of what is actually going on in terms of how they are getting rid of their money. If an individual says "I won £5000", we can prove that — potentially there is a whole line of enquiry there.

83. Secondly, I understand what you are trying to say about "Mr Big", the guy who does not touch drugs or anything but perhaps is getting the proceeds. We are dictated to by crime and predicated offences — by somebody being charged. But there is also, bear in mind, an offence here of money laundering, which is an offence in itself. It is very difficult to prove, but it is achievable.

84. As Det Superintendent Thompson said, the RUC responds to and acts on the tail end of what the detectives on the ground do. The RUC is also proactive in investigating the major criminals and the laundering of their proceeds.

85. Mr Ervine: I wish you well and I will watch your productivity levels with great interest.

86. The Chairperson: The draft legislation permits a police officer or a Customs and Excise officer to act as a financial investigator, albeit with less power. Why should they have less power and are you satisfied that members of the RUC could act as financial investigators with reduced powers?

87. Det Supt Thompson: It is clear why the RUC and Customs and Excise officers will not have the full powers that a person appointed as a financial investigator will have. Non-police or Customs and Excise officers have the power to require a person to appear at a time and place and provide information. The RUC and Customs and Excise officers in Northern Ireland have to work under the Police and Criminal Evidence Order, whereas a financial investigator who is not a police or customs officer does not have the same imposition.

88. A person is obliged to do certain things for a financial investigator and the RUC will never have those powers because it has to work under confined legislation. The RUC lives with that and it is beyond our expectations to have the same powers as a non police or customs officer.

89. The Chairperson: Thank you for attending this afternoon. The Committee session has overrun, but it has obeyed the spirit of the time limits. You say that your submission was late, but given the rushed nature of the process and the intervention of the Christmas and new year holidays, it was well done.

MINUTES OF EVIDENCE

Monday 8 January 2001

Members present:
Mr A Maginness (Chairperson)
Mr Agnew
Mr Close
Mr Ervine
Ms Lewsley
Mr McClarty
Mr M Robinson
Mr S Wilson

Witnesses:
Mr B Logan ) HM Customs and Excise
Mr D Toon )

90. The Chairperson: I welcome Mr Bill Logan and Mr Donald Toon to the second part of the Committee session that will deal with evidence from HM Customs and Excise. Their paper has now been distributed. Unfortunately, due to time constraints, it was not possible to distribute it before the meeting.

91. Mr Logan: We are pleased to be here. The paper is delivered late due to the holiday period and because it had to be cleared by our Minister, the Paymaster General. I will go through the paper and you can use it for reference or pick up on any points later.

92. The proposals in the Order strengthen and amend certain provisions in the Proceeds of Crime (Northern Ireland) Order 1996. The 1996 Order updated and restated the law relating to the confiscation of the proceeds of drug trafficking and other serious crime, bringing Northern Ireland broadly in line with the rest of the United Kingdom. Article 49 also introduced additional investigation powers, set out in schedule 2 of the Order, which are unique to Northern Ireland. These powers include the appointment of civilian financial investigators to assist police in the issuing of general bank circulars. However, intelligence suggests that those seeking to conceal criminal assets are moving away from banks and building societies and are making greater use of solicitors and real estate. The Government is determined to prevent criminals profiting from unlawful activities and an update to the 1996 Order is necessary.

93. The proposed new provisions extend article 49 of the 1996 Order to include HM Customs and Excise, who will now be able to appoint civilian financial investigators. Police and customs officers will also be authorised to exercise additional financial investigation powers in Northern Ireland. Production orders found at article 50 of the 1996 Order will be widened to include any relevant property. General bank circulars under schedule 2 para 3 of the 1996 Order will be broadened from banks to any financial institution, to include all relevant financial business as defined by the Money Laundering Regulations 1993. The level of information required will also be extended, and that extension is shown at the bottom.

94. There will be a new power to require solicitors to furnish information about non-contentious business transactions undertaken by the client — a general solicitor circular. These transactions include any dealings involving land, business, company, firm partnership, trust, bank accounts, savings accounts or investments. However, such requests are only authorised in the case of a specifically named person who is believed to have benefited from serious crime.

95. In the case of failing to provide, or falsifying, information the time limits for summary proceedings will also be extended from six months after an offence to 12 months after an offence, or three months from when sufficient information is available, whichever is later. How does this impact on Customs and Excise in Northern Ireland? Under the Order a senior customs officer, ranked surveyor, which is middle manager or above, will be able to go to a County Court judge and apply for the appointment of a civilian financial investigation officer to assist with the customs investigation.

96. In practice, this will probably not be a common occurrence because as a United Kingdom-wide department we benefit from a broad national and international network of expertise. However, this power increases our flexibility and in exceptional difficult financial cases there may be merit in appointing an experienced forensic accountant from the private sector. There will be particular merit in appointing such a person where we wish to make use of production orders under section 50 of the 1996 Order and where other powers in our possession were not appropriate or available. It will perhaps be a more common occurrence for the surveyor, or above, to go before the County Court judge and apply for a serving customs officer to be authorised with new powers of financial investigation. These powers are found in schedule 2 paragraph 3A of the 1996 Order, as amended, and introduced by the 2001 Order. This will allow Customs officers to apply for a general bank circular or a general solicitor circular, both of which are defined above.

97. The extension of time limits where information has not been provided or is falsified could also prove useful. It must, however, be emphasised that all these powers will be new to us in Customs and Excise, and the precise nature or effectiveness of their implementation cannot be predicted with certainty at the moment.

98. Allow me to refer you to annexe A, which details the current position as well as the customs resources dedicated to financial investigation. Customs and Excise play a key role in confiscating criminal assets through investigating and prosecuting offences relating to VAT, excise duty and prohibited goods such as illegal drugs. We have a total of 158 financial investigators, based both in the United Kingdom and internationally. All the financial investigators belong to our National Investigation Service, and they comprise about 8% of its personnel. As a prosecuting department, Customs and Excise also has its own Solicitor’s Office. A specialised section, known as the Asset Forfeiture Unit, is dedicated to confiscation proceedings. The unit comprises six lawyers and seven legal assistants. That is the submission from Customs and Excise.

99. The Chairperson: I suppose the Committee would like to ask you one fundamental question. There are already fairly considerable powers in the Proceeds of Crime (Northern Ireland) Order 1996. The draft Financial Investigations (Northern Ireland) Order amends it to extend those powers. Can you justify that extension?

100. Mr Logan: At present, intelligence sources tell us that those powers which exist — access to banks and building societies — are not sufficient. As criminal activities develop, we need reference to other aspects such as solicitors and real-estate companies. Perhaps my colleague might add to that.

101. Mr Toon: The first point regards the extension of powers available to police in Northern Ireland and unique to the jurisdiction. That is essentially a matter of our department, which has quite a significant role in financial investigation, being provided with a tool available to our colleagues. We feel it will support the effectiveness of our financial investigation work in the same way as it has for the RUC. It is also ahead of the rest of the United Kingdom. Indeed, these unique powers seem to us to make financial investigation in Northern Ireland more effective than that in much of the rest of the UK. That is very much a regularisation of the position.

102. General bank circulars, while also not strictly speaking available in the rest of the UK at present, certainly appear to us to be an extremely useful method of obtaining additional information where we can satisfy the concerns of a County Court judge that such circulars should be issued. The same goes in relation to solicitors. We must obviously emphasise that we are not talking here about general solicitor circulars in relation to anything other than what may be relevant to a financial investigation. There can be no question of information being sought that would be subject to client confidentiality or related to a potential criminal defence, for example. It is a matter of regularising the position and catching up with powers available to others.

103. We hope that those powers will become available elsewhere in the United Kingdom, subject to developments within the rest of it.

104. The Chairperson: Thank you. Any more questions?

105. Mr Close: In your reply, you said that it seemed to give greater effectiveness. Is it at all possible to quantify how the extended powers that you have had over the United Kingdom, as well as the further ones that are anticipated in relation to assets, relate to solicitor circulars and bank circulars?

106. Mr Toon: It is very difficult to quantify in any meaningful terms. At the end of the day, hard cash is going to be removed from the criminal. I cannot give real details. We are seeing financial investigations progress further and more quickly, as a result of additional information being available at an early stage in the investigation process.

107. Mr Close: Are these leading to prosecutions?

108. Mr Toon: I do not have figures available at the moment.

109. Mr Close: Will it be possible to provide financial figures to the Committee?

110. Mr Toon: Yes, we should be able to provide those.

111. Ms Lewsley: What other measures do you propose regarding the identification and confiscation of the proceeds of crime?

112. Mr Toon: The easiest thing to do here is refer you to what is now stated Government policy. The Performance and Innovation Unit produced a report last summer on the recovery of the proceeds of crime. That contained a number of proposals that have been broadly accepted by Government, including the establishment of a civil forfeiture regime and increased professionalism, which will increase professional qualifications. The particular one that is directly relevant to us is the extension of existing powers under the Criminal Justice Drug Trafficking Act to seize cash at import or export.

113. Currently, we have powers to seize cash that we suspect is related to drug trafficking. We would suggest that those powers should be broadened to allow the seizure of cash or other monetary instruments related to any serious crime, not just drug trafficking. That would be particularly useful from our point of view.

114. Mr Ervine: It is not quite termed in the same way, but I asked a similar question of the RUC. What would definitively place someone in the higher sights of Her Majesty’s Customs and Excise?

115. Mr Logan: That is a general question, and it is difficult to give a particular answer. It is the range of legislation we have available to us, coupled with some of the developments that may happen in new legislation, along with the Secretary of State’s initiative to set up an organised crime task force. There is greater identification of the criminal, as well as the activity that the criminal has been involved in.

116. Mr Ervine: My Colleague, Seamus Close, also made this point. If someone has got a motor vehicle, a house, four continental holidays a year, and an obvious lifestyle far beyond any income, would that necessarily place them in your higher sights, or must they be caught in what you perceive to be the commission of a crime? Can the RUC be proactive on money laundering? Of course, the person may not be a money launderer, they might turn out to be a drug dealer, but you might only discover that if you begin an investigation into assessing why he has the wealth, or the trappings of wealth, that his demeanour suggests.

117. At what point will you be proactive? Or are you continually waiting to find someone in the commission of a crime?

118. Mr Logan: Our proactivity starts with information, leading on to intelligence, that depends on whether we do any trend analysis. Therefore, we are increasing our intelligence function, which involves looking at commodities, how those commodities will arrive, what the trends are and who are the persons involved.

119. Mr Ervine: If this legislation were to fall into place as you would like it to, allowing you to do your job, do you foresee a circumstance in which you could ask a County Court judge whether it is merited that a specific person be placed under some form of intelligence-gathering methodology? That may include looking at bank accounts and things like that.

120. Mr Toon: I cannot see it operating in that way. Grave question marks would result from a system that operated in such a manner, particularly in terms of Human Rights Act issues and privacy rights.

121. Mr Ervine: What would place them in the higher sights? That is a perfectly legitimate question to ask, especially about its relevance to the requirement that is supposedly needed for the legislation. I do agree with you. However, my argument is that the legislation does not go far enough.

122. Mr Logan: In my submission, I said that it was new legislation as far as Customs and Excise were concerned. If it does not appear to go far enough, we will be seeking changes.

123. The Chairperson: Are there any circumstances in which you could envisage that Customs and Excise may embark on a "fishing expedition" in order to determine the position of an individual? As an organisation, is that something that you may embark upon, or do you regard it as being contrary to good public policy?

124. Mr Logan: My colleague has referred to human rights legislation. The department — even prior to the enactment of this legislation — did not embark on any such "fishing expeditions" in any field. Of further significance is section 75 of the Northern Ireland Act 1998, which Customs and Excise has signed up to. We are currently in the process of dealing with the Equality Commission on our equality scheme. We are to submit a draft equality scheme by 25 January 2001, which will take such matters into account.

125. Mr Ervine: You have just contradicted certain actions of your own department. If not from your own department, then from within Customs and Excise. When coming out of an airport, is there not the capacity for a "fishing expedition", whereby 10 people may be stopped, of which nine may be wholly innocent and have no cause to be considered guilty? When nothing is found, they are then allowed to proceed. Is that not a "fishing expedition"?

126.Mr Logan: I do not consider that to be a "fishing expedition". That is based on a profiled analysis.

127. Mr Ervine: Of which the vast majority are wrong?

128. Mr Logan: It may be gaining intelligence.

129. Mr Close: For example, you identify a guy whose only apparent source of income is the dole. Despite this, he is driving a flash car and he is having one or two holidays a year! Is that a "fishing expedition", or is that using your nose and saying "this just does not add up"? It does not add up. Therefore, this requires something be done and that certain things must be looked at.

130. Mr Logan: That point has been well made, and we are taking account of it in our intelligence capacity.

131. Mr S Wilson: The responses given show that considerable loopholes still appear to exist, enabling people who are obviously involved in something illegitimate to slip the net. This sounds like a blood sports meeting, putting them on hare sites and fishing expeditions — we will be baiting them next!

132. Mr Close: With a big stick.

133. Mr S Wilson: We are not prepared to pursue that. The public expectation of increasing the powers through this legislation will be that this kind of person can be dealt with, and there will be great disappointment if that does not happen. Are there any powers available to the Criminal Assets Bureau in Dublin that you do not have at present, which will not be added in an extension of this legislation, and which might be of benefit to you in pursuing the kind of financial crimes that we are looking at today?

134. Mr Logan: That issue is being scrutinised by others in the Northern Ireland Office. I cannot forecast what will happen but we are looking at it very closely, and, may I say, enviously. We will await the outcome of that.

135. Mr Toon: I would like to add only one point to that. I understand that the civil forfeiture regime, which is operated in the Republic of Ireland, is one of the models being looked at by the Performance and Innovation Unit, in the production of their report for Government. However, at this stage I have no information on the outcome of that.

136. The Chairperson: Thank you. I have one further question. I understand the RUC investigates criminality, but where is the investigative distinction between you at Customs and Excise and the police service? At what level do you intervene?

137. Mr Toon: To a significant degree across the UK, not just in Northern Ireland, it depends on the form of criminality involved. That is one of the driving issues. If we are talking about criminality in relation to indirect taxes, VAT, excise duty et cetera, then the primary responsibility for tackling that criminality lies with Customs and Excise. Other criminal activities would directly relate to our areas of responsibility. I think that representatives of the RUC made this point in relation to drug trafficking. The international movement of drugs and of funds to pay for drugs is a good example of the type of issue which concerns us.

138. For instance, we operate very closely with the National Criminal Intelligence Service; with all the police forces in England and Wales; and with the National Crime Squad on protocols to ensure that we have the greatest joint effect on international drug trafficking. However, when it is at international scale, the primary responsibility lies with the department.

139. Mr Agnew: Have Customs and Excise ever benefited from the issuing of general bank circulars?

140. Mr Toon: That would only be in Northern Ireland —

141. Mr Logan: I do not know the details, but I can supply that if you wish.

142. The Chairperson: Allow me to clarify that. You have not been beneficiaries of general bank circulars?

143. Mr Logan: No.

144. The Chairperson: Would it be better if the RUC, rather than yourselves, assisted us in this matter?

145. Mr Logan: That is correct.

146. Mr S Wilson: I think Fraser Agnew was referring to the possibility that the RUC may, for example, apply for a general bank circular that unearths information. Can this information be passed onto you? If that is the case, you will benefit because you can pursue an investigation. Does that degree of information exchange exist?

147. Mr Logan: That is possible, but I cannot confirm it. I will provide the Committee with a written response on the matter if required.

148. Mr Ervine: Can we guess your aspirations?

149. Mr Logan: We are seeking appropriate powers to deal with criminality in the areas of jurisdiction for which Customs and Excise — and other enforcement agencies — have responsibility. The comments made by members of the Committee are consistent with our thinking, and I am pleased to hear that.

150. Mr Ervine: I wish to say that it would not be a bad idea if Customs and Excise, and other statutory agencies, became familiar with specific political parties. That could not be harmful.

151. The Chairperson: Thank you very much, Mr Logan and Mr Toon. Your comments have been very helpful this afternoon. We have your written submissions for which we are grateful. Mr Toon was asked a question to which he indicated he might reply. It would be helpful if this reply was made available before the end of the week, if possible.

152. Mr Toon: I will do my best.

153. The Chairperson: Thank you very much, and thank you all for attending.

MINUTES OF EVIDENCE

Tuesday 9 January 2001

Members present:
Mr A Maginness (Chairperson)
Mr Bell (Deputy Chairperson)
Mr Agnew
Mr Close
Mr Ervine
Ms Lewsley
Mr McClarty
Mr McNamee
Ms Ramsey
Mr M Robinson
Mr S Wilson

Witnesses:

Mrs P Beckett )
Mr R Irvine )
Mrs I Martin ) Northern Ireland
Mr B McAlister ) Bankers’ Association
Mr D Power )

154. The Chairperson : Good morning. You are welcome to the Ad Hoc Committee. I want to thank the Northern Ireland Bankers’ Association for responding to our invitation to attend this morning to assist the Committee’s work. Does Mr McAlister want to introduce his team to the Committee?

155. Mr McAlister: The Northern Ireland Bankers’ Association welcomes the opportunity to meet and help the Committee. Mrs Beckett, Mr Irvine, Mrs Martin and Mr Power are here today on behalf of the industry, rather then the individual banks.

156. The member banks welcome the opportunity to meet the Committee and are committed to complying with any legislation enacted. We had considerable input into the consultation process which preceded the Proceeds of Crime (Northern Ireland) Order 1996. While this resulted in no substantive changes to the proposed legislation, it improved mutual understanding. The member banks of the association have always sought to observe the law, though considerable, irrecoverable costs have been incurred in doing so.

157. The proposed new legislation gives customs officers a rank equivalent to a police superintendent. They apply for the appointment of a financial investigator, which is likely to increase member banks’ workload and costs by introducing additional cases.

158. The Explanatory Document takes no account of, nor anticipates in any way the volume of additional work arising from Customs and Excise additionally obtaining the powers proposed. The Northern Ireland Bankers’ Association considers that the analysis of the time involved complying with general bank circulars is unrealistic. The wider definition of financial institutions will now incorporate other areas of our businesses.

159. The Chairperson: Thank you very much. It seems from your presentation and your written submission that you had concerns when the Proceeds of Crime (Northern Ireland) Order 1996 was mooted and subsequently introduced.

160. Is it fair to say that, when the Code of Practice was eventually introduced, you received reassurances?

161. Mr McAlister: That area was resolved as a result of our discussions.

162. The Chairperson: Is there anything in the present formulation of the Code of Practice with which you would take issue, or about which you have continuing concerns?

163. Mr Power: By and large, the banks were happy. We are content, as our views were considered and accepted in the Code of Practice eventually framed — we do not wish to bring any issues to the table today.

164. The Chairman: The Human Rights Commission — which will be making a submission later this morning — has suggested that, in the light of the draft Order before us, some amendments might be made to the Code of Practice. Do you have, or have you given any thought to, any proposed amendments to the code?

165. Mr Power: If the other group is to recommend changes, we would welcome participation in the process.

166. The Chairperson: Does anyone have any other questions?

167. Mr S Wilson: You have indicated that the 28-day period for compliance creates some difficulty. Is that 28-day period an absolute? For example, if you were having difficulty tracing accounts, would the police normally give an extension? Secondly, if the 28-day period is too short, especially now that the definition of financial institutions is wider, can you suggest an alternative reasonable period?

168. Mrs Martin: The legislation does not provide for any extension to the 28-day period — it is an absolute. I do not know if extensions can be granted operationally, but legally, the 28-day period must be complied with.

169. Mr S Wilson: It often happens, though, that 28 or 14 days or whatever might be specified, but extensions are sometimes granted —

170. Mrs Martin: The legislation does not provide for that. We would welcome provisional legislation to cater for this possibility.

171. Asking what is a reasonable period of time is like asking the question, "How long is a piece of string?" This depends on accessing records and so forth. It also depends on the quality and quantity of the information given in the first place in the order served. We would welcome more understanding of that when the orders are made and permitted time scales decided.

172. Mr McNamee: There was a plan to study the effects of the Proceeds of Crime (NI) Order 1996. Have the banks seen that? Have they contributed to the study of the effects of the 1996 Order to date?

173. If information on an individual were requested under the Proceeds of Crime (NI) Order 1996 or the new Financial Investigations Order, what effect would that have on the bank’s business with that client?

174. For instance, if a customer were the subject of a trawl for information, would the bank be as willing to do business with that individual and provide a loan? How would the bank’s view of an individual’s worthiness be affected if it knew a trawl on the individual was taking place? In addition, what are your views on article 23, which deals with compensation for people who may have suffered financially as a consequence of being investigated? What do you think of the provisions that exist to compensate an individual in those circumstances?

175. Mr Power: There are three elements to your question. The first element was whether we had been consulted. The answer is "No". No Northern Ireland Bankers’ Association’s member bank was asked to participate in any survey. I do not understand the second part of your question.

176. Mr McNamee: If the bank is aware that a customer has been investigated, since it has been requested to provide information on his dealings, how does that affect your willingness to do business with that customer? Would the bank advance a significant commercial loan to him, or would it take the view that because the person is being investigated, his future financial security may be threatened, and he is therefore not suitable to lend money to?

177. Mr Power: The terms of the Order are such that any information gathered is retained confidentially on our files. Therefore it is not part of the customer’s record, and, as I understand it, can have no bearing on their standing with the member banks.

178. Ms Beckett: The question certainly ought to be dealt with, and it is in article 48, entitled "Tipping-off". The bank has to be mindful that it does not tip-off the person that an investigation is underway. It must also be careful that it does not transfer or deal with the proceeds of crimes. The bank must work at all times within the other aspects of the legislation dealing with its customers.

179. Mr McNamee: When a request is made under the Order for information on a customer, it is made to a certain management level, and it is a matter of confidentiality for the bank. If that customer has business with one of the bank’s branches, the person making the decision on that business will not be aware of the investigation. In other words, if I deal with my local bank manager, will he or she be unaware?

180. Mr McAlister: It is not possible to put your hand on your heart and say that is true.

181. Mr McNamee: If that were the case, what would a bank manager’s opinion be if I wanted to borrow £100,000, and he knew I was being financially investigated?

182. Mr Power: I do not believe that opinion has to come into it at this stage. We are dealing with the law, and Mrs Beckett has explained that tipping-off is clearly one element of it. Therefore we can make no reference whatsoever to, hint about, or have any opinion on the financial standing of the individual or individuals.

183. Mrs Martin: Therefore any application for a loan would be dealt with using normal standard policies and procedures — be that credit scoring or whatever mechanism that a particular member bank had for loans of that nature.

184. Mr McNamee: Would it not be affected by the fact that the person had been investigated?

185. Mrs Martin: It should not if normal policies and procedures are followed. There is a human element in any decision.

186. The Chairperson: You are saying that the bank maintains neutrality as far as that is concerned.

187. Mrs Martin: The fact that someone has been investigated does not necessarily mean that they are guilty of any crime. It means that we have been asked, under the law, to comply with an Order to provide information. Therefore we do not infer any guilt because of a request for information.

188. Mr Close: I wish to tease out the time compliance aspect a little bit further. Am I correct to conclude from your presentation that, when consultation took place on the Proceeds of Crime (Northern Ireland) Order 1996, you also expressed your concern about the time limit? I further understand that until now you have been able to comply with those time limits and manage the current volumes. Is that right?

189. Mr McAlister: As far as I am aware, we have managed the current volumes, but there has been some latitude in time in some cases.

190. Mr Close: What increase in volume do you expect from the new legislation?

191. Mr Power: We cannot put numbers on that. However, if another body, such as Customs and Excise, brings in its own information, we would expect an increase in volume. That is all we can say — we have no numbers.

192. Mrs Martin: The new legislation also goes beyond the bank’s business as a deposit taking institution. It now takes in all of the bank’s businesses, for example, insurance services and other services of that nature.

193. Mr Close: Are you saying there is currently no slack with regard to the time limits?

194. Mr Power: Banks are not fully computerised. It is not a question of simply pushing buttons whenever general bank circulars are received. There is a great deal of human intervention by way of personal knowledge which may be retained on any one name that may appear on the list, so it takes time to carry out a full trawl. We made a point in our paper about the way in which information is fed through general bank circulars with just aliases and names. If we take "Smith" as an example, there could be all sorts of spellings: "Smith", "Smyth", "Smythe", and so on. There is a fair amount of work involved in trawling all that information. It has now been extended into other areas for businesses that are normally on separate accounting systems, so we are entering the realm of different elements of our information.

195. Mr Close: You are still not prepared to assist the Committee in suggesting an alternative to the 28 days.

196. Mr Power: I would not use such a strong word as "assist".

197. The Chairperson: "Unable," perhaps.

198. Mr Power: We are mindful of making sure that the information we feed back is accurate, and therefore any potential need for time is purely due to making sure that the information and the trawl we have completed have been fully accurate and complied with, and are what we are looking for.

199. Mrs Martin: It would be useful if, in the proposed legislation, there were some mechanism for a bank or financial institution to apply to the court — or, indeed, to the investigating officer — for more latitude on time, depending on the quality of the information that he has given us to search for. It would be on a specific, case-by-case basis, so on some occasions it might be possible to deal with the order within the 28-day time limit. In other cases, because of special conditions or whatever, it might not be possible. We would like the opportunity to seek additional time in a particular case.

200. The Chairperson: Have you any knowledge, either individually or collectively, about financial investigators putting pressure on banks because they have failed to comply within 28 days? Is there, in practice, an informal method of getting round the 28-day limit? What is the position?

201. Mr Power: By and large, member banks have been able to comply within the 28 days. What we are flagging up to the Committee is our concern that, if there is an increase in volume and more names are thrown into general bank circulars, we might want further time. That is why we are asking for something to be built into the legislation to allow latitude to be given.

202. Mr Ervine: I was impressed by the brevity of your presentation. I get a great deal of correspondence from banks which is very short, usually saying "This will cost you £25." Thankfully, you did not say that. You made two specific points, although obviously we have moved on to a third. One was that you have irrecoverable costs. You defended, or would like to defend, the confidentiality of the customer. My question is in relation to both current and potential legislation. Is there evidence of any damage to the institutions of banking by such legislation? Is there any evidence to suggest that banking is damaged, or that public confidence in banks is diminished as a result?

203. Mr McAlister: My personal view is "no" in both cases.

204. Mr Ervine: You realise that the two points you made will now be discarded regarding the institution of banking and its public confidence. If it is not rocked by legislation, it is unlikely that anyone will be too sympathetic towards the bank, though one does have some sympathy in relation to the time frame. But how long is a piece of string? If someone said "You have 40 days", would you not be coming back simply on the basis of resources you cannot recover and saying that you need an extension?

205. Mr Power: Member banks are not here today looking for sympathy. We are here to try to help the Committee understand the implications —

206. Mr Ervine: You misunderstand me. I am reacting to the presentation you gave. You defended the confidentiality of the customer — which I believe is unaffected on the basis that there is no damage to the institution of banking — and said you have irrecoverable costs. You then ask about time which I would say is about resources. You said more names are about resources. It seems to me there will still be irrecoverable costs.

207. Mr Power: The two issues of confidentiality and time go back to the point I made earlier: banks wish to ensure that general bank circulars are responded to in a professional and accurate manner, but some individuals’ names may be put forward in error. That is the nature of trying to comply with the law. In asking for time, and to respect confidentiality, we wish to ensure that genuine customers, who should not be affected by the Order, are protected. That is the point we are making on both counts.

208. Mr Ervine: "Should not be"?

209. Mr Power: Should not be. It is unfortunate if they are, but it is because of human intervention, in trying to respond to the very nature of what we have seen, that some of the wrong names have been put forward. Take the surname "Smith": it is a common surname, and when you add Michael or William, you could have 40 individuals. Sometimes addresses are not accurate either. That is the nature of what we try to deal with in complying with the Order.

210. Ms Lewsley: You talked about time limits. Could you give us an estimate of the number of general bank circulars you are aware of as an organisation? Do you feel that there will be an increase in future? Has there ever been anyone from your organisation that has refused to respond to general bank circulars?

211. Mr Power: I will take your last point first. All bank officials have to comply with the law, so there is no question of any one person refusing. There is a penalty of five years’ imprisonment if they do not. That message has been clearly passed through our policies and procedures.

212. One valid point that is important — and why we say that 28 days is insufficient — is that, in the body of what we have read, it suggests that one general bank circular would take 10 hours to produce the information. We do not see how that figure could have been arrived at. If you extend this Order right across the business of banking — and given the very nature of the various insurances, mortgages, deposits, current accounts, stockbrokering and all the other elements that banks in Northern Ireland subscribe to — we do not believe that 10 hours is realistic. As I understand it, we have had four general bank circulars in the past 12 months.

213. That sounds very trivial. With the number of names and the aliases put forward, it is the volume behind any one general bank circular that causes potential problems.

214. The Chairperson: What is the effect of a general bank circular? Are all the banks contacted and told to check a specific name, address, or an alias?

215. Mr Power: That is correct. All member banks in Northern Ireland receive the same document.

216. Mr McClarty: Do the member banks liaise with each other or is this done individually?

217. Mr McAlister: It is entirely individual. There is no liaison.

218. Mr Agnew: Is a bank manager under any obligation — if he were suspicious of a particular account — to speak to the authorities, or should he respond only to questions from them?

219. Mrs Martin: Under existing legislation, if you have suspicions, then you ought to advise a constable.

220. Mr Agnew: Are there instances where this has occurred?

221. The Chairperson: Are we referring to different legislation?

222. Mr Agnew: Yes. Is there an obligation on your part?

223. Mrs Martin: Yes.

224. The Chairperson: This has nothing to do with the Proceeds of Crime (Northern Ireland) Order 1996.

225. Mr Agnew: If you were suspicious of an account —

226. Mr McAlister: Money laundering involves a suspicion that cash is going into an account from a business that is different. It is suspicious if someone is not in the habit of lodging vast amounts of cash, when vast amounts of cash suddenly start going through an account. The reality is that those in the position to have all this cash are well aware of the rules and regulations. Furthermore, there is a great deal less cash floating about the system now than there used to be.

227. Mr Power: Under the Proceeds of Crime Order, a financial investigation is not a case of suspicion on the part of member banks. It is simply a response giving factual information based on the general bank circular served. It is not a case of a bank manager or any single individual suggesting that someone is involved in money laundering. It is complying with the terms of the order that has been served. This is separate legislation altogether.

228. Mr Close: The figure of 10 hours has been mentioned when pursuing general bank circulars, although it is not known where this information came from. What costs do you attribute in your exercises to pursue a general bank circular?

229. Mr Power: Member banks do not individually monitor the cost of the impact of a general bank circular being served. However, each individual bank has had to introduce new departments to cover not only this piece of legislation, but other legislation such as the regulations that deal with money laundering. This will include anything the Financial Services Authority imposes by way of regulation on member banks in Northern Ireland. There are also additional areas where banks have had to incur costs. The structures we have are all individual.

230. Mr Close: The Northern Ireland Office has estimated that such costs can amount to £250 per circular. You mentioned that last year there were four. In the light of dealing with money laundering in 1993, the 1996 Order and now this, I imagine there was some sort of superficial costing exercise.

231. If we refer to Mr Ervine’s letters from his bank, if those can be costed, surely the same type of exercise would be pursued in any sound financial institution as to likely costs in line with legislation and the additional onus placed on you?

232. Mr Power: To answer your question accurately, we have not individually costed the impact of complying with this Order. Generally, we cost situations when we have recoverable costs from clients.

233. Mr Close: So it could be less than £250?

234. Mr Power: It could well be.

235. The Chairperson: Mr Ervine never suggested his letters were costed.

236. Mr S Wilson: £25 to write a three-line letter.

237. Mr Ervine: It is £25 merely to think about writing a letter — it usually ends up more.

238. The Chairperson: Are there any further questions? If there are no further questions, I thank you all for coming here this morning. You have been very helpful. I believe this is the first time that the Bankers’ Association has come to the Assembly.

239. Mr McAlister: We have visited the Agriculture Committee on more than one occasion.

240. The Chairperson: In any event, thank you for your assistance to the Committee.

MINUTES OF EVIDENCE

Tuesday 9 January 2001

Members present:
Mr A Maginness (Chairperson)
Mr Bell (Deputy Chairperson)
Mr Agnew
Mr Close
Mr Ervine
Ms Lewsley
Mr McClarty
Mr McNamee
Ms Ramsey
Mr M Robinson
Mr S Wilson

Witnesses:
Professor B Dickson ) Northern Ireland Human
Ms M O’Conor ) Rights Commission

241. The Chairperson: Good morning, Prof Dickson and Ms O’Conor. You are very welcome. We are starting a little earlier than we thought, and I hope that does not inconvenience you. We thank you for coming along this morning to assist us in our consideration of the draft Order. I also thank you for the written submission you sent, and I note it is a provisional assessment of the draft Order. We obviously accept that, and if there are any further points you want to make to clarify your position, please feel free to do so.

242. Prof Dickson: Mr Chairman, I can make a few preliminary remarks. I understand we are here primarily to answer the Committee’s questions. As our submission says, we recognise the need to balance the rights of individuals against the rights of the collectivity, and, like all right-thinking people, we wish to fight crime and pursue its proceeds. Our fundamental position is that the response to that challenge must be proportionate — there must not be a sledgehammer used to crack a nut. Perhaps on one or two occasions in the Order that may be the consequence of what is being proposed.

243. Often one finds it difficult to make a general comment on proposed changes to the law because so much depends on how the changes are operated in practice in any particular case. One may be able to give the green light to something on paper but, in practice, you then find it is being operated in a way less than friendly towards human rights.

244. Our basic position is that we do not have a great deal of difficulty with the Order as it stands. Only in one or two aspects does it go unnecessarily far without the case being made properly by the Government. There may be a case to be made, but if there is one, we have not yet heard it. We do not know why there is to be specific legislation just for Northern Ireland and why it needs to go further than what exists elsewhere in the UK.

245. The Chairperson: You said you were disappointed that the Government had not notified you of its intentions to introduce this Order. Is there any obligation on the Government to consult you in relation to these matters?

246. Prof Dickson: There is no statutory obligation. We received a copy of the proposals for the draft at the same time as other consultees. When the Secretary of State announced that he was going to crack down on the proceeds of crime and money laundering, that was the first we had heard of it. We then expected to have some discussions with him as to how exactly the law would be changed to implement the policy the Government had adopted, but we did not hear from him.

247. There is no statutory obligation on the Government to consult us, but we have made it clear that, as a statutory human rights body, we expect to be consulted as early as possible in the process. We do not want to be adversely critical, necessarily, but want to help the Government comply with human rights standards.

248. The Chairperson: In the Explanatory Document, you said there is reference to a study that has been made of the experience to date of the Proceeds of Crime (Northern Ireland) Order 1996. You have not seen that study. Is there any way in which Government would share that with you?

249. Prof Dickson: I hope they would share it with us. Our experience to date, unfortunately, has been that they have not been willing to share information with us. For example, when they carried out a review of the Diplock courts recently I asked twice to see the evidence they had relied upon to come to certain conclusions. They have not even replied to my letters, let alone given me the information.

250. Mr S Wilson: Prof Dickson said he did not have a great deal of difficulty with this legislation. Reading through your submission, I would hate to see you having difficulty. While a great deal of lip-service is paid to wanting to deal with the crime, there seems to be some difficulty with almost every provision. In fact, at the very start you say that the punishment must not be cruel, inhuman or degrading. I am not too sure what relevance that has to this particular legislation, or why you felt that extended to it, but it sets the tone for the rest of your submission.

251. Let me take up a few points. I do not know what checks you did before making the submission. First, you indicate that the officer appointing a financial investigator should be sufficiently trained to know when it is appropriate to apply for such an appointment, and also that the persons appointed are likewise sufficiently trained and au fait with the requirements of a code of practice.

252. The evidence we had from the police yesterday was that, since they have to go before a magistrate, they must know that they have a case, for a magistrate would make it very difficult for them and would be incisive in questioning. I should like to know what additional training you feel is required for an investigating officer in that particular case and why you feel there needs to be more training, given the current mechanism for applying for a general bank order?

253. The second thing you mention is that the terms of the present Order are already quite extensive, if not intrusive. However, you do not elaborate on that in any way. As far as the police were concerned when they gave us evidence yesterday, even with the present legislation there were still difficulties in dealing with certain cases. I should like to know if you could elaborate on the extensiveness and intrusiveness of the legislation. Thirdly, the new paragraph 3 requires much more detailed information, such as reference numbers and so on, and this has implications regarding a person’s rights and their private life.

254. If the police or Customs and Excise are to get hold of the financial proceeds of crime, do you really think they can be successful if they do not ask for this information? You say you are concerned about the balance between people’s rights and dealing with criminals, but it appears that — once again the police have given us substantial evidence using professional advice and so on — criminals now find it very easy to hide the proceeds of their crimes. Why do you have an objection to that?

255. The last point I wish to make concerns your objection to seeking information from solicitors. The information we were given was that criminals now use the full range of financial and professional advice, most times without the knowledge of those who are giving it, including solicitors, and the police were very specific about this yesterday. Therefore if we are to be able to trace the proceeds of crime, is it not necessary that we, the police and the Customs and Excise, have access to this particular line of professional advice. There is a perception that this is about human rights, and this seems to be more like a document that champions the criminal rather than helps the customer.

256. Mr Ervine: I must lodge an objection to that, Chairman.

257. Mr S Wilson: Even in the last part, in paragraph 5, there is an objection to looking at the origins of property. There are human rights implications to finding the origins of money within the previous six years. The balance is certainly not in favour of the law-enforcing agencies in this document. I have just given a few examples, and there are others I could go through, but the balance is clearly in favour of people seeking to hide the proceeds of crime.

258. I would be interested to hear some of your comments and elaboration on the points you have made, but on which you have clearly not given any elucidation.

259. The Chairperson: There are four or five questions, and therefore quite a number of comments. I shall let you deal with it in points.

260. Prof Dickson: The Human Rights Commission did not really have any difficulty with the Order. However, the Commission points out in the paper that there are potential difficulties and certain questions which need to be asked in relation to provisions in the Order when taken in the round. If the Order is properly applied, there should be no real difficulty. However, it is the duty of the Human Rights Commission to draw the attention of the Committee to potential difficulties.

261. The "cruel punishment" to which you draw our attention is a reference to an article in the European Convention on Human Rights, which is now part of the law of all parts of the UK. It says that no one can be subjected to cruel, inhuman or degrading punishment. It is possible to argue — I do not say that it would convince a court — that confiscating the assets of a criminal, even if convicted, not proven to be the results of proceeds of crime could be taken as cruel punishment. I am only stating what international human rights standards say.

262. As far as training is considered, paragraph 4(a) of our submission refers to the training that would be required by Customs and Excise officers applying for the Order, and not to the training of police officers, who, I admit, are already trained in that regard. However, if Customs and Excise officers are to be given this power, it is appropriate that they be trained.

263. The reference in paragraph 4(b) to the existing powers to seek information as being intrusive is a fair reflection of what is in the existing schedule to the 1996 Order, where some quite detailed information can be asked of the person approached by the investigating officer. It is not illegal, but it is intrusive. That is a fair enough description.

264. Mr Wilson says that in paragraph 4(e) the Northern Ireland Human Rights Commission is objecting to that provision. We are not. There simply are implications for a person’s right to a private life. The European Court of Human Rights will probably see the interference with one’s private life as justified in the interests of dealing with crime. You may have misread that if you think the Commission is objecting. We are simply pointing out one of the potential difficulties that may or may not exist. As the paragraph concludes by saying, much depends on how the power is exercised rather than on how it is stated on paper.

265. As regards your point about solicitors, we have not been in communication with the police as to the type of investigations they currently conduct through solicitors. However, we have been in touch with the Law Society, whom I gather the Committee is hearing from at a later stage.

266. The Chairperson: Indeed.

267. Prof Dickson: Without prejudging what they are going to say to you, you may hear that the Law Society has severe reservations about extending the powers of financial investigators when trawling solicitors files. It has to be realised that a very special relationship exists between a lawyer and his or her client. We are not saying that that relationship is one which can never be interfered with by the State for good reasons, but they must indeed be good reasons. Paragraph 4 of the existing schedule realises that and states that legal professional privilege must be safeguarded. We have only drawn the Committee’s attention to that.

268. Finally, if I am correct in the point that you made on paragraph 5 at the very end, when we talk about the source of a person’s assets, we are doing so in the context of a recent Scottish decision which held that comparable Scottish law was incompatible with the European Convention because it used a sledgehammer. It went too far in confiscating assets, allowing assumptions to be made about the source of a person’s assets. I was only reporting what the Scottish court had said. I was not necessarily predicting the view of a Northern Irish court on the Order.

269. Mr Ervine: You identified the balance between the right to challenge serious crime effectively and the rights of the individual. I want to expound that a little. To coin a phrase from a colleague: "The dogs in the street know where the drug dealers are". The dogs in the street can see them effectively functioning on a day-to-day basis, doing what they regard as legitimate business.

270. The confidence of society in the security services is very much affected by these people continuing to be able to ply their nefarious trade. Is it not legitimate that we have legislation which allows the seizure of assets for crimes committed so that the benefit from crime is removed?

271. I asked this question at an evidence session yesterday. How we can be proactive without destroying someone’s human rights? How can we not be proactive if we are stoutly to defend the human rights of the larger number of people who live in the vicinity — those who suffer and watch as the monster grows larger, more powerful and more wealthy?

272. We do not have proactivity in this piece of proposed legislation. How do we become proactive as a society in dealing with problems we can see are irrational — that someone drawing £74 a fortnight on the dole is living a lifestyle that is alien to that income? We all need advice on that.

273. Prof Dickson: The Human Rights Commission would accept the basic premise that something needs to be done to fight drug dealing, people living off the proceeds of crime and so on, but it is a question of striking the right balance.

274. There are occasions when the rights of individuals must take second place to the rights of society. When the security forces stop us at a vehicle checkpoint, most of us accept the need for that — or we did during the troubles. That was the price we paid for the sake of a greater good. When we are searched before going onto an aircraft, most of us are grateful to be searched in that context for the sake of a greater good, namely not having the plane blown up. Likewise, the balance has to be struck here.

275. To date, a case has not been made by the Government for why there must be special legislation here and not in England. Is the problem so much worse here than in England? If so, let us have the facts and figures, and we can judge the need for this legislation.

276. Mr Ervine: I wish to address that. Had we been asked that question six or seven years ago, I would have said "No, I do not think there is a case". The difficulty is that we have watched the increased incidence of drugs in Dublin and in cities in the rest of the United Kingdom and throughout Europe.

277. The fundamental difficulty that exists in a Northern Ireland context is that we already have a series of illegal institutions in place. You can build a drugs cartel in Northern Ireland almost instantaneously, whereas in other cities and societies throughout the world they take a long time to put in place. We have seen them grow in various cities throughout the world. There are ready-made groups of people in Northern Ireland. The wealth, power and capacity that they have must be challenged much more effectively and speedily than in the rest of the United Kingdom, although I have no doubt that we are merely a test case for what will develop there.

278. Mr Close: In your provisional submission, you said you were not in a position to say whether there is a need for this new legislation in Northern Ireland. I come from a school of thought which believes — and I hope that the Human Rights Commission concurs with me — that there cannot and should not be an acceptable level of crime in any society.

279. Prof Dickson: Indeed.

280. Mr Close: In that light, do you also agree that Northern Ireland society appears to be losing the battle against the criminality associated with, for example, drug trafficking?

281. Prof Dickson: I do not have the facts and figures to date. I do not know whether reports in recent years from the Chief Constable, for example, highlight the fact that the proceeds of drug dealing are greater and more obvious than a few years ago. I have not heard any hard facts or figures from the Government to back up the need for this legislation. They may exist, but they have not been presented in the Explanatory Document, nor in Mr Mandelson’s statement that preceded the publication of the draft Order. They may have been in the study conducted, but it has not been made public. If there is a need for the legislation, by all means let us have it. However, let us first have evidence of that need.

282. Mr Close: I shall use certain facts which exist to draw what I consider to be logical conclusions. I shall test whether you consider them to be so. Do you agree that the volume of seizures of drugs in Northern Ireland has escalated over the past few years at a quite dramatic rate?

283. Prof Dickson: Yes.

284. Mr Close: Do you therefore agree that a considerable amount of money must be made by those involved in this racketeering in order to make it profitable for them to be taking such risks?

285. Prof Dickson: Yes, that is very likely.

286. Mr Close: The answer to those questions has been in the affirmative. I therefore draw the conclusion that we must enact stronger legislation to try to combat the obvious increase in racketeering, profiteering and, as Mr Ervine said, the overt flaunting of a lifestyle which is far beyond one which might be achieved by legal means.

287. Prof Dickson: I agree with that. My question is whether the situation in Northern Ireland is worse than that in London, Manchester, Glasgow, or anywhere else in Great Britain. They are not getting this legislation in Great Britain. They do not even have parts of the 1996 Order there. If the problem here is no worse, then I wonder why we need more draconian legislation.

288. Mr Close: As the elected representative of people in Northern Ireland, I do not want Northern Ireland citizens to suffer second best, or even to be in the same position as another society where it is obvious that criminality exists.

289. I want Northern Ireland to be a better society. I want to try to achieve — insofar as is humanly possible — a society where the ordinary decent citizen can go about his life and is not subjected to the type of thuggery associated with, for example, drug trafficking. You are more aware than I of the whole proliferation of criminality which leads to a lesser society. I want through the law to improve that situation so that we are held up throughout the modern world as being a beacon of light where criminals will not find they have an easy passage. That is a tremendous goal to try to achieve. I want to do that legally. I therefore conclude that an improvement on existing legislation is needed if we are to achieve that. Is that not a laudable goal? Is that not something that we should look for rather than looking to London, Scotland or Wales? Or, as someone else said, "we might not be as bad as them".

290. Prof Dickson: Absolutely, and I am on record as having said that I want the Human Rights Commission to help make Northern Ireland a better society. We share your goal of a more crime-free, paramilitary-free, safer environment for everyone who lives here. Of course we desire that, but we also share the Secretary of State’s desire for Northern Ireland to be a model for the world with regard to the protection of human rights. That is why the Human Rights Commission has been established by statute, as has happened in many other countries around the world — and not just in countries emerging out of conflict, but in well established Commonwealth countries such as Canada, New Zealand and Australia.

291. We see it as our duty to draw the attention of decision makers, yourselves included, to the possible human rights implications of certain legislation, but always within the framework of having to strike a balance between the rights of individuals and the rights of society. Yes, I share with you the goal of making Northern Ireland a crime-free society. One could do that quite easily by making it a police state, if you like, but that would be too high a price to pay. One must always strike a balance and, as we have said in this paper and as I have said orally, so much depends on how powers are implemented in practice rather than on how they read on paper. On balance, there is not a lot in this that worries us, but we draw the Committee’s attention to a few potential difficulties.

292. Mr Close: I thank you for that. I do not think anyone here would be looking for a police state, and I want to put that clearly on the record. I am concerned because I see this proposed legislation as a precursor to a new proceeds of crime bill, or whatever. The South has the Criminal Assets Bureau, and I shudder to think what the reaction of the Human Rights Commission would be to that if it has these concerns over the Financial Investigations Order. I would like you to reassure me that we are not going to be running up against an absolute brick wall if we try to build upon the 2001 Order.

293. Prof Dickson: I am not totally au fait with the Republic’s legislation on this, but I am aware that at a recent conference in Dublin various concerns were expressed by high ranking politicians and lawyers about the compatibility of the legislation on the Criminal Assets Bureau with the European Convention on Human Rights. When the Republic eventually gets round to incorporating the European Convention on Human Rights, the law on criminal assets may well have to be amended to make it compatible.

294. Mr McNamee: I am not against the concept of confiscating the proceeds of criminal activity, and I do not think anyone on the Committee would be. We must not be blinkered on the issue of legislation which is directed towards gathering information that will enable the proceeds of criminal activity to be confiscated.

295. You stated that this lies not in the actual powers but in the exercise of those powers and in how other individuals are affected by them. One may wear blinkers and think that it is fine to investigate a person who is suspected of being involved in criminal activity, but we have to consider the implications for other individuals.

296. We have already heard about the difficulties bank officials face when, for instance, issued with bank circulars. They may be providing information on an individual other than the one on whom the information is being sought. If information is being sought on a John Smith, then information on every John Smith will be released given that this Financial Investigations Order will extend those powers of trawl to other institutions, police officers, Customs and Excise officers, financial investigators and solicitors.

297. In situations where information will be acquired in the course of those trawls, what is your view on the number of people who will have absolutely no connection with the individual being targeted? What is your view on the large amount of information that will be assembled on a particular name and whether that information is manageable? Much of it will be relevant to the individual being targeted. However, what is your view on the number of other people whose information will be disclosed and the potential effect of that?

298. Prof Dickson: There is the danger that you identify, but it can be avoided by careful work by the financial investigators. When they are asking questions of financial institutions or solicitors, they ought to be able to identify in specific detail the person about whom they are asking questions. Therefore there should be little risk of other John Smiths having their private details divulged.

299. Under existing law everyone has a legal obligation to report a crime. If one knows that an offence has been committed, one has a duty to report that. That already goes some way towards protecting socie