Memorandum from HM Revenue and Customs
ROLE OF
HMRC IN STRATEGIC
EXPORT CONTROL
1. HM Revenue and Customs (HMRC) contribute
to a multi-agency approach to prevent and deter the illegal trade
in strategic goods. Policy is determined by the FCO in consultation
with the MOD and DFID. The DTI sets out the regulatory framework
and issues or refuses licences in accordance with agreed criteria.
Other agencies provide intelligence to inform licence decisions,
to inform HMRC's targeting, and to alert HMRC to consignments
of concern. HMRC's contribution is to:
— Ensure that declared export trade
is accompanied by the correct documentation, to check that a licence
is present and correct if required and that it covers the declared
goods and destination. Where a licence covers multiple shipments,
HMRC will ensure that it has been correctly decremented and will
return the licence to the exporter or agent as required. Exhausted
licences are returned to the DTI;
— Detect illegal goods at export and
to take enforcement action, including:
Seizure and subsequent confiscation or restoration
of the goods; and
Investigation with a view to prosecution in appropriate
cases;
— Disrupt activity, eg by visiting
potential exporters in collaboration with the relevant agencies
to prevent any exports of concern. HMRC also detect non-listed
goods going to end-users of concern under the WMD end-use catch-all
control. These cannot normally be seized unless there is evidence
that the exporter had grounds to suspect a WMD end-use but HMRC
intervention will often result in withdrawal of the goods from
export or to the goods being brought within the licensing system;
— Investigate offences relating to:
the intangible export of technology;
the offshore supply of military
listed goods and chemical, biological and nuclear weapons; and
the offshore provision of technical
assistance in relation to WMD goods.
And refer any case that we believe meets the criteria
to the Revenue and Customs Prosecution Office (RCPO)
ROLE OF
HMRC IN RELATION
TO THE
NEW CONTROLS
INTRODUCED IN
ORDERS UNDER
THE EXPORT
CONTROL ACT
2002
2. The new controls introduced in orders
under the Export Control Act 2002 extended HMRC extra territorial
role to cover activities akin to existing extraterritorial controls:
on the supply of goods to UN arms embargoed destinations; and
on the international movement of anti personnel mines under the
Landmines Act 1998. New controls on the provision overseas of
technical assistance in relation to WMD goods were an extension
of existing WMD controls which had been assigned to HMRC under
the Anti Terrorism, Crime and Security Act 2001. And new controls
on the intangible transfer of military technology were an extension
of the existing controls on the intangible transfer of dual-use
technology.
3. Breaches of the controls on the transfer
of WMD technology by any means (including word of mouth) falls
to HMRC when the transfer takes place overseas.
4. Section 7 of the Export Control Act 2002
provides that orders made under the Act may make provision for
the enforcement of the order (including provision as to powers
and duties of any person who is to enforce it). The provisions
which HMRC have agreed to enforce are set out in article 21(3)
of the order.
Are the controls enforceable?
5. We believe that the legislation provides
a sound base for investigation and prosecution. Where sufficient
evidence is readily available and disclosure of unused material
does not present particular difficulties (in the ways we have
described in our previous evidence) then HMRC would expect to
present a robust case for consideration by RCPO. Inevitably there
will be cases where questions of sufficiency of evidence or disclosure
difficulties lead us, in consultation with departmental legal
advisers and with RCPO, to abandon cases before they are reported
to RCPO in order to optimise our resources. The number of prosecutions
will not be high and should not be used as an indicator as to
whether the controls are successful.
6. Where offences are committed entirely
overseas, the enforcement difficulties can be compounded. Where
the alleged activity is internationally condemned, such as breaching
UN embargoes, greater cooperation can generally be expected from
foreign Governments and enforcement bodies. However, where it
relates to a supply or transfer that other states might consider
to be legitimate trade, we may not expect the same level of cooperation
from an overseas Government. Moreover, if the control relates
to goods that, if exported from the UK, might have been granted
a licence, the courts may consider this to be a technical offence
which, unless we are able to prove guilty knowledge, would result
in a maximum fine of £1,000. In allocating resources to overseas
investigations that can be costly, we have to take account of
the likelihood of cooperation to obtain evidence and the seriousness
of the offence that we can allege.
Investigation
7. HMRC assess all intelligence and reported
breaches to determine what, if any, action is appropriate. HMRC
investigate all activity suggesting a deliberate breach involving
a sensitive destination or particularly sensitive goods and will
refer the matter to RCPO to consider whether there is sufficient
evidence to mount a prosecution. The outcomes could be (a) that
the reported behaviour does not constitute an offence; (b) that
prima facie an offence may have been committed but there
is insufficient evidence to support a prosecution; (c) that there
is sufficient evidence to support a prosecution but that prosecution
is not in the public interest; d) that there is sufficient evidence
to support a prosecution and that prosecution is in the public
interest.
HMRC priorities
8. HMRC's approach has been to target investigation
resources on: a) deliberate breaches; and b) proliferation attempts
from overseas (which may or may not suggest that UK exporters
are complicit). Much valuable disruption activity has been done
by HMRC investigators working with our overseas counterparts,
with intelligence and security agencies, with other Government
Departments and with Industry. Once our powers were in place,
HMRC extended this activity to visiting a number of firearms dealers
to ensure that they were aware of the controls. More recently,
recognising the need to improve deterrence, HMRC has identified
strict liability cases with aggravating features and reported
them to RCPO. Details of successful prosecutions have been reported
to the Committee. We recognise the Committee's continued interest
in the enforceability of these controls and our response and we
are looking into ways of providing more information with suitable
safeguards.
November 2006
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