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Report on
AD HOC COMMITTEE

Draft Financial Investigations
(Northern Ireland) Order 2001

Report and Proceedings of the Committee (Continued)

 

APPENDIX 3

 

LIST OF WITNESSES

Royal Ulster Constabulary

 

Detective Superintendent David Thompson
Detective Chief Inspector Alan Mains

Her Majesty's Customs and Excise

Mr Bill Logan, Collector
Mr Donald Toon, Head of Prohibitions and Restrictions Policy

Northern Ireland Bankers' Association

Mrs Patricia Beckett, Bank Solicitor, Bank of Ireland
Mr Robert Irvine, Head of Retail Compliance, Ulster Bank
Mrs Irene Martin, Senior Corporate Manager, Northern Bank
Mr Bill McAlister, Secretary, Northern Ireland Bankers' Association
Mr Dennis Power, Head of Risk Management, First Trust Bank

Northern Ireland Human Rights Commission

Professor Brice Dickson, Chief Commissioner
Ms Maggs O'Conor, Case Worker

The Law Society of Northern Ireland

Mr John Neill, President
Mr John Bailie, Secretary and Chief Executive
Mr Nigel Broderick, Council Member
Mr Patrick Kinney, Council Member

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APPENDIX 4

 

LIST OF WRITTEN SUBMISSIONS TO THE COMMITTEE

     

     

  • Association of British Insurers

    •  

  • Her Majesty's Customs and Excise

    •  

  • Liberty

    •  

  • National Criminal Intelligence Service

    •  

  • Northern Ireland Association of Citizens Advice Bureaux

    •  

  • Northern Ireland Bankers' Association

    •  

  • Northern Ireland Human Rights Commission

    •  

  • Police Ombudsman for Northern Ireland

    •  

  • Royal Ulster Constabulary

    •  

  • The Law Society of Northern Ireland

    •  

  • The Queen's University of Belfast, School of Law

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APPENDIX 5

 

WRITTEN SUMISSIONS TO THE COMMITTEE

WRITTEN SUBMISSION BY:
ASSOCIATION OF BRITISH INSURERS

Thank you for letting us have the opportunity to comment on the above draft Order. I confirm that we do not wish to raise any points on it.

Please let me know if you need any further information.

BENEDICT McHUGO
Head of Tax

8 January 2001

WRITTEN SUBMISSION BY:
HM CUSTOMS & EXCISE

Background to the Order

1. The proposals in this Order strengthen or amend certain provisions in the Proceeds of Crime (Northern Ireland) Order 1996.

2. 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 into line with the rest of the United Kingdom (UK). Article 49 also introduced additional investigation powers (set out at Schedule 2 of the Order) which are unique to Northern Ireland. These powers include the appointment of civilian financial investigators to assist the police, and the issuing of general bank circulars.

3. However, intelligence suggests that those seeking to conceal criminal assets are moving away from banks and building societies and 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 therefore necessary.

Proposed New Provisions

4. The 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 within Northern Ireland.

5. Production orders, found at Article 50 of the 1996 Order, will be widened to include any relevant property.

6. General bank circulars, under paragraph 3, Schedule 2 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.

7. There will be a new power to require solicitors to furnish information about certain non-contentious business transactions undertaken by their client (a general solicitor circular). These transactions include any dealings involving land, business, company, firm, partnership, trust, bank account, savings account, 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.

8. 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 twelve months after an offence, or three months from when sufficient information is available (whichever is later).

Impact of the Proposed 2001 Order on HM Customs and Excise Northern Ireland

9. Under the Order a senior Customs officer, ranked as a surveyor or above, will be able to go to a County Court judge and apply for the appointment of a civilian financial investigator to assist with a Customs investigation. In practice this will probably not be a common occurrence, because as a UK wide department we benefit from a broad national, and international, network of expertise. However this power does increase our flexibility, and, in exceptionally difficult financial cases, there may be merit in appointing an experienced forensic accountant from the private sector. There would be particular merit in appointing such a person where we wished 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.

10. It will perhaps be a more common occurrence for a 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 at paragraph 3 and 3A of Schedule 2 to the 1996 Order (respectively amended and introduced by the 2001 Order). This will allow the Customs officer to apply for a general bank circular, or a general solicitor circular, both of which are defined as above.

11. Extension of time limits, in cases of failing to provide or falsifying information, could also prove useful.

12. However, it must be emphasised that all these proposed powers will be new to us, and the precise nature, or effectiveness, of their implementation cannot be predicted with certainty.

BILL LOGAN
Collector

10 January 2001

ANNEX A: Customs resources dedicated to financial investigation.

1. HM Customs and Excise plays a key role in confiscating criminal assets through investigating and prosecuting offences related to VAT, excise, and prohibited goods such as drugs.

2. There are a total of 158 financial investigators based both within the UK and internationally. All financial investigators belong to the National Investigation Service (NIS) and they comprise about 8% of NIS personnel.

3. As a prosecuting Department, Customs and Excise also has its own Solicitor's Office. Within this office there is a specialised section known as the Asset Forfeiture Unit (AFU), which is dedicated to confiscation proceedings. The AFU comprises six lawyers and seven legal executives.

SUPPLEMENTARY WRITTEN SUBMISSION BY:
HM CUSTOMS AND EXCISE

1. Response to question from Mr Close on the number of financial investigations leading to successful prosecution for money laundering.

For the most recent figures we have available, covering 1 January 1999 to 31 March 2000, we have had 8 successful prosecutions, with 3 cases pending, where money laundering was the predicate offence. In addition we have had successful prosecutions for money laundering following convictions for other predicate offences (eg drugs). Figures for these are not centrally available, but we anticipate they would be of a similar magnitude.

For the same period we have also made 165 successful confiscation orders, with approximately 50 others outstanding.

2. Response to question from Mr S Wilson on any benefit obtained by Customs and Excise from general bank circulars.

We can confirm that, to date, Customs & Excise have not benefited from general bank circulars, and that such information obtained by the RUC has not been disclosed to us. We have, however, benefited from disclosures that banks have made under the statutory obligations contained in existing money laundering legislation.

BILL LOGAN
Controller

15 January 2001

WRITTEN SUBMISSION BY:
LIBERTY

Draft Financial Investigations (NI) Order 2001

Thank you for your letter in relation to the above Order. Liberty has agreed to comment on this Northern Ireland Order on this occasion because of the implications expected to be contained in the draft Proceeds of Crime Bill. I am sure you will appreciate that the Committee for the Administration of Justice, our sister organisation in Northern Ireland has considerable expertise in this area and would be, I am sure, able to comment with great authority on such issues in the future. I regret the short timescales involved have not enabled us to more fully examine the issues and comment in more depth.

It is envisaged that the proposals contained within the forthcoming Westminster draft Proceeds of Crime Bill will review the provisions relating to the confiscation of the proceeds of crime in their entirety, in this respect it appears unusual to be introducing new regulations.

In relation to the current proposals, Liberty identifies a number of issues, which require further examination:

The extension of powers to allow Customs officers to appoint financial investigators

Liberty does not object to this proposal, provided that Customs officers are aware of the Codes of Practice of Financial Investigators and are not operating outside of these. Although we believe that a Customs officer equivalent to the rank of police superintendent should be responsible for such appointments, to avoid confusion about exactly who has sufficient seniority we would recommend there should be a schedule of suitable designated officers.

Power to receive information from `relevant financial business`

The proposals requiring a `relevant financial business` to provide a financial investigator with specified information might result in the violation of an individual's rights to respect for private and family life in accordance with Article 8 of the European Convention on Human Rights. Any interference with Article 8 has to be justified, for example by the need to prevent crime and disorder, and must be shown to be necessary in a democratic society. On balance Article 8 requirements may be justified where investigations are proportionate to the facts and the investigations are properly regulated. These increased powers must therefore be reflected in the Codes of Practice for the Financial Investigators.

The extension of powers allowing information to be required from solicitors

Liberty is always concerned about eroding the safeguards for the client/solicitor relationship. The current proposals relate only to Northern Ireland but raise serious concerns for an individual's rights to privacy and ability to receive legal advice. It may therefore be appropriate for the Assembly to seek the advice of the Northern Ireland Law Society to enable them to comment on these proposals.

We fully appreciate that the Law Society in England and Wales is a separate organisation, but as they are taking an interest in the forthcoming draft bill, I consulted them, asking what their reaction would be if such proposals were implemented in England and Wales. I quote their concerns about these measures below:

"The proposed carve out of professional privilege under section 6 goes further even than the second European Directive on money laundering, which at least recognises the legal privilege pertaining to advice given to a client outside legal proceedings. A client should always be able to obtain legal advice on the legality of their position without fear of being reported; section 6 makes inroads on even this degree of professional privilege. In addition the requirements will be a particular burden to solicitors who are currently not subject to money laundering regulations and will not have the systems in place to provide the required information. It is also not clear how the draft Order will work in conjunction with the new laws to be introduced under the PIU report and the second European Directive."

Extension of powers of financial investigators to have access to premises

We are unclear how these powers will be regulated, and again this might be done within the existing framework by making amendments to the existing Code of Practice for Financial Investigators powers. We do express some concern however, why financial investigators need this power. In practice police may be present in order to keep the peace in such situations, and would be able to apply for the appropriate order. Liberty takes this position because the specific safeguards and regulations surrounding the police make them the most appropriate authority. If however, the Committee disagrees with this position, we welcome the provisions that ensure such applications would be independently authorised by a court.

Extension of time limits for prosecutions

Liberty believes that prosecutions should always be prompt and relevant to the crime. Significant gaps of time may affect the individual's right to a fair trial and give rise to issues under Article 6 of the European Convention on Human Rights. Article 6(1) states: In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time.

Finally there have been two recent cases relating to the Confiscation of Assets which the Committee may be interested in, addressing how Article 6 (right to a fair trial) can be applied. A summary is provided for the Committee below.

McIntosh V HM Advocate 31 October 2000 The Times

This considered issues relating to the presumption of innocence and a reversed onus of proof on the accused. The cases of R v DPP ex parte Kebiline and Others [1993] 3 WLR 972, Elton v UK, The European Commission, Application No 32344/96 and Salabaiku v France (1988) 13 EHRR 379 were applied. The Crown in this case sought an order for the confiscation of the proceeds of drug trafficking under the Proceeds of Crime (Scotland) Act 1995, the court found that the respondent was entitled to a presumption of innocence.

R v Benjafield 28.12.2000 The Times

The Court of Appeal Criminal Division considered statutory provisions giving court powers to make confiscation orders, under which the onus of proof was expressly reversed. The court found that this did not contravene Article 6 of the European Convention on Human Rights, but, the application of the statutory provisions to the facts in a particular case which was critical in determining whether Article 6 had been contravened. Reliance was placed upon the cases of McIntosh v HM Advocate and Stott v (Procurator Fiscal Dunfermline) v Brown 6.12.2000. The Times, for guidance on the correct approach to Article 6, emphasised the need to strike a fair balance between the right of the individual and the general interest of the community. In the case of Montgomery 6.12.2000 these issues were also considered by the Privy Council, which found that: "Article 6 unlike Articles 8 and 11 is not subject to limitation. It does not require, nor indeed does it permit, a balance to be struck between the rights which it sets out and other considerations such as public interest".

In summary, Liberty expresses some concern about the extension of powers of financial regulators, particularly where this may not be necessary in relation to matters of access. If any of these measures are to be implemented the importance of ensuring that they are properly regulated is paramount. Liberty echoes the concern of the Law Society in England and Wales about erosion of the lawyer/client relationship.

DEBORAH CLARK
Director of Public Affairs

10 January 2001

WRITTEN SUBMISSION BY:
NATIONAL CRIMINAL INTELLIGENCE SERVICE

Thank you for your letter dated 20 December 2000. I welcome the opportunity to comment on the draft Order and its impact on the work of the National Criminal Intelligence Service (NCIS). You will already be aware that in accordance with European Union requirements the United Kingdom has a single central unit charged with receiving financial disclosures from financial institutions. This unit is the Economic Crime Unit (ECU) at NCIS.

Overall, I believe that the draft Order would clarify and strengthen the anti-money laundering and asset confiscation legislation, increasing the effectiveness of law enforcement in Northern Ireland and reducing the ability of criminals to hold on to the profits of their criminality.

With regard to the impact on NCIS, there are three main issues which I wish to draw to the attention of the Committee:

Firstly, we would expect the general increase in financial investigation work that would result from the draft Order to increase the number of requests for financial intelligence lodged by Northern Ireland law enforcement at the Economic Crime Unit (ECU) within NCIS.

Secondly, NCIS has forecast that as financial institutions are made increasingly aware of their disclosure responsibilities as a result of the financial investigation work generated by the draft Order, the number of disclosures from financial institutions based in Northern Ireland will rise. As explained above, all such disclosures must be directed through the Economic Crime Unit.

Thirdly, it is possible that the NCIS ECU may act as the central hub for dissemination and collation of general bank circular requests should such legislation be enacted in England and Wales in the future. Should this be the case, it would also be rational to include orders raised in Northern Ireland. The expansion in banking circulars proposed in the draft Order would, therefore, increase the potential workload on NCIS.

However, although each of the issues above is judged to result in an increase in workload for NCIS, overall we believe that the benefits to the Northern Ireland community of increasing the effectiveness of asset confiscation from criminals are highly desirable. I am also hopeful that the forthcoming judgement by the Home Secretary on NCIS funding will allow the organisation to fulfil the increased demands of the draft Order without necessitating a request for additional funding from your jurisdiction.

Finally, it has been the experience of NCIS that many law enforcement and government organisations from across the country have benefited from seconding selected staff into the ECU. Such secondments strengthen relationships between NCIS and parent organisations, as well as allowing effective exchanges of ideas to allow improvements in systems and procedures. Your Committee may wish to consider the potential benefits of such a secondment from the Northern Irish law enforcement community in the light of continuing financial investigation developments in your jurisdiction. Personally, I would welcome a positive proposal along these lines.

I hope that my comments are of use to the Committee, and if you have any further questions please feel free to contact me through my administration. In addition, should you or any members of the Ad Hoc Committee wish to visit NCIS headquarters in London to see the work of our Economic Crime Unit (and other parts of NCIS) I would be delighted to facilitate such a visit.

JOHN ABBOTT
Director General

4 January 2001

WRITTEN SUBMISSION BY:
NORTHERN IRELAND ASSOCIATION OF
CITIZENS ADVICE BUREAUX

I do not anticipate that the draft Order will have any significant impact on the work of Citizens Advice Bureaux in Northern Ireland.

Please do not hesitate to contact me if you require further information.

DEREK ALCORN
Chief Executive

12 January 2001

WRITTEN SUBMISSION BY:
NORTHERN IRELAND BANKERS' ASSOCIATION

DRAFT FINANCIAL INVESTIGATIONS (NI) ORDER 2001

Submission from the Northern Ireland Bankers' Association (NIBA) on:

(a) Experience of existing legislation Proceeds of Crime (Northern Ireland) Order 1996.

(b) The effect of the draft Financial Investigations (NI) Order 2001 on workload.

Member Banks of NIBA welcome the opportunity to make this submission and are committed to complying with legislation.

(a) EXPERIENCE OF EXISTING LEGISLATION - PROCEEDS OF CRIME (NORTHERN IRELAND) ORDER 1996.

1. Prior to the introduction of this legislation Member Banks had substantial discussions with the Northern Ireland Office (NIO).

2. These changed little in respect of legislation but did help to improve mutual understanding as regards implementation.

3. Our initial concerns were:-

       

    • The control mechanism for financial investigators. This was resolved when a Code of Practice was eventually introduced.

      •  

    • Time scale involved in complying with general bank circulars particularly where common names/aliases are widely used and where there are numerous addresses.

      •  

    • Pressure on bank staff to meet time limits imposed under the legislation.

4. Materially these concerns still exist but, subject to these, Member Banks are managing current volumes. We would recommend that the time limits for compliance with the Orders should be extended beyond the current 28 day period.

(b) THE EFFECT OF THE DRAFT FINANCIAL INVESTIGATIONS (NI) ORDER 2001 ON WORKLOAD

1. The introduction of the Order is likely to increase workload and costs in Member Banks because:-

       

    • The wider definition of Financial Institutions will include other areas of our businesses.

      •  

    • Customs officers of a rank equivalent to a police superintendent will be able to make application to the court for the appointment of a financial investigator.

2. Member Banks remain concerned about protecting customer confidentiality but will continue to observe the law.

BILL McALISTER
Secretary

5 January 2001

SUPPLEMENTARY WRITTEN SUBMISSION BY:
NORTHERN IRELAND BANKERS' ASSOCIATION

DRAFT FINANCIAL INVESTIGATIONS (NI) ORDER 2001

"Further to our attendance at the meeting of the Ad Hoc Committee - Financial Investigations (NI) Order 2001 we wish to clarify a matter which is referred to in our written submission at paragraph (a) 4 and on which certain questions were raised by members of the Committee.

Under the Proceeds of Crime (NI) Order 1996 a Notice under Schedule 2, paragraph 3 can be served on the Member Bank. The legislation states that such a Notice will indicate "a specified time" within which to comply. The Code of Practice indicates at section 3.4 that the specified time should not be "less than 21 days" in respect of such a Notice unless it appears to the investigator that the investigation may be prejudiced. The investigator should also have regard to the amount of work likely to be required by the Bank concerned. In practice, the general bank circular Notices made under Schedule 2, paragraph 3 require compliance within 28 days.

Apart from section 3.13 in the Code of Practice there is no provision for an application for an extension of time. In our submission we drew the Committee's attention to the potential additional work which the proposed new legislation would create. The Member Banks would therefore welcome that an extension to the current 28 day period is written into the proposed new legislation. We trust that this clarifies the submission."

BILL McALISTER
Secretary

11 January 2001

WRITTEN SUBMISSION BY:
NORTHERN IRELAND HUMAN RIGHTS COMMISSION

1. The Northern Ireland Human Rights Commission welcomes the opportunity to comment to the Northern Ireland Assembly's Committee on the proposed draft Financial Investigations (NI) Order 2001. The Commission was disappointed, however, not to have been notified earlier of the nature of the Government's intentions in this field. The Explanatory Document accompanying the draft Order refers, at para. 6, to a study which has been made of the experience to date of the use made of the provisions in the Proceeds of Crime (NI) Order. This Commission has not seen this study and we are therefore not in a position to say whether there is a need for this new legislation or not. Nor are we aware of why there is a need for special legislation just for Northern Ireland; the Government has not yet made out a specific case for such legislation.

2. The Commission is obviously supportive of the fight against criminal activity. It does not for a second approve of individuals and groups benefiting from crimes and it agrees with the policy of trying to divest criminals of their ill-gotten gains.

3. The rights of society to fight crime must, however, always be balanced against the rights of individuals who are suspected of, or convicted for, crimes and, even more importantly, against the rights of others who, through no fault of their own, may become caught up in the activities of such persons. In particular, the Commission believes that the principles that a person must be presumed innocent until proven guilty beyond all reasonable doubt and that the punishment for a crime must be proportionate to the seriousness of the crime, should always be given high prominence. International human rights standards, not least those in the European Convention on Human Rights which have now been incorporated into the law of all parts of the United Kingdom by the Human Rights Act 1998, certainly require that a person must always receive a fair trial (Article 6) and not be punished in a cruel, inhuman or degrading manner (Article 3).

4. The Commission has identified seven important changes which the proposed Order would make to the existing law and wishes to comment on each of those separately:

(a) Article 3 will allow Customs and Excise officers to apply to a County Court judge for the appointment of a financial investigator.

The Commission has no difficulty with this proposal in principle. Provided that Customs and Excise officers are sufficiently trained to know when it is appropriate to apply for such an appointment, and provided also that the person(s) appointed are likewise sufficiently trained and au fait with the requirements of the Code of Practice governing the activities of financial investigators, there can be little to worry about in the provision.

We note, however, that in the proposed new Article 49(5) of the Proceeds of Crime (NI) Order 1996, a "senior officer of an enforcement authority" is defined as meaning, in the context of Customs and Excise work, "a Customs officer not below such rank as may be equivalent to [the rank of police superintendent]". We find this a rather vague definition. A better approach may be to allow a Customs and Excise officer to make an application to the County Court if the Chief Executive, or some such named official, authorises such an application.

(b) Article 3(3) - by inserting a new Article 49(1A) into the Proceeds of Crime (NI) Order 1996 - also allows police officers and Customs and Excise officers to do two things which court-appointed financial investigators can do, namely (i) trawl financial institutions and (ii) trawl solicitors.

The Commission is again supportive of this measure provided that the police officers and Customs and Excise officers in question are obliged to comply with the Code of Practice which financial investigators are already obliged to comply with. The powers which police officers and Customs and Excise officers are being given by Article 49(1A) - which refers in turn to paras. 3 and 3A of Schedule 2 to the 1996 Order - are quite extensive, if not intrusive. They must therefore be exercised entirely properly from both a procedural and a substantive point of view. To reflect the applicability of the Code to a wider range of persons, the Code of Practice would need to be amended, probably in its title and also in many of its paragraphs which refer to financial investigators, especially those paragraphs relating to the powers conferred by paras 3 and 3A of Schedule 2 to the 1996 Order. (These amendments seem to be necessary because the term "financial investigators" is now to be defined by reference to the amended Article 49(1), not Article 49 in general; persons appointed under Article 49(1A) will therefore not be financial investigators for the purposes of the 1996 Order even though they can exercise many of their powers.)

(c) Article 4, by amending Articles 50 and 51 of the 1996 Order, extends to financial investigators the existing police powers of access to material under a County Court's production order. At present the Commission does not have a problem with this provision. We accept that its commencement does not have to await an amendment to the Code of Practice governing the exercise of powers by financial investigators, since that Code is concerned only with powers conferred by Article 49 of the 1996 Order, as amended.

(d) Article 5 amends para. 3 of Schedule 2 to the 1996 Order by, for example, extending it beyond banks to persons carrying on relevant financial business. At present the Commission does not have a problem with this provision.

(e) Article 5 also amends para. 3 of Schedule 2 by substituting a new list of information which a person carrying on a financial business must furnish to an investigator. The old para. 3 referred to information on whether a bank held any account or safe-deposit box in the name of a specified person. The new para. 3 requires much more detailed information to be supplied, such as "all reference numbers or other means of identification allocated by the respondent to the specified person for the purposes of the business relationship". There are clearly implications for a person's right to a private life here, a right protected by Article 8 of the European Convention on Human Rights, but any infringement in these circumstances could well be seen by the European Court of Human Rights as justified by Article 8(2) of the Convention, which recognises the prevention of crime as a reason for interfering with the right to a private life. As so often, a lot will depend on how the power in the new para. 3 is exercised in practice. It should always be exercised proportionately and precisely, not generally or as a blunt instrument.

(f) Article 6, by inserting a new para. 3A into Schedule 2 to the 1996 Order, provides for trawls to be made amongst solicitors for information. The Commission has concerns about this provision because it interferes with the lawyer-client relationship, which is normally sacrosanct. Even though para. 4 of Schedule 2 to the 1996 Order preserves legal professional privilege, it is not clear on present case-law authority that this would extend to justifying a solicitor not furnishing the information demanded under the new para.3A. The Commission is not persuaded that this amendment to the law is yet required, especially in view of the fact that the Government has not explained why it is required in Northern Ireland but not elsewhere in the United Kingdom and why the proposal was made without first taking the views of legal bodies in Northern Ireland as to whether there was a need for it.

(g) Article 7 extends the time limit for prosecutions in some cases from 6 months to 12 months. Again the Commission does not at present have a problem with this provision.

5. A more general point needs to be made concerning the power conferred on courts by the 1996 Order to issue confiscation orders. Articles 9 and 10 permit a court in certain situations to make assumptions about the origins of property received by, or of expenditure made by, a person within the previous six years. In a recent Scottish case (McIntosh v HM Advocate, 13 October 2000) the High Court of Judiciary held, by a majority of two to one, that a comparable provision in the Proceeds of Crime (Scotland) Act was incompatible with Article 6(2) of the European Convention on Human Rights, which confers on everyone the right to be presumed innocent until proven guilty. Thought should therefore be given as to whether the law applying in Northern Ireland should be amended to take account of this decision (although it will possibly be appealed to the Privy Council).

PROFESSOR BRICE DICKSON
Chief Commissioner

11 January 2001

WRITTEN SUBMISSION BY:
POLICE OMBUDSMAN FOR NORTHERN IRELAND
(Copied to the committee)

financial investigations (NI) Order 2001

Thank you for sending us the proposal for a draft Financial Investigations (NI) Order 2001.

My office has responsibility for investigating allegations, both criminal and disciplinary, against the police. It is not inconceivable that in the course of our work we will need to engage in financial investigation. I am therefore writing to ask that my office be added as an "enforcement authority" under Article 3 of the 2001 Order. This would enable us to utilise these additional powers should the circumstances arise in which we need to do so.

If you have any queries please do not hesitate to contact me.

NUALA O'LOAN
Police Ombudsman

12 January 2001

WRITTEN SUBMISSION BY:
ROYAL ULSTER CONSTABULARY

1. The proposals in the Financial Investigations (NI) Order 2001 strengthen or amend powers provided for in the Proceeds of Crime (NI) Order 1996 and are intended to prevent criminals profiting from unlawful activities.

2. The 1996 Order brought Northern Ireland broadly in line with the rest of the UK in respect of the law relating to the confiscation of the proceeds of drug trafficking and other serious crime. However, by virtue of Article 49, additional investigative powers were introduced. These are unique to Northern Ireland. Article 49 permits the appointment of a person, who is not a police officer, as a "financial investigator" (FI), provided a County Court judge is satisfied that certain criteria are met.

3. Under the proposed new legislation the application for appointment of a financial investigator is no longer confined to the police but can be made by a senior officer of HM Customs and Excise. Additionally, a suitable police officer or Customs officer can also be appointed as a financial investigator, although they do not command the same range of powers as are given to a non police or Customs officer. Their powers are confined to those conferred by paragraphs 3 and 3A of Schedule 2 of the 1996 Order.

4. New powers are also proposed in respect of solicitors and the gleaning of specified information within a specified time and in a specified manner. The information sought must relate to a specifically named person, ie a client who is suspected of having benefited from serious crime.

5. Two other proposed changes of note are:

(i) Under Article 49 of the 1996 Order "the proceeds of any such conduct" will read "any relevant property". This is important as the actual proceeds of a criminal act can be altered or disguised to hide their provenance.

(ii) In paragraph 3 of Schedule 2 of the 1996 Order "the business of banking (the bank)" becomes "relevant financial business (the respondent)". This amendment widens the application of the requirements to include all relevant financial business as defined by the Money Laundering Regulations 1993 and increases the level of information which must be furnished to the investigator.

6. It is the RUC's submission that since their introduction in 1996 financial investigation powers have been used to good effect. They are used in selected cases only, following a determination that the appointment of a financial investigator could substantially enhance the investigation. An example of their assistance is the identification of 1,232 previously unknown accounts connected to those persons under investigation.

7. We would contend that the proposed new powers will enhance the effectiveness of the existing powers. In particular, the ability to trawl all financial institutions should prove of benefit, as will the ability to require a solicitor to confirm if a person was his client and to obtain details of transactions carried out on his/her behalf in respect of certain types of businesses.

8. The ability to have selected police or Customs officers appointed as Fls in order to issue general bank circulars or general solicitor circulars will obviate the need to seek the services of a person outside of the two principal law enforcement agencies.

9. The effects of drug trafficking and acquisitive crime of a highly profitable nature must not be underestimated. Their impact on society generally and individual victims, particularly where organised criminality is involved, has been widely publicised. No good argument can be advanced as to why individuals should profit from their illegal activities. As well as bringing perpetrators to justice, it is only right that their ill-gotten gains are taken away. Unfortunately with the assistance of professional advisers those ill-gotten gains can often be hard to identify and retrieve. That is why it is important for law enforcement to have the necessary tools to combat such activity. This proposed new legislation will go a considerable way in meeting those needs.

DAVID H THOMPSON
Detective Superintendent

5 January 2001

WRITTEN SUBMISSION BY:
THE LAW SOCIETY OF NORTHERN IRELAND

Introduction and Preliminary Remarks

1.1 Chairperson and members of the Committee, thank you for this opportunity to address you to-day. We represent the Law Society of Northern Ireland, the professional body which regulates and represents just under 2,000 practising solicitors in this jurisdiction.

1.2 My name is John Neill. I am a solicitor in private practice in a firm with offices in Belfast and throughout North Down, and I am currently President of the Society. I am accompanied to-day by two other members of the governing Council of the Society. Mr Patrick Kinney, a partner in a private practice firm with offices in Belfast and Newry, with an interest in human rights. Also Mr Nigel Broderick, an experienced criminal practitioner in a firm with offices based in Belfast, Newtownards and Armagh. We are accompanied by Mr John Bailie, who is Chief Executive and Secretary of the Society and, as such, the Society's senior policy adviser, who is also a qualified solicitor.

1.3 Given the limited time available to us all, our purpose to-day is to address the main policy issues raised by the proposed Order.

1.4 It is our intention to make available to you following this meeting a formal note recording the main points made by way of this presentation and dealing with any other points you may wish to raise with us to-day.

1.5 Given the time-constraints it may be of most benefit to the Committee if we concentrate on those aspects of the proposed Order on which we can offer some experience and expertise from a professional perspective. In essence these are the provisions which will impinge on the relationship between any client and his or her solicitor. For ease of reference I refer you at this stage to (here cite and direct attention to Article 6 of the draft Order and the relevant statements within the Explanatory Document accompanying the draft Order).

The Context

2.1 I should like to begin by making one point clear. The Law Society does not condone the activities of criminals, nor do we have any interest in affording protection to drug barons, terrorists or racketeers. We do understand and appreciate the objectives and sentiments of the proposals.

2.2 However we are obliged to draw attention to the rights of every citizen to due process and equal treatment before the law.

2.3 The reservations we have about these proposals are of relevance to each of you and your constituents. The proposed Order will encroach further on the principles of solicitor/client confidentiality and legal professional privilege. These principles do not afford privileges to lawyers; they provide vital protections to individual citizens.

2.4 Solicitor-client confidentiality and legal professional privilege are of a different order than other forms of confidentiality not recognised by law. A solicitor is in the unique position of being unable, as a matter of both professional and legal obligation, to disclose any information about a client's affairs without a waiver by the client or on foot of a clear and lawful authority for doing so.

2.5 These protections have not been devised by accident or by lawyers for lawyers. They are characteristic of all developed democratic legal systems over many centuries. The issue is not encroachment on lawyers' territory. It is the right which each of you have to consult your legal adviser about your personal business confident in the knowledge that the privacy of that consultation will be respected and will not lightly or arbitrarily be overridden. These principles have evolved under judicial supervision over the years so as to prevent excesses such as furtherance of criminal interest. The principles do not provide carte blanche to criminals.

2.6 Let me cite one of the authoritative legal statements of the principle "The principle.......is that a client must be able to consult his lawyer in confidence. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests".

Justification

3.1 Against this background, the first point we wish to make about the draft Order is that little objective justification for the introduction of these further measures, nor for the selection of Northern Ireland for special treatment in this respect, has been presented to date.

3.2 The Proceeds of Crime Order, which is to be amended by the proposed Order, represents a series of extensive powers already available to the investigating authorities. It is notable that the Explanatory Document refers to the fact that the provisions of the 1996 Order have been used to good effect. The powers therein are widely recognised as draconian, but the present provisions have the merit of being applied throughout the United Kingdom and have built-in safeguards.

3.3 A significant extension of those powers is now proposed by the Government. It seems clear that the level of protection generally, and against abuse of the additional powers to be conferred on the investigating authorities, are less than the safeguards which apply at present under the Proceeds of Crime Order.

3.4 For example, we draw attention to the powers conferred by Article 6 of the proposed Order. From the Explanatory Document it is clear that the purpose of these provisions is to enable speculative "trawls" to obtain information about transactions conducted generally by solicitors for clients. The operation of these provisions will almost certainly involve infringements of confidentiality and privacy not just of the person under investigation but of those persons with whom the person under suspicion has had legal dealings.

3.5 It would appear that once appointed the special financial investigator is to have an extensive range of discretionary powers. These are speculative in nature and, irrespective of the provisions of any Code of Practice, it is clear that the investigator will have a high degree of personal discretion as to the exercise of these powers. It is notable that the exercise of these powers is not made subject to any form of independent judicial oversight by which the circular might be challenged or issues of legal privilege resolved.

3.6 There are indications that the measures have been proposed in response to views expressed by the law enforcement agencies, and on the basis of a study. The proposals have been prepared without any input from the Law Society. We make this point about the value of prior consultation because this would have allowed there to be: an exchange of information and experience about the operation of the present provisions; an evaluation of any problems which arise at present, and exploring alternative means by which the concerns of the authorities might be addressed; and may have avoided some of the questionable assumptions about the profession which appear in the Explanatory Document.

The Order in Council/Northern Ireland Dimension

4.1 As it is, the Northern Ireland Office (NIO) have produced an Order about which, for the reasons I have mentioned already, we have reservations. We should mention also our concerns that these measures are to be limited to Northern Ireland and to be taken forward by way of the Order in Council procedure.

4.2 First, in respect of the use of the Order in Council procedure, the effect will be to preclude the same degree of Parliamentary debate and amendment as would apply to a Westminster Bill.

4.3 The decision to legislate by this unsatisfactory method is perhaps harder to understand where the Government has signalled an intention to bring forward within this Parliamentary Session a Westminster Bill on broadly the same issues. There is a reference within the Explanatory Document (at paragraph 1) to the consultation exercise on the report "Recovering the Proceeds of Crime". It is understood that the Government proposes to legislate in respect of that report, and it would appear viable for that Bill to be used to carry any legislative amendments for Northern Ireland which are considered necessary in due course.

4.4 Secondly it seems inappropriate that, without any persuasive justification, the Government is proposing to legislate exceptionally in respect of the criminal justice system in Northern Ireland at this time. Media coverage of the proposed Order suggests that the Government see the introduction of these provisions on general solicitor circulars as paving the way for the introduction of similar measures in the rest of the United Kingdom. If this is so we would suggest that the Government should make this clear.

Other Matters

5.1 I have mentioned already that we do not propose to deal to-day with the more detailed drafting or other reservations we have about the proposed Order. However, I might touch briefly on these, on the basis that if there are any matters on which you wish us to expand we will attempt to do so in response to your questions. Our main concerns are:

(a) the Government's assertion that the proposed legislation complies in all respects with the terms of the European Convention on Human Rights may not be well-founded;

(b) the effect of the amendments to the 1996 Order now proposed would appear to be to make client information available to the financial investigator retrospectively. That is, on commencement of the proposed Order, it would be possible for an inquiry to be raised about a transaction which was entered into by an individual prior to the introduction of this legislation on the basis that his or her confidence with his or her solicitor would be respected and preserved by law.

Summary

6.1 In conclusion, it may be helpful to summarise for the Committee the position of the Law Society at this stage, pending discussions with the Northern Ireland Office and preparation of a further detailed submission as part of the current formal consultation process.

6.2 We would invite the Committee to consider supporting the position of the Society on the following points

(a) to acknowledge the importance of safeguarding the public interest in the principles of solicitor-client confidentiality and legal professional privilege;

(b) having regard to the importance of those principles, to affirm that these should not be interfered with lightly, without careful consideration of other options or without the provision of effective safeguards;

(c) that any legislation on the lines proposed or, at a minimum, implementation of those provisions affecting solicitor/client confidentiality and legal professional privilege should not be brought forward pending full and meaningful consultations between the NIO and the Law Society;

(d) that if and when legislation on these matters is brought forward, it should not be by way of Order in Council;

(e) that legislation on these matters should not be applicable to Northern Ireland on a selective and experimental basis.

6.3 I hope that the Committee will find these observations of some interest and value in assessing the proposed Order. I emphasise again, to avoid any possible misunderstanding, that these reservations are not being expressed in the interests of lawyers, but in the interests of anyone who needs to be able to consult a lawyer secure in the knowledge that their confidences will be respected. We should be pleased to try to deal with any questions you may have arising from this presentation.

JOHN NEILL
President

10 January 2001

WRITTEN SUBMISSION BY:
THE QUEEN'S UNIVERSITY OF BELFAST

We have managed to look at Articles 5 and 6 of the draft Order. These appear to be the main substantive provisions.

In relation to Article 5 we would comment that the provision appears to be internally consistent and to reflect appropriately the aims of the Article as set out in the Explanatory Document. More generally, extending the powers of financial investigators to cover "relevant financial business" represents a significant enhancement of the powers which may be exercised by the enforcement authorities under the 1996 Order and this may have considerable potential for curbing the opportunities available for money laundering.

There are concerns that Article 6 as drafted may not be limited to non contentious business as the Explanatory Document claims. It is certainly not expressly limited to non contentious business. It would not be right that papers relating to ongoing land or company litigation should be provided to financial investigators. There are Article 8 ECHR implications here and the possibility of ongoing litigation being subject to investigatory powers may mean that Article 8 is infringed.

I hope this proves useful.

DAVID CAPPER
Senior Lecturer
School of Law

8 January 2001

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