Report on
AD HOC COMMITTEE

Draft Financial Investigations
(Northern Ireland) Order 2001

Report and Proceedings of the Committee (Continued)

MINUTES OF EVIDENCE

Monday 8 January 2001

Members present:
Mr A Maginness (Chairperson)
Mr Agnew
Mr Close
Mr Ervine
Ms Lewsley
Mr McClarty
Mr M Robinson
Mr S Wilson

Witnesses:
Mr B Logan ) HM Customs and Excise
Mr D Toon )

90. The Chairperson: I welcome Mr Bill Logan and Mr Donald Toon to the second part of the Committee session that will deal with evidence from HM Customs and Excise. Their paper has now been distributed. Unfortunately, due to time constraints, it was not possible to distribute it before the meeting.

91. Mr Logan: We are pleased to be here. The paper is delivered late due to the holiday period and because it had to be cleared by our Minister, the Paymaster General. I will go through the paper and you can use it for reference or pick up on any points later.

92. The proposals in the Order strengthen and amend certain provisions in the Proceeds of Crime (Northern Ireland) Order 1996. The 1996 Order updated and restated the law relating to the confiscation of the proceeds of drug trafficking and other serious crime, bringing Northern Ireland broadly in line with the rest of the United Kingdom. Article 49 also introduced additional investigation powers, set out in schedule 2 of the Order, which are unique to Northern Ireland. These powers include the appointment of civilian financial investigators to assist police in the issuing of general bank circulars. However, intelligence suggests that those seeking to conceal criminal assets are moving away from banks and building societies and are making greater use of solicitors and real estate. The Government is determined to prevent criminals profiting from unlawful activities and an update to the 1996 Order is necessary.

93. The proposed new provisions extend article 49 of the 1996 Order to include HM Customs and Excise, who will now be able to appoint civilian financial investigators. Police and customs officers will also be authorised to exercise additional financial investigation powers in Northern Ireland. Production orders found at article 50 of the 1996 Order will be widened to include any relevant property. General bank circulars under schedule 2 para 3 of the 1996 Order will be broadened from banks to any financial institution, to include all relevant financial business as defined by the Money Laundering Regulations 1993. The level of information required will also be extended, and that extension is shown at the bottom.

94. There will be a new power to require solicitors to furnish information about non-contentious business transactions undertaken by the client - a general solicitor circular. These transactions include any dealings involving land, business, company, firm partnership, trust, bank accounts, savings accounts or investments. However, such requests are only authorised in the case of a specifically named person who is believed to have benefited from serious crime.

95. In the case of failing to provide, or falsifying, information the time limits for summary proceedings will also be extended from six months after an offence to 12 months after an offence, or three months from when sufficient information is available, whichever is later. How does this impact on Customs and Excise in Northern Ireland? Under the Order a senior customs officer, ranked surveyor, which is middle manager or above, will be able to go to a County Court judge and apply for the appointment of a civilian financial investigation officer to assist with the customs investigation.

96. In practice, this will probably not be a common occurrence because as a United Kingdom-wide department we benefit from a broad national and international network of expertise. However, this power increases our flexibility and in exceptional difficult financial cases there may be merit in appointing an experienced forensic accountant from the private sector. There will be particular merit in appointing such a person where we wish to make use of production orders under section 50 of the 1996 Order and where other powers in our possession were not appropriate or available. It will perhaps be a more common occurrence for the surveyor, or above, to go before the County Court judge and apply for a serving customs officer to be authorised with new powers of financial investigation. These powers are found in schedule 2 paragraph 3A of the 1996 Order, as amended, and introduced by the 2001 Order. This will allow Customs officers to apply for a general bank circular or a general solicitor circular, both of which are defined above.

97. The extension of time limits where information has not been provided or is falsified could also prove useful. It must, however, be emphasised that all these powers will be new to us in Customs and Excise, and the precise nature or effectiveness of their implementation cannot be predicted with certainty at the moment.

98. Allow me to refer you to annexe A, which details the current position as well as the customs resources dedicated to financial investigation. Customs and Excise play a key role in confiscating criminal assets through investigating and prosecuting offences relating to VAT, excise duty and prohibited goods such as illegal drugs. We have a total of 158 financial investigators, based both in the United Kingdom and internationally. All the financial investigators belong to our National Investigation Service, and they comprise about 8% of its personnel. As a prosecuting department, Customs and Excise also has its own Solicitor's Office. A specialised section, known as the Asset Forfeiture Unit, is dedicated to confiscation proceedings. The unit comprises six lawyers and seven legal assistants. That is the submission from Customs and Excise.

99. The Chairperson: I suppose the Committee would like to ask you one fundamental question. There are already fairly considerable powers in the Proceeds of Crime (Northern Ireland) Order 1996. The draft Financial Investigations (Northern Ireland) Order amends it to extend those powers. Can you justify that extension?

100. Mr Logan: At present, intelligence sources tell us that those powers which exist - access to banks and building societies - are not sufficient. As criminal activities develop, we need reference to other aspects such as solicitors and real-estate companies. Perhaps my colleague might add to that.

101. Mr Toon: The first point regards the extension of powers available to police in Northern Ireland and unique to the jurisdiction. That is essentially a matter of our department, which has quite a significant role in financial investigation, being provided with a tool available to our colleagues. We feel it will support the effectiveness of our financial investigation work in the same way as it has for the RUC. It is also ahead of the rest of the United Kingdom. Indeed, these unique powers seem to us to make financial investigation in Northern Ireland more effective than that in much of the rest of the UK. That is very much a regularisation of the position.

102. General bank circulars, while also not strictly speaking available in the rest of the UK at present, certainly appear to us to be an extremely useful method of obtaining additional information where we can satisfy the concerns of a County Court judge that such circulars should be issued. The same goes in relation to solicitors. We must obviously emphasise that we are not talking here about general solicitor circulars in relation to anything other than what may be relevant to a financial investigation. There can be no question of information being sought that would be subject to client confidentiality or related to a potential criminal defence, for example. It is a matter of regularising the position and catching up with powers available to others.

103. We hope that those powers will become available elsewhere in the United Kingdom, subject to developments within the rest of it.

104. The Chairperson: Thank you. Any more questions?

105. Mr Close: In your reply, you said that it seemed to give greater effectiveness. Is it at all possible to quantify how the extended powers that you have had over the United Kingdom, as well as the further ones that are anticipated in relation to assets, relate to solicitor circulars and bank circulars?

106. Mr Toon: It is very difficult to quantify in any meaningful terms. At the end of the day, hard cash is going to be removed from the criminal. I cannot give real details. We are seeing financial investigations progress further and more quickly, as a result of additional information being available at an early stage in the investigation process.

107. Mr Close: Are these leading to prosecutions?

108. Mr Toon: I do not have figures available at the moment.

109. Mr Close: Will it be possible to provide financial figures to the Committee?

110. Mr Toon: Yes, we should be able to provide those.

111. Ms Lewsley: What other measures do you propose regarding the identification and confiscation of the proceeds of crime?

112. Mr Toon: The easiest thing to do here is refer you to what is now stated Government policy. The Performance and Innovation Unit produced a report last summer on the recovery of the proceeds of crime. That contained a number of proposals that have been broadly accepted by Government, including the establishment of a civil forfeiture regime and increased professionalism, which will increase professional qualifications. The particular one that is directly relevant to us is the extension of existing powers under the Criminal Justice Drug Trafficking Act to seize cash at import or export.

113. Currently, we have powers to seize cash that we suspect is related to drug trafficking. We would suggest that those powers should be broadened to allow the seizure of cash or other monetary instruments related to any serious crime, not just drug trafficking. That would be particularly useful from our point of view.

114. Mr Ervine: It is not quite termed in the same way, but I asked a similar question of the RUC. What would definitively place someone in the higher sights of Her Majesty's Customs and Excise?

115. Mr Logan: That is a general question, and it is difficult to give a particular answer. It is the range of legislation we have available to us, coupled with some of the developments that may happen in new legislation, along with the Secretary of State's initiative to set up an organised crime task force. There is greater identification of the criminal, as well as the activity that the criminal has been involved in.

116. Mr Ervine: My Colleague, Seamus Close, also made this point. If someone has got a motor vehicle, a house, four continental holidays a year, and an obvious lifestyle far beyond any income, would that necessarily place them in your higher sights, or must they be caught in what you perceive to be the commission of a crime? Can the RUC be proactive on money laundering? Of course, the person may not be a money launderer, they might turn out to be a drug dealer, but you might only discover that if you begin an investigation into assessing why he has the wealth, or the trappings of wealth, that his demeanour suggests.

117. At what point will you be proactive? Or are you continually waiting to find someone in the commission of a crime?

118. Mr Logan: Our proactivity starts with information, leading on to intelligence, that depends on whether we do any trend analysis. Therefore, we are increasing our intelligence function, which involves looking at commodities, how those commodities will arrive, what the trends are and who are the persons involved.

119. Mr Ervine: If this legislation were to fall into place as you would like it to, allowing you to do your job, do you foresee a circumstance in which you could ask a County Court judge whether it is merited that a specific person be placed under some form of intelligence-gathering methodology? That may include looking at bank accounts and things like that.

120. Mr Toon: I cannot see it operating in that way. Grave question marks would result from a system that operated in such a manner, particularly in terms of Human Rights Act issues and privacy rights.

121. Mr Ervine: What would place them in the higher sights? That is a perfectly legitimate question to ask, especially about its relevance to the requirement that is supposedly needed for the legislation. I do agree with you. However, my argument is that the legislation does not go far enough.

122. Mr Logan: In my submission, I said that it was new legislation as far as Customs and Excise were concerned. If it does not appear to go far enough, we will be seeking changes.

123. The Chairperson: Are there any circumstances in which you could envisage that Customs and Excise may embark on a "fishing expedition" in order to determine the position of an individual? As an organisation, is that something that you may embark upon, or do you regard it as being contrary to good public policy?

124. Mr Logan: My colleague has referred to human rights legislation. The department - even prior to the enactment of this legislation - did not embark on any such "fishing expeditions" in any field. Of further significance is section 75 of the Northern Ireland Act 1998, which Customs and Excise has signed up to. We are currently in the process of dealing with the Equality Commission on our equality scheme. We are to submit a draft equality scheme by 25 January 2001, which will take such matters into account.

125. Mr Ervine: You have just contradicted certain actions of your own department. If not from your own department, then from within Customs and Excise. When coming out of an airport, is there not the capacity for a "fishing expedition", whereby 10 people may be stopped, of which nine may be wholly innocent and have no cause to be considered guilty? When nothing is found, they are then allowed to proceed. Is that not a "fishing expedition"?

126.Mr Logan: I do not consider that to be a "fishing expedition". That is based on a profiled analysis.

127. Mr Ervine: Of which the vast majority are wrong?

128. Mr Logan: It may be gaining intelligence.

129. Mr Close: For example, you identify a guy whose only apparent source of income is the dole. Despite this, he is driving a flash car and he is having one or two holidays a year! Is that a "fishing expedition", or is that using your nose and saying "this just does not add up"? It does not add up. Therefore, this requires something be done and that certain things must be looked at.

130. Mr Logan: That point has been well made, and we are taking account of it in our intelligence capacity.

131. Mr S Wilson: The responses given show that considerable loopholes still appear to exist, enabling people who are obviously involved in something illegitimate to slip the net. This sounds like a blood sports meeting, putting them on hare sites and fishing expeditions - we will be baiting them next!

132. Mr Close: With a big stick.

133. Mr S Wilson: We are not prepared to pursue that. The public expectation of increasing the powers through this legislation will be that this kind of person can be dealt with, and there will be great disappointment if that does not happen. Are there any powers available to the Criminal Assets Bureau in Dublin that you do not have at present, which will not be added in an extension of this legislation, and which might be of benefit to you in pursuing the kind of financial crimes that we are looking at today?

134. Mr Logan: That issue is being scrutinised by others in the Northern Ireland Office. I cannot forecast what will happen but we are looking at it very closely, and, may I say, enviously. We will await the outcome of that.

135. Mr Toon: I would like to add only one point to that. I understand that the civil forfeiture regime, which is operated in the Republic of Ireland, is one of the models being looked at by the Performance and Innovation Unit, in the production of their report for Government. However, at this stage I have no information on the outcome of that.

136. The Chairperson: Thank you. I have one further question. I understand the RUC investigates criminality, but where is the investigative distinction between you at Customs and Excise and the police service? At what level do you intervene?

137. Mr Toon: To a significant degree across the UK, not just in Northern Ireland, it depends on the form of criminality involved. That is one of the driving issues. If we are talking about criminality in relation to indirect taxes, VAT, excise duty et cetera, then the primary responsibility for tackling that criminality lies with Customs and Excise. Other criminal activities would directly relate to our areas of responsibility. I think that representatives of the RUC made this point in relation to drug trafficking. The international movement of drugs and of funds to pay for drugs is a good example of the type of issue which concerns us.

138. For instance, we operate very closely with the National Criminal Intelligence Service; with all the police forces in England and Wales; and with the National Crime Squad on protocols to ensure that we have the greatest joint effect on international drug trafficking. However, when it is at international scale, the primary responsibility lies with the department.

139. Mr Agnew: Have Customs and Excise ever benefited from the issuing of general bank circulars?

140. Mr Toon: That would only be in Northern Ireland -

141. Mr Logan: I do not know the details, but I can supply that if you wish.

142. The Chairperson: Allow me to clarify that. You have not been beneficiaries of general bank circulars?

143. Mr Logan: No.

144. The Chairperson: Would it be better if the RUC, rather than yourselves, assisted us in this matter?

145. Mr Logan: That is correct.

146. Mr S Wilson: I think Fraser Agnew was referring to the possibility that the RUC may, for example, apply for a general bank circular that unearths information. Can this information be passed onto you? If that is the case, you will benefit because you can pursue an investigation. Does that degree of information exchange exist?

147. Mr Logan: That is possible, but I cannot confirm it. I will provide the Committee with a written response on the matter if required.

148. Mr Ervine: Can we guess your aspirations?

149. Mr Logan: We are seeking appropriate powers to deal with criminality in the areas of jurisdiction for which Customs and Excise - and other enforcement agencies - have responsibility. The comments made by members of the Committee are consistent with our thinking, and I am pleased to hear that.

150. Mr Ervine: I wish to say that it would not be a bad idea if Customs and Excise, and other statutory agencies, became familiar with specific political parties. That could not be harmful.

151. The Chairperson: Thank you very much, Mr Logan and Mr Toon. Your comments have been very helpful this afternoon. We have your written submissions for which we are grateful. Mr Toon was asked a question to which he indicated he might reply. It would be helpful if this reply was made available before the end of the week, if possible.

152. Mr Toon: I will do my best.

153. The Chairperson: Thank you very much, and thank you all for attending.

MINUTES OF EVIDENCE

Tuesday 9 January 2001

Members present:
Mr A Maginness (Chairperson)
Mr Bell (Deputy Chairperson)
Mr Agnew
Mr Close
Mr Ervine
Ms Lewsley
Mr McClarty
Mr McNamee
Ms Ramsey
Mr M Robinson
Mr S Wilson

Witnesses:

Mrs P Beckett )
Mr R Irvine )
Mrs I Martin ) Northern Ireland
Mr B McAlister ) Bankers' Association
Mr D Power )

154. The Chairperson : Good morning. You are welcome to the Ad Hoc Committee. I want to thank the Northern Ireland Bankers' Association for responding to our invitation to attend this morning to assist the Committee's work. Does Mr McAlister want to introduce his team to the Committee?

155. Mr McAlister: The Northern Ireland Bankers' Association welcomes the opportunity to meet and help the Committee. Mrs Beckett, Mr Irvine, Mrs Martin and Mr Power are here today on behalf of the industry, rather then the individual banks.

156. The member banks welcome the opportunity to meet the Committee and are committed to complying with any legislation enacted. We had considerable input into the consultation process which preceded the Proceeds of Crime (Northern Ireland) Order 1996. While this resulted in no substantive changes to the proposed legislation, it improved mutual understanding. The member banks of the association have always sought to observe the law, though considerable, irrecoverable costs have been incurred in doing so.

157. The proposed new legislation gives customs officers a rank equivalent to a police superintendent. They apply for the appointment of a financial investigator, which is likely to increase member banks' workload and costs by introducing additional cases.

158. The Explanatory Document takes no account of, nor anticipates in any way the volume of additional work arising from Customs and Excise additionally obtaining the powers proposed. The Northern Ireland Bankers' Association considers that the analysis of the time involved complying with general bank circulars is unrealistic. The wider definition of financial institutions will now incorporate other areas of our businesses.

159. The Chairperson: Thank you very much. It seems from your presentation and your written submission that you had concerns when the Proceeds of Crime (Northern Ireland) Order 1996 was mooted and subsequently introduced.

160. Is it fair to say that, when the Code of Practice was eventually introduced, you received reassurances?

161. Mr McAlister: That area was resolved as a result of our discussions.

162. The Chairperson: Is there anything in the present formulation of the Code of Practice with which you would take issue, or about which you have continuing concerns?

163. Mr Power: By and large, the banks were happy. We are content, as our views were considered and accepted in the Code of Practice eventually framed - we do not wish to bring any issues to the table today.

164. The Chairman: The Human Rights Commission - which will be making a submission later this morning - has suggested that, in the light of the draft Order before us, some amendments might be made to the Code of Practice. Do you have, or have you given any thought to, any proposed amendments to the code?

165. Mr Power: If the other group is to recommend changes, we would welcome participation in the process.

166. The Chairperson: Does anyone have any other questions?

167. Mr S Wilson: You have indicated that the 28-day period for compliance creates some difficulty. Is that 28-day period an absolute? For example, if you were having difficulty tracing accounts, would the police normally give an extension? Secondly, if the 28-day period is too short, especially now that the definition of financial institutions is wider, can you suggest an alternative reasonable period?

168. Mrs Martin: The legislation does not provide for any extension to the 28-day period - it is an absolute. I do not know if extensions can be granted operationally, but legally, the 28-day period must be complied with.

169. Mr S Wilson: It often happens, though, that 28 or 14 days or whatever might be specified, but extensions are sometimes granted -

170. Mrs Martin: The legislation does not provide for that. We would welcome provisional legislation to cater for this possibility.

171. Asking what is a reasonable period of time is like asking the question, "How long is a piece of string?" This depends on accessing records and so forth. It also depends on the quality and quantity of the information given in the first place in the order served. We would welcome more understanding of that when the orders are made and permitted time scales decided.

172. Mr McNamee: There was a plan to study the effects of the Proceeds of Crime (NI) Order 1996. Have the banks seen that? Have they contributed to the study of the effects of the 1996 Order to date?

173. If information on an individual were requested under the Proceeds of Crime (NI) Order 1996 or the new Financial Investigations Order, what effect would that have on the bank's business with that client?

174. For instance, if a customer were the subject of a trawl for information, would the bank be as willing to do business with that individual and provide a loan? How would the bank's view of an individual's worthiness be affected if it knew a trawl on the individual was taking place? In addition, what are your views on article 23, which deals with compensation for people who may have suffered financially as a consequence of being investigated? What do you think of the provisions that exist to compensate an individual in those circumstances?

175. Mr Power: There are three elements to your question. The first element was whether we had been consulted. The answer is "No". No Northern Ireland Bankers' Association's member bank was asked to participate in any survey. I do not understand the second part of your question.

176. Mr McNamee: If the bank is aware that a customer has been investigated, since it has been requested to provide information on his dealings, how does that affect your willingness to do business with that customer? Would the bank advance a significant commercial loan to him, or would it take the view that because the person is being investigated, his future financial security may be threatened, and he is therefore not suitable to lend money to?

177. Mr Power: The terms of the Order are such that any information gathered is retained confidentially on our files. Therefore it is not part of the customer's record, and, as I understand it, can have no bearing on their standing with the member banks.

178. Ms Beckett: The question certainly ought to be dealt with, and it is in article 48, entitled "Tipping-off". The bank has to be mindful that it does not tip-off the person that an investigation is underway. It must also be careful that it does not transfer or deal with the proceeds of crimes. The bank must work at all times within the other aspects of the legislation dealing with its customers.

179. Mr McNamee: When a request is made under the Order for information on a customer, it is made to a certain management level, and it is a matter of confidentiality for the bank. If that customer has business with one of the bank's branches, the person making the decision on that business will not be aware of the investigation. In other words, if I deal with my local bank manager, will he or she be unaware?

180. Mr McAlister: It is not possible to put your hand on your heart and say that is true.

181. Mr McNamee: If that were the case, what would a bank manager's opinion be if I wanted to borrow £100,000, and he knew I was being financially investigated?

182. Mr Power: I do not believe that opinion has to come into it at this stage. We are dealing with the law, and Mrs Beckett has explained that tipping-off is clearly one element of it. Therefore we can make no reference whatsoever to, hint about, or have any opinion on the financial standing of the individual or individuals.

183. Mrs Martin: Therefore any application for a loan would be dealt with using normal standard policies and procedures - be that credit scoring or whatever mechanism that a particular member bank had for loans of that nature.

184. Mr McNamee: Would it not be affected by the fact that the person had been investigated?

185. Mrs Martin: It should not if normal policies and procedures are followed. There is a human element in any decision.

186. The Chairperson: You are saying that the bank maintains neutrality as far as that is concerned.

187. Mrs Martin: The fact that someone has been investigated does not necessarily mean that they are guilty of any crime. It means that we have been asked, under the law, to comply with an Order to provide information. Therefore we do not infer any guilt because of a request for information.

188. Mr Close: I wish to tease out the time compliance aspect a little bit further. Am I correct to conclude from your presentation that, when consultation took place on the Proceeds of Crime (Northern Ireland) Order 1996, you also expressed your concern about the time limit? I further understand that until now you have been able to comply with those time limits and manage the current volumes. Is that right?

189. Mr McAlister: As far as I am aware, we have managed the current volumes, but there has been some latitude in time in some cases.

190. Mr Close: What increase in volume do you expect from the new legislation?

191. Mr Power: We cannot put numbers on that. However, if another body, such as Customs and Excise, brings in its own information, we would expect an increase in volume. That is all we can say - we have no numbers.

192. Mrs Martin: The new legislation also goes beyond the bank's business as a deposit taking institution. It now takes in all of the bank's businesses, for example, insurance services and other services of that nature.

193. Mr Close: Are you saying there is currently no slack with regard to the time limits?

194. Mr Power: Banks are not fully computerised. It is not a question of simply pushing buttons whenever general bank circulars are received. There is a great deal of human intervention by way of personal knowledge which may be retained on any one name that may appear on the list, so it takes time to carry out a full trawl. We made a point in our paper about the way in which information is fed through general bank circulars with just aliases and names. If we take "Smith" as an example, there could be all sorts of spellings: "Smith", "Smyth", "Smythe", and so on. There is a fair amount of work involved in trawling all that information. It has now been extended into other areas for businesses that are normally on separate accounting systems, so we are entering the realm of different elements of our information.

195. Mr Close: You are still not prepared to assist the Committee in suggesting an alternative to the 28 days.

196. Mr Power: I would not use such a strong word as "assist".

197. The Chairperson: "Unable," perhaps.

198. Mr Power: We are mindful of making sure that the information we feed back is accurate, and therefore any potential need for time is purely due to making sure that the information and the trawl we have completed have been fully accurate and complied with, and are what we are looking for.

199. Mrs Martin: It would be useful if, in the proposed legislation, there were some mechanism for a bank or financial institution to apply to the court - or, indeed, to the investigating officer - for more latitude on time, depending on the quality of the information that he has given us to search for. It would be on a specific, case-by-case basis, so on some occasions it might be possible to deal with the order within the 28-day time limit. In other cases, because of special conditions or whatever, it might not be possible. We would like the opportunity to seek additional time in a particular case.

200. The Chairperson: Have you any knowledge, either individually or collectively, about financial investigators putting pressure on banks because they have failed to comply within 28 days? Is there, in practice, an informal method of getting round the 28-day limit? What is the position?

201. Mr Power: By and large, member banks have been able to comply within the 28 days. What we are flagging up to the Committee is our concern that, if there is an increase in volume and more names are thrown into general bank circulars, we might want further time. That is why we are asking for something to be built into the legislation to allow latitude to be given.

202. Mr Ervine: I was impressed by the brevity of your presentation. I get a great deal of correspondence from banks which is very short, usually saying "This will cost you £25." Thankfully, you did not say that. You made two specific points, although obviously we have moved on to a third. One was that you have irrecoverable costs. You defended, or would like to defend, the confidentiality of the customer. My question is in relation to both current and potential legislation. Is there evidence of any damage to the institutions of banking by such legislation? Is there any evidence to suggest that banking is damaged, or that public confidence in banks is diminished as a result?

203. Mr McAlister: My personal view is "no" in both cases.

204. Mr Ervine: You realise that the two points you made will now be discarded regarding the institution of banking and its public confidence. If it is not rocked by legislation, it is unlikely that anyone will be too sympathetic towards the bank, though one does have some sympathy in relation to the time frame. But how long is a piece of string? If someone said "You have 40 days", would you not be coming back simply on the basis of resources you cannot recover and saying that you need an extension?

205. Mr Power: Member banks are not here today looking for sympathy. We are here to try to help the Committee understand the implications -

206. Mr Ervine: You misunderstand me. I am reacting to the presentation you gave. You defended the confidentiality of the customer - which I believe is unaffected on the basis that there is no damage to the institution of banking - and said you have irrecoverable costs. You then ask about time which I would say is about resources. You said more names are about resources. It seems to me there will still be irrecoverable costs.

207. Mr Power: The two issues of confidentiality and time go back to the point I made earlier: banks wish to ensure that general bank circulars are responded to in a professional and accurate manner, but some individuals' names may be put forward in error. That is the nature of trying to comply with the law. In asking for time, and to respect confidentiality, we wish to ensure that genuine customers, who should not be affected by the Order, are protected. That is the point we are making on both counts.

208. Mr Ervine: "Should not be"?

209. Mr Power: Should not be. It is unfortunate if they are, but it is because of human intervention, in trying to respond to the very nature of what we have seen, that some of the wrong names have been put forward. Take the surname "Smith": it is a common surname, and when you add Michael or William, you could have 40 individuals. Sometimes addresses are not accurate either. That is the nature of what we try to deal with in complying with the Order.

210. Ms Lewsley: You talked about time limits. Could you give us an estimate of the number of general bank circulars you are aware of as an organisation? Do you feel that there will be an increase in future? Has there ever been anyone from your organisation that has refused to respond to general bank circulars?

211. Mr Power: I will take your last point first. All bank officials have to comply with the law, so there is no question of any one person refusing. There is a penalty of five years' imprisonment if they do not. That message has been clearly passed through our policies and procedures.

212. One valid point that is important - and why we say that 28 days is insufficient - is that, in the body of what we have read, it suggests that one general bank circular would take 10 hours to produce the information. We do not see how that figure could have been arrived at. If you extend this Order right across the business of banking - and given the very nature of the various insurances, mortgages, deposits, current accounts, stockbrokering and all the other elements that banks in Northern Ireland subscribe to - we do not believe that 10 hours is realistic. As I understand it, we have had four general bank circulars in the past 12 months.

213. That sounds very trivial. With the number of names and the aliases put forward, it is the volume behind any one general bank circular that causes potential problems.

214. The Chairperson: What is the effect of a general bank circular? Are all the banks contacted and told to check a specific name, address, or an alias?

215. Mr Power: That is correct. All member banks in Northern Ireland receive the same document.

216. Mr McClarty: Do the member banks liaise with each other or is this done individually?

217. Mr McAlister: It is entirely individual. There is no liaison.

218. Mr Agnew: Is a bank manager under any obligation - if he were suspicious of a particular account - to speak to the authorities, or should he respond only to questions from them?

219. Mrs Martin: Under existing legislation, if you have suspicions, then you ought to advise a constable.

220. Mr Agnew: Are there instances where this has occurred?

221. The Chairperson: Are we referring to different legislation?

222. Mr Agnew: Yes. Is there an obligation on your part?

223. Mrs Martin: Yes.

224. The Chairperson: This has nothing to do with the Proceeds of Crime (Northern Ireland) Order 1996.

225. Mr Agnew: If you were suspicious of an account -

226. Mr McAlister: Money laundering involves a suspicion that cash is going into an account from a business that is different. It is suspicious if someone is not in the habit of lodging vast amounts of cash, when vast amounts of cash suddenly start going through an account. The reality is that those in the position to have all this cash are well aware of the rules and regulations. Furthermore, there is a great deal less cash floating about the system now than there used to be.

227. Mr Power: Under the Proceeds of Crime Order, a financial investigation is not a case of suspicion on the part of member banks. It is simply a response giving factual information based on the general bank circular served. It is not a case of a bank manager or any single individual suggesting that someone is involved in money laundering. It is complying with the terms of the order that has been served. This is separate legislation altogether.

228. Mr Close: The figure of 10 hours has been mentioned when pursuing general bank circulars, although it is not known where this information came from. What costs do you attribute in your exercises to pursue a general bank circular?

229. Mr Power: Member banks do not individually monitor the cost of the impact of a general bank circular being served. However, each individual bank has had to introduce new departments to cover not only this piece of legislation, but other legislation such as the regulations that deal with money laundering. This will include anything the Financial Services Authority imposes by way of regulation on member banks in Northern Ireland. There are also additional areas where banks have had to incur costs. The structures we have are all individual.

230. Mr Close: The Northern Ireland Office has estimated that such costs can amount to £250 per circular. You mentioned that last year there were four. In the light of dealing with money laundering in 1993, the 1996 Order and now this, I imagine there was some sort of superficial costing exercise.

231. If we refer to Mr Ervine's letters from his bank, if those can be costed, surely the same type of exercise would be pursued in any sound financial institution as to likely costs in line with legislation and the additional onus placed on you?

232. Mr Power: To answer your question accurately, we have not individually costed the impact of complying with this Order. Generally, we cost situations when we have recoverable costs from clients.

233. Mr Close: So it could be less than £250?

234. Mr Power: It could well be.

235. The Chairperson: Mr Ervine never suggested his letters were costed.

236. Mr S Wilson: £25 to write a three-line letter.

237. Mr Ervine: It is £25 merely to think about writing a letter - it usually ends up more.

238. The Chairperson: Are there any further questions? If there are no further questions, I thank you all for coming here this morning. You have been very helpful. I believe this is the first time that the Bankers' Association has come to the Assembly.

239. Mr McAlister: We have visited the Agriculture Committee on more than one occasion.

240. The Chairperson: In any event, thank you for your assistance to the Committee.

MINUTES OF EVIDENCE

Tuesday 9 January 2001

Members present:
Mr A Maginness (Chairperson)
Mr Bell (Deputy Chairperson)
Mr Agnew
Mr Close
Mr Ervine
Ms Lewsley
Mr McClarty
Mr McNamee
Ms Ramsey
Mr M Robinson
Mr S Wilson

Witnesses:
Professor B Dickson ) Northern Ireland Human
Ms M O'Conor ) Rights Commission

241. The Chairperson: Good morning, Prof Dickson and Ms O'Conor. You are very welcome. We are starting a little earlier than we thought, and I hope that does not inconvenience you. We thank you for coming along this morning to assist us in our consideration of the draft Order. I also thank you for the written submission you sent, and I note it is a provisional assessment of the draft Order. We obviously accept that, and if there are any further points you want to make to clarify your position, please feel free to do so.

242. Prof Dickson: Mr Chairman, I can make a few preliminary remarks. I understand we are here primarily to answer the Committee's questions. As our submission says, we recognise the need to balance the rights of individuals against the rights of the collectivity, and, like all right-thinking people, we wish to fight crime and pursue its proceeds. Our fundamental position is that the response to that challenge must be proportionate - there must not be a sledgehammer used to crack a nut. Perhaps on one or two occasions in the Order that may be the consequence of what is being proposed.

243. Often one finds it difficult to make a general comment on proposed changes to the law because so much depends on how the changes are operated in practice in any particular case. One may be able to give the green light to something on paper but, in practice, you then find it is being operated in a way less than friendly towards human rights.

244. Our basic position is that we do not have a great deal of difficulty with the Order as it stands. Only in one or two aspects does it go unnecessarily far without the case being made properly by the Government. There may be a case to be made, but if there is one, we have not yet heard it. We do not know why there is to be specific legislation just for Northern Ireland and why it needs to go further than what exists elsewhere in the UK.

245. The Chairperson: You said you were disappointed that the Government had not notified you of its intentions to introduce this Order. Is there any obligation on the Government to consult you in relation to these matters?

246. Prof Dickson: There is no statutory obligation. We received a copy of the proposals for the draft at the same time as other consultees. When the Secretary of State announced that he was going to crack down on the proceeds of crime and money laundering, that was the first we had heard of it. We then expected to have some discussions with him as to how exactly the law would be changed to implement the policy the Government had adopted, but we did not hear from him.

247. There is no statutory obligation on the Government to consult us, but we have made it clear that, as a statutory human rights body, we expect to be consulted as early as possible in the process. We do not want to be adversely critical, necessarily, but want to help the Government comply with human rights standards.

248. The Chairperson: In the Explanatory Document, you said there is reference to a study that has been made of the experience to date of the Proceeds of Crime (Northern Ireland) Order 1996. You have not seen that study. Is there any way in which Government would share that with you?

249. Prof Dickson: I hope they would share it with us. Our experience to date, unfortunately, has been that they have not been willing to share information with us. For example, when they carried out a review of the Diplock courts recently I asked twice to see the evidence they had relied upon to come to certain conclusions. They have not even replied to my letters, let alone given me the information.

250. Mr S Wilson: Prof Dickson said he did not have a great deal of difficulty with this legislation. Reading through your submission, I would hate to see you having difficulty. While a great deal of lip-service is paid to wanting to deal with the crime, there seems to be some difficulty with almost every provision. In fact, at the very start you say that the punishment must not be cruel, inhuman or degrading. I am not too sure what relevance that has to this particular legislation, or why you felt that extended to it, but it sets the tone for the rest of your submission.

251. Let me take up a few points. I do not know what checks you did before making the submission. First, you indicate that the officer appointing a financial investigator should be sufficiently trained to know when it is appropriate to apply for such an appointment, and also that the persons appointed are likewise sufficiently trained and au fait with the requirements of a code of practice.

252. The evidence we had from the police yesterday was that, since they have to go before a magistrate, they must know that they have a case, for a magistrate would make it very difficult for them and would be incisive in questioning. I should like to know what additional training you feel is required for an investigating officer in that particular case and why you feel there needs to be more training, given the current mechanism for applying for a general bank order?

253. The second thing you mention is that the terms of the present Order are already quite extensive, if not intrusive. However, you do not elaborate on that in any way. As far as the police were concerned when they gave us evidence yesterday, even with the present legislation there were still difficulties in dealing with certain cases. I should like to know if you could elaborate on the extensiveness and intrusiveness of the legislation. Thirdly, the new paragraph 3 requires much more detailed information, such as reference numbers and so on, and this has implications regarding a person's rights and their private life.

254. If the police or Customs and Excise are to get hold of the financial proceeds of crime, do you really think they can be successful if they do not ask for this information? You say you are concerned about the balance between people's rights and dealing with criminals, but it appears that - once again the police have given us substantial evidence using professional advice and so on - criminals now find it very easy to hide the proceeds of their crimes. Why do you have an objection to that?

255. The last point I wish to make concerns your objection to seeking information from solicitors. The information we were given was that criminals now use the full range of financial and professional advice, most times without the knowledge of those who are giving it, including solicitors, and the police were very specific about this yesterday. Therefore if we are to be able to trace the proceeds of crime, is it not necessary that we, the police and the Customs and Excise, have access to this particular line of professional advice. There is a perception that this is about human rights, and this seems to be more like a document that champions the criminal rather than helps the customer.

256. Mr Ervine: I must lodge an objection to that, Chairman.

257. Mr S Wilson: Even in the last part, in paragraph 5, there is an objection to looking at the origins of property. There are human rights implications to finding the origins of money within the previous six years. The balance is certainly not in favour of the law-enforcing agencies in this document. I have just given a few examples, and there are others I could go through, but the balance is clearly in favour of people seeking to hide the proceeds of crime.

258. I would be interested to hear some of your comments and elaboration on the points you have made, but on which you have clearly not given any elucidation.

259. The Chairperson: There are four or five questions, and therefore quite a number of comments. I shall let you deal with it in points.

260. Prof Dickson: The Human Rights Commission did not really have any difficulty with the Order. However, the Commission points out in the paper that there are potential difficulties and certain questions which need to be asked in relation to provisions in the Order when taken in the round. If the Order is properly applied, there should be no real difficulty. However, it is the duty of the Human Rights Commission to draw the attention of the Committee to potential difficulties.

261. The "cruel punishment" to which you draw our attention is a reference to an article in the European Convention on Human Rights, which is now part of the law of all parts of the UK. It says that no one can be subjected to cruel, inhuman or degrading punishment. It is possible to argue - I do not say that it would convince a court - that confiscating the assets of a criminal, even if convicted, not proven to be the results of proceeds of crime could be taken as cruel punishment. I am only stating what international human rights standards say.

262. As far as training is considered, paragraph 4(a) of our submission refers to the training that would be required by Customs and Excise officers applying for the Order, and not to the training of police officers, who, I admit, are already trained in that regard. However, if Customs and Excise officers are to be given this power, it is appropriate that they be trained.

263. The reference in paragraph 4(b) to the existing powers to seek information as being intrusive is a fair reflection of what is in the existing schedule to the 1996 Order, where some quite detailed information can be asked of the person approached by the investigating officer. It is not illegal, but it is intrusive. That is a fair enough description.

264. Mr Wilson says that in paragraph 4(e) the Northern Ireland Human Rights Commission is objecting to that provision. We are not. There simply are implications for a person's right to a private life. The European Court of Human Rights will probably see the interference with one's private life as justified in the interests of dealing with crime. You may have misread that if you think the Commission is objecting. We are simply pointing out one of the potential difficulties that may or may not exist. As the paragraph concludes by saying, much depends on how the power is exercised rather than on how it is stated on paper.

265. As regards your point about solicitors, we have not been in communication with the police as to the type of investigations they currently conduct through solicitors. However, we have been in touch with the Law Society, whom I gather the Committee is hearing from at a later stage.

266. The Chairperson: Indeed.

267. Prof Dickson: Without prejudging what they are going to say to you, you may hear that the Law Society has severe reservations about extending the powers of financial investigators when trawling solicitors files. It has to be realised that a very special relationship exists between a lawyer and his or her client. We are not saying that that relationship is one which can never be interfered with by the State for good reasons, but they must indeed be good reasons. Paragraph 4 of the existing schedule realises that and states that legal professional privilege must be safeguarded. We have only drawn the Committee's attention to that.

268. Finally, if I am correct in the point that you made on paragraph 5 at the very end, when we talk about the source of a person's assets, we are doing so in the context of a recent Scottish decision which held that comparable Scottish law was incompatible with the European Convention because it used a sledgehammer. It went too far in confiscating assets, allowing assumptions to be made about the source of a person's assets. I was only reporting what the Scottish court had said. I was not necessarily predicting the view of a Northern Irish court on the Order.

269. Mr Ervine: You identified the balance between the right to challenge serious crime effectively and the rights of the individual. I want to expound that a little. To coin a phrase from a colleague: "The dogs in the street know where the drug dealers are". The dogs in the street can see them effectively functioning on a day-to-day basis, doing what they regard as legitimate business.

270. The confidence of society in the security services is very much affected by these people continuing to be able to ply their nefarious trade. Is it not legitimate that we have legislation which allows the seizure of assets for crimes committed so that the benefit from crime is removed?

271. I asked this question at an evidence session yesterday. How we can be proactive without destroying someone's human rights? How can we not be proactive if we are stoutly to defend the human rights of the larger number of people who live in the vicinity - those who suffer and watch as the monster grows larger, more powerful and more wealthy?

272. We do not have proactivity in this piece of proposed legislation. How do we become proactive as a society in dealing with problems we can see are irrational - that someone drawing £74 a fortnight on the dole is living a lifestyle that is alien to that income? We all need advice on that.

273. Prof Dickson: The Human Rights Commission would accept the basic premise that something needs to be done to fight drug dealing, people living off the proceeds of crime and so on, but it is a question of striking the right balance.

274. There are occasions when the rights of individuals must take second place to the rights of society. When the security forces stop us at a vehicle checkpoint, most of us accept the need for that - or we did during the troubles. That was the price we paid for the sake of a greater good. When we are searched before going onto an aircraft, most of us are grateful to be searched in that context for the sake of a greater good, namely not having the plane blown up. Likewise, the balance has to be struck here.

275. To date, a case has not been made by the Government for why there must be special legislation here and not in England. Is the problem so much worse here than in England? If so, let us have the facts and figures, and we can judge the need for this legislation.

276. Mr Ervine: I wish to address that. Had we been asked that question six or seven years ago, I would have said "No, I do not think there is a case". The difficulty is that we have watched the increased incidence of drugs in Dublin and in cities in the rest of the United Kingdom and throughout Europe.

277. The fundamental difficulty that exists in a Northern Ireland context is that we already have a series of illegal institutions in place. You can build a drugs cartel in Northern Ireland almost instantaneously, whereas in other cities and societies throughout the world they take a long time to put in place. We have seen them grow in various cities throughout the world. There are ready-made groups of people in Northern Ireland. The wealth, power and capacity that they have must be challenged much more effectively and speedily than in the rest of the United Kingdom, although I have no doubt that we are merely a test case for what will develop there.

278. Mr Close: In your provisional submission, you said you were not in a position to say whether there is a need for this new legislation in Northern Ireland. I come from a school of thought which believes - and I hope that the Human Rights Commission concurs with me - that there cannot and should not be an acceptable level of crime in any society.

279. Prof Dickson: Indeed.

280. Mr Close: In that light, do you also agree that Northern Ireland society appears to be losing the battle against the criminality associated with, for example, drug trafficking?

281. Prof Dickson: I do not have the facts and figures to date. I do not know whether reports in recent years from the Chief Constable, for example, highlight the fact that the proceeds of drug dealing are greater and more obvious than a few years ago. I have not heard any hard facts or figures from the Government to back up the need for this legislation. They may exist, but they have not been presented in the Explanatory Document, nor in Mr Mandelson's statement that preceded the publication of the draft Order. They may have been in the study conducted, but it has not been made public. If there is a need for the legislation, by all means let us have it. However, let us first have evidence of that need.

282. Mr Close: I shall use certain facts which exist to draw what I consider to be logical conclusions. I shall test whether you consider them to be so. Do you agree that the volume of seizures of drugs in Northern Ireland has escalated over the past few years at a quite dramatic rate?

283. Prof Dickson: Yes.

284. Mr Close: Do you therefore agree that a considerable amount of money must be made by those involved in this racketeering in order to make it profitable for them to be taking such risks?

285. Prof Dickson: Yes, that is very likely.

286. Mr Close: The answer to those questions has been in the affirmative. I therefore draw the conclusion that we must enact stronger legislation to try to combat the obvious increase in racketeering, profiteering and, as Mr Ervine said, the overt flaunting of a lifestyle which is far beyond one which might be achieved by legal means.

287. Prof Dickson: I agree with that. My question is whether the situation in Northern Ireland is worse than that in London, Manchester, Glasgow, or anywhere else in Great Britain. They are not getting this legislation in Great Britain. They do not even have parts of the 1996 Order there. If the problem here is no worse, then I wonder why we need more draconian legislation.

288. Mr Close: As the elected representative of people in Northern Ireland, I do not want Northern Ireland citizens to suffer second best, or even to be in the same position as another society where it is obvious that criminality exists.

289. I want Northern Ireland to be a better society. I want to try to achieve - insofar as is humanly possible - a society where the ordinary decent citizen can go about his life and is not subjected to the type of thuggery associated with, for example, drug trafficking. You are more aware than I of the whole proliferation of criminality which leads to a lesser society. I want through the law to improve that situation so that we are held up throughout the modern world as being a beacon of light where criminals will not find they have an easy passage. That is a tremendous goal to try to achieve. I want to do that legally. I therefore conclude that an improvement on existing legislation is needed if we are to achieve that. Is that not a laudable goal? Is that not something that we should look for rather than looking to London, Scotland or Wales? Or, as someone else said, "we might not be as bad as them".

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