Memorandum submitted by the National Criminal
Intelligence Service (NCIS)
THE NATIONAL CRIMINAL INTELLIGENCE SERVICE
AND THE ROLE OF THE ECONOMIC CRIME UNIT
1. The National Criminal Intelligence Service
(NCIS) was formed in 1992 and gained statutory status on 1 April
1998. It is tasked with providing leadership and excellence in
criminal intelligence to combat serious and organised crime. With
a total budget of some £48 million and 700 staff, NCIS is
an interagency organisation working in partnership with others
and acts as the criminal intelligence hub for law enforcement
activity affecting the nation. It specifically seeks to tackle
individuals at the top tier of criminality. All significant investigations
instigated by law enforcement agencies are reported to NCIS to
ensure that any relevant intelligence is utilised, as well as
to ensure that two or more agencies do not commit resources targeting
the same criminal operation. It should be noted that NCIS is not
an investigative or operational body—the organisation seeks
to provide intelligence and services to other operational agencies
to ensure that they act in the most efficient manner in tackling
criminality.
2. NCIS has six regional offices throughout
the UK and a headquarters building in London. The regional offices
liaise closely with all law enforcement and governmental agencies
within their area. Whilst the headquarters unit focuses on both
strategic and policy issues. A number of specialist units exist
within the headquarters to provide expertise with regards to particular
types of criminality. One such specialist unit is the Economic
Crime Unit (ECU), which acts as the Financial Intelligence Unit
(FIU) function for the United Kingdom. This is the central, national
unit responsible for receiving, analysing, and disseminating financial
disclosures received in the UK and forwarded to Law enforcement
for investigation.
3. The ECU brings together personnel from
a range of law enforcement and government departments, including
Police, Customs, Benefits Agency, Financial Services Authority,
Inland Revenue, and the Gaming Board, in order to pool resources
and skills in the fight against money-laundering. It also directly
employs a number of specialist staff. The unit undertakes the
following functions:
— provides an educational service to
United Kingdom law enforcement agencies on matters relating to
financial investigation and money-laundering issues;
— assists the UK central authority
with information regarding financial investigation and money-laundering
issues;
— provides a central advice and consultancy
service for financial intelligence and money-laundering issues;
— liaises with financial institutions,
trade associations, and regulatory bodies (including the FSA)
over the education and training of Money-Laundering Reporting
Officers at all financial bodies within the UK;
— exchanges financial intelligence
and training with foreign FIUs, as well as providing assistance
to other countries in the formation of new FIUs and the drafting
of appropriate anti money-laundering legislation;
— provides input to money-laundering
policy formation at international level by being part of the UK
delegation to the Financial Action Task Force (FATF); and
— exchanges financial intelligence
with Foreign FIUs in 53 nations around the globe as part of the
Egmont group.
The current legislation
4. Over the past decade and more, a range
of legislation designed to prevent money laundering has been introduced
by successive governments. In summary, current legislation obliges
any individual who, in the course of his or her business, gains
knowledge or suspicion that funds are the proceeds of drugs trafficking
or terrorist activity, to disclose details to a constable. For
all intents and purposes, the "constable", in this case,
is the ECU at NCIS. Failure to so disclose may leave the individual
open to prosecution for a money laundering offence, carrying a
maximum sentence of 14 years imprisonment, and/or prosecution
for failing to disclose, attracting a maximum sentence of five
years imprisonment. It is not an offence to fail to disclose knowledge
or suspicion of funds linked to other crimes—including corruption.
However, failure to do so would leave the individual open to prosecution
for mainstream moneylaundering offences—carrying a maximum
sentence of 14 years. If an individual has made a disclosure,
he or she may have a defence against prosecution for laundering,
but such a defence is not automatic and depends upon the timeliness
and proportionality of the disclosure.
5. The above legislative framework means
that financial institutions (and, on occasion, individuals) make
disclosures to the ECU when they have knowledge or suspicion of
that funds they are handling are criminal in origin. A table summarising
the levels of disclosure in recent years is attached at Annex
A. As can be seen, the overall level of disclosures—some
14-15,000 per annum on average—has been said by some observers
to be low in comparison to the size of the UK financial services
sector.
6. In additional to the mainstream anti-money
laundering legislation the UK introduced the Money Laundering
Regulations 1993 which created a series of obligations for the
financial services sector. The obligations included: the appointment
of an individual responsible for evaluating disclosures and overseeing
compliance with the Regulations (known as the Money Laundering
Reporting Officer or MLRO), training of staff; customer identification
requirements; record keeping requirements; and the need for adequate
procedures to prevent and detect money laundering. Breach of these
provisions carry a maximum sentence of two years imprisonment
and/or an unlimited fine.
7. However, there have been no convictions
for breaches of the Regulations to date. In part, this has been
due to no particular organisation being designated to deal with
such breaches. The recently published Cabinet Office document
"Recovering the Proceeds of Crime" acknowledged this
weakness. It is the view of NCIS that the new powers granted to
the FSA under the Financial Services and Markets Bill will allow
a more proactive regulatory approach, and the recent issuing of
the FSA consultation paper 46 on money laundering was a welcome
development.
The disclosure process
8. Unfortunately, current UK legislation
does not stipulate the format in which a suspicious transaction
report (STR) should be made to the `constable'. This causes a
tremendous variation in detail contained within STRs and effectively
reduces the speed and effectiveness of the overall system. That
said, some institutions have worked closely with the ECU to achieve
greater standardisation. As a matter of good practice the ECU
normally only accepts STRs in writing by post, fax, or electronic
secure link. Upon receipt the ECU evaluates the disclosure in
terms of apparent urgency—a small number of cases, "fast
tracks", must be handled immediately due to the circumstances
surrounding the suspect or the funds. Such "fast track"
cases are disseminated to law enforcement within 24 hours of receipt.
Other reports are processed in the order they arrive. An acknowledgement
letter is provided for all disclosures, which in the majority
of cases gives permission for the financial institution to continue
normal business. It is a common misconception that NCIS can force
an institution to continue with a transaction; it should be noted
that the final decision as to whether or not to continue the business
rests with the financial institution as a commercial judgement.
9. All disclosures are checked against the
financial disclosure database and against other NCIS databases
and, where necessary, the databases of other law enforcement agencies.
All information relevant to the disclosure is collated and analysed
to determine the most appropriate investigating unit, and an intelligence
package is forwarded to that unit for action.
10. The unit receiving the disclosure will
usually institgate its own investigation, obtaining evidential
matter from the financial institution by means of a production
order. The financial investigator and financial institution will
typically have a high level of contact as the investigation progresses,
to ensure that the burden on the financial institution is kept
to an acceptable minimum whilst gaining the best evidence and
intelligence. This relationship also allows for direct feedback
between investigator and institution as to the quality of the
initial disclosure.
11. After the operational unit has concluded
its investigation, it should submit a feedback report to the ECU.
The ECU is then able to inform the financial institution which
made the initial disclosure as to the quality and suitability
of the disclosure in order to promote best practice. Here the
ECU is dependent on the operational units providing them with
the original feedback for onward transmission to the institutions.
This has, at times, caused problems, but the new ECU database
system has automatic reminder procedures for operational units
to encourage more timely and meaningful feedback information.
Developments within NCIS ECU
12. The conclusions of the recent Cabinet
Office report drew attention to the need for additional investment
in the ECU as the United Kingdoms' national FIU. The Home Office
has granted a limited increase for the current financial year
which has already allowed for an expansion in staff numbers to
improve the throughflow of disclosures. NCIS is hopeful that for
the financial year 2001-02 the full amount recommended in the
PIU report will be made available in order to allow the unit to
meet its responsibilities more fully and to recruit more specialist
staff.
13. NCIS has also invested significant funds
in recent years to the development of a new computer database
for disclosures, which allows a more rapid and accurate analysis
of disclosures, secure electronic receipt of disclosures from
financial institutions, and electronic dissemination of intelligence
packages to financial investigation units in Police forces and
Her Majesty's Customs & Excuse. The database has been operational
since January 2000. Further monies have also been secured through
the Government's "invest to save" funding, with the
objective of further developing electronic communications between
NCIS and a wide range of public and private sector bodies, including
overseas Financial Intelligence Units to facilitate the exchange
of both intelligence and educational material.
14. NCIS ECU is also attempting to further
links with the FSA, and to this end we are currently working on
a new partnership agreement to formalise our relationship. Whilst
the partnership agreement will form a sound basis for co-operation,
other legislative provisions are awaited allowing for adequate
legal gateways to enable the passing of confidential information
between the two agencies. The secondment of a new FSA employee
into the ECU is also due to occur shortly which will further cement
this relationship. NCIS sees the education of financial institutions
as key in the fight against all types of laundering, and a close
relationship with the FSA will be vital in order for the fight
against laundering and corruption to succeed.
15. NCIS ECU has also had a long running
relationship with trade bodies, including the BBA, and is a key
contributor to the Joint Money Laundering Steering Group (JMLSG).
NCIS also assisted the JMLSG to produce the Money Laundering Guidance
Notes for financial institutions. It is our opinion that the BBA
and other professional associations have a vital role to play
in the education and encouragement of the financial services industry
in the fight against money laundering. The ECU plans to increase
the level of contact and communication with such trade bodies
in the light of aforementioned budget increases, through mediums
such as seminars and trade conferences. The aforementioned invest
to save funded communication project will also be seeking to create
educational material accessible electronically by both institutions
and professional bodies.
National Criminal Intelligence Service (NCIS)
November 2000
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