Examination of Witnesses (Questions 60
- 79)
TUESDAY 31 OCTOBER 2000
MR RICHARD
MANNING, DR
ELAINE DRAGE,
MR GORDON
WELSH, MR
CERI SMITH
AND MS
LORNA HARRIS
60. No action was taken by you?
(Mr Welsh) We took action in the context of referring
them to the appropriate authorities.
61. You had no conviction, you have taken no
action.
(Mr Welsh) It is out of our hands. We do not have
independent investigatory responsibility. We rely on the appropriate
authorities in the United Kingdom to do those investigations and
to bring charges.
Chairman: That sounds like part of the
problem. We must move on to money laundering and asset recovery.
Ann Clwyd
62. In the Government's memo to us you say corruption
is aided and abetted by money laundering, it allows those involved
to protect the proceeds of crime and benefit from them. You talk
about the laundering process involving financial centres in London,
Geneva or New York, as well as centres in some developing countries.
Can you tell us how much money is being laundered through the
world financial centres, in particular through London, and what
proportion of the money stems from corruption?
(Mr Smith) In terms of estimating the magnitude of
money laundering, there have been several studies, none of them
entirely successful. By definition they do not advertise that
they have successfully laundered their money. This has caused
a great deal of measurement problems. The IMF using 1996 figures
suggested that the total global laundering problem was between
590 billion and 1.5 trillion US dollars a year. I personally think
that is not guesswork, but it is certainly not a particularly
reliable figure, simply because of the problems of measurement.
There have been no estimates of the problem within the United
Kingdom of any reliability, and consequently there is no estimate
of the sums within that which are attributable to corruption.
My understanding is that those academics who studied the problem
believe that about half of the criminal proceeds laundered throughout
the world are due to drugs trafficking and that the other half
is related to all other criminal activities. Again, that is only
an estimate.
63. Is the problem getting better or worse?
(Mr Smith) If one uses proxies, for instance there
are professional money launderers and if you were to do a search
on the worldwide web you would find certain people advertising
their services.
Mr Robathan
64. How very useful.
(Mr Smith) Some are the American authorities.
65. I do not have the money to launder.
(Mr Smith) You can use the commission charged as proxy,
and if that commission is going up it would indicate it is getting
harder to launder the funds. I believe that commission has been
rising, which we take as an indication of success in either creating
barriers to entry into the financial service market or, indeed,
increasing the risks associated with and rewards demanded by criminals
who are laundering proceeds.
Ann Clwyd
66. What are the current UK problems of legislation
on money laundering?
(Mr Smith) Last summer the Cabinet Office published
a Performance and Innovation Unit Report which identified a range
of difficulties that currently exist within the anti-money laundering
system in the United Kingdom. I think an example of some of the
difficulties has been the piecemeal way in which money laundering
law has developed in the United Kingdom. We have three separate
pieces of primary legislation: the Prevention of Terrorism Act,
which relates to terrorism funds, the Drug Trafficking Act, which
relates to the proceeds of drug trafficking, and the Criminal
Justice Act, which relates to all other criminal activities. Due
to the way in which the legislation was implemented, there are
differences in the definition of money laundering and the actual
nature of the crimes within those. That is one area where there
has been some lack of clarity in the definition of money laundering.
67. Are there plans to introduce new legislation?
(Mr Smith) The Performance and Innovation Unit Report,
which has been published as agreed Government policy, has stated
that there are recognised problems and the Government certainly
has intentions to change those.
(Ms Harris) If I can just add to that, there is a
financial crime team within the Home Office specifically looking
at recovering the proceeds of crime. The report to which Mr Smith
has referred is currently considering legislation. It is hoped
that the legislation on financial crime generally would be introduced
either in the next session or in the one after that.
68. What prosecutions have there been in the
United Kingdom in recent years on money laundering proceeds of
corruption?
(Ms Harris) The difficulty here is I do not have specific
figures available to me at the moment, but obviously money laundering
is an activity which follows a predicate offence. There has to
be criminal activity which led to the proceeds being available
to be laundered. The tradition of the United Kingdom law enforcement
is to prosecute the substantive offence rather than the money
laundering. Money laundering as a stand-alone offence is rarely
prosecuted. Usually what the prosecutor will go for is the predicate
offence.
Mr Rowe
69. Am I not right in thinking that in the case
of auction houses the selling of goods which the auction house
has good cause to believe is actually criminal or improper is
actually prosecutable? What you are saying is that the theft of
the picture would be proceeded against by the British authorities
but the selling of the picture by Sotheby's would not. In fact,
in that case it is. Why do you not have the same kind of law that
says that both the laundering and the original theft are proceeded
against?
(Ms Harris) I may have given the wrong impression.
Money laundering is criminally actionable in the United Kingdom.
The point I was making was that normally what is actually prosecuted
by the authorities is the predicate offence. Very often the person
who committed the predicate offence is the launderer as well.
The prosecution will then decide not to prosecute the same person
for the laundering.
70. Are you saying that the bank through which
the money passes is exempt from the likelihood of prosecution?
(Ms Harris) If the money launderer is not the person
who committed the predicate offence then there will be an investigation
if it is reported to the appropriate authorities at the right
time. The point I was making is, if the money launderer is the
person who committed the predicate offence then very often the
prosecution authorities will take, in common parlance, one bite
of the cherry only.
Ann Clwyd
71. What prosecutions have there been? You said
you do not have figures at the moment. Does that mean zero or
100?
(Ms Harris) I have would to get the figures for that.
I would have to come back to the Clerk of the Committee.[15]
On money laundering alone it is not a significant number of
prosecutions and convictions.
72. An article in the Financial Times
about a week ago claimed that many of the transactions that enabled
the former Nigerian dictator Sani Abacha to launder money through
the United Kingdom were reported to the British Authorities and
the authorities failed to act. What do you say to that?
(Ms Harris) Again, I have some difficulty with that
because this is an active case which is currently being investigated.
In a public hearing I do not think it is appropriate to answer
questions, with respect.
Ann Clwyd: That is okay.
Chairman
73. Are there judicial proceedings?
(Ms Harris) Again, that is not something that the
Home Office would either confirm or deny, the state of proceedings.
74. What are you claiming, that you cannot answer
the question?
(Ms Harris) I cannot answer the question in public.
I will give you all the details you want if the session is in
private.
Chairman: All right.
Mr Worthington
75. Let us take the case of where one knows
that there is a dictator overseas who is milking his country and
it is known to everybody, would you ever have a situation where
the British Government said, in foreign policy terms or in development
terms, it is crucial to get that person's money that is being
laundered in London or do we sit back and wait for someone to
find a specific instance? Is there really serious proactive action
ever taken by the British Government to say it is crucial in foreign
policy terms that we get that money and we return it to X country?
(Ms Harris) In nearly all cases one would wait for
a request from the foreign Government. However, I can conceive
of a possibility of a situation being outlined as being so extreme
as to make the United Kingdom authorities, for example the CPS
or another law enforcement authority, itself suggest to the police,
perhaps, that an inquiry be opened to see if there is any truth
in the allegations and rumours surrounding the apparent criminal
source or origin of the funds.
76. It has never happened!
(Ms Harris) I cannot say that it has never happened.
I am afraid I am not in a position to say that.
77. You cannot say it has happened?
(Ms Harris) I can certainly think of cases where international
media attention has focused the authorities in the United Kingdom
on transactions and events, to the extent that the police have
been asked to make enquiries
78. The point I am making is, if you take people
like Milosevic and Saddam Hussein—we did this on the Sanctions
Report—we could not find any evidence at all that in the
major areas of foreign policy, where you want to stop Milosevic
salting money away or Saddam Hussein or others—the British
Government had said, "We need to act on this". We are
waiting for others to act all of the time, are we not?
(Ms Harris) If one is looking at the system for reporting
potential money laundering, there is the Financial Intelligence
Unit within NCIS which has responsibility for receiving the suspicious
transaction reports. If there is an allegation or suspicion that
money is being laundered in the United Kingdom, the first authority
to know about that will be the FIU and NCIS, a branch of the police,
which will lead, if the suspicions are borne out, to an independent
investigation.
Ann Clwyd
79. How many various reports do they receive
in a year?
(Ms Harris) For suspicious transaction reports last
year there was about 15,000.
(Mr Smith) Perhaps I can clarify the system of reporting.
If a United Kingdom bank knows or suspects that the funds that
are being deposited within it are the proceeds of an indictable
offence, then that bank is required to make a report to NCIS.
It would be a criminal act for that bank to assist in the laundering
of those funds. It is quite clear that corruption falls within
that and that if any United Kingdom institution knows or suspects
that the funds it is dealing with are, in fact, the proceeds of
corruption, then it would be criminal for them to assist in that
unless they were to make a report to NCIS, which provides them
with a statutory defence.
15 See Evidence p. 31. Back
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