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Mr. Gerald Kaufman (Manchester, Gorton): Is my right hon. Friend aware that had my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) been on the receiving end of religious hatred, he might take a less academic view of it?

Is my right hon. Friend also aware that his decision to introduce legislation to turn religious hatred into an offence will be welcomed not only by Muslims, Sikhs and Hindus, but by Jews as well? He may well be aware that even in this fevered situation the story has been circulating that the attack on the World Trade Centre was a Jewish plot, with Jews who were working there advised not to go into work on 11 September. Does he therefore accept that if the Bill is to be introduced—I am glad to hear that it will be—the decision to prosecute should be that of the Attorney-General and not that of the Crown Prosecution Service, which recently admitted to institutionalised racism within its ranks?

Mr. Blunkett: My right hon. Friend puts his finger on issues as quickly and carefully as ever. The Attorney-General will want to lay down key principles in terms of action, but we will want the CPS to be able to take more decisive action at a local level than has been apparent over the past 17 years.

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Action Against Financing Terrorism

4.36 pm

The Chancellor of the Exchequer (Mr. Gordon Brown): With permission, Mr. Speaker, I wish to announce measures that seek to cut off the supply of funds to terrorism.

Those who finance terror are as guilty as those who commit it, so our response to the funding of terrorist acts must be every bit as clear, as unequivocal and as united as our response to the terrorist acts themselves. The action plan that I am placing in the House of Commons Library, which is now available in the Vote Office, arises from concerted work across Governments, and in particular from decisions of the G7 group of Finance Ministers and Central Bank governors on 6 October. It proposes to tighten our law, further empower the police and strengthen co-ordination across the world.

I can report to the House that having already fully implemented UN Security Council resolutions on the Taliban and on Osama bin Laden, the United Kingdom has now frozen 35 suspect bank accounts, immobilising more than £63 million of suspect terrorist funds. I can also report that by Order in Council, following the latest UN resolution 1373, we have frozen all UK bank accounts associated with the individuals and organisations named in the US Treasury's suspects lists and have already seized in total £180,000 held by those identified in Friday's updated list.

Our UK domestic controls are already among the best in the world, but as part of the emergency anti-terrorism Bill announced this afternoon by the Home Secretary the Government propose a new power to freeze funds when suspicious transactions are under investigation. That will be backed up by new reporting requirements on financial institutions so that they must disclose not only known transactions destined for terrorism, but transactions where there are grounds for suspicion.

Clearly, a balance has to be struck between individuals' right to privacy and their security at a time of increased risk, but we believe that there is a case for new powers for the police to monitor accounts that may be used to facilitate terrorism; for Customs to be allowed, where there are suspicions, to seize cash not only at our borders, as it can now, but within the UK as well; for the Inland Revenue and Customs where applicable to share information and co-operate more effectively with the police; and for the Treasury to freeze assets where there is a clear risk to safety and security.

We do this not least because of the weight of evidence concerning the finances of bin Laden and the al-Qaeda organisation, which is complex but becoming clearer daily. It is not primarily bin Laden's personal wealth that supports the Taliban and active terrorist operations, but the profits from the drugs trade and other businesses, and from individual and company sponsors. That money is channelled through a range of financial centres across the globe, with evidence already pointing to centres in the Gulf, Pakistan and central Asia and to money laundering through an established underground banking system. The cells that form part of the wider al-Qaeda network are often self-financing, possibly using business fronts and crime to sustain themselves. Unravelling that relies on first-rate co-ordination.

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Since 11 September, the security services, police, special branch and Customs and Excise—co-ordinated by the National Criminal Intelligence Service—as well as our armed forces, have worked together to track down terrorist finance, and I believe that the whole House will wish to express its gratitude to them.

To enhance those efforts, we now propose to establish and fund within NCIS a new multi-agency terrorist finance unit, fully supported by additional special branch investigative resources. To improve financial intelligence further, a new taskforce will bring to the anti-terrorism effort the best of academic, financial and commercial expertise, using in particular the best skills of forensic accountancy in tracking assets. It will also investigate underground banking, which is often used for legitimate purposes such as remitting earnings to families and communities far away, but is also known to provide very easy means for criminals and terrorists to conceal the laundering of money and its movement around the world.

Bureaux de change are another network by which money can be laundered and transferred. In the past 18 months, Customs and Excise has charged 89 people in connection with laundering £590 million. That is just a start. In the consultation document that we are publishing today, we therefore propose the implementation from 12 November of a new regime of supervision to ensure the compliance of bureaux with money-laundering regulations, and we will consult on a registration charge. To make easier the tracing and tracking of criminal and terrorist assets, we are also consulting on a new requirement for proper disclosure of beneficial ownership of companies.

Large financial centres all over the world have an important part to play in cutting off the supply of terrorist funding. I am able to tell the House that many of the measures that we are bringing forward are to be replicated throughout UK Crown dependencies and overseas territories. They will be announcing their own plans to introduce appropriate equivalent measures.

The G7 Finance Ministers and Central Bank governors met in Washington on 6 October and concluded that a special plenary of the international financial action taskforce would meet later this month to agree the imposition, enforcement and monitoring of new international standards to combat terrorist finance. Our Government are also pressing for the UN to establish a permanent monitoring and enforcement unit for those standards; for the International Monetary Fund to provide the expert help that many countries need to set up economic crime units; and for the early ratification of the European Union second money-laundering directive and the international convention on the suppression of the financing of terrorism.

At international meetings, G7 Ministers also had a chance to review the current state of the world economy. We expressed solidarity with the United States Government and the whole of the USA after the tragic events of 11 September and agreed that the global economic challenge demanded a global response.

Not only have interest rates been brought down worldwide, but the central banks of America, the euro area, Japan and Britain have made clear their determination to take any necessary further action. Oil

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prices, which have previously risen in times of trouble, have fallen in the past month. We will continue to work with the oil-producing countries to ensure steadiness of supply and prices. Where markets have failed, as in airline insurance, Governments throughout Europe and America have acted together, with a new short-term insurance guarantee.

These remain uncertain and testing times. As Governments and Finance Ministers work together, every one of us is conscious of the human consequences of economic uncertainty, especially concerns about employment. Since 11 September, the world has acted together decisively to seek to maintain the conditions for stability and growth. The Government's assessment of the current state of the economy and our forecasts for next year will be published next month in the pre-Budget report for full discussion in the House.

If fanaticism is the heart of modern terrorism, finance is its lifeblood, and I believe that the whole House will agree on the need to move expeditiously to cut off the supply of terrorist finance. Once again, the House is demonstrating its unity and determination, standing firm, as one, to cut off all means of support to terrorism.

Mr. Michael Howard (Folkestone and Hythe): First, I express my gratitude to the Chancellor for the advance indication that he gave me of the contents of his statement.

I welcome the statement and the measures that the Chancellor has described. Draining the financial lifeblood of terrorism is as important a contribution to its defeat as any other measure we can take. The Chancellor will therefore have the full support of the Opposition for any appropriate action that he takes to achieve that aim.

We particularly welcome the recognition that whereas money laundering is about making dirty money clean, much of the financial support for terrorism comes, as the Chancellor made plain, from business activity of one kind or another—some of it apparently legitimate. Does he agree that a recognition of that distinction should be at the heart of our approach, and that simply building on existing laws against money laundering may not prove to be the right course?

Although we welcome the inquiry that the Chancellor has announced into what he described as underground banking, does he accept that any problems caused by that system will not be limited to this country? What assessment has he made of the extent to which the use of the system in other countries has implications for the financing of terrorism? What action, if any, is being taken in respect of that activity in those countries?

Will the Chancellor assure us that any new requirements that he intends to introduce will be straightforward and comprehensible to those who have to implement them? Does he agree that there has too often been confusion about what the banks are supposed to do? Does he agree that, if his approach is to be effective, there can be no room for ambiguity about the responsibilities of the banks?

This morning's edition of The Times says:

Has clarity now been introduced into that confusion? Finally, what progress, if any, has been made in the investigation of share movements in the days leading up to 11 September, which caused such widespread concern?

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We shall scrutinise the detail of the Chancellor's measures when they become available, with a view to ensuring that Britain has legislation that does not merely adorn the statute book, but works effectively to make a real difference in our efforts to protect those to whom we are accountable, and others across the world, from the appalling consequences of terrorist acts.

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