Examination of Witnesses (Questions 160-179)
MR MARK
FUCHTER, MR
GUY WESTHEAD,
MR DAVID
RICHARDSON AND
MR DAVID
GREEN QC
1 MARCH 2007
Q160 Mike Gapes: Would it not be
helpful to publish the names of those who have paid the compounding
penalties? That would act as even more of a deterrent.
Mr Fuchter: HM Customs and Excise
of old did used to publish names in certain cases that were laid
down by Peter Lilley when he was the Paymaster in 1989. Events
have overtaken us. The Commissioners for Revenue and Customs Act
prevents us from doing so. We have clear legal advice that we
cannot publish the names. What we still do—and in these
two cases—we are publicising details without the names,
so we are publicising in general terms that there has been a case
concluded involving these factors and this sort of behaviour but
we are still looking to publish information on that basis. One
of the two has yet to be publicised.
Q161 Judy Mallaber: Mr Fuchter, you
mentioned warning letters earlier and, as we understand it from
evidence from the Foreign and Commonwealth Office, that is the
sanction you use most frequently. In 2005 and 2006 nearly 50 were
issued. Coming back to this question of publication, you have
explained you cannot provide full details in some cases because
publication might identify the persons concerned and so breach
your requirement on confidentiality, but as I understand it you
are satisfied that these people who you have warned have breached
the Export Control Act 2002 and are therefore liable for criminal
prosecution. You may say to me you are not allowed legally to
publish that but why should their names be withheld?
Mr Fuchter: They are not at the
stage where there is sufficient evidence for anyone to conclude
that they have committed an offence. In the warning letter process,
we do use the words "you may have". We cannot say that
you have because, as you say, they would have committed an offence.
This is an efficient and effective way of concluding cases where
it is not clear whether or not an offence has been established
and there are insufficient grounds to say either way.
Q162 Judy Mallaber: Your argument
on not publishing would just be that it is not clear they have
committed an offence?
Mr Fuchter: They have not been
arraigned for anything. They are not subject to criminal prosecution.
They are just under the broader umbrella of taxpayer confidentiality
in that sense.
Q163 Judy Mallaber: Where you do
send someone a warning letter, what happens after? Do you check
up on whether they have mended their ways and are better people
in future?
Mr Fuchter: Yes, we do. There
are two angles on this. Firstly, we conclude a lot of cases by
warning letter but I want to emphasise we feel the warning letter
is quite a powerful tool if it goes to a company—it may
be quite a large company—with an export control department.
It may not achieve much in terms of deterring others and we do
not think it does; it is really about preventing and deterring
and perhaps steering that company and its employees towards improved
compliance.
Q164 Judy Mallaber: You say you are
not clear at that stage whether you have sufficient evidence for
a criminal prosecution. How serious does their offence have to
be? Would it be helpful to find some way of publicising the circumstances
in which letters are issued in order to act as a deterrent to
others?
Mr Fuchter: On the first point,
I am sure it will vary across the cases that I am aware of. The
weight of evidence will vary. In some cases where we have not
been able to proceed with a prosecution—we have discontinued
it, for example—if we really feel that there is no chance
ever of sufficient evidence emerging or there is a fatal flaw
in the potential evidence, we would conclude that case by a warning
letter. The advantage for us operationally in terms of enforcement
is that we have then made clear to the company the details of
the law and that should help assist our enforcement approach next
time.
Q165 Judy Mallaber: Do you require
them to report back to you on what they do as a result of getting
your letter?
Mr Fuchter: Only as part of the
follow-up approach. I have not answered the second part of your
question: do we take any follow-up action? All warning letters
will be referred to our local inland audit staff in one or other
of our operational directorates. They will pursue any potential
breaches or any issues arising from that warning letter in their
follow-up audit of that company's books and records.
Mr Westhead: Maybe this is in
keeping with the direction in which you would like us to travel:
we could consider carrying out some further publicity, either
local or national, which would focus on the type of offences that
are being carried out and that generate the warning letter and
therefore provide some further publicity of the types of things
that exporters are doing that are clearly potentially in breach
of the Export Control Act. Exporters need to take that on board
and learn lessons from it.
Judy Mallaber: That would be very helpful
as part of what the Committee has found, that very often exporters
are not aware of the rules. I am not sure if that is something
that you would wish to pursue further after the meeting, Chair.
Chairman: I think so, yes.
Q166 John Battle: I am increasingly
not comfortable with this because, as far as I understand it,
if people break the rules on this they can be criminally liable.
Is that right?
Mr Fuchter: Yes.
Q167 John Battle: As my colleague
reminds me, if a person does not fill their tax form in on time,
the Inland Revenue gets quite heavy with posters everywhere. If
you get an ASBO your picture is in the paper, but are we going
pretty soft really and pussy footing around companies that ought
to know what the rules are and that, if they break them, it should
be transparent and publicly known that they are stepping over
that line. Otherwise, if I am not clear that it is a criminal
act, you might think it is a bit of corporate irresponsibility
and not really a criminal act. What we are talking about is weapons
being sold to places. We have said it is out of order. If they
get there and cause an amazing amount of damage, I just wonder
whether we are tough enough in our insistence on compliance.
Mr Fuchter: In terms of enforcement,
I do not consider that we are going soft. The matters under which
we operate are criminal. There are no civil offences under which
we can proceed. There are in other Revenue and Customs regimes
and that is a separate issue. We can act and we do act. I do not
think we are going soft. We have something like nine active cases
on the stocks at the moment in our criminal investigation department
and we have already concluded four last year. We do have to secure
enough evidence to a sufficient standard and that is the bottom
line.
Mr Richardson: The point I would
make about the suggestion of going soft is that when a case is
referred to the Revenue and Customs Prosecutions Office, after
we have gone through the evidential test, is there sufficient
evidence, the next part of the test is the public interest. If
you have a weapons case, the public interest is very high. If
you have sensitive goods that are WMD end-user, the public interest
is very high and quite rightly so. If you have legitimate goods
to a legitimate destination but the issue is one of regulation
and licensing, the public interest maybe is not so high and it
may be more appropriate for HMRC to consider a compound or a warning
letter or some other disposal. Your concern is an entirely legitimate
concern about the nature of the goods and the harm they do. It
is a key part of the public interest test that we will always
take into account.
Q168 Chairman: The Committee has
raised the question in the past about how Revenue and Customs
exchange information with other EU countries with an experience
of prosecuting export control breaches. During a recent debate
in the House, the Minister said that the Revenue and Customs Prosecutions
Office has recently met with Eurojust colleagues and other EU
prosecutors. What has been the outcome?
Mr Green: As Mr Richardson went,
I will let him answer that.
Mr Richardson: We did go and have
a meeting, hosted by Eurojust, last month. We had prosecutors
and investigators from the Netherlands, France, Spain and Germany
there. They are all key countries in terms of export control.
One of the concerns of this Committee last year was, if I can
put it crudely, that other countries find this easier and we find
it difficult. The conclusion that we took away from the meeting
with our colleagues was that, although other people face different
challenges, they find it difficult as well. They still have to
deal with intelligence material forming the basis of these investigations.
They still have to deal with issues of licensing and what is the
appropriate licensing regime. They still have to deal with getting
sufficient evidence from jurisdictions where it may be less easy
to get evidence from. Some of those countries will put their focus
on civil or administrative penalties or on having a particularly
onerous and bureaucratic licensing regime to stop people wanting
to apply. Other countries do not have the same disclosure regime
that we do. When asked the question, "What do you do when
there is exculpatory material sitting in the background?"
I have to say they were scratching their heads a bit and not quite
sure what they would do with it. One of the advantages of the
system that we have and that we have talked to the Committee about
before in relation to the disclosure regime is that we do have
quite a clear and well practised regime where prosecutors and
judges know and understand the issues that are in play and can
deal with them.
Q169 Chairman: Is there anything
that we have learned from other EU countries where you think we
could do that and that would be an improvement in the UK system
or is it just recognising that different countries do things differently
and we do not see any need to change in the light of that exchange?
That may be the right answer, of course.
Mr Richardson: It may well be.
Q170 Chairman: Is that the gist of
it? We all do things a bit differently. We have had an exchange
but as a result of that we have no suggestions to make for doing
things differently.
Mr Richardson: I need some time
to digest the notes we made of the session in The Hague. The suggestion
I have is that one of the most powerful things is knowing who
your opposite numbers are in the other countries and being able
to talk to them. I know that in some cases we have made extensive
use of Crown Prosecution Service liaison magistrates in Paris
and in Madrid. They have been extremely helpful by putting us
in touch with the right people. The main benefit of a session
like the one we had is knowing who our opposite numbers are and
understanding their understanding of our regime so that we can
better explain to them when we make mutual legal assistance requests.
Q171 Mike Gapes: Can I ask about
the catch-all provisions for non-listed goods with regard to weapons
of mass destruction. In your memorandum you said that when you
detect non-listed goods going to end-users of concern you normally
cannot seize these goods unless there is evidence that the exporter
has grounds to suspect that there is an end-use which is weapons
of mass destruction. Instead, you often just get the goods withdrawn
from export or brought into the licensing system. Can you clarify
that for us?
Mr Fuchter: Apologies for drafting
which, on reflection, probably looked a bit garbled. That certainly
was not the intention. We were trying to explain how goods were
dealt with once we had detained them. I think we said last time
that we will target non-listed goods in this area because the
catch-all is a very important provision and works well. It is
a question of our powers, that we cannot seize goods without evidence
that the exporter was aware of the intended use. In many cases
the exporter genuinely is not aware, but it is fair to say of
those numbers that we reported in our annual report, 38 occasions
in one year and 42 in the other, those are cases where the DTI
has subsequently rated the goods in that consignment as licence
required. On the point about coming into the licensing system,
the exporter may have applied for a licence and may even have
been given one. We think that is a success from our point of view
because it has given the Government the chance to consider whether
or not those goods should be permitted to go forward.
Q172 Mike Gapes: Do you assess that
the current law is strong enough to deal with this area?
Mr Fuchter: We think it is, yes.
The point for HM Revenue and Customs is that, where we report
our seizure statistics, cases like this will not appear on them
so we have started to include these figures just as a sentence
in our annual reports to reflect that this is activity going on
that we think is valuable, but that is a minor point, I accept.
Q173 Mike Gapes: Do you sometimes
give the exporter the impression that you might be taking legal
action just to force them to apply for a licence?
Mr Fuchter: That is certainly
not our intention, no. It works on the basis of our understanding
of the intelligence assessment, in terms of what non-listed goods
might be moving through export control. We are coming at it from
that point of view. Officers are then detaining goods and contacting
the DTI who then consider whether the goods should be subject
to licence.
Q174 Mike Gapes: We heard evidence
from the UK Working Group who asked for a change in the current
regulations to have a new catch-all requirement and they gave
us the example of the Predator unmanned aerial vehicles which
use civilian technologies and which are not subject to control,
but which can clearly have a serious military use. Do you see
any practical problems with their proposal about bringing in a
new requirement?
Mr Fuchter: That control is part
of an EU regulation. The lead departments would need to establish
whether or not there is a question of EU competence to be resolved.
The UK may not be able to go it alone. It may be that we do not
know exactly where the Working Group is coming from, but some
of these goods might be already controlled by the existing military
end-use if they are going to an embargoed destination. The main
point in terms of the practical problems would be that any extension
of the military end-use control, either to extend its breadth
to cover more countries or to extend the list of goods, would
obviously raise questions on the impact of the vast majority of
trade that is going through export controls, in particular if
it led to us detaining more goods which were then held up whilst
the DTI rating unit had to examine them and conclude whether or
not the catch-all should be invoked. If lots of goods were subsequently
released on that basis, traders might legitimately challenge us.
The flip side of that would be the enforcement costs for ourselves
and other departments in policing such a scheme. We certainly
can see the potential in the point you are making to extend the
military end-use control in the way you have described. I understand
that issue will be part of the up and coming review of export
controls and that is the sort of issue we would expect to debate
in some detail with our colleagues in DTI.
Q175 Sir John Stanley: Mr Fuchter,
when you came in front of this Committee last year you put into
the public domain for the first time that you were considering
a prosecution of a weapons of mass destruction trafficking and
brokering case. Can you tell us whether any charges have been
made and, if not, why not?
Mr Green: I can assist there.
The case is still open. It is a complex matter covering several
jurisdictions. Treasury Counsel is advising on evidence and we
are examining the disclosure position very closely. The case is
still with us.
Q176 Sir John Stanley: Does the case
involve UK individuals who are citizens or residents?
Mr Green: I am sorry, I cannot
answer that question.
Q177 Sir John Stanley: You cannot
answer because you do not know the answer or you do not want to
disclose the answer?
Mr Green: I do know the answer
but I cannot give you it because of the confidentiality provisions
of the Commissioners for Revenue and Customs Act.
Q178 Sir John Stanley: Can you confirm
that these offences, if they are offences, have been committed
overseas, in the UK or a combination of both?
Mr Green: I would have to give
the same answer.
Q179 Sir John Stanley: Can you tell
us whether your existing powers enable you to prosecute for trafficking
and brokering overseas by UK citizens or residence? This is without
regard to the case. Do your powers enable you to prosecute actions
committed overseas by UK citizens which, if committed in the UK,
would be criminal offences?
Mr Richardson: Yes. There is a
number of extraterritorial controls in the orders made under the
Export Control Act 2002 which contain offences relating to acts
done by individuals in the UK or by UK persons, whether they are
natural persons or companies, who are outside the UK. Provided
the evidence exists and effectively hits the targets in the orders
in that they are moving around restricted or prohibited items,
yes, the powers exist to prosecute those individuals.
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