Cross-border co-operation between the Governments of the United Kingdom and the Republic of Ireland - Northern Ireland Affairs Committee Contents


Submission from HM Revenue and Customs

1.  SUMMARY

    —  Her Majesty's Revenue & Customs (HMRC) was formed in April 2005 following the passage of The Commissioners for Revenue and Customs Act. This act implemented the recommendations of the O'Donnell Review, integrating the former departments of Inland Revenue and HM Customs & Excise.

    —  Both former departments had been involved in cross border co-operation with "sister" organisations in the Republic of Ireland. The fiscal authorities in the Republic of Ireland had also merged sometime prior to the creation of HMRC. These organisational changes have facilitated the exchange of information and increased cross border co-operation.

    —  Cross border co-operation is not limited to reciprocal exchanges through the two fiscal authorities as HMRC has established relationships with other law enforcement agencies in the Republic of Ireland, eg the Criminal Assets Bureau and An Garda Siochana.

    —  These relationships are being developed on a daily basis by the presence of a HMRC officer based in the British Embassy in Dublin. This officer, the Fiscal Crime Liaison Officer (Dublin) (or FCLO), is part of a worldwide network of officers that HMRC have placed in key locations. His role includes that of "Competent Authority" for HMRC in the exchange of material with the relevant authorities in the Republic of Ireland and similarly he is able to task authorities and receive taskings on behalf of HMRC.

    —  There are a large number of examples available to demonstrate the extent of cross border co-operation between HMRC and the various law enforcement agencies in the Republic of Ireland. These happen on a number of levels but primarily involve either Mutual Administrative Assistance or Mutual Legal Assistance. There has also been a significant increase in the number of European Arrest Warrants executed in the ROI on behalf of HMRC.

    —  The individual examples that follow are a sample of the exchanges that take place at an operational, tactical and strategic level to drive criminal and civil actions in relation to fiscal crime.

2.  BACKGROUND

  2.2.  By their nature, offences involving HMRC "assigned matters" often include a cross border aspect to the offence. This may relate to the smuggling or diversion to home use of excise goods such as cigarettes or alcohol from countries where there is lower taxation into the UK. Locally there is an additional problem with the smuggling of hydrocarbon oil from the Republic of Ireland into Northern Ireland.

  2.3.  Close cooperation between HMRC and Law Enforcement Agencies in other jurisdictions has long been a feature of HMRC investigations. To assist foreign enquiries and investigations HMRC has a network of officers (Fiscal Crime Liaison Officers) located around the world. There are 16 posts covering all of the EU Member States and strategically important posts in the Middle East and South East Asia. The FCLO officers can use their contacts and experience of host authority procedures to make requests on behalf of HMRC. For example, there is an FCLO based in Dublin and this is an important link between HMRC and law enforcement agencies in the Republic of Ireland.

  2.4.  When obstacles to effective cross border investigations are encountered action is taken resolve the impediment and ensure cases progress. For example, a recently formed Organised Crime Task Force (OCTF) sub group has been set up to crack down on fuel fraud. The Cross Border Fuel Fraud Enforcement Group, which is chaired by HMRC, includes representatives from PSNI, SOCA, NIO with the Republic of Ireland represented by Officers from Revenue Commissioners and the Criminal Assets Bureau. The remit of this group is to share intelligence, resources and to target individual cases. The first meeting of this group took place in August 2008 and operational planning for future joint working and a variety of other initiatives is already underway.

3.  EVIDENCE

  3.2  Specific examples of areas were there have been cross border co-operation include:

3.3  Operation Nursery

  3.3.1  This investigation was logistically one of the largest cross border multi agency investigations targeting an organised crime gang based in the North Louth/South Armagh areas. In Northern Ireland the investigation concerned the laundering, distribution and sale of illegal fuel from filling stations in Northern Ireland controlled by the organisation. As the principal of the organisation was resident in the Republic of Ireland the main offence in that jurisdiction was tax evasion.

  3.3.2  In Northern Ireland, HMRC were the lead agency, supported by the PSNI, military and military Logistical Corps. In the Republic of Ireland the Criminal Assets Bureau were the lead Agency, supported by An Garda Siochana, Irish Army and the Revenue Commissioners. The operation which involved regular cross border meetings between stakeholders, exchange of intelligence and joint operational planning culminated in simultaneous offence action being taken in both jurisdictions. During the operation a Senior Officer from HMRC was located in the Republic of Ireland operational control room and a Superintendent from CAB was located in the NI operational control room. This ensured relevant operational information could be relayed quickly to the both jurisdictions and appropriate decisions taken.

  3.3.3  In Northern Ireland the outcomes were:

    —  5 premises were searched.

    —  1 arrest was made.

    —  4 fuel laundering plants were seized, dismantled and removed.

    —  7 vehicles seized and removed.

    —  100,000 litres illegal fuel seized and removed.

  3.3.4  In the Republic of Ireland the results were:

    —  3 premises were searched.

    —  Approximately €200,000 cash and cheques were seized.

    —  2 persons were arrested and one was subsequently charged with failing to render tax returns. He later received a two year suspended sentence and paid €1.6 million in unpaid tax.

  3.3.5  However, as a result of the investigation, HMRC referred two members of the organisation to ARA (now SOCA) resulting in the seizure of two filling stations and two buy-to-let residential properties.

3.4  Operation Diddle

  3.4.1  Was a recent successful oils prosecution that resulted in four convictions for evasion of excise duty, suspended prison sentences totalling 6 years 9 months, plus the UK's first Serious Crime Prevention Orders that prohibit the offenders from dealing or benefiting from trading in hydrocarbon oil for a period of five years were granted. The court also imposed confiscation Orders totalling £1.2 million pounds.

  3.4.2  This case involved the illegal importation into and the distribution within Northern Ireland of hydrocarbon oil by an Armagh based organisation. With the assistance of the Revenue Commissioners, details of purchases of fuel made by this organisation in the Republic of Ireland were obtained. The fuel was invoiced to a rural filling station in the Republic of Ireland controlled by the organisation but with evidence obtained from the Revenue Commissioners it was possible to demonstrate to the court that this station did not have the capacity to receive the quantities of fuel purchased. It was accepted that the majority of the fuel was actually smuggled into Northern Ireland and sold through filling stations owned or operated by the organisation. The Garda Bureau of Fraud Investigation (GBFI) also conducted extensive financial enquiries in the Republic of Ireland on behalf of HMRC. The case, which was knocked in 2004, eventually concluded in 2008, and in the intervening period there was regular and on going assistance provided by Authorities in the Republic of Ireland. Without this assistance and the evidence gained in the Republic of Ireland, it is unlikely that convictions would have been obtained in this case.

3.5  Operation Dannell

  3.5.1  In 2006, HMRC supported and participated in an operation targeting oils fraud in the Border areas of South Armagh/North Louth. The operation centred on a large farm/commercial complex which is bisected by the Irish Land Boundary. On the northern side of the complex, HMRC Officers supported by military logistical corps and PSNI, seized in excess of 100,000 litres of illegal fuel, five fuel tankers and some 1,700 litres of Republic of Ireland fuel marker dye. This quantity of dye had potential to mark in excess of 8.5 million litres of kerosene which could then have been sold illegally in the Republic of Ireland. The Republic of Ireland side of the complex was searched by the Criminal Assets Bureau supported by An Garda Siochana, and the Revenue Commissioners. The search in the Republic of Ireland uncovered more illegal fuel, a large quantity of cash, 3rd party cheques, fuel invoices and a computer hidden under hay bales in a remote barn. The cash and cheques were seized under Proceeds of Crime and one person has been charged with tax evasion in the Republic of Ireland. Throughout the planning process for this operation, which lasted several months, there were regular Cross Border, Multi-Agency planning meetings during which operational plans were formulated, intelligence shared and potential problems identified and resolved. For example, to ensure there would be no legal challenge to the jurisdiction of the searches, both the Northern Irish and Republic of Ireland Authorities ensured Ordinance Survey officials were present during the operation and they agreed and mapped the precise line of the Border. To assist the authorities in the Republic of Ireland with their post knock investigation, HMRC Officers visited Northern Ireland fuel firms and obtained details of fuel which had been delivered to this site under the drawback scheme. This information has assisted Authorities in the Republic of Ireland to determine a tax liability. The ROI case is pre-trial and is, therefore, sub judice.

3.6  Operation Flatmate

  3.6.1  In July 2008 as part of a joint operation with Republic of Ireland Customs, HMRC Criminal Investigation Officers visited storage premises South of Newry and discovered 2,000 bottles of wine. The wine was seized as it had been illegally diverted from a bonded warehouse and as such was not duty paid alcohol. The investigation, which is continuing, is part of an €1 million, EU-wide excise duty and VAT fraud investigation.

3.7  Operation Falx

  3.7.1  Was a HMRC operation leading to the seizure of 2.4 million cigarettes at Belfast docks in 2005. Prior to the seizure of the cigarettes, HMRC sought and obtained surveillance from the Revenue Commissioners which ensured HMRC were able to arrest the driver and successfully prosecute him for evasion of duty on the cigarettes.

3.8  Operation Carder

  3.8.1  This is an ongoing oil laundering investigation by HMRC in Northern Ireland. To date, five persons have been interviewed and released pending report to the PPS. As part of the investigation assistance was sought and obtained from the Revenue Commissioners. As financial enquiries continue it is likely that further assistance will be sought from the Criminal Assets Bureau and/or Garda Bureau of Fraud Investigation.

3.9  Operation Clubhaul

  3.9.1  Is an ongoing HMRC led operation targeting the illegal fuel trade and a complex abuse of the VAT system. In December 2007, HMRC Officers supported by the PSNI and Officers from the Revenue Commissioners supported by An Garda Siochana simultaneously searched a number of commercial and domestic premises on both sides of the Border. A number of arrests were made in Northern Ireland and the investigation is continuing and will involve further Cross Border cooperation.

3.10  Liaison in direct tax issues

  3.10.1  Following the establishment of HMRC the FCLO in Dublin has been working closely with the Irish Revenue Commissioners to explore new and previously untested methods to identify and manage direct tax risk across the jurisdictions. Leading on from this the FCLO was granted competent authority status to deal in direct tax issues (the first to be granted to any overseas liaison officer) and raise the profile of such matters with the Revenue Commissioners.

  3.10.2  Following from this representatives from HMRC and the Revenue Commissioners held a conference in Dublin in November 2007 to explore areas of mutual interest, to consider obstacles to co-operation between both agencies and to identify current and future risks. This conference was hailed a success by the Chairman of the Revenue Commissioners and the British Ambassador to Ireland who both formally opened the conference. As a direct result of the conference closer working in the field of direct taxation has been established a number of joint initiatives have commenced.

  3.10.3  A direct tax steering group has been set up whose role is to discuss areas of common interest and to identify joint areas of risk. In addition a construction industry fraud and compliance sub-group has been established to manage the risk of employees and/or employers working across both jurisdictions but failing to properly account for their taxes in either. This has already identified sub-contractors falsifying records to show their true tax status and history with a view to manipulating the respective tax regimes in the (mistaken) belief that neither revenue agency can cross check the details.

  3.10.4  HMRC identified an individual who was resident in the North and operating a business there but also had businesses in the South. Through cross border liaison it was established that this person had not told either revenue service the true extent of his trade and assets held in either jurisdiction. A tax loss was identified and proceedings were instigated to assess this person for tax both in the North and the ROI. As a direct result of HMRC alerting the ROI authorities of their concerns the Revenue Commissioners are now in the process of recovering in excess of 400k Euro tax.

4.  CONCLUSION

  4.2  These are a small sample of the case examples, involving a variety of commodities and taxes, conducted by HMRC in Northern Ireland which have involved Cross Border assistance. Virtually every investigation undertaken by our Criminal Investigation team in Northern Ireland involves requests being made to Authorities in the Republic of Ireland. As demonstrated above, it has been the experience of this office that when requested, assistance has always been provided.

  4.3  Paul Goggins, Security Minister and Chair of the OCTF, acknowledged this fact in his address to the OCTF Cross Border conference at Limavady in October 2006 when he stated that, "Her Majesty's Revenue and Customs in Northern Ireland and the Revenue Commissioners in the Republic of Ireland have developed a special relationship in terms of cross border work and in the last 12 months have supported each other to progress several major cases which are currently before the courts"

  4.4  Due to the unique situation in the UK of having an uncanalised land boundary with another Member State, it is inevitable this will be exploited by organised crime either by, using the different duty rates to create illegal profit, using the Border to frustrate enforcement action or attempting to hide the profits of crime from one jurisdiction in the other.

  4.5  The necessity for Cross Border cooperation, and the difficulties encountered when it does not take place, was demonstrated following the introduction of Commissioners for Revenue & Customs Act 2005. Working together with the Irish Criminal Assets Bureau we had identified a legal issue around our ability to disclose information to the Criminal Assets Bureau in the Republic of Ireland. This potential inability to exchange intelligence between two law enforcement agencies could have hampered operational effectiveness in both jurisdictions and may also have had an impact on a number of on going operations, potentially jeopardizing the seizure of millions of pounds of illegally gained assets.

  4.6  HMRC, working through the Organised Crime Task Force and with the support of Treasury, Home Office and Northern Ireland Office Ministers, sought opportunities available to change the legislation. As a result of this an amendment was included in the Serious Crime Bill and a new legal gateway permitting exchange of intelligence with the CAB was introduced with effect from March 2008. The introduction of this legislative change is an indication of the importance placed on Cross Border cooperation both at a political level and operationally by all concerned in law enforcement activity in Northern Ireland and the Republic.

  4.7  To give one example of the effectiveness of the information exchange between HMRC and CAB, HMRC has recently provided a number of affidavits to CAB in relation to cash seizures along the Irish land Boundary. One such seizure of circa €60k took place in a hotel car park on the border in extremely suspicious circumstances. Two of the individuals concerned have a criminal history of cigarette smuggling, with criminal records in Northern Ireland resulting from successful prosecutions undertaken by HMRC. This material has been passed to CAB in affidavit format to assist their civil case in relation to the forfeiture of this cash.

  4.8  HMRC believe that effective cross border and inter agency co-operation are essential to deal with serious and organised crime in Northern Ireland and in the particular circumstances which apply to the patterns of organised crime seen in Ireland as a whole. We will continue to strive to improve the operational relationships that we have.

Her Majesty's Revenue and Customs

September 2008





 
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