Money laundering and the financing of terrorism - European Union Committee Contents



In the United Kingdom alone the turnover of the most serious forms of organised crime is perhaps £15 billion a year, two thirds of which is laundered through banks and other bodies. Much of this constitutes the proceeds of drug trafficking. The problem is global, and so must be the response. More than 180 countries are involved as members of or by being associated with the Financial Action Task Force (FATF), which recommends the action they should take to counter money laundering and the financing of terrorism, and promotes the monitoring of their compliance with those standards.

The European Commission has been a member of the FATF from the outset, and the Community has been in the forefront of the fight. For the Member States, the FATF policy is implemented by a Directive which sets out in detail what is expected of them. The first requirement is that they should implement the Directive, and not all have yet done so. The United Kingdom has done so very effectively, but in other respects the Government have been slow. Astonishingly, they have not even signed, much less ratified, the Warsaw Convention on Money Laundering and Terrorist Financing, which would extend to all Council of Europe States arrangements through which to access financial information on money laundering and terrorist financing, and information on assets held by criminal organisations, including terrorist groups.

The Warsaw Convention, if in force, would also help with recovery of the proceeds of crime, especially through civil proceedings. This is vital for the prevention and deterrence of drug trafficking and other serious crimes. Freezing the assets of suspected terrorists is another essential weapon, but it must not be abused; those whose assets are frozen have a right to know why, to make representations, and to have them considered. The European Court has led the way to progress in the EU; the United Nations still has some way to go.

Information is the key. Whenever a transaction or other activity appears suspicious, it has to be reported. The burden falls mainly on banks, but also on other financial institutions, lawyers, accountants, insurers and others. In the United Kingdom, in the last full year the banks alone submitted 145,000 suspicious activity reports to the Serious Organised Crime Agency. The cost of doing so is considerable: one bank spent £36 million in that year to carry out this and related duties. We have considered whether the benefit is commensurate; the feedback is insufficient, and there is practically no way of knowing whether in any specific case the provision of information was fruitful. Access to the database of suspicious activity reports is too wide, and the data are retained unnecessarily long. We have made recommendations on how these matters might be improved.

Today, any study of terrorist financing has to take account of the proceeds of piracy. The Government say that they have not found a link between the two. We believe that they would find one if they looked for it, making the same effort as they have, with other States, in naval operations.

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