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.
— 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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