General exceptions

347.     Paragraph 16 sets out exceptions as to when property that would by virtue of paragraphs 11 to 15 be earmarked as terrorist property is not to be treated as such. The effect of paragraph 12 is that where, for example, someone is given a car in return for action of a terrorist nature, and then sells the car to someone else, the car continues to be earmarked as terrorist property. This is qualified by sub-paragraph (1) which provides that if the purchaser paid full value for the car, and was unaware of its terrorist origins, the property is no longer earmarked. However, the money paid for the car continues to be earmarked by virtue of sub-paragraph (7).

348.     Sub-paragraphs (2) to (6) set out other circumstances in which terrorist property will cease to be earmarked: where a claimant obtains property from a defendant in civil proceedings which are based on the defendant's criminal conduct (as defined in paragraph 19), and the property would otherwise be earmarked; where a payment is made following a compensation or restitution order under the Powers of Criminal Courts (Sentencing) Act 2000, and the sum or property received would otherwise be earmarked; where an amount is paid in accordance with a restitution order made by the court under the Financial Services and Markets Act 2000 and the amount would otherwise be earmarked; and where restitution is required to be made by the Financial Services Authority under that Act paying an amount which would otherwise be earmarked.

Part 6 Interpretation

349.     "Disposing" of property is a key feature of the provisions at paragraph 12 and 13. Disposal of property may take place, for instance:

• where the property is dealt with to some extent only (including where an interest in the property is created); a disposal might also consist of the grant of an interest in a part (sub-paragraph (1) of paragraph 18);

• where a person makes a payment, in cash or any other kind of property, to another (sub-paragraph (3) of paragraph 18);

• where property changes hands on death (sub-paragraph (4) of paragraph 18).

350.     Sub-paragraph (5) is relevant to the protection provided at sub-paragraph (1) of paragraph 16 for persons who obtain property "for value". It provides that a person obtains property "for value" only when he has given executed consideration for it. That means that if someone obtains property in return for a promise to pay for it or to perform some service in exchange, that will not count as having "obtained for value" until the payment is actually made or the service performed.

351.     Sub-paragraph (2) provides that where a person grants an interest in property which is earmarked, that interest is also to be treated as property which is earmarked. For example, if a person grants a lease on a car obtained through terrorism, then the lease on the car should also be treated as being obtained through terrorism i.e. as property which is earmarked.

352.     Sub-paragraph (1) defines certain terms used in this Schedule.

353.     Sub-paragraph (3) provides that the provisions on property earmarked as terrorist property apply to events occurring before commencement of this Schedule. So if cash is obtained through terrorism before commencement on the Schedule, it is still liable to seizure and forfeiture under the Schedule.

SCHEDULE 2 TERRORIST FINANCE

354.     This Schedule amends the Terrorism Act 2000 (c. 11) in a number of respects.

Part 1 Account monitoring orders

355.     The Terrorism Act contains a provision enabling a judge to order a person to produce particular material to a constable for the purposes of a terrorist investigation (paragraphs 5 to 10 of Schedule 5). Information on accounts held by financial institutions is included and may be subject to such orders. This power is, however, not well suited to information relating to transactions. In particular it only relates to material in the possession, power or custody of the financial institution or such material, which will come into existence within 28 days of the order. As a result such production orders cannot require the "real-time" disclosure of the fact that a transaction on the account had occurred, as there may well be a delay before the material recording that fact is produced.

356.     Thus there is a gap in the current provisions where investigating authorities need to be able to obtain information relating to the account or accounts held with a specified financial institution by a named individual or body. Account monitoring orders will be the mechanism available to obtain this information. The information required is principally that relating to transactions on the account. The information sought is similar to that which is sought by account monitoring orders provided for in the Proceeds of Crime Bill. However, it has a different scope to that Bill, in that the order can be obtained for the purposes of a terrorist investigation* and so is focused on terrorism as opposed to all criminal activity. Account monitoring orders are to be provided for by the addition of a new Schedule (Schedule 6A) to the Terrorism Act 2000.

     *Terrorist investigation is defined in section 32 of the Terrorism Act.

357.     An account monitoring order would have the effect of requiring a financial institution to provide specified information in relation to an account (for example, details of all transactions passing through the account) to a specified place or places during a specified period for a maximum of up to 90 days. This information would normally be provided in the form of a bank statement.

358.     An account monitoring order may be obtained if the person making it is satisfied that the application satisfies all three requirements of subparagraph (1) of paragraph 2 of new Schedule 6A.

359.     Paragraph 3, subparagraph (2) allows an applicant for an account monitoring order to vary the description of information sought in the application. This is necessary so that an application does not fail completely where the judge is prepared to make the order in relation to certain of the information specified but not all. This flexibility avoids the need for a further application to be made.

360.     Paragraph 6(1) provides that account monitoring orders made by a judge have effect as if they were orders of the Court. This enables a failure to comply with an order of the judge to be dealt with as a contempt.

361.     Paragraph 6(2) is necessary as the information which is described in the order will be held by the financial institution subject to various restrictions on its disclosure to third parties. This subparagraph makes it clear that the order has effect, and must be complied with, despite the existence of such restrictions.

362.     Paragraph 7(1) precludes the use of a statement made by a financial institution in response to an account monitoring order as evidence against the financial institution in any criminal proceedings.

363.     There are three exceptions to this rule. Failure to comply with an account monitoring order will be dealt with as a contempt of court. Subparagraph (2)(a) provides that any statement given by a financial institution can be used in such proceedings. Subparagraph (2)(b) prevents a financial institution being free to provide evidence inconsistent with a statement already provided in proceedings against it for an offence. The third exception addresses the possibility, albeit low, that a financial institution which has given a statement in response to an account monitoring order is subsequently convicted of an offence under any of sections 15 to 18 of the Terrorism Act. The statement made may well contain information relevant to what money or other property may be subject to a forfeiture order under section 23 of that Act. This provision allows the statement to be used in such proceedings.

Part 2 Restraint orders

364.     At present, the Terrorism Act contains a provision enabling the High Court to make a restraint order, freezing assets, to prevent someone accused of an offence under sections 15 to 18 of the Terrorism Act from selling his property in order to avoid forfeiture.

365.     The Bill makes a fundamental change to this scheme. The point at which a restraint order may be made is brought forward to any time after an investigation has been started (at present, although a restraint order may be made at the investigative stage, it is only possible to do so where charges are anticipated). This will reduce the risks that funds will be dissipated or used for terrorism before a decision has been made on whether to launch formal criminal proceedings investigation.

366.     Paragraph 2, subparagraph (2) allows the High Court to make a restraint order where a criminal investigation has commenced into a suspected offence under any of sections 15 to 18 of the Terrorism Act. Because at an early stage of a criminal investigation, there are no proposed proceedings, the references to proposed proceedings have been changed to any proceedings for the offences under investigation.

Part 3 Disclosure of information

367.     Under section 19 of the Terrorism Act it is an offence for a person who, by virtue of information which has come to him in the course of a trade, profession, business or employment, believes or suspects that another person has committed an offence under sections 15 to 18 of that Act to fail to disclose it to a constable.

368.     Paragraph 5 of Part 3 adds a number of provisions to the Terrorism Act. By virtue of new section 21A (inserted by paragraph 5(1)) where a person knows or suspects, or has reasonable grounds for knowing or suspecting, that a person has committed an offence under any of sections 15 to 18 of that Act, and the information came to him in the course of a business in the regulated sector, he must disclose that information. Failure to do so is an offence. Section 19 is amended to remove such persons from the scope of that section (-paragraph 5(3)). The regulated sector is defined in Part 1 of Schedule 3A added by sub-paragraph (6) of paragraph 5.

369.     That this provision is only directed at persons who are carrying out activities in the regulated sector reflects the fact that they should be expected to exercise a higher level of diligence in handling transactions than those engaged in other businesses. Where a business carries out some activities which are specified in Schedule 3A, Part 1 and some which are not, then it is only to the extent that information is obtained in the course of the specified activities that is covered by these provisions.

370.     The requirement to pass on information where there are reasonable grounds to know or suspect that someone has committed an offence lays down an objective test for criminal liability. In recognition of this subsection (6) of section 21A provides that the court must take any guidance issued by the supervisory authority or any other appropriate authority into account when determining whether an offence has been committed. That guidance has to be approved by the Treasury and is published in a manner approved by the Treasury so as to bring it to the attention of persons likely to be affected by it. A list of supervisory authorities is to be found in Schedule 3A, Part 2.

371.     Paragraph 5 also adds a further new provision to the Terrorism Act (section 21B). This provision ensures that persons in the regulated sector can disclose information which causes them to know or suspect, or gives them reasonable grounds to know or suspect, that an offence has been committed to the police without fear of breaching any other legal restriction which would otherwise apply.

Part 7 Miscellaneous

SCHEDULE 3: FREEZING ORDERS

372.     The Schedule sets out a series of measures that the Treasury may include in a freezing order. The Treasury may include other supplementary, incidental, saving or transitional provisions.

Interpretation

373.     References to a person specified in a freezing order means those specified by name or description in accordance with section 5(4).

Funds

374.     This clause provides that freezing orders may include a provision defining funds.

Making funds available

375.     This paragraph provides that a freezing order must define the meaning of making funds available to or for the benefit of a person.

Licences

376.     A freezing order must include provisions for authorising funds to be made available, subject to conditions set out by the Treasury. The Treasury may charge fees to cover the administrative costs of granting a licence.

Information and documents

377.     A freezing order may provide that a person must provide information or a document if it is reasonably needed in order establish whether an offence under the order has been committed. The requirement to provide information or a document may be made by the Treasury or a person authorised by the Treasury. The requirement is to do so, in a certain time period and at a place set out in the order. The order may provide that the requirement to provide information is not to be taken to breach any restriction on the disclosure of information. However, the requirement does not apply to information or documents subject to legal privilege, except to the extent that the information or document is held with the intention of furthering a criminal purpose.

Disclosure of information

378.     This paragraph provides that a freezing order may include a provision requiring a person to disclose information if three conditions apply.. First, the person required to disclose must be specified in the order. Secondly, the person must know or suspect, or have grounds to know or suspect, that a person specified in a freezing order is a customer of his or has dealings with him. Thirdly, the information must have come to him in the course of a business in the regulated sector. The freezing order may include provisions: that the requirement to disclose information is not a breach of any restriction on the disclosure of information; on the use to which the information may be put and further disclosures; and, that the obligation to disclose does not apply to privileged information except where the information is held with the intention of furthering a criminal purpose.

Offences

379.     A freezing order may include any of the following provisions providing for offences.

380.     A person commits an offence if he fails to comply with a prohibition imposed by an order or facilitates the breach of a freezing order by another person. A person does not commit these offences if he did not know and had no reason to suppose that the person to whom funds were made available was the person specified in the freezing order. On summary conviction, a person guilty of an offence under either provision is subject to imprisonment for up to 6 months or a fine not exceeding the statutory maximum or to both. On conviction on indictment, a person guilty of an offence under either such provision is subject to imprisonment for up to 2 years or to a fine or to both.

381.     A person commits an offence if he fails, without reasonable excuse to provide information or a document as required by an order. A person commits an offence if he provides information or a document which he knows includes information which is false in a material particular, or he does so recklessly. On summary conviction, a person guilty of an offence under either such provision is subject to imprisonment for up to 6 months or a fine not exceeding level 5 on the standard scale.

Offences: procedure

382.     A freezing order may include a provision that proceedings for an offence under the order are not to be instituted unless the relevant Director of Public Prosecutions or the Treasury consents.

383.     An information or complaint relating to an offence under the order may be tried in England and Wales or Northern Ireland if it is laid or made within one year from the commission of the offence. In Scotland, summary proceedings for an offence may be commenced within one year of the commission of the offence.

Offences by bodies corporate

384.     A freezing order may provide that where an offence has been committed by a body corporate with the consent, connivance or by neglect of a director, manager, secretary or other similar officer, or by a partner of a Scottish partnership, then he is also liable for the offence.

Compensation

385.     A freezing order may include provision for compensation to be paid to a person who has suffered loss as a result of the order, or the grant or refusal of a licence under the order, or the revocation of a licence. The entitlement to compensation may be made subject to a requirement that the claimant has behaved reasonably (for example by mitigating his loss).

Treasury's duty to give reasons

386.     A freezing order must provide that if a person specified as having their funds frozen makes a request to the Treasury to give him the reason why he is so specified, then the Treasury must give the person the reason in writing as soon as practicable.

SCHEDULE 5

387.     This lists the pathogens and toxins to be brought under immediate control under Part 7.

SCHEDULE 6

388.     This provides details relating to the composition, constitution and administration of the Pathogens Access Appeal Commission.

FINANCIAL EFFECTS OF THE BILL

389.     We expect some, relatively small, costs to be incurred this year. It is not possible at this stage to provide a breakdown as the costs of a number of measures will depend on details included in secondary legislation or to be confirmed later.

EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER

390.     There are no public sector manpower effects arising directly as a result of the provisions in this bill. However, the bill provides for the AEAC to be deployed on more nuclear sites than currently. The Director of Civil Nuclear Security may require that the AEAC are deployed on more sites, which would require more UKAEAC officers.

SUMMARY OF THE REGULATORY APPRAISAL

391.     This bill amends and extends legislation in a number of areas, some of which will impact on industry. These include: data retention by communications service providers, provision of passenger and freight information, aviation security, civil nuclear security, terrorist funding, freezing orders and the control of pathogens and toxins.

392.     Following the events of September 11 it is clear that, along with the loss of human life, a single attack can have a severe impact on specific industry sectors and on the economy as whole. Although to date no attacks have been mounted against the UK, they did affect the US operations of several UK companies and killed many British Citizens.

393.     Given the nature of the threat it is extremely difficult to quantify the benefits from this legislation. However, through improved detection, tracking and prevention of terrorism the bill will contribute to a higher level of security for the UK, preventing the loss of life and ensuring that businesses and society as a whole can continue to operate in safety.

394.     It is also extremely difficult to determine overall compliance costs resulting from the bill. Many of the provisions which have cost implications will only be used should the need arise. This is the case for example with the detention of aircraft, deployment of the UKAEAC and passenger and freight information.

395.     Equally, the total compliance costs of a number of other measures in this bill will depend on the details of the proposals to be covered in secondary legislation. Such secondary legislation or codes will be developed in consultation with industry to ensure that there will be effective compliance with the measures and that the costs of such compliance will be minimised.

396.     A Regulatory Impact Assessment for the bill will be available from the Home Office website as will further details of those provisions in the bill which will impact on industry.

COMMENCEMENT

397.     A number of provisions in the bill will commence on Royal Assent as detailed in clause 123.

EUROPEAN CONVENTION ON HUMAN RIGHTS

398.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention (as defined by section 1 of that Act). The statement has to be made before second reading. The Secretary of State for the Home Department has made the following statement:

In my view the provisions of the Anti-terrorism, Crime and Security Bill are compatible with the Convention rights.

1 June 2000, Cm 4759.
2 No. 248.