Select Committee on Northern Ireland Affairs Fourth Report

Part Two: The Government's Response

  84. Tackling terrorism is always going to be difficult. The successful paramilitary organisations are those which have evolved sophisticated networks and found ways to conceal both their overtly terrorist activity, and the fundraising which allows that to happen.

  85. To combat paramilitary activity successfully Government has to be just as smart, and fully committed to a long and arduous campaign. Our discussions, both here and in our visits to other jurisdictions, have demonstrated to us that this message is increasingly widely understood. The conventional approach to law enforcement—which might be described loosely as detection, arrest, prosecution and punishment—has a role to play but alone does not hold the key. A successful anti-terrorism strategy has to be proactive, and take prevention as the ultimate measure of success. In a proactive strategy, attention to terrorist financing becomes crucial. The action which the US Government has taken in recent months to identify and freeze financial assets linked with or destined for terrorist organisations clearly illustrates this new approach.

  86. In general, we have learned that a successful anti-terrorism strategy must include the following elements:

• ·intelligence: not only provides a direct insight into the activities of paramilitary organisations, but increasingly uses powerful technology to analyse and predict terrorist behaviour;

·joint working: full international co-operation and communication between law enforcement and other government agencies, drawing also on the knowledge and assistance of agencies in other jurisdictions and in the private sector and/or society.

• ·combined strategies: not only reactive prosecution, but direct preventative action; and

• ·legitimacy: it is essential that the actions of Governments against terrorism are accountable and fully backed by law.

We have been heartened by the many examples we have discovered both here and abroad of a willingness to engage actively in anti-terrorism strategies, particularly since September 11th 2001.

  87. The strategy of Government in Northern Ireland has evolved over time, reflecting the nature of the situation there. The original Anti-Racketeering Unit which was established in 1988 has since experienced several changes in identity and, indeed, in corporate ownership.[119] To this, since September 2000, has been added the Organised Crime Task Force, with its focus on the serious and organised crime in which past and present paramilitaries are increasingly participating.[120] We anticipate that before the end of this Parliamentary session the Proceeds of Crime Bill, which will enable the establishment of an Assets Recovery Agency similar to the Criminal Assets Bureau in Dublin, will have passed into law.

  88. In view of what we learned about the growing links between paramilitary organisations and organised criminal gangs, we broadened the scope of our inquiry to encompass the Government's strategy against organised crime in Northern Ireland. The connection between paramilitary activity and organised crime in Northern Ireland poses both advantages and disadvantages for those seeking to combat terrorism directly. As Mr Veness testified, criminal activity can be a "smokescreen" behind which terrorists hide.[121] Equally, however, the redefinition of paramilitaries in many of their activities as simply criminal opens up opportunities to pursue them for more visible offences. Convictions and/or other penalties for their criminality may be easier to secure. And, if the crime which finances the terrorism is stopped, hopefully the terrorism is prevented too.

  89. The role of the Assets Recovery Agency will be to take the financial battle one step further. The Proceeds of Crime Bill will provide the Agency with the powers to pursue money and other assets acquired through criminality in order to deny the criminal the benefit of the crime. It will have powers to investigate individuals' finances not only where there has been a conviction but also where an individual's lifestyle gives grounds for suspicion.[122] While this is a ground-breaking development in our law, it follows the example set in the Republic of Ireland over the last six years and in the United States over centuries. We were told that an effective assets recovery programme can not only deny criminals significant sums of money but can also prove psychologically unsettling to those who, like terrorists, use intimidation to render themselves untouchable by the justice system.

  90. ACC White told us:

"... we are pursuing two strategies, one of prosecution where prosecution we feel is warranted, and one of disruption, of inhibiting supply. You may not finish up with the individuals before the court, but you are actually taking the profits out of their pockets."[123]

In the remainder of our Report we consider the various elements of the Government's strategy both against terrorist fundraising activity and against organised crime, under these twin headings of disruption and prosecution.

Disruption

The difficulties of law enforcement

  91. The difficulties of law enforcement in Northern Ireland can be summarised as:

• ·political: the recognised hostility to the law enforcement agencies within some communities means that certain operations have to be planned with special caution and sensitivity;

• ·geographical: the presence of around 400 crossing points on the border makes policing very difficult, while the ease of travel across the border enables criminals to exploit variations in the law of the two jurisdictions for profit, and to shield themselves from prosecution; and

• ·strategic: the division of enforcement responsibilities between agencies with different priorities and answerable to different Ministers does not readily lend itself to a coherent and co-ordinated approach.

  92. The division of responsibilities between different agencies—for example, Customs & Excise and the Police Service Northern Ireland—is inevitable in some degree as they have clearly defined separate remits. While welcome, devolution adds another layer of complexity in the response to crime which does not recognise such administrative boundaries. Nonetheless, a focus on co-ordinated strategy provides the best available answer to the problems posed by the political and geographical constraints on operation in Northern Ireland. This has been recognised by the Northern Ireland Office, and the UK Government more widely, through the establishment of the Organised Crime Task Force.

THE ORGANISED CRIME TASK FORCE

".. clearly the multi-agency dimension is the critical one.."

Assistant Commissioner David Veness[124]

  93. The founding of the Organised Crime Task Force was announced by the Secretary of State on 25th September 2000, "to bring together on a continuing basis, for as long as it takes, all the agencies involved in a concerted drive to cut off those organised criminal activities at their source. To work together and where appropriate with our Irish counterparts, to rid Northern Ireland of this Mafia-like virus that still infests society here."[125]

  94. The Task Force is a strategic body, rather than an operational one, and functions as a representative group for participating organisations under the chairmanship of the Security Minister, Jane Kennedy. It has a small staff provided by the Northern Ireland Office and its membership includes the Police Service Northern Ireland, H M Customs & Excise, the Home Office, the National Criminal Intelligence Service and the Inland Revenue.[126] The Task Force produces an annual assessment of the threat posed to Northern Ireland by organised crime and from this seeks to agree common strategic priorities for action by the participating agencies in the coming year. In 2001-02 these strategic priorities were:

• ·reducing extortion;
• ·developing operational priorities to inhibit drug abuse and disrupt the supply of illegal drugs;
• ·reducing hydrocarbon oils fraud;
• ·reducing tobacco and alcohol smuggling;
• ·targeting money-laundering; and
• ·developing a methodology for identifying and prioritising organised criminals in Northern Ireland "for concerted action".[127]

For 2002-2003 these strategic priorities remain the same, with the addition of the objective to reduce the trade in counterfeit goods.[128] The Task Force also operates through sub-groups which take forward certain aspects of strategy, specifically: strategy; the law; co-ordination; assessment and analysis; and the public sector.[129]

  95. The Minister, and others to whom we spoke both formally and informally praised the Task Force and stressed the importance of the co-ordination between organisations which it had made possible. The Minister said:

"... I think the success of the Task Force has been its ability to support organisations and agencies by enabling them to take the lead in tackling organised crime. The Task Force has done it by bringing the agencies together in a way which, whilst at the same time as respecting their necessary independence and their autonomy, has enhanced their effectiveness by enabling them to share information. ... This process has added value to their existing work because it has enabled the agencies to reach agreement at a senior level and to commit resources and to assist each other."[130]

  96. The Minister highlighted particularly the effect of the Task Force on the working relations between Police Service Northern Ireland and Customs & Excise. Her words were echoed by Mr Byrne of Customs & Excise, who similarly assured us that the relationship between the two organisations was "better now than it has ever been".[131] Mr Byrne especially commended the work of the co-ordinating sub-group which, he said, had made "a notable difference" to co-operation between Customs and the PSNI, and had "directly contributed to the successes" of late 2001, such as the cigarette seizures at Warrenpoint.[132]

  97. We congratulate the Northern Ireland Office for the establishment of the Organised Crime Task Force as a model for co-operative working and joint development of strategy.

Joint working through the Task Force

  98. The Task Force is still a comparatively new body although it has quickly established both a role and a reputation for "provoking, stimulating and encouraging".[133] One of the most encouraging aspects of what we heard is the enthusiasm of the Task Force participants for the multi-agency approach, and the hopes these participants express for the involvement of others. Mr Byrne told us that as a next step he believed the Task Force would "encourage us to stimulate other agencies to actively participate in joint operational activity";[134] Mr Moore told us that, while the Inland Revenue was a comparative newcomer to the Task Force, he had been "pleasantly surprised at the welcome" the organisation had received and he believed that "everybody is looking towards this with a very positive attitude for the future".[135] While recognising that the Task Force's focus was specifically on organised crime in Northern Ireland, Mr Veness of the Metropolitan Police recognised its approach as a potential model for future UK-wide activity and also stressed that force's willingness to contribute to the Task Force's work.[136]

  99. We were conscious that the development of an effective strategy could be made more difficult by the division of responsibilities between the Northern Ireland Office and the Northern Ireland Executive. We were, therefore, particularly pleased to learn of the Executive's involvement with the Task Force, through the Inter-Departmental Group of the Northern Ireland Executive,[137] and the Task Force Public Sector sub-group.

  100. Witnesses expressed hopes that such links across the administrations might grow even closer in time: for example, Mr Byrne told us that Customs & Excise would particularly welcome the closer involvement of Trading Standards and local authorities in its approach to excise fraud, which he predicted could make "a considerable difference to our overall effectiveness".[138] We hope that the overwhelmingly positive reports from participants in the Task Force will encourage both those in the Task Force itself and other agencies to consider how the benefits of this approach might be extended and shared more widely.

"Jane and Reg go shopping": securing public support

  101. The Criminal Assets Bureau told us that public support had been tremendously helpful to them in countering organised crime. In America, we learned that the rallying-round of financial institutions following the events of September 11th had greatly enhanced the speed and effectiveness of the crackdown on terrorist assets worldwide. In both these instances, the Government effort to respond to a particular threat was aided by a concerted and strong public reaction to a particular recent event, or events—in the case of the Republic of Ireland, the 1996 murders of Garda McCabe and the journalist Veronica Guerin.[139] In the political context of Northern Ireland, the communication of the Government's message against organised crime is likely to prove more difficult to achieve, but success will nonetheless be highly significant to the overall strategy.

  102. As we have noted in earlier sections of our Report, there is in Northern Ireland "an attitude of mind ... that if you can defraud the Government it is not of a criminal nature".[140] Paramilitaries have identified and tapped into this culture, exploiting it in their provision through criminal networks of cheap, duty-free consumables such as alcohol and tobacco. Reducing demand for these cheap consumables will be an essential element of the strategy for tackling counterfeiting and smuggling: this in turn will require the education of the consumer.

  103. There are several elements to the message. There are implications for society in acquiescing to, or participating in, the sale of smuggled and counterfeit goods. The proceeds of the crime will finance further criminal or terrorist acts which undermine society. More directly, the evasion of the duty "is depriving us of hospitals and the like".[141] Poor grade cigarettes and alcohol can damage the individual's health just as laundered fuel can damage a car engine. Finally, individuals can support Government in tackling these problems, by choosing not to put money into the hands of the terrorists or their criminal associates, and by actively assisting the law enforcement effort.

  104. Officials agreed with us that communicating these facts would play an important part in the developing strategy. In spite of the "attitude of mind" identified in some quarters, they were also positive about the likely reception such a message would receive. Mr Byrne told us that Customs & Excise had embarked on publicity campaigns:

"... making the point .. that you cannot look at oils fraud in total isolation from the community in which it is existing. There are a number of people in Northern Ireland who support our message ... There are a lot of people who do want to tell us ...[142]

While Customs had found the response from Northern Ireland to its hotline "disappointing", it had nonetheless established that nearly 50 per cent of the information it received to trigger excise fraud investigation work came directly from members of the public.[143]

  105. The Minister assured us that she herself and the Organised Crime Task Force intended to play a part in communicating the anti-crime message on an ongoing basis. She referred to an event shortly before Christmas 2001, which had become known by officials as "Jane and Reg go shopping", in which she had carried out a walkabout of a shopping area with the Northern Ireland Executive Minister, Sir Reg Empey MLA, to draw public attention to the dangers of counterfeit goods. This had proved "very effective".[144] Further initiatives had included work with Trading Standards Officers. We were encouraged to learn of the co-operation between the Northern Ireland Executive and the Northern Ireland Office in the publicity campaign about the dangers of counterfeit goods. We hope that this success will provide the foundation for many more joint initiatives in the fight against organised crime.

  106. Support for initiatives can be difficult to sustain in the medium to long term, even when it is influenced by events. It is therefore important to keep reinforcing the message, particularly where - as in the case of cheap counterfeit designer goods—the individual may perceive the message as demanding a personal sacrifice. In other cases, while the message may be heard, the connection with a lifestyle choice may be initially overlooked. While in America, on the eve of the six-month commemoration of September 11th, we saw examples of continuing campaigns in powerful television advertisements produced by the Drug Enforcement Administration which explicitly linked the drugs trade and the financing of terrorism.

  107. Therefore we were pleased to learn from the Minister that the importance of communicating the effects and dangers of organised crime to the public of Northern Ireland had been acknowledged, through the specific allocation of an Information Officer to the Task Force, and the provision within its limited resources of a budget for publicising its work.[145] The Northern Ireland Office has also begun to assess the measure of public support for the Task Force and its work through periodic public opinion surveys. The Minister told us that initial results were "very encouraging".[146] The 2002 Organised Crime Task Force Strategy sets an objective to develop cross-community support for tackling organised crime.[147] We agree with Customs & Excise that publicity campaigns can be more effective than law enforcement in certain situations,[148] and we urge the Government to give serious consideration to the role which such campaigns might play in the future strategy for dealing with specific facets of organised crime such as fuel laundering and tobacco smuggling.

  108. The Northern Ireland Office also informed us in March 2002 of the appointment of Professor Ronald Goldstock as a Special Adviser to the Secretary of State on organised crime. Professor Goldstock has worked extensively with police services on organised crime, particularly in New York, and brings a formidable reputation for articulating the pervasive effect it has on society in so many ways. The Minister told us that while he will not be a part of the Task Force, his work for the Secretary of State will undoubtedly be of benefit to it.[149] We welcome the appointment of an adviser to the Secretary of State on organised crime. We hope that the communication of an effective public message will form a key part of his considerations and his contribution to strategy.

Measuring performance

  109. Although all of those we spoke to asserted very clearly that the Task Force was a success and had made a considerable difference, we found it difficult to gain concrete evidence of the effect the Task Force has had on strategy and agency operations.

  110. In part this is in the nature of the work. It will always be more difficult to analyse the impact of a strategy than the effectiveness of operations, and success in prevention is harder to demonstrate than success in securing justice. In the area of overlap between crime and terrorism, security considerations often prevent successes from being publicised.

  111. Nonetheless we were told that the Government hoped the new approach would be judged "by the results it achieves"; the NIO also suggested that members of the Task Force had found some way to assess "in year progress against [its] targets".[150] We therefore sought information from the NIO which we hoped would enable us to compare the results achieved by the partnership agencies since the foundation of the Task Force, with what had gone before.

  112. We were surprised at the Government's response to this request, which stated:

"As far as operational successes are concerned, PSNI could only give a flavour in the time available ... Unfortunately, in several cases, the information is either not available in the form you want through current crime recording systems ... or cannot be extracted without in-depth research ... Most disappointingly for the Committee .. is the fact that the police did not use a definition of organised crime before the inception of the OCTF and so cannot provide a list of operational successes for the period 1 March 1999 to 30 September 2000."[151]

More worryingly, the response indicated that the NIO had been unable to obtain statistics for the numbers of convictions related to organised crime in Northern Ireland, because officials had thought the police held these records and found out only when looking into our request that the police did not.[152] We were subsequently informed that the NIO is to begin storing court activity data in a new database "but sadly this has proved to be a very complex undertaking" and the data will not be available on the new system for some months to come.[153]

  113. We understand that the format of official records will change from time to time as policy changes, making comparisons difficult, and we do not think that such statistics alone should drive future strategy. Nonetheless, given the importance of intelligence in countering terrorism and serious and organised crime, the inability of the NIO to access, or even locate, data on organised crime when needed is a cause for concern.

  114. The establishment by the Task Force of formal objectives for its second year strategy, coupled with impact and activity indicators which are very reliant on hard data, make the case even more pressing.[154] We were therefore encouraged to receive from the Police Service Northern Ireland a letter assuring us that following our request work has started on the development of a "central statistical collection point" which will be "both dynamic and responsive to future requests for data".[155] There is clearly much more work to be done.

  115. We recommend that the NIO and the Task Force jointly consider the development of an information strategy. This consideration should include:

• ·an assessment of the Task Force's need for hard information, not only to inform the threat assessment but wider intelligence needs;

• ·the identification of sources of such information and the establishment of contacts and mechanisms to enable swift access, through legislation if necessary;

• ·whether records kept by participating agencies are in forms which are compatible for Task Force analysis and if not, what changes are needed; and

• ·whether the Task Force should keep its own records in relation to outcomes and if so, what resources would be needed from Government to enable such activity.

  116. While the value of such data for intelligence is our primary concern, our interest in this matter was prompted by the Government's assertion that it wished the Task Force to be judged by its results. We believe that the consistent publication of results would do much to convince the public of the value of the Task Force's work. To a degree this is already done, with press releases marking significant successes as they arise; the Threat Assessment and Strategy documents for 2002-2003 also mark an improvement, although they may only receive a limited circulation in Northern Ireland.

OTHER ISSUES

Information sharing

  117. The difficulty over information available to the Task Force opens the wider question of the ease with which agencies can exchange data. The importance of information sharing was stressed to us by staff of the Criminal Assets Bureau in Dublin, who had benefited from specific arrangements which had been made for them to access other agencies' records.

  118. The picture we gained of information exchanges amongst UK agencies was fairly complex. While we were told that there is a common law power enabling agencies to share case-specific information in the public interest,[156] we were also told informally that there were not, in all cases, direct channels of communication between agencies, necessitating the use of intermediaries. Nor was there always a "two-way flow" of information.[157]

  119. Witnesses told us that the main barriers to information sharing were "cultural issues". In some instances these issues might be "about protecting your job"[158] while in others there were deeper questions to consider. Perhaps the most obvious and difficult of these related to the confidentiality of personal tax records. Mr Moore of the Inland Revenue confirmed that taxpayer confidentiality had been a bar to inter-agency co-operation in the past, and added that there had been situations in his own experience, "not specifically within the NI context, where I have received information and I have been uncomfortable with the fact that I was not able to pass it on to the police."[159] However, we were also told that action had now been taken under the Anti-Terrorism, Crime and Security Act to establish and secure both existing and new gateways for information exchanges: in consequence, the Inland Revenue expected that in future they would be able to respond "more fully to requests for information from the police and [would] be in a position to spontaneously disclose information where we discover evidence of some other crime".[160] This is a welcome development, which must be secured as soon as possible.

  120. Nonetheless there remain some constraints. The Data Protection Act prevents the sharing of bulk data.[161] Consequently, information continues to be provided on a specific case-by-case basis. Mr Byrne of Customs & Excise told us:

"Another agency cannot come in on a fishing expedition, as defence lawyers call it, and they cannot trawl through our databases to find, analyse, manipulate the information to see whether it will help them."[162]

Resources

  121. While the evidence suggests that the Organised Crime Task Force has had particular success in enabling the most effective use of the resources available for countering organised crime, we were not surprised to learn that certain organisations had continuing concerns about the level of resources they were able to allocate to this work and to counter-terrorism. Mr White of the PSNI told us that action on these matters had to be "within [the] capacity" of his officers, who were "spread across a fairly broad spectrum of criminal activity".[163]

  122. We gained a similar picture from Mr Veness of the Metropolitan Police concerning Great Britain. Mr Veness warned:

"..the events of 11 September have meant that we can no longer without extra resourcing address the twin challenges of continuing dissident IRA activity, for example, in the major cities of the United Kingdom and a greatly enhanced international terrorist threat. We are moving resources one from the other, and indeed not only one from the other but we are moving them from crime that affects people in their homes, in their families and in their high streets as well."[164]

He suggested that, while they were not faced with the challenge of terrorism, Customs might equally find themselves with conflicting priorities in tackling organised and other excise frauds.[165]

  123. The comments of our witnesses suggest that the situation in Great Britain and in Northern Ireland in respect of resources may be somewhat different and, unusually, the situation in Northern Ireland in this instance may be a little better. If this is so, however, it is largely because of the new and distinct focus on organised crime in the Government's strategic priorities for Northern Ireland. The clarity brought about by the establishment of the Organised Crime Task Force has encouraged Customs & Excise Northern Ireland in increasing its staff complement dealing with hydrocarbon oils fraud - one of the Task Force's current strategic priorities - from 25 officers to more than 160.[166] Early reports suggest that this investment is already showing its value as the decline in legitimate petrol sales in Northern Ireland has been halted: this contrasts with the situation prior to the investment of new resources, when the decline in legitimate sales was very steep indeed.

  124. The activities of serious and organised criminal groups—in which, in Northern Ireland, paramilitaries play a significant part—draw significant sums of money out of the Treasury's coffers. In the last year alone, hundreds of millions of pounds have been lost in oil revenues in Northern Ireland; there are the costs of dealing with lives wrecked by drugs, as well as by violence. Dealing with such serious criminal activity can also be very difficult, personally and professionally, to those on the front line.

  125. It is imperative that the police and other agencies engaged in tackling paramilitary or criminal activity have the resources and the support that they need. To ask them to make a choice between fighting domestic terrorism, or international terrorism, or organised and other crime which affects people directly in their daily lives is wrong. We welcome the commitment by H M Treasury and Customs and Excise to tackling hydrocarbon oils fraud in Northern Ireland, which responds to the priorities set by the Organised Crime Task Force. However, there remains considerable scope for further investment in tackling other forms of criminality as well as paramilitary activity.

  126. We urge H M Treasury to recognise that investing in action, not only against organised crime, but against terrorism in Northern Ireland and Great Britain, would provide a strong financial return to the Exchequer and contribute to the establishment of a more honest and stable society. We call on Government to consider sympathetically the cases presented by the police services and other law enforcement agencies concerning the resources they need to tackle such crimes.

Prosecution

The reporting of paramilitary-related crime

  127. As we have noted in an earlier section of our Report (see paragraph 50) there continues to be a reluctance among the public in Northern Ireland to report certain crimes. This is perhaps particularly the case in relation to paramilitary-related activity such as extortion. It is not difficult to see why individuals might hesitate to complain of such activity: the paramilitary approach has been "perfected over 20-25 years" and frequently includes the use of intimidation and very serious threats of violence.[167]

  128. Extortion is a cash-based crime, the evidence of which is comparatively easily hidden in business accounts.[168] The Police Service Northern Ireland are therefore very dependent upon witnesses coming forward to help in detection and investigation yet, they told us, they believed that only about ten per cent of extortion offences were ever notified to them.[169]

  129. It was evident to us that this was a source of considerable frustration to the PSNI. ACC White's discussion of the problems experienced by the police in such cases was illuminating. The essential points may be summarised as follows:

• ·overt intimidation of the victim/witness leads to significant under-reporting;

• ·in cases where a complaint is made it is frequently withdrawn before coming to trial, for reasons unknown: we were told that the instances of the complainant declining to proceed "has been a steadily rising figure over the years";

• ·where the crime reported is not overtly paramilitary it will go to jury trial rather than the Diplock court; and

• ·there has been systematic and repeated intimidation of juries.[170]

  130. We sought further details on the trend in withdrawn complaints from the Minister. She told us that, contrary to ACC White's comments, the overall number of cases in which a complainant declined to proceed had fallen slightly from 11,913 in 1999-2000 to 10,874 in 2000-2001. She concluded that although intimidation was a 'special problem' in Northern Ireland, it was "difficult to say if this [withdrawing of complaints] is a problem or even if this is a trend".[171] The 2002 Organised Crime Threat Assessment stated that, in reported extortion cases, 46% of victims requested that no police action be taken for fear of reprisal, and 39% of victims withdrew the complaint or reported no further contact from the extortionists. The Assessment suggested that in such cases "it is strongly suspected that the victim has, in fact, acceded to the extortionists' demands".[172]

Witness protection

  131. We sought to explore the availability of witness protection schemes, which might encourage more victims to come forward. We were surprised to discover that ACC White was very critical of the resources available for witnesses, which he suggested frankly provided a disincentive for individuals to consider putting themselves at risk from reprisal by notifying the authorities:

"Regretfully the way we approach it ... is a very money-pinching way in that the individual... is moved in to a council estate, given a minimum sum of money in terms of what he would be entitled to as an unemployed person. If he is a businessman he gets absolutely no money to re-establish himself and is required to sell his own business within the Province if he can and he must employ his own lawyer to do that. His house will be taken off him under the emergency provisions ... so he gets the bare minimum for what that house is worth ... if you have to go on the run leaving behind your whole social fabric and getting nothing to replace that, you do not really have much of a choice as a businessman. When you do the sums in your head you just roll over and pay."[173]

  132. The Minister suggested to us that measures in the Criminal Evidence (Northern Ireland) Order 1999 which will take effect this year would go some way to alleviating the problems experienced by witnesses.[174] However these measures, while welcome, are focused upon proceedings in the courtroom and do not therefore appear to address the problems highlighted by the Police Service Northern Ireland. During the course of our inquiry we were made aware of two successful witness protection programmes run by other jurisdictions in similar circumstances: in Italy, and in America, where the witness protection programme is run by the FBI.

  133. We find the picture of support for potential witnesses presented to us by the PSNI very disappointing. The level of personal sacrifice required of the individual, as it was described to us, is unreasonable; it makes the individual and potentially his or her family victims twice over. It is not surprising that so few are currently willing to make a stand. We believe that the Government, in conjunction with the Executive where appropriate, must look again at the type and level of resources it makes available to support potential witnesses before, during and after cases which go to trial.

  134. We were, however, encouraged to hear from the Minister of initiatives which are at least seeking to identify the true nature and extent of the problem. Two research projects are to take place: through trade organisations, a survey to seek to clarify the experience of extortion by business in Northern Ireland; and in commissioned research with victims and witnesses of crime, to seek to explore the reasons why complainants withdraw from the judicial process.[175] We welcome the new initiatives introduced by the Minister to improve understanding of the difficulties associated with the under-reporting of crime, and the bringing of cases to prosecution, and we also welcome the co-operation of trade organisations in this effort. We hope that these research projects will be expedited and the lessons they provide acted upon as a matter of urgency.

Charging and sentencing

  135. The charging and sentencing of the types of crimes we discussed is made more complicated by the difficulty in establishing and using evidential links to terrorism. ACC White told us, for example, that while the police often knew such a link existed, "if there is no evidential chain [we] can produce for the court that will clearly demonstrate that it is PIRA money or money lodged by any given PIRA member [we] cannot highlight the organisation".[176] Mr Veness, similarly, advised us that there are a number of hurdles for the law enforcement agencies in dealing with terrorist-related cases, including the pressures on investigators to produce evidence within pre-trial custody time limits and the provisions of human rights law.[177]

  136. It is partly for these reasons that the Government has shifted its strategy to focus upon the criminality of paramilitary fund-raising actions and the connection with organised crime. We were told that even this can be a challenge in terms of charging and sentencing: Mr White said that the courts had difficulty in recognising an organised crime infrastructure, "because the law, by and large, only recognises individual criminal acts".[178]

  137. The Minister told us that she was "not aware of any difficulty" in the sentencing of terrorist-related offences. She highlighted the work of the Organised Crime Task Force, which was enabling the police and Customs to focus upon criminal activity including that carried out by former and present paramilitaries:

"You can disrupt that work, arrest them, charge them, convict them for that activity and while, yes, it does not immediately read across that a paramilitary has been caught in the act of smuggling and been prosecuted, as far as the courts are concerned this individual has been caught as a smuggler and is dealt with as a smuggler."[179]

  138. While the police acknowledged that it was easier to make and press a case on criminal charges than specifically terrorist ones,[180] they expressed some doubt about the effectiveness of the charges they were able to bring in relation to crimes which were not overtly linked to terrorism. ACC White told us that the police "could certainly argue for longer sentences" in relation to extortion, while Mr Veness told us that he would wish to see greater sentences in relation to excise evasion offences such as fuel smuggling, pointing out the importance of fuel in the construction of home-made explosives.[181] Mr Byrne of Customs & Excise similarly acknowledged that the penalties exacted for excise evasion offences tended to be low.[182]

  139. There are two arguments to be made. Firstly, that sentencing by the judiciary within the maximum tariff may be low; and secondly, that the maximum tariff itself, laid down in statute, may in certain cases be too low.

Sentencing within the tariff

  140. In his comments on extortion, ACC White told us that the PSNI generally charged extortion offences under section 20 of the Theft Act (Northern Ireland) 1969 (Blackmail). The maximum tariff under this section is fourteen years imprisonment. He said that "until recently the most severe sentence there has only amounted to five years ... the average being about 35 months".[183] Mr Byrne, in discussing the penalties available to Customs for excise evasion offences, told us that while the maximum penalties available for such offences were seven years' imprisonment or an unlimited fine, or both, the typical penalties exacted were "a financial penalty, £5,000 or less, quite often a suspended sentence, from time to time, no more than three months' imprisonment". However, he also cited recent instances in which prison sentences had extended to two and a half years. He thought that the seven-year maximum tariff was "enough", although he did not wish to comment on whether the courts sentenced appropriately within that range.[184]

  141. We sought further information relating to the maximum tariffs for a range of offences associated with paramilitary fund-raising, and the average sentences imposed in Northern Ireland, England and Wales. The figures we received from the Home Office indicated that while average sentences for obtaining property by deception, receiving stolen goods and the fraudulent evasion of duty were higher in Northern Ireland, the sentences imposed in Northern Ireland for robbery, blackmail and supplying controlled drugs were shorter than sentences imposed for the equivalent offences in England and Wales. Further, this Northern Ireland average was lower in spite of the skew on the figures created by higher sentences awarded in cases where terrorist involvement was recognised.[185] In all cases, the average sentence was significantly lower than the maximum sentence which could have been provided.

  142. The £5,000 financial penalty cited by Mr Byrne in respect of excise evasion is also a cause for concern, given that it has been suggested to us that paramilitaries may raise up to £10,000 from a single illegal tank-load of smuggled fuel. Although the Minister said that she had no evidence of a problem in relation to sentencing,[186] it does not appear to us that the examples we have heard provide any serious deterrent at all. Mr Veness told us that the paramilitaries were well aware of these current realities:

"..we are seeing that the paramilitaries in Great Britain ... have seen an opportunity whereby their profit, both the personal, organisational and terrorist purposes, can be gained with a relatively low risk as to the eventual criminal outcome ... they know where the ceiling rests and indeed how the courts will interpret that ... the sentencing scope at the moment limits the deterrent effect upon the criminal."[187]

  143. We are concerned that there is some evidence that the courts in Northern Ireland have become inured to a certain degree of criminality which would not be tolerable elsewhere in the United Kingdom.[188] In view of the corrupting nature of these crimes on society, we would wish to see much harsher sentences and financial penalties in all such cases. Without them, there is no real deterrent either to the paramilitaries or to the 'ordinary decent' criminals (as they are referred to in the vernacular in Northern Ireland) who have learned by their example. We recommend that the Government ensure that the judiciary in Northern Ireland are fully apprised of the strong links which have now been established between paramilitary organisations, serious and organised crime and the range of offences which provide these groups and individuals with their income.

  144. On a separate point, ACC White also drew to our attention that the main Act used by the PSNI in dealing with extortion — the Theft Act (Northern Ireland) 1969—pre-dates the paramilitary-associated problem it is now required to address. We understand that the Organised Crime Task Force is already looking at the possibility of updating the statute. Following these discussions, the PSNI wrote to us to suggest the creation of an aggravated offence in respect of extortion. This would be:

"Any demand made whereby the victim perceives, or believes, that demand is made by or on behalf of a paramilitary group or allied organisation or where any demand is made in which the name of such group or organisation is so implied by virtue of the geographical area in which the victim resides or conducts their business".[189]

The PSNI added that if proper cognizance was given by the courts to such an aggravated offence, the current maximum tariff under the 1969 Act would continue to be adequate. We draw the suggestion by the PSNI of an aggravated offence in relation to extortion to the attention of the Northern Ireland Office.

The maximum tariff

  145. Mr Veness took the view that the maximum tariff for such crimes as hydrocarbon oils fraud should be extended in order to provide a clearer deterrent. He argued that the longer maximum tariffs available in cases relating to drugs had been responsible for diverting paramilitary activity from drug dealing into the 'softer' area of smuggling. He also reminded us that the consequences of smuggling can still be deadly when terrorists benefit from it.[190]

  146. Dr Silke has reported his own analysis of the sentences available and awarded for 'fundraising' crimes, as compared to the sentences for overtly terrorist offences. His work suggests both that the sentences are too low, and that there is a correlation between the ages of those sentenced for 'fundraising' crimes and the ages at which paramilitaries are released from prison having served sentences for explicit terrorist crimes. Thus the consequences of the differential in sentencing for the two types of crime are that the paramilitary organisations tend to perceive fundraising activity such as extortion as low risk activity and assign their older and more experienced members to these duties. These individuals would tend to be both more competent and more ruthless in their actions, believing that they are unlikely to be caught and, if they are, the penalties would not be so bad the second time around.[191]

  147. We believe that the raising of the maximum tariff for extortion and other crimes linked to paramilitary fundraising, combined with the greater exercise of the courts' powers in such cases, would significantly increase the deterrent effect on paramilitaries and other serious criminals. We recommend that the Government consult the law enforcement agencies about the evidence that they and others have presented to us, and explore how the relevant statutes can be most effectively updated.

Extradition

  148. We were told by Customs & Excise that it was not possible to extradite criminals on fiscal charges from the Republic of Ireland because the two jurisdictions did not have matching legislation.[192] This was known and exploited in the criminal fraternity and was consequently a source of considerable frustration to officers.

  149. However, when we questioned the Minister about this problem at the end of our inquiry, she informed us that the Republic of Ireland had amended its legislation on 20th March 2002 so that it was now possible to carry out such extraditions.[193] We welcome the introduction of extradition provisions for fiscal crimes between the United Kingdom and the Republic of Ireland.

  150. Mr Byrne also reminded us that there are other ways to "raise the cost of doing business", and that seizing the proceeds of crime "through assessment, as well as simply confiscation, causes pain".[194] In the next section of our Report we look at the role which the new Assets Recovery Agency will play.

The Assets Recovery Agency

What is Assets Recovery?

  151. Assets recovery, or asset forfeiture, is the process by which governments reclaim from criminals the proceeds of their crimes. In general terms, there are three ways in which this can be done:

·at the conclusion of criminal proceedings: if an individual is found guilty by the court of committing a certain offence, the court may at the same time determine whether the individual has benefited financially or materially from that crime. If so, the court may order that the benefit - or an equivalent sum - be forfeited;

·through civil proceedings: where the authorities are able to identify specified assets of an individual as the proceeds of crime, they may pursue a legal case to confiscate those assets even if the individual has not been charged with a crime. The individual may defend the case, and prove that the assets concerned were legitimately acquired. This is sometimes known as an in rem action because the legal charge is against the assets themselves rather than against the assetholder;

·through taxation: in other cases, the authorities may be able to identify specific assets that have been acquired by a suspected criminal, but may not be in a position to prove that the assets represent the proceeds of crime. Investigation of the tax affairs of the suspect may result in taxation (and civil recovery) of the assets, even though the source of the assets cannot be identified.

Why is assets recovery needed in Northern Ireland?

  152. Organised crime in Northern Ireland is persistent and growing. It threatens the return of normality to the many honest citizens in Northern Ireland, and increasingly threatens to spill over onto the mainland. This has been recognised by the UK Government since the establishment of the Anti-Racketeering Unit in 1988 although, as the first part of our Report testifies, the range and incidence of organised criminal activity has increased greatly in recent years. The creation of an Assets Recovery Agency provides an opportunity to tackle the problem by confiscating the wealth and disrupting the activities of the criminals involved.

  153. Serious and intelligent criminals can and do buy high quality legal, accountancy and financial advice. They keep themselves informed of investigative and enforcement techniques and take steps to isolate their criminal activities from law enforcement scrutiny. They obscure the origins of "dirty money" by the use of complex money laundering schemes; they divide up and locate their assets in several jurisdictions—often those with bank, corporate or trust secrecy legislation—to make the work of regulators and investigators more difficult. This is the pattern of behaviour of organised criminals throughout the world. Those in Northern Ireland are no different.

Operation of assets recovery programmes

  154. There is nothing new in the concept of confiscating the assets of criminals. One of the first acts of the French Revolutionary Government in the 1790s was to introduce 'La Confiscation des Profits Illicites'. The United States of America has exercised asset forfeiture since 1789, and now has a number of complex programmes operating at different levels of government, including the Racketeer Influenced and Corrupt Organisation Statute (RICO).[195] Another famous and successful confiscation programme was carried out by the Hong Kong Independent Commission Against Corruption, which was set up in 1974.

  155. The Republic of Ireland first instituted assets recovery provisions through its Criminal Justice Act 1994. Its efforts have been internationally acknowledged as very successful. The UK itself has had limited assets recovery provisions on the statute book since 1986, in relation to drug trafficking.[196] In 1989 these provisions were extended to cover all serious crime.

  156. Confiscation under these provisions has not been a successful activity in the UK. A report in 2000 by the Government's Performance and Innovation Unit (PIU), which drew on the experience of civil forfeiture powers in the Republic of Ireland, Australia, Italy and the USA, found that in the previous five years confiscation orders had been raised in an average of only 20 per cent of drugs cases, and a mere 0.3 per cent of other crime cases. Where the courts had ordered amounts to be seized, the collection rate averaged 40 per cent or less. As a consequence asset confiscation policies which could, if properly used, attack the proceeds of crime and generate significant cost savings for the criminal justice system were failing to deliver against these objectives. This poor performance was attributed to a variety of factors including a lack of personnel, restricted training in financial investigation, poor inter-agency co-operation and inappropriate restrictions on the ability of the courts to restrain defendants from disposing of their assets.[197]

Financial investigation

  157. Money belonging to serious and organised criminals, and to paramilitaries, is not always held in bank or building society accounts. It is also laundered through businesses, hidden in company financial accounts using false invoices, and invested in insurance bonds.[198] It can be very difficult to establish the true ownership of money hidden in this way.

  158. For this reason, financial investigation is a highly skilled and resource intensive activity. It is not a mechanical process. It takes a long time, sometimes years, to prepare a case. For the individual investigator it involves following paper trails, conducting interviews, seeking evidence, exercising imagination, initiative, self-motivation and good judgement. In the private sector individuals possessing these skills and attributes are highly prized and highly paid. In the public sector they have been neither highly prized nor highly paid, and often find themselves overwhelmed by a grossly excessive workload. The PIU concluded that financial investigation was "underused, undervalued and underresourced", and investigators were ill-equipped to cope with the demands placed upon them.[199]

The proposal for an Assets Recovery Agency in the UK

  159. The Government responded to the PIU report by introducing the Proceeds of Crime Bill, which is currently being considered by Parliament. The Bill seeks to extend the powers available in UK law for assets recovery, and creates an Assets Recovery Agency. As a dedicated agency, this will take the lead in England, Wales and Northern Ireland in investigating and reclaiming the proceeds of crime via the criminal, civil and taxation routes noted in paragraph 151 above.[200] The Agency will also have a role in establishing training and best practice models to support financial investigators working in the wider law enforcement community.

  160. The proposed new legislation was welcomed by our witnesses for its potential impact in Northern Ireland. During the standing committee stage of the bill in the House of Commons, the Parliamentary Under-Secretary of State for the Home Office, Bob Ainsworth MP, had stated that it would be important that the Agency's work in Northern Ireland was given the high profile and priority that would be necessary.[201] While acknowledging the difficulty of pursuing civil recovery cases, Mr Byrne of Customs & Excise described the bill as a "massive asset", and looked forward particularly to the impact which the Agency could have in enforcing confiscation orders.[202] The Minister anticipated that the Agency would be a "formidable addition" to the law enforcement effort in Northern Ireland.[203]

  161. ACC White welcomed the proposal but was concerned that the implementation would fall short of what the PSNI would desire. The PSNI had in mind a number of individuals who they would wish to recommend to the Agency for investigation, but they were concerned that the Agency would be too small to deal with the potential workload.[204] The PSNI had too few detectives and officers trained in financial investigation to take on such work itself.[205]

ALLOCATION OF RESOURCES

  162. Given the findings of the PIU report on the resourcing of financial investigation, and the very urgent nature of the problem of organised crime in Northern Ireland, we too were anxious to clarify the balance between the resources to be provided to the Agency, and the Government's expectations of its output. Officials from the Home Office told us that the Government anticipated that the Agency would initially carry out a total of 15 to 20 civil recovery cases, 15 to 20 taxation cases and 250 confiscation cases a year; working from these estimates, it had been decided that the provision of 100 staff overall would be an appropriate starting point for its work.[206]

  163. We had two concerns about this level of provision:

• ·whether the overall provision was appropriate for the nature and difficulty of the work which lies ahead; and

• ·whether the complement dedicated to Northern Ireland would be sufficient, given the particular and growing problem of organised crime which it will have to tackle there.

The nature and difficulty of the work

  164. In order to get a sense of the levels of staffing which might be required to carry out the Agency's role effectively, we attempted to draw analogies from the experience of other offices currently engaged in similar work. Mr Moore of the Inland Revenue told us that across the UK financial investigators will "carry a portfolio" of serious fraud cases, "typically 15 to 20, maybe as low as ten depending on the complexity". The average length of investigation time for such a case was subsequently confirmed as about three years, although some cases can take eight to ten years to settle.[207] These particular investigations are, generally, into taxpayers who co-operate with the Inland Revenue in ascertaining the extent of their understated tax liabilities. This will not be the situation for organised criminals under civil investigation by the Assets Recovery Agency, who may be expected to do everything possible to conceal and retain their assets.

  165. The prosecution work undertaken by the Inland Revenue may provide a more realistic benchmark. We understand that the Inland Revenue employ 45 full-time senior officers to handle prosecutions into false financial accounts, personal tax returns and PAYE returns (although excluding sub-contractor exemption certificates and internal theft of repayment order frauds). According to their annual reports, the Inland Revenue conducted between 17 and 40 such prosecutions in each of the financial years 1997-98 to 2000-2001.[208] The civil confiscation and civil recovery investigations to be undertaken by the Assets Recovery Agency will be of at least the same magnitude and complexity as the work entailed in collecting evidence for a prosecution by the Inland Revenue. The work is also likely to be a great deal more dangerous and confrontational.

Experience of assets recovery in the United States and the Republic of Ireland

  166. Our discussions with officials in both the Republic of Ireland and the United States demonstrated to us the potential significance of the Assets Recovery Agency for the fight against terrorism and organised crime in Northern Ireland. The experience of both the US and the Republic of Ireland is that assets recovery is an invaluable tool for law enforcement. Its primary value lies in the disruption to criminal activity which results from the confiscation of these criminal assets. There is also a significant secondary benefit in the psychological effect which assets recovery can have on individuals who have previously believed themselves immune from prosecution—either because they have effectively distanced themselves from the crime being carried out or because they have intimidated associates or witnesses.

  167. Of the two jurisdictions we visited, the experience of the Criminal Assets Bureau (CAB) in the Republic of Ireland is more closely related to the proposals for the UK. The CAB, like the proposed Assets Recovery Agency (ARA), is a dedicated agency. It deals with a number of the particular problems and even individuals which the Assets Recovery Agency in Northern Ireland will have to face. A detailed report of the discussions we carried out in Dublin can be found in the Annex.

  168. The following facts are, however, significant for the current discussion on resources:

• ·At 31st December 2000 the Criminal Assets Bureau had 45 staff including 8 revenue officers, 3 customs officers and 3 solicitors, and plans were underway for further expansion;[209]

• ·During its first five years of operations, the CAB recovered IR£21 million under high court orders;

• ·With a primary focus on investigating the financial affairs of individuals who were paying no tax, or only superficial amounts of tax, the CAB in the same period assessed IR£56 million in taxes, of which it had collected IR£28 million (the remainder still being subject to appeal);

• ·These successes had been achieved in spite of the fact that the individuals scrutinised by the CAB had in many instances made substantial efforts to conceal their criminal activity by mixing it with legal business. and by hiding criminal assets in other jurisdictions. Some had challenged the proceedings taken against them in the High Court and pursued a lengthy course of appeal.

The Agency in Northern Ireland

  169. Under the Government's plans there will be a separate branch of the Assets Recovery Agency in Northern Ireland, headed by an Assistant Director. We are pleased that the particular nature of the problems in Northern Ireland has been recognised in the decision to appoint an Assistant Director of the Agency with responsibility for operations in Northern Ireland.[210] The Minister, Jane Kennedy MP, also assured us that the overall Director of the Agency would have to take account of developments in Northern Ireland, including the work of the Organised Crime Task Force, in drawing up his annual plan and priorities.[211]

  170. In spite of these welcome indications and the written assurances of the Home Office that planning proceeded on the assumption that the Agency "will need to meet the particular needs and circumstances of Northern Ireland including the legacy of paramilitary involvement in crime", we were concerned to discover that, out of an overall provision of 100 staff for the Assets Recovery Agency, the Home Office is currently planning to allocate a maximum of only ten staff to the Northern Ireland branch.[212]

  171. The Home Office told us that they recognised the Criminal Assets Bureau was "pretty successful" in both its civil recovery and taxation cases.[213] However, officials were unable to tell us how many staff the CAB had, and in fact under-estimated the resources available to the CAB by a third. They argued against drawing comparisons with the Bureau or the Inland Revenue on the basis that each has different responsibilities.[214] That may be so but there are also many things they have in common, in the approaches they are taking and the types of individuals they are dealing with. While we would not argue for identical allocations of resources, we would have thought that illustrative comparisons with other successful organisations might be helpful when establishing a new and important body.

  172. The Home Office suggested to us that the Government was

"...happy that the Agency has sufficient resources to be able to deal with the sort of caseload that we have suggested. There may be room for argument about whether it should have capacity to deal with a bigger caseload but it may be argued, especially when introducing innovative powers like civil recovery and the use of taxation specifically for criminal gains, that the best thing to do is to start on a limited basis and see how we go."[215]

  173. Confiscation of criminal assets has been practised in the UK for the past 15 years. The problems of organised criminal activity in Northern Ireland have been around for much longer but have worsened markedly in recent times. The evidence presented by the National Audit Office earlier this year, indicating that two-thirds of petrol stations in Northern Ireland are now selling some illicit fuel, graphically demonstrates how swiftly organised crime can grow to undermine society if it is not checked.[216] There has already been a significant learning process in the UK. In our opinion, there is little to be gained, and far more to lose, from proceeding with assets recovery on the limited basis indicated by the Government in Northern Ireland.

  174. The Agency cannot be solely staffed by financial investigators. There is a critical mass of skills and abilities which are needed to carry out financial investigations even before considering issues of administrative support. The Criminal Assets Bureau in Dublin includes on its staff not only forensic accountants but police officers, tax officers, legal and IT specialists and administrators.[217]

  175. We considered that a comparison of the level of staffing of the Bureau with the proposals for our own Agency was significant, given the strong similarities in the problems which the two governments face on the island of Ireland. The Bureau's 45 staff are successfully dealing with issues arising in the Republic, which has a population of approximately 3.8 million. In five years they have recovered substantial sums through taxation proceedings. They have not lost a single court case. They have successfully developed relationships with law enforcement agencies in other jurisdictions. Their effectiveness is genuinely feared and respected.[218]

  176. Compared to this, the proposal is to allocate ten officials for the ARA in Northern Ireland, with its population of 1.7 million.[219] In the light of the evidence we have received on the growth and operation of serious and organised crime in Northern Ireland, the contrast is stark. This allocation of staff to Northern Ireland, will be unlikely to provide the range and critical mass of skills required, and their impact therefore will be limited. There are high expectations on the part of politicians, law enforcement agencies, the general public and (presumably) the criminals themselves, that the Assets Recovery Agency will have a significant impact on the problem of organised and serious crime. On the basis of the evidence we have heard, those expectations are unlikely to be met so far as Northern Ireland is concerned.

  177. We call on the Government to reassess its allocation of resources to the Assets Recovery Agency in order that more resources can be allocated to Northern Ireland. We believe that it is currently under-resourced for the task required, and we further believe that the establishment of its reputation as a threat to criminality in its first few years will be crucial to its success. We therefore recommend that the Government

 make forward provision now in its spending plans for the substantial expansion of the Agency as its work develops.

  178. There can be no illusions about the worrying nature of the situation Northern Ireland currently faces. Paramilitary-related and organised crime is penetrating and corrupting society. The establishment of the Assets Recovery Agency could be a significant step forward in tackling the problem. Yet the work of the Agency, locally as well as nationally, looks set to be frustrated by the lack of proper financial support and commitment from Government. We further recommend that in reassessing the allocation of resources to the Assets Recovery Agency, the Government directly consult the agencies represented on the Organised Crime Task Force for Northern Ireland about the level of resources they believe will be necessary for the Agency to be effective in Northern Ireland.

PRINCIPLES

  179. Our discussions with officials in the United States and the Republic of Ireland also enabled to us to consider wider questions relating to the practice to be adopted by the Assets Recovery Agency in the UK. In the list below we highlight the principles we have identified which we believe should inform the Agency's approach to its work:

(A) It must seek to engage, and maintain, public support for its work.

As we have noted previously, the establishment of the Criminal Assets Bureau in Dublin followed rising public concern over the growth of organised crime, and the murders of Garda McCabe and Veronica Guerin. The public support which the CAB thus gained at the outset has been reinforced by the work it has done to target the most serious criminals, some of whom were very visible in the community because of their apparently unsupported lifestyles. Mechanisms which have been used by other jurisdictions to encourage public support include the establishment of mechanisms for members of the public to report individuals with suspicious lifestyles, and the 'recycling' of seized assets through various schemes which are visible to the public, such as drugs education programmes. This form of recycling already takes place in the UK.

(B) It must use its extensive powers proportionately.

One aspect of securing public support will be the choices which the Agency makes in relation to those whom it pursues. It is most likely that the public will support the Agency if it is seen to make a real difference, by tackling those who are perceived to have been 'getting away with' serious criminality. Both the US and the Republic of Ireland have sought to ensure that their assets recovery programmes are appropriately targeted by setting in statute minimum thresholds of value for assets which may be pursued. These thresholds prevent the agencies concerned from becoming deflected by petty crime.

(C) It must use its powers accountably, fairly and with due diligence.

Both the US and the Republic of Ireland have built substantial safeguards into their assets recovery programmes in respect of transparency and the legitimacy of the process. For example, stringent rules govern the public advertisement in the United States of civil recovery actions, in order that any interested party should have the opportunity to stake a claim to the assets concerned: in the event of a failure to publish the required notices, confiscated assets must be immediately handed back. Both jurisdictions recognise that legitimately-held assets may become entangled with the proceeds of crime and have made provision for hearings and appeals to prevent injustice.

We were also told by officers of the CAB that they perceived such a strong link between the organisation's success and its credibility that they were very careful in assessing their evidence and choosing which cases to take to court. This proper caution had led to the welcome situation in which, in five years of operation, the Bureau had not lost a single legal challenge or case on appeal.

(D) The Agency's staff must be properly protected, in order that they may pursue these difficult and sensitive cases safely and effectively.

We discuss this issue further in paragraphs 189-197 below.

  180. At this stage, prior to the passing of the Proceeds of Crime Bill, the exact formation of the Agency and the working methods it might adopt remain unclear. In the remainder of this section we consider specific concerns in more detail.

Information sharing

  181. As we have noted in paragraph 86 above, the freedom to exchange information between different law enforcement agencies has been identified as one of the most crucial aspects of counter-terrorist strategy.

  182. Officials of the CAB told us of an approach they had found to work well. A significant proportion of the Bureau's staff were officials on secondment from other agencies such as the Irish national police service, An Gárda Síochána, and the Revenue Commissioners. Part of the secondment agreement provided for some of these seconded officials to maintain their freedom of access to the seconding agency's databases. Thus the Agency, through the powers vested in these secondees, was able to cross-check an individual's records across Government in a particularly fast and effective way.[220]

  183. While provisions have been made for the establishment of gateways between the Assets Recovery Agency and other bodies, and organisations such as Customs & Excise are expecting to second staff to the Agency, it does not appear to us that these arrangements have been made with such a possibility in mind. We recommend that the Government consider the possibility of enabling certain staff seconded to the Assets Recovery Agency to maintain access to their sponsoring organisation's databases.

  184. We were also concerned about the difficulty which the Agency might find in gaining access to information held by the devolved administration. Officials from the Home Office assured us that they believed devolution would not have any material effect on the process.[221] We hope that, in common with other gateways, the effectiveness of the procedure will be kept under review until it has been thoroughly tried and tested.

Asset sharing

  185. The procedure by which assets seized are returned to the community has the power to be either beneficial towards or destructive of an assets recovery programme. In the United States there are tightly controlled programmes for, for example, sharing recovered assets between federal and state enforcement agencies. In the Republic of Ireland, by contrast, asset sharing has been excluded from the Proceeds of Crime statute, for fear that a profit motive would be popularly perceived to 'taint' the CAB's work.

  186. The approach to be taken in England, Wales and Northern Ireland lies part way between the two approaches described above. As in the Republic of Ireland, all money received through asset recovery will go into the central Consolidated Fund. A Recovered Assets Fund has been established, into which sums equalling "up to half" of the receipts from confiscation, civil recovery and cash forfeiture cases will be placed. This Fund is to be used to support projects such as drugs rehabilitation programmes, community regeneration initiatives and local crime reduction partnerships as well as law enforcement initiatives and research.[222] Mr Stadlen of the Home Office told us that with 300 applications for funding in the second round of bidding the Fund is already over-subscribed.[223]

  187. We asked whether the public would see a link between the Recovered Assets Fund and proceeds of crime actions. We were told that such a link would be evident where funding was provided for community-based projects. We welcome the establishment of the Recovered Assets Fund, which provides a means to return the proceeds of crime to the community whilst protecting the integrity of the confiscation process. We recommend that detailed consideration be given to the ways in which such projects might be publicly associated with assets recovery work in order to foster support for this new approach to tackling crime. In order to safeguard the reputation of the Fund and also its link with the assets recovery process, we also recommend that care be taken to ensure grants provided by the Fund are appropriately spent.

Thresholds for action

  188. While anticipating that thresholds for action would be set for the new Agency, ACC White of the PSNI was concerned that the minimum threshold would be set with closer regard to the Agency's available resources than to the nature of the organised criminality the Agency is seeking to tackle: in other words, that Government would attempt to make the crime fit the law enforcement response, rather than the other way around. He suspected that the minimum threshold would be restrictive, "in excess of what would trigger off the activity we would wish".[224] He therefore sought a separate decision on thresholds for the Agency in Northern Ireland, rather than a common threshold for activity in Northern Ireland, England and Wales. A distinct minimum threshold for Assets Recovery Agency activity in Northern Ireland, which reflects local circumstances, must be set so that the Agency can be effective in that particularly difficult situation. We recommend that the Assistant Director of the Agency for Northern Ireland be given the power to determine this threshold, having consulted with the local law enforcement agencies and the Northern Ireland Office.

Protection of staff: our Second Report and the Government's Response

  189. One of the most urgent messages we received from staff of the CAB during our visit to Dublin was the advisability of protecting staff of the Agency and their families from the threat of intimidation. We were told that the types of individual who would come to the attention of financial investigators were likely to be sophisticated and potentially very dangerous criminals; extreme violence had been threatened and even used against officials working in this area in the Republic of Ireland prior to the establishment of the CAB.[225] For this reason, the founding statute for the Criminal Assets Bureau included measures to protect individual officers of the Bureau in the conduct of their work, and to make the disclosure of the identity of members, or former members of Bureau staff and of their families a serious criminal offence.[226]

  190. We asked our witnesses whether they would have similar concerns for staff operating in assets recovery in the UK, and specifically in Northern Ireland. We were assured that all of the organisations which gave evidence to us recognised the difficulties of the political situation in Northern Ireland, and the possibility of paramilitary links to their cases.[227]

  191. A variety of special measures were taken to protect staff when working in Northern Ireland, depending upon the specific nature of the case under consideration. Nonetheless, Mr Byrne of Customs & Excise told us that in the course of normal operations in Northern Ireland there had been six instances in the last nine months in which officials had been attacked, by means including stoning, the ramming of vehicles and "serious verbal abuse".[228] The Inland Revenue related instances of telephone and postal threats to staff, and the bombing of eight offices over a thirty year period, both in Northern Ireland and on the mainland. While there had been no bombings in recent years, it was noted that there had been an increase in attempts at intimidation at a time when there was press speculation about the Inland Revenue's involvement with the NIO's Anti-Racketeering Unit.[229] From such evidence it is clear that there must be the possibility of similar attempts being made against the new Agency and its staff.

  192. We published an interim report on the Proceeds of Crime Bill on 14 February 2002 in which we recommended that the Government protect the new Agency's staff by statutory anonymity, in the way that staff of the Republic of Ireland's Criminal Assets Bureau were protected.[230] We then tabled amendments to the Proceeds of Crime Bill to implement our recommendation, which were debated during consideration of the Bill on 27 February 2002.

  193. During that debate the Minister, Bob Ainsworth MP, welcomed our report and recommendation. He explained that although our proposal was potentially a "big step", given the current very limited anonymity provisions in UK law, the Government was seriously considering whether such provisions might be possible. Having referred to the particular situation in Northern Ireland, he concluded the debate by saying:

"...I recognise the issues and ...I shall do my level best to ensure that we can do something that is effective if that is in any way possible ... If we can find ways and means of giving such useful protections, we should seek to do so."[231]

When he replied formally to our Second Report, and other concerns which we raised privately in correspondence, he indicated that the Government was continuing to look into the matter and would "bring forward any necessary amendment during the Bill's passage in the House of Lords". This response is reprinted in the appendices to this Report.[232]

  194. We were pleased with the sympathetic response which the Government had made to our suggestion; nonetheless, we believed that the issue was too important to let rest. We are very grateful to Lord Brooke of Sutton Mandeville, the Chairman of our Committee in the previous Parliament, who enabled us to pursue the development of the Government's thoughts on this matter by tabling our amendments again during consideration of the Bill in the House of Lords.

  195. Our amendments were debated in the House of Lords on 22nd April 2002. On that occasion the Minister, Lord Rooker confirmed that an amendment would be brought forward to Part 12 of the Bill. He said:

"...the amendment that we intend to table will empower the director of the agency, and only the director, to direct that members of agency staff may operate using pseudonyms in circumstances where they would otherwise need to identify themselves by name. That will, we believe, provide an important protection in appropriate cases."[233]

  196. The amendment was subsequently made in the House of Lords on 27th May. The new clause (Agency staff: pseudonyms), provides the director of the Agency with the power described by Lord Rooker in the paragraph above. It also states:

"In any proceedings or application under this Act a member of the staff of the Agency in respect of whom a direction [for the use of a pseudonym] is in force must not be asked (and if asked is not required to answer) any question which is likely to reveal his true identity."

The amendment must also be agreed to by the House of Commons before it can pass into law.[234]

  197. We appreciate the very positive response from the Government towards our suggestion that staff of the Assets Recovery Agency should receive some form of statutory protection of their identities. We believe that staff of the Agency will be able to work far more effectively and safely because of it.

Conclusion

  198. The Government has taken some significant steps in developing its strategy against terrorism, and against organised crime. The importance of cutting paramilitaries off from their sources of income has been recognised, and joint working against organised crime looks set to contribute significantly to the reduction of that threat.

  199. What is important now is that these advances in strategy are followed through. Those who are actively engaged in the difficult and dangerous work of tackling paramilitaries and serious criminals have a right to expect not only a formal commitment to their work but properly resourced support by Government for the long term.

  200. It is also imperative that the Government continue to take direct action to compel those connected with paramilitary organisations - within both traditions - to cease all paramilitary activity. Reports that some weapons have been put beyond use are, of course, welcome. But when acts of decommissioning are swiftly followed by further evidence of continued gun-running, intimidation and brutal physical assaults, including on children, by paramilitary organisations which have declared themselves to be on ceasefire, it is difficult not to feel a sense of hypocrisy. Until such fundamentally destructive acts cease, Northern Ireland cannot truly know a peaceful future.

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119   Ev pp 71-72 Back

120   Ev p 72 Back

121   Q87 Back

122   Q28 Back

123   Q22 Back

124   Q110 Back

125   Confronting the Threat, Northern Ireland Organised Crime Task Force Strategy 2001-2002, inside back cover Back

126   Q462 Back

127   Confronting the Threat, Northern Ireland Organised Crime Task Force Strategy 2001-2002 p8 Back

128   Confronting the Threat: Strategy 2002-2003, Serious and Organised Crime in Northern Ireland p11 Back

129   Confronting the Threat, Northern Ireland Organised Crime Task Force Strategy 2001-2002 pp8-9. The public sector sub-group links the Task Force to the devolved administration through OFMDFM. Back

130   Q459 Back

131   Q306 Back

132   Q331 Back

133   Q337 Back

134   Q337 Back

135   Q273 Back

136   Q110 Back

137   Confronting the Threat: Strategy 2002-2003, Serious and Organised Crime in Northern Ireland p13 Back

138   Q338 Back

139   See Annex  Back

140   Q56 Back

141   Q339 Back

142   Q339 Back

143   Q339 Back

144   Q467 Back

145   Ev p 74; Q486 Back

146   Q488 Back

147   Confronting the threat: Strategy 2002-2003, Serious and Organised Crime in Northern Ireland p12 Back

148   Q339 Back

149   Q460 Back

150   Ev p 74 Back

151   Ev p 75 Back

152   Ev p 75 Back

153   Ev p 85 Back

154   Confronting the Threat: strategy 2002-2003, Serious and Organised Crime in Northern Ireland pp15-16 Back

155   Ev p [FT17 p2] Back

156   Q322 Back

157   Q46 Back

158   Q322 Back

159   Q273 [our emphasis] Back

160   Q225 Back

161   Q323; Q469 Back

162   Q323 Back

163   Q46 Back

164   Q114 Back

165   Q115 Back

166   Q46 Back

167   Q24 Back

168   QQ256-257 Back

169   Q24 Back

170   Q24 Back

171   Q474 Back

172   The Threat Assessment 2002: Serious and Organised Crime in Northern Ireland, p8 Back

173   Q29 Back

174   S.I. 1999, No. 2789 (N.I.8); Q475 Back

175   Q467; Q478 Back

176   Q49 Back

177   Q127 Back

178   Q50 Back

179   Q480 Back

180   Q23 Back

181   Q119 Back

182   Q347 Back

183   Q23 Back

184   Q347 Back

185   Ev p 90 Back

186   Q481 Back

187   Q121 Back

188   For example, see the comments of our witnesses reported in paragraph 145 above; also QQ23, 347 Back

189   Ev p 91 Back

190   QQ119-122 Back

191   A Silke, In Defense of the Realm - Financing Loyalist Terrorism in Northern Ireland - Part One: Extortion and Blackmail, Studies in Conflict and Terrorism 21 (1998) pp350-355 Back

192   Q336 Back

193   Q483; see also Ev p 89 Back

194   Q347 Back

195   Asset forfeiture and the law at www.fbi.gov; Asset forfeiture, Drug Enforcement Administration at www.druglibrary.org Back

196   For example the Drug Trafficking Offences Act 1986; the Criminal Justice (Scotland) Act 1987; the Criminal Justice (Northern Ireland) Order 1990. Back

197   Recovering the proceeds of crime, PIU June 2000 Back

198   Q10  Back

199   Recovering the proceeds of crime, PIU June 2000 para 1.28, Chapter 7 Back

200   Some of the powers to be granted to the Director of the Assets Recovery Agency in Northern Ireland, England and Wales will be exercised in Scotland by the Scottish Ministers. Back

201   Official Report, Standing Committee B, 13 November 2001 cc8 Back

202   QQ351,353 Back

203   Q459 Back

204   QQ41,28 Back

205   Q74 Back

206   Q359 Back

207   Q294, with footnote Back

208   Inland Revenue Annual Reports: Cm 4079 (1998) p55; Cm 4477 (1999) p79; Cm 5029 (2000) p101; Cm 5304 (2001) p104. Back

209   Criminal Assets Bureau Annual Report 2000 pp7,16 Back

210   Q446 Back

211   Q451 Back

212   Ev p 89 Back

213   Q361 Back

214   QQ362, 365, 372 Back

215   Q378 Back

216   HM Customs and Excise: the misuse and smuggling of hydrocarbon oils, National Audit Office, HC 614 (2001-2002) p15 Back

217   See Annex Back

218   See Annex Back

219   UK 2002 Yearbook at www.statistics.gov.uk, pp13-14 Back

220   Annex  Back

221   Q421 Back

222   Q385; Q432 Back

223   Q430 Back

224   Q28 Back

225   See Annex  Back

226   Criminal Assets Bureau Act 1996 ss10-11 Back

227   See for example Q211 Back

228   Q310 Back

229   QQ216, 287, 289 Back

230   The financing of terrorism in Northern Ireland: interim Report on the proceeds of crime bill, Second Report 2001-02, HC628 Back

231   Official Report, 27 February 2002 cc752, 768 Back

232   Ev p64 Back

233   Official Report [Lords] 22nd April 2002, c37 Back

234   Official Report [Lords] 27 May 2002 cc1104-1105 Back

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Prepared 2 July 2002