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


The fora for international cooperation


184.  We regret that a senior official from the secretariat of the FATF was not permitted to give us oral evidence on the organisation and current activities of the FATF. (paragraph 31)

185.  Since the Government accept that they are accountable to Parliament for United Kingdom membership of the FATF, they should find a more systematic way to report to Parliament on FATF developments. Written statements after each plenary session would be a start. (paragraph 32)


186.  Nearly eight years after the signature of the 2001 Protocol to the Convention on Mutual Assistance in Criminal Matters it is not yet in force for five Member States, so that there is still no full cross-border cooperation even on obtaining details of bank accounts. This is a situation which the EU Counter-terrorism Coordinator described as "shocking". We think this is not too strong a word. (paragraph 36)

187.  The Government should satisfy themselves that the United Kingdom is in a position to provide these forms of cooperation in a timely and effective manner, and should press other Member States to do likewise. (paragraph 37)

188.  It is deplorable that negotiations for an agreement on mutual legal assistance, begun nearly eight years ago and concluded over six years ago, should still not have resulted in an agreement which is in force between the EU and the United States. We hope the Government will press ahead urgently with the ratification of the United Kingdom's bilateral agreement, and encourage other Member States to do likewise. (paragraph 40)


189.  The Government must hasten the procedure for United Kingdom ratification of the Second Additional Protocol to the 1959 Council of Europe Convention on Mutual Legal Assistance in Criminal Matters. (paragraph 42)

190.  We doubt whether there was ever any good reason for the delay in signature by the United Kingdom of the Warsaw Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism; certainly there is now no reason for any further delay. Still less do we see why a further 18 months should be needed before ratification. (paragraph 47)

191.  The failure to sign and ratify the Warsaw Convention sends out a negative message about current United Kingdom commitment to the prevention and control of money laundering and the financing of terrorism. If the United Kingdom is to preserve, let alone enhance, its reputation in this sphere, Ministers must demonstrate the priority they attach to this by setting a clear timetable for signature and ratification. (paragraph 48)


192.  We believe the case of Kadi and subsequent cases demonstrate the need for human rights enhancements at UN Security Council level when the Sanctions Committee is considering whether to impose sanctions on persons or bodies, or is responding to requests for de-listing. The Government should press for United Nations practice to evolve in a manner consistent with the jurisprudence of the European Court of Justice. (paragraph 54)


193.  We agree with the Commission that it is essential to strengthen operational cooperation among EU FIUs, and to eliminate the problems which administrative FIUs have with the exchange of information. We urge the Government to work towards this end. (paragraph 59)

194.  FIU.NET should be a priority project, but we are far from convinced that this is yet the case. Since all Member States are bound by the FIU Decision to have FIUs exchanging information in a secure manner, all should participate in FIU.NET. (paragraph 64)

195.  If the United Kingdom is indeed committed to making FIU.NET work, the Government must take active steps to give it the necessary sophistication. (paragraph 65)

196.  If FIU.NET is to continue to be financed from the EU budget, the Commission needs to manage it more proactively and to ensure that it provides value for money to the Member States which participate in it. (paragraph 66)

Confiscation of the proceeds of crime

197.  The review of the FATF Recommendations is a good opportunity to re-examine, not just the text of Recommendation 38, but the manner in which it is implemented, and the way in which compliance is measured. (paragraph 72)

198.  We commend the Commission for its efforts to increase cooperation among Member States over confiscation of the proceeds of crime. We urge the Government to take a lead in driving this agenda forward with renewed vigour. (paragraph 74)


199.  The Government should give higher priority to the negotiation of bilateral asset sharing agreements with non-EU countries not already involved. (paragraph 78)

200.  The Framework Decision on the mutual recognition of confiscation orders was due to be transposed into national law by 24 November 2008. The United Kingdom is among the States which have failed to do so. The Government must take immediate steps to remedy this. Given the importance of the Framework Decision, the Commission must adopt a robust stance in monitoring its effective implementation by all Member States, and react swiftly should delays or problems arise. (paragraph 80)


201.  Article 23(5) of the Warsaw Convention, which requires mandatory cooperation between States on civil recovery, is yet another reason, if one were needed, why the United Kingdom should ratify the Convention without delay. (paragraph 89)

202.  The Government should give the highest priority to international cooperation on the confiscation of the proceeds of crime, whether by post-conviction criminal confiscation or by civil recovery. (paragraph 91)

203.  We welcome the suggestion of the Executive Secretary of MONEYVAL that the Council of Europe may press the merits of civil recovery in the review of the FATF Recommendations. We trust that the Government will support such a move. (paragraph 92)

204.  Cooperation in relation to civil recovery must be given much greater prominence in the current FATF review of its standards and the associated methodology for assessment of its members, so that failure to provide this would have a significant negative impact on compliance ratings for the countries concerned. (paragraph 93)

205.  The Government must devise an overall strategy for the conclusion of bilateral agreements with third countries, including asset sharing provisions, and press for their early negotiation and for their timely and effective entry into force. (paragraph 95)

The private regulated sector


206.  Failure to report a suspicious transaction based on a minor criminal offence should not be prosecuted; and this should be achieved, not by a decision that in a particular case prosecution would not be of public benefit, but by amending the law so that such a transaction would not need to be reported. (paragraph 109)

207.  Consideration should therefore be given to amending the Proceeds of Crime Act 2002 to include a de minimis exclusion. (paragraph 110)


208.  We agree with the recommendation of the EU Counter-terrorism Coordinator that the Commission and Member States should consider steps to increase the effectiveness of public-private cooperation on countering terrorist financing, and we urge the Government and the Commission to take it forward. We believe this applies equally to AML. (paragraph 113)


209.  We urge SOCA to intensify its dialogue with the private sector in order to improve the practical utility of its guidance, and so to ensure better focus on matters of real importance. (paragraph 118)

210.  It is only by being provided with increased levels of case by case feedback that the regulated sector will be persuaded of the value of the efforts it puts into the SARs regime. (paragraph 122)

211.  Where it is clear that particular SARs have contributed to the success of an AML or CFT operation, and that feedback on this can be given to the originator of the SARs without compromising operations, SOCA should make it the practice to do so in selected cases where they believe that this will demonstrate the importance of providing such reports. (paragraph 123)


212.  It is vital that SOCA should make a serious attempt to calculate the cost/benefit of the reporting of suspicious activities by the United Kingdom private regulated sector. The Government must similarly press international bodies to provide a rigorous cost/benefit analysis. (paragraph 128)

213.  We commend the Commission for commissioning a review of the cost of compliance with financial services regulation, recognising the importance of attempting to estimate the burden of compliance. We hope they will take this work forward, in particular to see whether the benefits of compliance justify the burden. (paragraph 129)


214.  One matter to which we expect the Treasury to pay particular attention in their review of the burden on the private sector is whether this burden does, as has been claimed, put the regulated sector at a competitive disadvantage compared to other countries. (paragraph 132)


215.  We believe that the Government must provide a definition of equivalence, and allow the regulated sector to rely on the list of equivalent countries. (paragraph 137)

216.  The Government should press for tough and clear published EU criteria for States to be granted third country equivalence status, and for a set procedure for them to apply for inclusion in the list, and for handling such requests. (paragraph 139)


217.  There is a need for greater harmonisation of approach within the FATF when, as with Iran, counter-measures are called for. The Government should press for this in the present FATF review of the International Cooperation Review Group process. (paragraph 145)

Current threats


218.  It must be right that Hawala and other alternative remittance systems should always be treated as a money service business like any other more formal money service businesses. The Payment Services Directive should ensure that this happens across the EU. (paragraph 154)

219.  However we believe that by its nature Hawala is more susceptible to misuse, and that particular care needs to be taken to ensure that money service businesses and money transmission agents are made aware of their responsibilities, and comply with them. This will involve making information and instructions available in a wide variety of languages. (paragraph 155)

220.  The United Kingdom has considerable experience in regulating Hawala; we recommend that the Government should actively share this experience with their EU and FATF partners, and seek to ensure that no vulnerabilities in these systems are overlooked. (paragraph 156)


221.  Measures taken to mitigate the impact of the economic crisis should not adversely affect AML/CFT controls, and should be scrutinised to make sure that they do not. Nor should such measures divert resources away from AML and CFT. (paragraph 162)


222.  We have received no evidence to suggest that the payment of a ransom should be made a criminal offence, and we do not suggest that the law should be changed. (paragraph 164)

223.  It is important to know whether the proceeds of piracy are being used for terrorist financing, and if so the order of magnitude of the sums involved. The Government must take the initiative, if possible in concert with other interested States. (paragraph 167)

224.  We urge the Government to raise this issue with their EU partners and in the FATF with a view to establishing the extent of the link between the proceeds of piracy and terrorist financing, and to warning members of the FATF about these risks. (paragraph 168)

225.  The Government should consider raising in the FATF the question whether a joint typologies exercise between the FATF, the Middle Eastern and North African FATF and the Eastern and Southern Africa Anti-Money Laundering Group would be of use. (paragraph 169)

226.  In every case of piracy where a ransom has been demanded and the payment is being assembled in the United Kingdom, those involved have in our view a duty to seek consent for the payment of the ransom. Not to do so is likely to result in the commission of a criminal offence. We regard it as an abdication of responsibility by the Home Office to suggest otherwise. (paragraph 173)


227.  The FATF Recommendations do not require information on the ELMER database of SARs to be made available other than in connection with serious crimes. Access for other purposes should be on request to SOCA. (paragraph 182)

228.  The Information Commissioner should review and report on the operation and use of the ELMER database, and should consider in particular whether the rules for the retention of data are compatible with the jurisprudence of the European Court of Human Rights. (paragraph 183)


229.  We recommend this report to the House for debate. (paragraph 14)

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