Joint memorandum from HM Revenue and Customs
and Revenue and Customs Prosecutions Office[115]
1. The value of the goods which were subject
to the two prosecutions (Q144)
The table below shows the cases prosecuted over
the last two years, the goods and their value (where available)
and the approximate cost of the prosecution to RCPO. These figures
do not include HMRC's investigation costs.
| Year | Case
| Goods and value | Fine + costs
| Approximate cost of prosecution |
| 2005-06 | Praetorian Associates
| Body armour | £2,500 |
£2,600 |
| Vestguard | Body armour
£128,000
| £10,500 | £3,300
|
| 2006-07 | PKI | Body armour
and helmets
£23,000
| £11,600 | £11,500
|
| Winchester Procurement |
Helmets and flak jackets
£48,260 |
£8,500 | £7,200 |
| | |
| |
2. The lack of awareness in academia of the Export Control
Act 2002 and the awareness-raising which the Government is undertaking
(Qq 151-2)
HM Revenue and Customs has not arranged or participated directly
in any of the awareness-raising initiatives led by DTI Export
Control Organisation with the academic community, although we
have taken part in some policy discussions at meetings where representatives
of academia were present. We would, however, respond positively
if asked to do so. In our oral evidence we said that we were surprised
at the statement about a lack of awareness in academia, given
the following activities or initiatives that have taken place:
— The ECO consulted representative bodies for the
academic community in the run up to the introduction of the new
controls in 2004.
— The ECO has undertaken a number of compliance
visits to higher education establishments.
— "Universities UK" is a standing member
of the Export Control Advisory Committee and is involved in discussions
regarding export control issues.
— Separately, the FCO has worked with the academic
community to introduce a compulsory pre-entry screening system
known as ATAS (Academic Technology Approval Scheme) for non-EU
students intending to take PhD-level (and some Masters-level)
research in limited, specific areas that may have military applications.
Further information on ECO's activities in this area is in
their memorandum of December 2006 (QM 26) questions 18-23, made
in response to questions arising from the Westminster Hall debate.
HMRC would aim to investigate any evidence of a breach of
the export licensing regime by members of the academic community.
3. Whether any lessons for the UK have been learned from
the recent Eurojust meeting (Q 170)
In summary, RCPO learned that:
— The other four jurisdictions represented do not
necessarily have a wide experience of prosecuting such cases.
— The complex investigative background to such cases
can easily cause similar difficulties to the sort of disclosure
questions that we face in the UK.
— Procedures for dealing with such issues vary considerably
from country to country. Inability to disclose sensitive matters
can sometimes lead to trials collapsing.
— The ability to implement a very strict licensing
regime and impose civil penalties often results in early disposal
of breaches.
— There are a number of issues that would warrant
a more detailed discussion than we were able to have.
— That ability to have a forum to meet prosecutors
and investigators involved in similar work and to share experiences
is a valuable experience and well worth developing further.
This meeting did not involve any HMRC officials, but we note
RCPO's final point about the merits of such a forum and would
be prepared to support and contribute in future.
4. Whether the trafficking controls apply to a person
with UK residency rights but not citizenship operating outside
the UK (Q 189)
The relevant legislation, with RCPO's highlighting, is as
follows:
Export Control Act 2002
"United Kingdom person" means a United Kingdom national,
a Scottish partnership or a body incorporated under the law of
any part of the United Kingdom.
(2) For the purposes of the definition of "United
Kingdom person" a United Kingdom national is an individual
who is—
(a) a British citizen, a British overseas territories
citizen, a British National (Overseas) or a British Overseas citizen;
(b) a person who under the British Nationality Act
1981 (c 61) is a British subject; or
(c) a British protected person within the meaning
of that Act.
The Trade in Goods (Control) Order 2003
Citation, commencement and extent
1. — (1) This Order may be cited as
the Trade in Goods (Control) Order 2003 and shall come into force
on 1 May 2004.
(2) Articles 3(1) and 4 apply to any person
within the United Kingdom and article 3(2) applies to any person
elsewhere who is a United Kingdom person as defined in section
11(1) of the Export Control Act 2002.
Supply or delivery of restricted goods
3. — (1) Subject to the provisions
of this Order, no person shall directly or indirectly—
(b) agree to supply or deliver; or
(c) do any act calculated to promote the supply or
delivery of,
any restricted goods, where that person knows or has reason
to believe that his action or actions will, or may, result in
the removal of those goods from one third country to another third
country.
(2) Subject to the provisions of this Order,
no United Kingdom person shall directly or indirectly—
(b) agree to supply or deliver; or
(c) do any act calculated to promote the supply or
delivery of,
any restricted goods, where that person knows or has reason
to believe that his action or actions will, or may, result in
the removal of those goods from one third country to another third
country.
(3) Paragraph (1) applies to any act, or any
part of any act, done in the United Kingdom.
(4) Paragraph (2) applies to any act, or any
part of any act, done outside the United Kingdom or the Isle of
Man.
Transfer, acquisition or disposal of controlled goods
4. —(1) Subject to the provisions of this
Order, no person shall—
(a) arrange the transfer of controlled goods from
one third country to another third country; or
(b) acquire or dispose, or agree to acquire or dispose,
of any controlled goods, where that person knows or has reason
to believe that such an acquisition or disposal will or may result
in the removal of those goods from one third country to another
third country.
(2) Subject to the provisions of this Order,
no person shall—
(a) arrange or negotiate; or
(b) agree to arrange or negotiate,
a contract for the acquisition or disposal of any controlled
goods, where that person knows or has reason to believe that such
a contract will or may result in the removal of those goods from
one third country to another third country.
(3) Subject to the provisions of this Order,
no person shall in return for a fee, commission or other consideration—
calculated to promote the arrangement or negotiation of a contract
for the acquisition or disposal of controlled goods, where that
person knows or has reason to believe that such a contract will
or may result in the removal of those goods from one third country
to another third country.
(4) Paragraphs (1), (2) and (3) apply to any
act, or any part of any act, done in the United Kingdom.
The Trade in Controlled Goods (Embargoed Destinations) Order
2004
Supply and delivery of controlled goods
3. —(1) Subject to the provisions of this
Order, no person shall directly or indirectly—
(b) agree to supply or deliver; or
(c) do any act calculated to promote the supply or
delivery of,
any controlled goods to any person or place in an embargoed
destination.
(2) Subject to the provisions of this Order,
no United Kingdom person shall directly or indirectly—
(b) agree to supply or deliver; or
(c) do any act calculated to promote the supply or
delivery of,
any controlled goods to any person or place in an embargoed
destination.
(3) Paragraph (1) applies to any act or any
part of any act, done in the United Kingdom.
(4) Paragraph (2) applies to any act or any
part of any act, done outside the United Kingdom or the Isle of
Man.
In respect of acts done wholly outside the UK, the Trade
in Goods (Control) Order 2003 prohibits acts by United Kingdom
persons in respect of restricted goods, but not controlled goods.
Thus, extra-territorial controls only apply to a limited class
(some security and paramilitary equipment; missiles and their
components with a range greater than 300 km).
United Kingdom persons are defined by reference back to
the Export Control Act 2002 and are, essentially, British citizens,
subjects, protected persons or UK companies. These definitions
are quite precise and are extensively detailed in the British
Nationality Act 1981 and associated Home Office guidance.
This means that a person who has rights short of a status
listed in the Export Control Act 2002 would not be liable under
the extra-territorial provision. Thus, a person with leave to
remain in the UK or with a different type of status short of those
listed in the Export Control Act would only be liable for acts
done wholly or partially in the UK.
The Trade in Controlled Goods (Embargoed Destinations)
Order 2004 similarly creates an extra-territorial control applicable
to United Kingdom persons, but does not incorporate the definition
in the Export Control Act 2002. In RCPOs view, however, a court
would interpret the 2004 order consistently with the 2003 order,
given that they are aimed at a similar type of offence and offender.
As they are both penal provisions, they would be construed restrictively
and as a result the 2004 Order is unlikely to be interpreted as
being effective against a wider class of persons than the 2003
Order.
5. Whether HMRC and RCPO will be part of the review of
the Export Control Act 2002 led by the DTI (Q 190)?
HMRC are participating fully in the review, seeking RCPO
input where appropriate on evidential and wider criminal justice
issues.
6. Whether there are any gaps or shortcomings in the powers
in respect of WMD (Q. 192)?
HMRC assess that there are no gaps or shortcomings in the
powers that we derive from customs legislation and from legislation
relating to WMD.
7. An update on the WMD case raised by Sir John Stanley
MP last year (Q 193)
As agreed, RCPO shall submit a separate briefing to the
Attorney General, to enable him to brief the Committee on a confidential
basis in whatever terms he considers best.
8. The monitoring arrangements in place for the end use
of imported firearms (Q. 204)
Further to HMRC's oral answer to Qq195-204, there is to our
knowledge no single authority that takes oversight of the end-use
of all imported firearms. As firearms are prohibited in the UK,
end use of imports by Registered Firearms Dealers (as opposed
to supplies for police or military purposes) effectively boils
down to either deactivation or re-export. The primary responsibility
lies with local police firearms licensing officers and their controls
are applied in relation to any domestic transaction between one
RFD and another. The monitoring arrangements are that:
— HMRC FXOs (Firearms and Explosives Officers) verify
that imported weapons are entered into the RFD's Firearms Register;
that the weapons fall into the correct section of the Firearms
Act the import licence was issued and that the RFD is authorised
to deal in such weapons; that additionally weapons that are imported
from another EU Member State are covered by an EU Transfer licence;
and that serial numbers on documents and weapons match up.
— Police firearms licensing officers control the
weapons from that point onwards. They ensure that weapons are
securely stored and that any disposal or other onward transaction
by the importing RFD is properly accounted for in each dealer's
Firearms Register in order that onward transfers or sales to other
RFDs remain under control.
— By agreement between HMRC, Home Office and ACPO,
the FXO can extend their audit beyond the importing RFD in certain
circumstances through to final disposal where there are suspicion
of illegal disposal of imports, for example by illegal diversion
from re-export onto the domestic market.
FURTHER QUESTIONS
Q1. In their memorandum HM Revenue and Customs state that,
recognising the need to improve deterrence, HMRC has identified
strict liability cases with aggravating features and reported
them to the Revenue and Customs Prosecutions Office. These are
cases prosecuted under section 68(1) of the Customs and Excise
Management Act 1979 where there is no requirement to prove intent
to avoid export control. Should the Committee expect to see more
prosecutions? What are the aggravating features HMRC refers to
in the memorandum?
We cannot predict how many strict liability cases we would
formally investigate but our broad expectation is that there might
be between 7 and 10 cases reported to RCPO in any given year.
The number of cases that might be prosecuted under s68(1) may
also reduce in the future if conditional cautions became available
for dealing with export control cases.
The features that HMRC would regard as aggravating circumstances
and thus lead to an export controls investigation include the
following:
— That the goods are not on any Open Licences;
— Presentation of an incorrect licence;
— The export was to a sensitive destination;
— The goods were particularly sensitive;
— The exporter has a previous poor compliance history;
or
— The exporter did not apply effective internal
controls;
HMRC will also take into account other features that can
occur in any customs offence cases (albeit they may not occur
in export controls cases) such as involvement in other customs
related offences (for example smuggling of other goods at the
same time), assault of a Customs officer, or a particularly novel
and serious method of smuggling. HMRC do not regard this list
as entirely prescriptive or exhaustive.
In the session Members asked about the answer to the question
Susan Kramer MP received on 13 September 2006 (Column 2335-6W)
and would like to know what were the gross figures on which the
percentages were based (Q 148)
The gross figures are in column D of this table and we have
repeated the percentages in column E for convenience. Information
in columns A to D was originally provided in an answer to a PQ
tabled by John Bercow MP on 22 March 2006 (Official Report,
column 427W).
| Financial Year | No of Seizures
| No of Referrals from DTI | Total number of breaches
(B + C)
| percentage of breaches (col D) as per reply to Susan Kramer PQ
|
| A | B | C |
D | E |
| 2000-01 | 120 | 30
| 150 | 80% |
| 2001-02 | 80 | 27
| 107 | 88% |
| 2002-03 | 67 | 21
| 88 | 92% |
| 2003-04 | 63 | 31
| 94 | 84% |
| 2004-05 | 37 | 28
| 65 | 83% |
| | |
| |
Q2. The Committee understands that a questionnaire has
been circulated within the EU about export control sanctions and
penalties in EU Member States. Has it been completed? Could the
Committee have a copy?
HMRC contributed to the Government's response to this questionnaire.
We understand that the DTI will be submitting a copy of the UK's
response to the questionnaire to the Committee in due course.
Q3. In its evidence to the Committee in December the UK
Working Group on Arms suggested that as more jurisdictions introduced
controls in arms traffickers, brokers were tending to "reinvent"
themselves as transporters to stay one step beyond the law but
that regulating the activities of transporters would help to address
this problem. The Group suggested that tracing transportation
was more straightforward than tracing brokering paperwork. As
the enforcement agency for export control what is HMRC's view
of the practical aspects of this proposal?
HMRC do not agree with the notion that introducing new regulations
on the activities of transporters would help to address the issue
of any arms trafficker or broker who reinvents themselves or otherwise
reclassifies their business activity from one of trading in military
goods to that of transport operator. This is for two reasons:
— Our enforcement capabilities and powers are not
affected; and
— It is not so much about enforcement officers'
access to different types of paperwork, but more about what that
paperwork says in terms of evidence.
In our view an attempt by a trader to "reinvent"
themselves would not put them beyond the law, and nor would the
introduction of new regulatory controls on transporters make a
material difference in terms of documentary evidence.
May 2007
115
RCPO responses are italicised. Back
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