House of Commons - Northern Ireland Affairs

Select Committee on Northern Ireland Affairs Fourth Report

Part One: The continuing threat from paramilitary organisations

9. Not all the paramilitary organisations-loyalist or republican-are on ceasefire. Active terrorist groups need money in order to finance continuing campaigns.

10. The costs of campaigns include:

weapons, ranging from rudimentary pipe or fertiliser bombs to more sophisticated equipment such as rifles and rocket launchers;

communications equipment such as radios and, increasingly, mobile phones[6];
personnel costs including training, the establishment of safe houses and 'wages' to members, whether or not they are engaged in front line activity; and
welfare costs of support for individuals during and after time in prison, and their families.[7]

11. Even where organisations are on ceasefire, commentators suggest that fundraising continues "as a cautious and sensible precaution in case of the collapse of the peace process".[8] ACC Raymond White of the Police Service Northern Ireland told us that the various bodies still have both considerable running costs, and an extensive fundraising capacity: the PSNI provided estimates, which we report at paragraph 33 below.[9]

12. Like other organisations, paramilitary groups have overhead costs—such as accommodation and administration—which are not directly campaign-related and thus not affected by changes in status and activity. The Provisional IRA (PIRA), which is generally held to be the most sophisticated of the groups operating in Northern Ireland, has been reported to employ professional accountants.[10] To a greater or lesser degree, all of the organisations may be considered over the years to have established property, asset and investment portfolios which continue to need management, even if the organisation is on ceasefire. As Dr Silke points out, while organisations have such substantial portfolios, they are very unlikely to disband.[11] Most important of all, the paramilitary organisations have built up power bases within local communities. These power bases are in many instances threatened by the peace process. Money is therefore increasingly required for propaganda purposes and to fund political campaigning.

13. Not all money raised by or on behalf of a paramilitary organisation will find its way into the organisation's coffers. Increasingly in recent years former terrorists have used their status, connections and skills in creating and developing criminal organisations and structures. These arrangements provide the resources for comfortable—and in some instances very extravagant—personal lifestyles. ACC White told us that "vast sums of money haemorrhage themselves in the process from the criminal activity through to the organisation", and that "some of [the early release prisoners] now are entirely in this business to create a pension fund for themselves".[12] Similarly the Association of Chief Police Officers noted that "this manner of income benefits the personal lifestyles of many individuals associated with paramilitary activity".[13]

The need for money

14. The degree to which money is required for any of these purposes can vary considerably from organisation to organisation, depending on the degree of sophistication of the groups concerned and their perspectives on the peace process. Commentators have, however, made some valuable general points about paramilitaries and their need for money:

Very little money is in fact required to maintain a rudimentary but effective terrorist campaign. Terrorists in Northern Ireland and on the mainland UK have at times gained a very significant rate of return on their expenditure, measured by the financial costs to government of responding to their acts. For example, Dr Silke has calculated that for every £1 raised by paramilitaries in Northern Ireland in 1993 and spent in the terrorist campaign, the average cost to the governments of the United Kingdom and the Republic of Ireland in countering and repairing terrorist damage was £130. Thus, Dr Silke estimated that the overall cost of Northern Ireland terrorism to government in 1993 was "in the region of £2 billion".[14]

Increased access to money enables organisations to increase the sophistication and impact of their activities.[15] The extra power which a strategic capability and extensive financial resources can give to terrorism was clearly illustrated by the September 11th attacks.

Those organisations in Northern Ireland which are on cease-fire have, in a sense, encountered a 'double dividend' through the early release of prisoners. The significant reduction in the number of paramilitaries in prison has led to an equally significant reduction in the numbers depending on the organisations for welfare payments. At the same time, the releases have provided organisations with a number of personnel newly available to diversify fundraising activity. Thus, the organisations have both a less urgent need for money, and their members a greater ability to raise it.[16]

Approaches to fund-raising

15. The approaches adopted for paramilitary fund-raising over the years have ranged from the very simple to the very sophisticated, and from the simply criminal to the apparently legitimate. They include:

armed robbery;

extortion/protection rackets;

loan sharking;

drinking clubs;

gaming machines;

smuggling of alcohol, tobacco and petrol;

sale of counterfeit goods including audio and videotapes and CDs;

the drugs trade (supply and dealing);

kidnapping; and

fraud (such as social security fraud and building sub-contractor fraud).

There are a small number of sources of finance on the fringes of legitimacy, particularly:

revenue generated by black cab operations;
running other legitimate businesses such as security firms and courier services, the profits of which can be used by the organisation; and
donations, both from the United Kingdom and the Republic of Ireland and overseas, particularly the USA.

16. Some of these activities are of greater historic than current significance. Government action to tighten the accounting requirements for drinking clubs during the 1990s has significantly reduced the profitability of such ventures to paramilitary organisations.[17] Kidnapping has similarly ceased to be an attractive fundraising option following the deaths of an Irish police officer and an Irish soldier in a shootout following the kidnapping of businessman Don Tidey, and the disappearance of the racehorse Shergar. The Shergar case in particular became very high-profile,[18] and was perceived to have been damaging to PIRA's political cause.

17. Other activities, however, have become increasingly significant. The Northern Ireland Organised Crime Task Force Threat Assessment 2001 highlighted:

money laundering;
tobacco and fuel smuggling;
business and social security fraud; and
intellectual property theft (counterfeiting)

as the highest priority problems for the task force to address in its first year.[19]

18. These are operationally complex and potentially very lucrative crimes. Assistant Commissioner David Veness of the Metropolitan Police told us that, as well as being highly profitable, these activities were appealing to terrorists because they attract relatively low penalties compared to the penalties for traditional terrorist crimes.[20]

The link between terrorism and organised crime

"One destructive legacy of the Troubles is that the terrorist godfathers have been able to use the organisational networks that are in place, combined with the fear that they engender within their communities, to line their own pockets, for whatever purpose. Keeping control of the communities in order to make money has become an end in itself."

Jane Kennedy, Minister of State for Northern Ireland[21]

19. On 28 December 2001, a loyalist paramilitary group known as the Orange Volunteers declared a ceasefire. The stated reason for their action was:

20. This statement highlights a new and important development in the history of Northern Ireland terrorism which has made the picture more complicated, for Government and the paramilitaries alike: the diversification into serious and organised crime. Although the organisations' need for money has reduced, individuals within those organisations— with expertise, and time on their hands—have found that the opportunities and capacity for them to raise money through crime have increased. As the Orange Volunteers declaration makes plain, not all those involved in the paramilitary organisations are happy about this development; but there are those for whom monetary gain has become more attractive than ideology. The money has indeed become an end in itself.

21. Both the Security Minister, Jane Kennedy, and the police told us that they perceived an increased linkage—or continuum—between criminal activity engaged in by terrorists for ideologically-driven fundraising, and serious and organised crime. The lines between the two had become "increasingly blurred"[23] as paramilitaries shared activities and profits with organised criminal gangs and were employed by criminal gangs to carry out purely criminal activity.[24] The 2002 threat assessment published by the Organised Crime Task Force for Northern Ireland identifies 76 gangs matching the National Crime Intelligence Service definition of organised crime. Of these gangs, "nearly half" have links to paramilitary organisations.[25] Mr Veness estimated that "as much as 80 per cent" of Real IRA (RIRA) activity on the mainland was linked to ordinary crime, which he described as "truly exceptional".[26]

22. There had even been instances where paramilitaries from the opposing traditions had acted together. For example, ACC White told us that

23. Such instances were prompted by profit and enabled by a sharing of expertise. The Metropolitan Police told us that paramilitaries acted in conjunction with 'ordinary' criminals in order to benefit from their contacts, and market knowledge;[28] while ordinary criminals had sub-contracted to paramilitaries for their expertise in contract killing and serious robbery.[29] Mr Veness believed that linkages occurred in some cases because "the name of a paramilitary organisation is a negotiating asset in winning ... assistance" and in others, particularly on the mainland, because criminals did not feel themselves to be particularly affected by direct paramilitary activity: "In fact, the economic gain might outweigh the disadvantage of a bomb or two".[30]

24. Such linkages are not unique to Northern Ireland and Great Britain. Our informal discussions during our visits to the Republic of Ireland and the United States yielded a picture of serious criminality which was increasingly flexible and international: a concept was developing of the 'criminal entrepreneur' willing to try anything, anywhere, and in any company, provided the profit was sufficiently high.

The threat to Great Britain

25. We were concerned to hear also of the extent to which these organised criminal and paramilitary groups were spilling over into Great Britain. Mr Veness told us of "paramilitaries, particularly RIRA [the Real IRA], coming to the mainland of Great Britain because their ability to exploit the economic market place of the island of Ireland is now limited, whereas Great Britain and indeed mainland Europe represent a much more lucrative ... market place".[31] Another officer described in more detail how paramilitaries used Great Britain as a land route for transportation of illicit cigarettes between Europe and the island of Ireland. A mainland market had developed for other criminal activities such as the laundering of rebated diesel fuel which was "almost self-sufficient".[32]

26. Mr Veness noted, particularly in relation to dissident Republican terrorist activity, that the sharing of knowledge and operations between paramilitaries and criminals aided direct terrorism in two ways:

·the profits were sufficient to fund "real bomb-making";[33] and
·the access to smuggling routes facilitated the easy movement of explosives and other terrorist equipment into Great Britain.[34]

The challenge for Great Britain's law enforcement authorities lay in alerting officers on the ground to the potential seriousness of activity such as the illegal sale of tobacco and cigarettes, which "may not be a priority for the local police";[35] the "leaching of paramilitary activity into mainland criminality, either willingly or by coercion [was] ... a very significant cause for concern".[36]

Risk

27. All types of criminal activity entail a degree of risk for those carrying them out. For paramilitaries, in weighing up which activities are most likely to be advantageous, there are two types of risk to consider. Firstly, like all criminals, they must consider the likelihood that they will be caught, and the penalties likely to be exacted from them if they are convicted; secondly, there is an additional element of risk which is perhaps demonstrated in the kidnapping cases noted in paragraph 16 above: that the action will turn the community which they purport to represent and protect against them.

28. While the profit motive, combined with the comparatively low penalty risk, might be considered reasons enough for paramilitaries to pursue their current activities, a third factor which would appear to be highly significant is community support. Both the Police Service Northern Ireland (PSNI) and the Metropolitan Police told us that crime such as tobacco, alcohol and fuel smuggling, and the counterfeiting and sale of designer goods and CDs was perceived as "victimless crime".[37] Detecting "an attitude of mind that certain aspects of criminality are quite all right", ACC White suggested:

29. ACC White's further comments soon gave the lie to this perception. He pointed out that such sales were part of the complex brokerage of power within communities, giving paramilitaries "as it were insidious control over those areas in which they live and operate".[39] There were also considerable knock-on effects to wider society, arising from the effects of such black-market trading on the conventional economy:

30. The more rooted organised crime becomes in society, the more difficult it is to tackle, and the more insidious its long-term effects. As ACC White noted in relation to the sale of fuel (see paragraph above), it is not only the lines between terrorism and crime which may become blurred: it is also the lines between the legitimate and black economy. As a consequence of both legitimate cross-border shopping and the illegal fuel trade, it is estimated that 139 filling stations in Northern Ireland have closed since 1994.[41] HM Customs & Excise have recently estimated that out of 700 filling stations remaining in Northern Ireland, around 200 to 250 sell only or largely illegal fuel, while around 400 to 450 filling stations—more than half—have some involvement with this illegal trade.[42] If such a situation were to develop in other sectors the consequences would be very profound.

31. Nor should it be thought that this is peculiarly a Northern Ireland problem: these groups, having saturated the Northern Ireland markets, are beginning to turn their attention to Great Britain. The Association of Chief Police Officers provided us with some illustrative examples of the levels of mainland activity:

-An illicit alcohol bottling plant raided by Customs & Excise recovered 18,000 litres of illicit alcohol being prepared for distribution in England;

-Two lorries intercepted on successive days in northern England led to the recovery of 11 million cigarettes concealed within legitimate loads."[43]

These few examples provide a valuable early warning of the potential scale of the problem and impact on society if organised crime should be allowed to become established throughout the UK. We are all aware of the ill-effects in some other regions of Europe where organised economic crime has undermined the very structure of law-abiding communities.

32. Organised crime has been clearly demonstrated to be feeding and facilitating Northern Ireland terrorism. We applaud the fact that the Northern Ireland Office and law enforcement agencies have identified this threat and publicised it so explicitly. It is crucial that Government as a whole should recognise this link: organised crime must be rooted out of both Northern Ireland and Great Britain.

How do paramilitary organisations raise money, and how much do they need?

33. Establishing how much money paramilitary organisations have, and how much they need, is of course very difficult. Recent estimates from the Police Service Northern Ireland are set out in the table below:

Table 1

Organisation*	Estimated running costs (per year)	Estimated fundraising capacity (per year)
Provisional IRA(PIRA)	£1.5m	£5-8 million
Real IRA(RIRA)	£500,00	£5 million
Continuity IRA(CIRA)	£25-30,000
INLA	£25-30,000	£500,000
UDA	£500,000	Between £500,000-£1 million
UFF	£250,000
UVF	£1-2million	£1.5 million
LVF	£50,000	£2 million

*Each of the organisations will tend to use a mixture of methods of financing including some or all of the following: fuel, tobacco & alcohol smuggling; drugs; counterfeit goods; armed robberies, extortion and membership subscription. In some cases the Brigades themselves are expected to be self-financing. Source: PSNI

These figures indicate that, at least in the case of PIRA and RIRA, the capacity to raise money far outstrips actual need. By contrast, we were told that the INLA was believed to be experiencing "financial difficulties".[44]

Fundraising in Northern Ireland

34. Historically, the vast majority of paramilitary funds for both Republican and Loyalist groups have been generated within Northern Ireland. The primary reason for this is the relative ease of raising funds within these communities. Sympathy for the cause is greatest within the originating community. Those concerned also have the local knowledge which facilitates crime or the direct intimidation of individuals from whom money is sought. The fact that Northern Ireland remains predominantly a cash economy also encourages a local focus, as it facilitates money laundering and makes it difficult for the law enforcement agencies to trace transactions.[45]

35. Loyalist groups particularly have tended to operate within clearly defined and jealously-guarded territories: feuds have arisen as changes in the community response to the paramilitaries have made fundraising more difficult in certain areas, and put pressure on brigades to expand their territories in order to safeguard their income.[46] A greater proportion of Republican paramilitary funds have been derived from external sources such as crime on the mainland and overseas donations: these issues are discussed in paragraphs 41-46 below.

36. For the communities of Northern Ireland there has been a substantial price to pay as terrorist fundraising has been firmly rooted in, and exploitative of, the local community. It has also been closely linked to paramilitary control of the community: this has been demonstrated directly through the widespread practice of extortion, or protection rackets, sometimes under the cover of 'voluntary' donations by businesses to prisoners' aid societies.[47]

Criminal franchises

37. Indirectly, paramilitaries have also exercised control of their communities by 'licensing' the operations of other criminals within their territories in return for a percentage of the proceeds of the crime. In this way groups—but particularly the PIRA— have sought to benefit from deeply antisocial activity such as drug dealing while remaining distant from it.[48] Murders during the ceasefire by paramilitaries have frequently been related to drugs. It has been widely alleged that such instances, while purporting to reflect paramilitary 'protection' of the community from undesirables, also serve a paramilitary purpose in enforcing lucrative franchises.[49]

38. It would appear that following the Belfast Agreement paramilitaries are seeking to exploit sources of funding which are likely to be more acceptable to the community. While extortion continues to be a severe problem,[50] there is an increasing reliance on activities such as the illegal smuggling and sale of fuel, tobacco products and alcohol; and the counterfeiting and sale of designer and other goods. There has also been a shift from the armed robbery of banks to the armed theft of products such as cigarettes and white goods, and of cash in transit. These activities are less visible to the community and less likely to impact upon bystanders.

39. The current main sources of funds are discussed in further detail in paragraphs 48-67 below.

Fundraising on the UK mainland

40. Evidence suggests that most fundraising activity on the mainland is associated with Republican terrorism. As noted in paragraphs 25-26 above, Mr Veness told us that the Real IRA were engaged in sophisticated and lucrative fundraising in Great Britain through organised crime. Mr Veness said that RIRA appeared to be "rather more nakedly geared towards profit, both of the individual members and, to a degree, the organisation" than other Republican groups.[51] We did not hear a specific estimate for the amount of money which RIRA might gather on the mainland, but the seizure within Great Britain of individual illegal loads of between 2 million and 11 million cigarettes suggest an order of magnitude.[52] There is little information about Loyalist fundraising on the mainland, although in 1992 it was estimated that Scottish support for the UDA and UVF might amount to £100,000 a year.[53]

Fundraising in other jurisdictions

41. Throughout the 1970s and 1980s the IRA, in particular, received considerable support from sympathisers in other jurisdictions: the sources of these donations are alleged to have included the United States of America, East Germany and Libya.

42. Of these, the most sustained activity has been in the United States of America. Commentators such as former Sunday Times journalist James Adams have suggested that the importance of overseas donations has been exaggerated and donations from the USA have formed only a small portion of IRA income.[54] In the mid to late 1980s published statements from Noraid stated that contributions were in the range $160,000 - $800,000 — roughly £110,000-£560,000 at today's prices—per year,[55] while overall PIRA income at the time was believed to be about IR£7 million (£Stg 5.75 million) a year.[56] To put Mr Adams' claim in context, he also notes that a single illegal gaming machine could net the PIRA up to £27,000 a year.[57]

43. The importance of overseas donations is two-fold. Although the sums involved are comparatively small, they are derived (at least) semi-legitimately. More valuable than the donations is the publicity generated by fund-raising, which tends to be sympathetic to the cause.

44. While there continues to be a substantial Irish American lobby in the United States, attitudes within the US have shifted since September 11th last year. Shortly after the tragedy, on 1st November 2001, the Friends of Sinn Fein held a fundraising dinner, the proceeds from which were donated to the New York disaster fund.[58] The gesture was not universally welcomed. Similarly, the Congressional investigation into links between the PIRA and the Colombian terror group, the FARC, (referred to in paragraph 5 above) suggests an ending of the "niggling tolerance for the IRA" detected by one commentator in the early 1990s.[59] As part of the war against terrorism the US Government has taken the explicit step of designating the Real IRA, Continuity IRA, the LVF, Orange Volunteers, Red Hand Defenders and the UDA/UFF as terrorist organisations: their assets have been blocked under Executive Order 13224.[60]

45. ACC White of the PSNI confirmed that "vigilant" support afforded to the enforcement authorities in Northern Ireland by the US Treasury Department had enabled action to be taken against accounts maintained by PIRA sympathisers. However, he continued to warn against complacency in respect of hidden, and cash donations:

46. We welcome the action taken by the US Government to identify and take action against paramilitary groups in Northern Ireland, as part of the war against terrorism. We recommend that our Government, in its continuing dialogue with the US Government, press for further such measures where funds and fund raising activity for any Northern Ireland paramilitary organisation can be identified within the United States.

The Republic of Ireland

47. The Republic of Ireland has, of course, experienced problems akin to those experienced in Northern Ireland as paramilitaries operate on both sides of the land border. During our visit to Dublin, we were told that the growth of organised crime and the drugs trade there—which may be linked to paramilitary activity, although it remains difficult to prove—had been identified as a threat from the early 1990s. The Irish Government responded to this threat by developing a new approach to the seizure of criminal assets, through the formation of an assets recovery agency called the Criminal Assets Bureau in 1996. This has had significant success in disrupting and destabilising criminal networks, and enjoys substantial public support. The work of the Criminal Assets Bureau is discussed further in paragraphs 166-168; a note of our visit to Dublin is included in the Annex.

The main sources of paramilitary funds

Extortion

48. An attempted case of extortion by paramilitaries was described in the Belfast Telegraph on 23rd January 2002. The report stated:

"... the businessman, who was only identified as Witness A, came home from work to find three masked and armed men there. In what was described as a "terrifying ordeal", the gang demanded £2,500, telling him they were from the Bangor UVF. After taking the keys to his warehouse ... and the keys to his BMW car, two of the men left ... they went to the business premises and stole around a £1,000 worth of cigarettes and alcohol and £460 from the office ... Witness A got a number of phone calls telling him he would get his car back after he paid them £2,500."[

49. A description of the extortion practices of paramilitaries has been published by Dr Silke.[63] The Organised Crime Threat Assessment for 2001 stated that reported cases of extortion are "almost exclusively" linked to loyalist groups: the 2002 Threat Assessment confirmed the strong connection between terrorism and extortion, stating that of 99 instances of extortion reported to the police between 1 January 1999 and 6 March 2002, over 80% were linked to paramilitaries.[64] ACC White said that paramilitaries used extortion to provide a regular income:

50. Although this is known by the police, extortion in Northern Ireland continues to be largely a hidden problem and is a major cause for concern. ACC White told us that he believed only about 10 per cent of cases in Northern Ireland were reported to the police, as fear of paramilitary reprisals continues to deter individuals from confronting the problem. He acknowledged that:

51. The Organised Crime Threat Assessment for 2001 adds the following points:

·extortion threatens inward investment, as businesses will be reluctant to move into an area where extortionists operate;

·it increases the costs of business, leading to higher prices for the consumer and costs to the taxpayer;

·it destroys families, relationships and businesses; and

·there is a danger of such activity being copied by young unemployed adults who see the use of intimidation, coupled with a paramilitary name, as a means to acquire "easy money".[67]

Fuel laundering and smuggling

52. Fuel laundering and smuggling are a significant threat to the stability of Northern Ireland society at present. The large differentials in duty payable on road fuels between Northern Ireland and the Republic of Ireland provide a strong incentive for criminals to either purchase fuel in the Republic of Ireland and smuggle it north for illegal re-sale, undercutting Northern Ireland prices; or to acquire rebated fuels such as 'red diesel', which are cheaper and not designed for road use, launder them to remove identifying chemical markers, and sell them on as, or mixed with, legitimate road fuels.

53. This activity is tremendously lucrative. The NAO recently reported that:

"Laundering plants detected in Northern Ireland reveal that processing plants can have the capacity to produce between 10,000 and in one case up to 200,000 litres of fuel a week when operating at full capacity. This amounts to a revenue loss of between £5,000 and £90,000 of hydrocarbon oils duty [per week] when operating at full capacity."[

54. Laundered and smuggled fuels are either sold directly to motorists through 'huckster' sites or indirectly through conventional filling stations.[69] While we heard some anecdotal evidence that direct pressure had been placed on filling station owners to accept such fuel, the effects on the market from the ready availability of a cheaper option in many cases provide sufficient incentive to filling station owners to acquiesce rather than lose their business.[70] As we have noted in paragraph 30 above, this has led to an appalling situation in which nearly two thirds of the remaining petrol stations in Northern Ireland are partially involved in the illegal trade.[71]

55. Although these fuels are cheap for motorists at the point of purchase, they have hidden costs. Petrol retailers have long argued that it is destroying their business, and thereby having an effect on the wider local economy. The lower grade fuels which are laundered and/or mixed with road fuels can degrade and destroy car engines. Fuel laundering and smuggling are inherently dangerous processes, and the chemicals and materials which are used in fuel laundering, such as sulphuric acid, can cause severe environmental damage if not properly handled and treated.

56. Preliminary indications suggest that Customs are beginning to have an impact on this activity. Substantial fuel laundering plants such as those cited by the NAO have been broken up. We were also told that "the latest available figures show that deliveries of legal product to Northern Ireland have risen for the first time in five years".[72]

57. While this is to be welcomed, it is too soon to say decisively that the trend has been reversed. Legitimate cross-border shopping, which is also a significant factor in the decline of petrol sales in Northern Ireland, may have been reduced by the incidence of foot and mouth, and this may in part account for the rise in legitimate domestic sales in the past year. We are considering the issue of fuel smuggling in greater detail in our current inquiry, into the Impact in Northern Ireland of cross-border road fuel price differentials: three years on, which will reflect on developments since our predecessors reported on the price differential in 1999.[73]

Alcohol and tobacco smuggling

58. Like fuel smuggling, alcohol and tobacco smuggling are large scale frauds which impact primarily upon Government through substantial revenue losses. However, as with road fuel, the loss of legitimate sales can have an effect on the profitability of local retailers.

59. Tobacco smuggling is currently a more significant problem in Northern Ireland than alcohol smuggling. The Organised Crime Task Force for Northern Ireland Threat Assessment for 2001 notes:

"Smuggling of cigarettes from EC countries with low duty rates and smuggling from countries outside EU is prevalent. Countries of the former Soviet Union (Lithuania, Russia, Ukraine) and South East Asia represent the biggest external cigarette smuggling threat to the UK."[

The 2001 Threat Assessment also highlights two main routes by which illegal tobacco and cigarettes enter Northern Ireland and Great Britain: they are smuggled in, in large quantities which are then dispersed for sale; or they are brought in by returning 'holidaymakers', carrying excess duty free.[75]

60. We were pleased to be given evidence of recent major successes by the law enforcement agencies, both in the UK and in the Republic of Ireland, in tackling tobacco and alcohol fraud. A supplementary memorandum from the Northern Ireland Office listed seizures by UK and Republic of Ireland officers totalling 76.85 million cigarettes (of which nearly 2 million arose from air passenger traffic) and the closing down of an illicit, counterfeit 'vodka' bottling plant with a substantial capacity.[76]

Armed robbery

61. Armed robbery is one of the most long-standing paramilitary approaches to fund-raising. It is relatively unsophisticated, but for the individuals involved it also entails risk: sentences following conviction can be long and, as ACC White pointed out, increasing forensic expertise in relation to firearms has made it easier for law enforcement authorities to identify specific weapons used and thus the individuals or organisations using them.

62. ACC White told us that armed robberies were increasing in Northern Ireland. The Organised Crime Threat Assessment 2002 confirms that there were 120 attacks on cash in transit in 2001. Eighty of these were successful: an increase of 264% on the year 2000. Ninety-six of the attacks involved the use of firearms. There was also a 100% increase in hijackings in 2000-2001.[77] While he noted that armed criminals might claim falsely to have paramilitary links "to create that element of fear",[78] ACC White drew a distinction between robberies "conducted by the criminal fraternity in its own right", and those conducted by paramilitaries.[79] Bank and building society robberies, he suggested, were generally no longer considered by paramilitaries to provide a good return for the risk involved. Instead:

Counterfeiting

63. Counterfeiting covers a wide variety of illegal activity and trading, including the forgery of currency, and the production and sale of goods such as CDs, perfume, designer clothes and videos. Like armed robbery, counterfeiting (or intellectual property theft) is an area which has long been of interest to paramilitaries and criminals. It is a comparatively low risk option, since there is a ready—and unquestioning— market for such goods when offered at bargain prices.[81]

64. In the financial year 2001-2002 the Police Service Northern Ireland seized 121,133 counterfeit items, with a total value of approximately £4 million.[82] Not all of these items will be directly linked to paramilitary groups: Mr White suggested that the paramilitaries were primarily interested in the manufacture and wholesaling of such goods, which is "where the profitability lies".[83]

65. Others have estimated the likely profit to paramilitaries of such activity. It has been suggested that the total benefit to loyalist paramilitaries is in the region of £400,000, while video piracy alone could earn paramilitaries—but predominantly the PIRA—a total of £1 million. Paramilitary extortion from other criminals by means of 'licensing' or 'taxing' (as noted in relation to drug dealing in paragraph 37 above) could increase the terrorists' gain from counterfeit sales.[84]

66. Clearly, counterfeiting is one of the areas where there is a demonstrable link between the paramilitaries and a vast network of other criminals. For example, on 25 April 2002 a newspaper carried a report of 'Operation Mali', which in the year 2000 uncovered a money counterfeiting ring that had produced US dollars with a face value of nearly $27 million. Those involved in the ring had links to the Official IRA (now disbanded) and to the Russian mafia, and the trail led investigators to Denmark, France, Austria, Germany, Latvia, Russia, the Czech Republic and the Republic of Ireland.[85] This case also highlights the increasing sophistication of such operations, as it is reported that "the fake notes— known as "Super Dollars" because they were nearly impossible to detect ... were printed using the same paper, ink and techniques as genuine currency".[86]

67. While not all counterfeiting within or related to Northern Ireland is on this scale or of this quality, Mr White described counterfeiting in Northern Ireland as "extremely extensive".[87] Although he believed the Police Service Northern Ireland was "the only Police Service that tackles [counterfeiting] in any structured way", and in spite of the significant seizures of goods in recent years, he believed "we are still scratching the surface" of it.[88]

How paramilitaries spend their money: a warning from Fort Lauderdale

68. While looking at the sources of terrorist income it is important not to lose sight of the expenditure. In spite of the ceasefires, there is a significant body of evidence to demonstrate that paramilitary organisations are maintaining and improving their capability to mount further terrorist campaigns, should they consider it desirable.

69. We saw particularly compelling evidence of this in the Fort Lauderdale gun-running case, which was brought to trial in Florida in 2000 and widely reported in the American press. Four people were tried on charges of purchasing firearms and ammunition and smuggling them to the Republic of Ireland. The defendants were Conor Claxton, Martin Mullan, Anthony Smyth, and Smyth's partner, Siobhan Browne. Smyth was a long term resident in the United States[89] while Browne, an Irishwoman, was a naturalised American.[90]

70. The conspiracy had been discovered on July 5 1999—more than a year after the signing of the Belfast Agreement—when a baggage screener in Coventry identified a gun in a parcel mailed from Fort Lauderdale to the Republic of Ireland. When the parcel was opened by the police, it was found to contain a .357-calibre Magnum revolver and a 9mm pistol. A total of seven packages were then found on the same flight which contained weapons and ammunition.[91] The parcels bore labels which stated that they contained toys, video cassette players, stereo equipment, computers, baby clothes, radios and other items.[92] The guns had been placed inside these items, which had been hollowed-out.[93]

71. Police replaced the items in the parcels with replicas and inert firearms, in order to follow them through the post.[94] In the following 20 days a further 23 packages from Florida and Philadelphia were seized, in Coventry, Dublin, Galway and New York. They contained 46 guns and 600 rounds of ammunition.[95] 122 guns were seized in total.[96]

72. The defendants were identified when, at about the same time in America, an agent of the Bureau of Alcohol, Tobacco and Firearms identified multiple weapons purchases by Browne, using two names and two social security numbers. Browne was traced to a post office box, which was also used by Claxton; Claxton's name was then found on an Interpol list of IRA terrorist suspects.[97] An address in Galway to which some of the parcels had been sent turned out to belong to Claxton's girlfriend.[98] Further corroboration was obtained when police traced the first parcel and the revolver inside back to Florida. The gun had been purchased by Anthony Smyth, Browne's partner, from a licensed dealer named Ed Bluestein. Closed circuit television footage from the post office at which the parcel had entered the postal system showed it had been posted by Claxton himself. Mullan was not identified until some time later, as a result of surveillance of Claxton's activities.

73. Claxton, Smyth and Browne were arrested in Fort Lauderdale on 26 July 1999.[99] During a search of Claxton's property, a Provisional IRA keyring was found in Claxton's car. Claxton testified that he had bought this at a fair in Fort Lauderdale. Martin Mullan was arrested the following day, 27 July, in Philadelphia.[100] The four were charged under America's Arms Export Control Act.[101]

74. Following his arrest, Claxton gave a statement confirming his links with the PIRA. The FBI testified that Claxton at that time claimed the weapons would be used against the British, the then RUC and against loyalist paramilitary groups.[102] Subsequently, during the course of the trial in 2000, Claxton denied making that statement.[103] However he related that he had joined the PIRA in 1992, and had been an international representative for the PIRA and for Sinn Fein, on missions to America, Europe, Kurdistan and South Africa[104]. Mullan, from Dunloy in County Antrim, had worked as a driver and election agent for Sinn Fein.[105] The defence case argued that the weapons had been bought, without any intent to put them to use, to allay the concerns of American sympathisers of the PIRA who might otherwise transfer their support to dissident Republican paramilitary groups such as the Real IRA.

75. The prosecution case stated that the guns had been bought mainly by Smyth and Browne—who as a naturalised American was the only one of the four with the legal right to purchase weapons[106]—and posted to the Republic of Ireland by Claxton and Mullan. The case included evidence of more than 300 fingerprints, videos of Claxton and Mullan posting the weapons, and bank transfers between Belfast and Florida.[107]

76. Ed Bluestein made a plea bargain and testified that Smyth and Browne had bought 38 handguns from him, and had paid him an additional $50 per gun not to record all of the sales, as he was required to do by law.[108] The prosecution also presented a 'wish list' of further purchases which Bluestein testified had been faxed to him by Smyth and Browne.[109] This 'wish list' included long range sniper rifles and .50 calibre ammunition, handguns fitted with silencers, AK47 magazines with a short 'shelf life',[110] and a machine-gun built into a briefcase, activated by a trigger built into the handle.[111]

77. While Claxton admitted leading the group,[112] he claimed that the other three defendants had not known he was a PIRA member, or the use to which the guns would be put. He said that he had been sent to Florida by 'higher ups' within the PIRA to buy the weapons.[113] He also claimed that the weapons were to be stockpiled in the Republic of Ireland for defensive use.[114] The 'wish list' presented to Bluestein was said to have been presented to test the dealer's trustworthiness, rather than with serious intent.

78. The prosecution charged that the actual gun-running operation had been financed out of Belfast. Claxton received some money by transfer, and on one occasion collected money from an unidentified woman in Boston. During the trial, Claxton and Mullan were supported by the local Irish Northern Aid Committee, which was reported to have raised more than $100,000 for their defence.[115]

79. Claxton was convicted on 39 counts, including using a false passport to facilitate terrorism, conspiracy and smuggling. Smyth was convicted on 31 counts, and Mullan on 10 counts. They were all acquitted of the key charges of conspiracy to murder or maim.

80. Browne had pleaded guilty on lesser charges of conspiracy to buy handguns rather than stand trial. She did not testify. During sentencing, she claimed that she had been innocent of the major charges and had been threatened with execution by Claxton after she discovered the extent of the conspiracy and tried to leave.[116] This charge was denied by Claxton's supporters.

81. In sentencing Claxton to four years and eight months in prison, and Mullan and Smyth to three years in prison each, the judge recorded his regret that federal guidelines did not permit the awarding of longer sentences for the charges on which the three had been convicted.[117] However, Claxton's sentence was extended by several months by judicial discretion, as the judge ruled that he had lied about the extent of Mullan's and Smyth's knowledge of the operation and of his links with the IRA.[118]

Part One: Conclusion

82. The details which we have given above demonstrate the nature and the magnitude of the problems which terrorism has brought, and could bring again, to Northern Ireland and, increasingly, to Great Britain. When we began the inquiry we had not anticipated the extent to which paramilitary and criminal interests had become entangled. This blurring of the boundaries poses new and difficult challenges for law enforcement, particularly given the peace process and the Government's commitment to pursue police and criminal justice reform in Northern Ireland.

83. The changing nature of paramilitary activity since the ceasefires requires a different kind of strategy to that adopted by the Government in the early 1990s. In the second part of our Report, we consider the steps already taken by Government to develop a new strategy, and the steps which it might take in the future.

6 Q55 Back

7 Playing the 'Green Card' - financing the Provisional IRA: Part 1, J. Horgan and M. Taylor Terrorism and Political Violence Vol 11 No. 2 (1999) pp6-7; also see Q55 Back

8 Silke, Drink, Drugs, and Rock'n'Roll - Financing Loyalist Terrorism in Northern Ireland: Part Two, Studies in Conflict and Terrorism 23 (2000), p124 Back

9 QQ3-6 Back

10 Playing the 'Green Card' - financing the Provisional IRA: Part 1, J. Horgan and M. Taylor Terrorism and Political Violence Vol 11 No. 2 (1999) p9 Back

11 Silke, Drink, Drugs, and Rock'n'Roll - Financing Loyalist Terrorism in Northern Ireland: Part Two, Studies in Conflict and Terrorism 23 (2000), p124. See also Q4 Back

12 QQ60-61 Back

13 Ev p 25 Back

14 In defense of the Realm: Financing Loyalist Terrorism in Northern Ireland- Part One: Extortion and Blackmail, A Silke, Studies in Conflict & Terrorism, 21 [1998] pp333-334 Back