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Mr. Brown: I welcome the shadow Chancellor to his new responsibilities. From his experience as Home Secretary, he brings to the post a knowledge of terrorist activities and how to deal with them. I am grateful to him for what he has said this afternoon. I should have preferred to have this debate with him under different circumstances, but I am pleased that he has been able to support the measures that we have announced today.
The right hon. and learned Gentleman is right that the financing of terrorism is distinct from simple money laundering. Money from legitimate sources can go to an illegal destination to support terrorism. It is precisely for that reason that we have called back into action the international financial action taskforce, which made 40 recommendations on how to deal with the issues of money laundering.
We are now asking the taskforce to deal with the vexed question of the financing of terrorism. I believe that it will introduce an international standard that all countries will be asked to follow. I also believe that international institutions will be prepared to help countries that do not immediately have the resources or expertise to implement such measures, particularly through the creation of economic crime units. I therefore assure the right hon. and learned Gentleman that we are taking seriously the distinction between money laundering and the financing of terrorism.
On the investigation into underground banking, the right hon. and learned Gentleman is absolutely right to point out that such banking is not exclusive to Britain. Indeed, it is more prevalent in many other countries. Once the taskforce has examined the issue, with the expertise that we hope can be brought to bear from not just the public but the private sector, we will share with other countries the results of that review. We are determined to co-operate with other countries in asset tracking, so that we can identify the sources from which terrorism is financed.
My right hon. Friend the Home Secretary will be introducing the legislation. The economic crime unit will be part of NCIS, which is under my right hon. Friend's authority. The measure in the Bill that will be of interest to the banks and financial institutions is the obligation to report to the proper authorities any reasonable suspicion that funding could be used for terrorist activities. As the right hon. and learned Gentleman, a former Home Secretary, rightly said, previous legislation left some grounds for ambiguity. There can be no doubt now that any financial institution which has a reasonable suspicion that money is being used to fund terrorist activity is under a clear obligation to report that to NCIS. Investigative action will then be taken as a result.
Finally, the right hon. and learned Gentleman asked about the review of share movements in the period before 11 September. He will have noted that the Financial Services Authority has investigated the matter and issued a statement, but investigations are taking place throughout
the world. I have spoken to the head of the Bundesbank in Germany, to the Federal Reserve bank and to the Bank of Japan; all are investigating the matter. Any conclusions that can be made will be brought before the House. The matter is obviously serious and we are determined to investigate it fully.
Mr. Tam Dalyell (Linlithgow): When my right hon. Friend gets back to his office in the Treasury, will he ask his officials to produce a file—a very long file—which resulted from the Inter-Parliamentary Union's 1999 visit to Peru? The file is on drugs money laundering, in particular the immensely complex issue of anonymous numbered bank accounts. No one in their right mind thinks that there is any simple answer to that problem, but it has gained added importance, especially in view of the pressure—to which my right hon. Friend referred—on the United Nations in respect of a permanent monitoring unit. Such a unit—I cannot imagine who is resisting it—might give us some hope that the problem of anonymous numbered bank accounts will be addressed.
Mr. Brown: Yes, I will ask my officials to show me the papers to which my hon. Friend refers. He is absolutely right: the laundering of drugs money is a major problem on all continents and we need far better enforcement. I believe that the events of 11 September have given new urgency to efforts to deal with the problem.
My hon. Friend might have seen the performance and innovation unit report, published through the Cabinet Office a few months ago, which identified the scale of the money lost as a result of the drugs business. I assure him that we shall deal with those issues and that we shall continue to press for the UN monitoring unit.
Matthew Taylor (Truro and St. Austell): The whole House agrees that those who choose to finance terrorism are as loathsome as, and perhaps even more cowardly than, those who undertake terrorist acts of the kind that we have witnessed in the past month. We strongly welcome the Chancellor's attempt to tackle, to track down and to prosecute such individuals both here and internationally, but I have some questions relating specifically to his proposals.
Will the Chancellor make it clear that the laws on monitoring and freezing of bank accounts and extending new powers to the police will require reasonable grounds linked specifically to suspicion of terrorism or other illegal activities, and that court approval will be needed, perhaps in accordance with rules similar to those that already cover phone tapping?
NCIS already has a substantial number of disclosures, but I understand that currently few are investigated owing to lack of resources. Is the Chancellor confident that there will be—and is he able to tell the House about—increased resources for NCIS? Also, as it is not an executive body, will similarly increased resources be given to the Metropolitan police anti-terrorism unit so that it can pursue prosecutions? The PIU in the Cabinet Office has already identified that this country carries out a far smaller number of prosecutions than other countries such as the United States and Italy.
Can the Chancellor outline the Government's position on any action against non-compliant countries following the recommendations of the financial action taskforce,
which said that members—compliant countries—should apply counter-measures to non-compliant countries by 30 September 2001? Were any measures applied and—perhaps more important—do the Government intend to apply any measures to non-compliant countries?The Government have already said that they will take action on bribery of foreign Governments. Will similar action be taken against bribery of non-Government individuals and bodies? That is a route through which organisations that may ultimately engage in terrorism may raise funds.
Having promised action on money exchanges, do the Government intend to examine other routes through which such money is often laundered? The FSA has identified spread betting, financial advisers, online broking and credit unions as examples of those. It will be a difficult task, but if the Government are planning to tackle one or two routes, they must tackle them all if action is to be effective.
We shall support Government measures and I hope that the Chancellor will be able to reassure the House on the issues that we are considering.
Mr. Brown: I am grateful to the hon. Gentleman. I talked to him this morning, as I did to the shadow Chancellor, about the detail of the measures that we are proposing.
In his first set of questions, the hon. Gentleman rightly spoke of getting the balance right between the civil liberties that it is our duty to defend in advance, and the need for security felt by people in the United Kingdom. I believe that the proposal that we are bringing forward gets the balance right. There will be every opportunity to debate the issue of police powers to investigate bank accounts. We intend that this will be done only where there is reasonable suspicion. We intend also that, where possible, this should go through the courts. I can assure the hon. Gentleman that we intend to work closely with the financial institutions in implementing this procedure.
The hon. Gentleman is right about NCIS. Thousands of reports are produced each year, which are passed on for further investigation by the police. It is generally accepted, not only in Britain but in America and elsewhere, that so far we have lacked the asset-tracking skills that would allow us to get to the source of funding for those who are engaged in terrorism. We intend to give NCIS and the economic crime unit that particular expertise and additional funding. We intend also that a taskforce will be set up that will bring in private and academic expertise where that is applicable. We have already had discussions with some private sector organisations. Special branch investigative resources will be increased.
The hon. Gentleman asked about tax reliefs. I should point out that it is illegal to claim tax relief for corrupt activities. The problem has been that in other jurisdictions subsidiary companies that are not British companies have claimed tax relief for the payment of bribes to officials. I can assure the hon. Gentleman that the new legislation that we propose will extend the requirement that no tax relief can be given not only to Government or public officials, but to anybody in the private sector and to anyone else who receives money for corrupt activities. The law will be improved and cleaned up in that way.
The hon. Gentleman also asked about spread betting and a range of other activities that may be the subject of money laundering. What those activities have in common is that usually they involve cash transactions, which are difficult to monitor. The FSA takes responsibility for examining the betting industry. I can assure the hon. Gentleman that as a result of a recent report that it has produced, the FSA intends to take further action. I can assure him also that in all the areas that he raised with me both this morning and now, we shall take whatever action is necessary.
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