Ad Hoc Committee

Draft Financial Investigations
(Northern Ireland) Order 2001

Report and Proceedings of the Committee

AD HOC COMMITTEE - FINANCIAL INVESTIGATIONS
(NI) ORDER 2001 : MEMBERSHIP

The Committee was established following a resolution of the Northern Ireland Assembly on 11 December 2000:-

"That this Assembly appoints an Ad Hoc Committee to consider the draft Financial Investigations (Northern Ireland) Order laid by the Secretary of State in accordance with section 85(4)(b) of the Northern Ireland Act 1998 and to submit a report to the Assembly by 5 February 2001.

Composition:
UUP 2
SDLP 2
DUP 2
SF 2
Other Parties 3

Quorum: The quorum shall be five.

Procedure: The procedures of the Committee shall be
such as the Committee shall determine."

The membership of the Committee is as follows:-
Mr Alban Maginness (Chairperson)
Mr William Bell (Deputy Chairperson)
Mr Fraser Agnew
Mr Seamus Close
Mr David Ervine
Ms Patricia Lewsley
Mr David McClarty
Mr Pat McNamee
Ms Sue Ramsey
Mr Mark Robinson
Mr Sammy Wilson

TABLE OF CONTENTS

Introduction

Background

The Committee's Approach

Committee's Consideration of the Draft Order

Conclusions and Recommendations

Appendix 1 Proceedings of the Committee

Appendix 2 Minutes of Evidence

Appendix 3 List of Witnesses

Appendix 4 List of Written Submissions to the Committee

Appendix 5 Written Submissions to the Committee

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INTRODUCTION

1. The Secretary of State wrote to Lord Alderdice on 22 November 2000 referring the draft Financial Investigations (Northern Ireland) Order 2001 to the Assembly for its consideration and comments no later than 12 February 2001. As a result of this letter the Assembly established an Ad Hoc Committee on 11 December 2000, to consider the draft Order and submit a report to the Assembly by 5 February 2001.

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BACKGROUND

2. The Ad Hoc Committee held its first meeting on 19 December 2000, Mr Alban Maginness was elected as Chairperson and Mr William Bell as Deputy Chairperson. The Committee agreed that all meetings would be held in public, not to have deputies, and that decisions requiring division would be determined by simple majority. The Minutes of Proceedings are in Appendix 1.

3. At the first meeting the Committee considered the draft Financial Investigations (Northern Ireland) Order 2001 and debated the purpose and changes to the legislation. The Committee agreed its overall approach, which is set out below.

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THE COMMITTEE'S APPROACH

4. The Committee decided, as a result of extremely tight deadlines, it would invite written and oral evidence from:

• Her Majesty's Customs and Excise;

• Northern Ireland Bankers' Association;

• Northern Ireland Human Rights Commission;

• Royal Ulster Constabulary; and

• The Law Society of Northern Ireland.

5. It was also decided to invite written evidence from:

• Association of British Insurers;

• Criminal Assets Bureau, Republic of Ireland;

• European Commission Representation in Northern Ireland;

• General Council of the Bar of Northern Ireland;

• Institute of Chartered Accountants in Ireland;

• Irish Council for Civil Liberties;

• Liberty;

• National Criminal Intelligence Service;

• Northern Ireland Association of Citizens Advice Bureaux;

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

• University of Ulster, Faculty of Business and Management.

6. The Committee received 11 written submissions of evidence.

7. Representatives of the Royal Ulster Constabulary and Her Majesty's Customs and Excise appeared before the Committee on 8 January 2001 to make presentations and answer questions about the provisions of the draft Order, Minutes of Evidence are given in Appendix 2. Her Majesty's Customs and Excise officials agreed to forward supplementary written evidence to the Committee.

8. Officials from the Northern Ireland Bankers' Association, Northern Ireland Human Rights Commission and The Law Society of Northern Ireland appeared before the Committee on 9 January 2001 to make presentations and answer questions about the provisions of the draft Order. The Northern Ireland Human Rights Commission agreed to send the Committee a final written submission to replace its provisional written submission. The Law Society also agreed to forward the Committee a written submission.

9. A list of witnesses is included in Appendix 3. A list of organisations who submitted written evidence to the Committee is included in Appendix 4 and the written submissions are included in Appendix 5.

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COMMITTEE'S CONSIDERATION OF THE DRAFT ORDER

10. The Committee carried out an Article by Article consideration of the draft Order on 16 January 2001.

11. Article 1 provides the title of the Order and states that the substantive provisions of the Order shall come into operation on a day to be appointed by the Secretary of State.

The Committee had no comment on this Article.

12. Article 2 attracts to the Order the provisions of the Interpretation Act (Northern Ireland) 1954.

The Committee had no comment on this Article.

13. Article 3 amends Article 49 of the Proceeds of Crime (Northern Ireland) Order 1996. The effect of the amendment would be to enable a Customs officer, of the rank equivalent to a police superintendent (ie surveyor or above) to apply for the appointment of a financial investigator to assist Customs and Excise investigations into financial benefit obtained as a result of serious crime. Additionally, it makes new provision for the authorisation by the County Court of named police and Customs officers to exercise two powers, namely the power to carry out a trawl of all financial institutions and of solicitors, ie general bank and solicitor circulars respectively.

The Committee had no objections to the appointment of police and Customs officers on the assumption that relevant officers would be sufficiently trained and au fait with the requirements of the Code of Practice governing the activities of financial investigators. The Committee noted the concerns expressed by the Northern Ireland Bankers' Association in relation to the time period for compliance with general bank circulars. It recommended there be some mechanism whereby the Code of Practice for financial investigators could be amended to include an application for an extension of the time period for compliance with general bank and solicitor circulars. The Committee's views on general solicitor circulars are given in 16 below.

14. Article 4 amends Article 50 of the 1996 Order to provide financial investigators with the same rights of access to material under a production order as are currently available to the police. It will also amend this procedure to include production of any property held by a person who has benefited from specified or serious criminal conduct, or transferred to or by such a person in the previous six years. It also makes consequential amendments to Articles 51 and 52 to reflect the amendments made to Article 49.

The Committee had no objections to these amendments.

15. Article 5 amends Schedule 2 to the 1996 Order. One of the changes relates to paragraph 3 of the Schedule which enables a financial investigator to require a bank to provide him with specified information. The amendment would broaden this power, so that such a requirement could instead be imposed on any person carrying out "relevant financial business", as defined by the Money Laundering Regulations 1993. It also broadens the range of information the bank must provide.

The Committee had no objections to this amendment.

16. Article 6 enables a financial investigator, where he believes a person has benefited from serious crimes, to require a solicitor to confirm whether during a specified period, the person was his client in respect of certain types of non-contentious business. These will concern transactions involving any land, business, company, firm, partnership, trust, bank account, savings account or investments. If so, the solicitor would be required to provide certain information about the client and the nature of any transaction relating to those matters.

The Committee noted that there was no definition of "non-contentious business" in the draft Order and recommended that this should be clearly defined. The members debated the supporting and opposing arguments for Article 6. The Committee's majority view was to accept the amendment in the draft Order but some members had serious concerns reflecting those of Liberty, the Human Rights Commission and The Law Society of Northern Ireland on solicitor/client confidentiality and legal professional privilege. The Committee agreed to recommend that the Secretary of State enter into full and meaningful consultations with the relevant organisations before implementation.

17. Article 7 extends the time limit for bringing summary proceedings for offences under paragraph 5 of Schedule 2 to the 1996 Order. It introduces an exception to the standard period within which a prosecution of a summary offence should be brought - 6 months from the commission of the offence. In relation to summary offences under paragraph 5(1) or (2) of the Schedule (failing to provide, or falsifying, information) the time limit for prosecutions would become three months from the date on which sufficient evidence to prosecute becomes available or 12 months from the commission of the offence, whichever is the later.

The Committee had no objections to this extension.

18. Article 8 makes certain minor amendments to Schedule 2 to the 1996 Order which would be necessary as a consequence of the other provisions of this draft Order.

The Committee had no comment on this Article.

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CONCLUSIONS AND RECOMMENDATIONS

19. The draft Order was supported by the majority of the Committee. The Committee made the following recommendations:

• Full and meaningful consultation by Secretary of State before implementation.

• There is a need for a clear definition of "non-contentious business".

• There should be a mechanism to apply for an extension of the time period for compliance with general bank and solicitor circulars.

• Update the Code of Practice for financial investigators.

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APPENDIX 1

PROCEEDINGS OF THE COMMITTEE

MINUTES OF PROCEEDINGS

TUESDAY, 19 DECEMBER 2000
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr William Bell MLA (Deputy Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Pat McNamee MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis
Mr Hugh Widdis

Apologies: Mr David Ervine MLA
Ms Sue Ramsey MLA

Meeting opened at 10.05am in closed session.

The Clerk in the Chair.

1. Apologies

Apologies are listed above.

2. Election of Chairperson and Deputy Chairperson

The Clerk opened the meeting and notified the Committee that the two Democratic Unionist Party nominations had been changed to Mr Mark Robinson and Mr Sammy Wilson. Nominations for Chairperson were sought. Mr Close proposed that Mr Maginness take the Chair; Ms Lewsley seconded this. There were no further nominations. The question was put that Mr Maginness do take the Chair. Mr McNamee questioned if this was allowed as Mr Maginness is Chairperson of the Regional Development Committee. The meeting was suspended at 10.10am for the Clerk to seek advice on this matter.

Mr Bell joined the meeting at 10.11am.

The meeting resumed at 10.15am.

The Clerk informed the Committee that it was in order for Mr Maginness to chair the Regional Development Committee and the Ad Hoc Committee - Financial Investigations (NI) Order 2001 if elected. The Clerk put the question that Mr Maginness do take the chair. This was carried unanimously.

Mr Maginness in the Chair.

Nominations for Deputy Chairperson were sought. Mr Wilson proposed Mr Bell take the position of Deputy Chairperson; Mr Close seconded this. There were no further nominations. The question was put that Mr Bell take the position of Deputy Chairperson. This was carried unanimously.

3. Declaration of Interests

The Chairperson reminded members that they were required to declare any specific or other interests related to the work of this Committee. He asked each member to declare any interests. There were none in addition to those published in the Register of Members' Interests, Second Edition, June 2000.

4. Terms of Reference

The Chairperson outlined the Terms of Reference for the Committee.

5. Committee's Procedures

The members agreed to hold future meetings in public session and that voting would be by simple majority as in Standing Order 47(9). It was agreed not to have deputies.

6. Committee's Work Programme

The Committee debated the purpose and changes to the legislation following a brief presentation from the Assembly Research and Library Service and requested a research brief on the comparison of the proposals within the Financial Investigations (Northern Ireland) Order 2001 with other countries.

Action: Clerk

As a result of the extremely tight deadlines set out in the Secretary of State's letter to Lord Alderdice, the Committee agreed to invite written and oral evidence from:

Her Majesty's Customs and Excise
Law Society of Northern Ireland
Northern Ireland Banker's Association
Northern Ireland Human Rights Commission
Royal Ulster Constabulary

The Committee agreed to invite written evidence from:

Association of British Insurers
Criminal Assets Bureau, Republic of Ireland
European Commission Representation in Northern Ireland
General Council of the Bar of Northern Ireland
Institute of Chartered Accountants in Ireland
Irish Council for Civil Liberties
Liberty
National Criminal Intelligence Service
Northern Ireland Association of Citizens Advice Bureaux
Queen's University of Belfast, School of Law
University of Ulster, Faculty of Business and Management

Action: Clerk

7. Any other business

None.

Mr Bell and Mr Close left the meeting at 10.54am.

8. Dates of future meetings

The members agreed that the next two meetings of the Committee would be held on Monday, 8 January 2001 at 2.00pm in Room 135, and Tuesday, 9 January 2001 at 10.30am, in Room 144, Parliament Buildings.

The Chairperson adjourned the meeting at 10.59am.

Alban Maginness MLA
Chairperson, Ad Hoc Committee - Financial Investigations (NI) Order 2001
8 January 2001

MINUTES OF PROCEEDINGS

MONDAY, 8 JANUARY 2001
ROOM 135, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Mr David Ervine MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis

Apologies: Mr William Bell MLA (Deputy Chairperson)
Ms Sue Ramsey MLA

Meeting opened at 2.07pm in public session.

1. Apologies

The apologies are listed above.

2. Approval of draft minutes of previous proceedings

The minutes were agreed and signed by the Chairperson.

3. Matters arising from meeting of 19 December 2000

The Chairperson reminded the members of the Secretary of State's letter to Lord Alderdice outlining that comments should be received from the Assembly no later than 12 February 2001.

4. Evidence from the Royal Ulster Constabulary (RUC)

Evidence on the Financial Investigations (NI) Order 2001 was taken from Detective Superintendent David Thompson and Detective Chief Inspector Alan Mains from the RUC.

2.13pm Mr Ervine joined the meeting
2.16pm Mr Robinson joined the meeting
2.21pm Mr Agnew joined the meeting

5. Evidence from Her Majesty's Customs and Excise

Evidence on the Financial Investigations (NI) Order 2001 was taken from Mr Bill Logan and Mr Donald Toon from Her Majesty's Customs and Excise. It was agreed that they would forward additional information.

Action: Clerk

6. Any other business

The Chairperson informed members that The General Council of the Bar of Northern Ireland would not be able to provide a written submission until after their meeting of 17 January 2001 and the Northern Ireland Association of Citizens Advice Bureaux would not be submitting a written response.

The Committee agreed to ask the Criminal Assets Bureau, Dublin for an oral presentation.

Action: Clerk

7. Dates of future meetings

The next meeting of the Committee is to be held on Tuesday, 9 January 2001 at 10.30am in Room 144 in Parliament Buildings. A further meeting for Tuesday, 16 January 2001 at 10.30am was agreed.

The Chairperson adjourned the meeting at 3.28pm

Alban Maginness MLA
Chairperson, Ad Hoc Committee - Financial Investigations (NI) Order 2001
9 January 2001

MINUTES OF PROCEEDINGS

TUESDAY, 9 JANUARY 2001
ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr William Bell MLA (Deputy Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Mr David Ervine MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Pat McNamee MLA
Ms Sue Ramsey MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis
Mr Hugh Widdis

Meeting opened at 10.38am in public session.

1. Apologies

None.

2. Approval of draft minutes of previous proceedings

The minutes were agreed and signed by the Chairperson.

3. Matters arising from meeting of 8 January 2001

The Chairperson informed members that the Criminal Assets Bureau, Dublin had provided a copy of its Annual Report 1999. This together with written submissions from the Association of British Insurers and the Queen's University of Belfast School of Law were issued to members.

4. Evidence from Northern Ireland Bankers' Association

Evidence on the Financial Investigations (NI) Order 2001 was taken from Mrs Patricia Beckett, Mr Robert Irvine, Mrs Irene Martin, Mr Bill McAlister and Mr Dennis Power of the Northern Ireland Bankers' Association.

5. Evidence from Northern Ireland Human Rights Commission

Evidence on the Financial Investigations (NI) Order 2001 was taken from Professor Brice Dickson and Ms Maggs O'Conor of the Northern Ireland Human Rights Commission. A final written submission will be sent to the Committee.

11.43am Mr Ervine left the meeting.
12.10pm Ms Lewsley and Mr McClarty left the meeting.

6. Evidence from The Law Society of Northern Ireland

Evidence on the Financial Investigations (NI) Order 2001 was taken from Mr John Bailie, Mr Nigel Broderick, Mr Patrick Kinney and Mr John Neill of The Law Society of Northern Ireland. A written submission will be forwarded to the Committee.

7. Format of Report

A draft report will be prepared and distributed to members on Monday 15 January 2001.

Action: Clerk.

8. Any other business

The Assembly Research and Library Service provided a research brief on the comparison of the proposals within the Financial Investigations (NI) Order 2001 with other countries.

9. Date and time of next meeting

The next meeting of the Committee is to be held on Tuesday, 16 January 2001 at 10.30am in Room 152 in Parliament Buildings.

The Chairperson adjourned the meeting at 1.00pm.

Alban Maginness MLA
Chairperson, Ad Hoc Committee - Financial Investigations (NI) Order 2001
16 January 2001

MINUTES OF PROCEEDINGS

TUESDAY, 16 JANUARY 2001
ROOM 152, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr William Bell MLA (Deputy Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Mr David Ervine MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Pat McNamee MLA
Ms Sue Ramsey MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis
Mr Percy Johnston

Meeting opened at 10.37am in public session.

1. Apologies

None.

2. Approval of draft minutes of previous proceedings

The minutes were agreed and signed by the Chairperson.

3. Matters arising from meeting of 8 January 2001

No further information was received from the Criminal Assets Bureau, Dublin.

4. Update of Written Submissions

Members were given an update on written submissions received; 10 organisations provided written submissions.

5. Minutes of Evidence

All members were reminded to return amendments to the Minutes of Evidence by Tuesday, 16 January 2001.

6. Consideration of the Draft Report

The Committee examined the draft Report and it was agreed to carry out an Article by Article consideration of the draft Order.

Article 1 - The Committee had no comments on this Article.

Article 2 - The Committee had no comments on this Article.

Article 3 - The Committee was content with this Article but recommended there be some mechanism whereby the Code of Practice for financial investigators could be amended to include an application for an extension of the time period for compliance with general bank and solicitor circulars.

11.05am Mr Bell joined the meeting.

Article 4 - The Committee had no objections to this Article.

11.12am Mr Robinson joined the meeting.

Article 5 - The Committee had no objections to this Article.

11.17am Mr Agnew joined the meeting.

Article 6 - The Committee engaged in considerable debate about supporting and opposing arguments for Article 6. It recommended that "non-contentious business" should be clearly defined.

11.55am Ms Lewsley left the meeting.

12.12pm Mr McClarty and Mr Wilson left the meeting.

As regards the substance of Article 6 the Committee's majority view was to accept the amendments in the draft Order. To some extent the Committee shared the concerns of Liberty, the Northern Ireland Human Rights Commission and The Law Society of Northern Ireland. It was also cognizant of those concerns and recommended that the Secretary of State enter into full and meaningful consultations before implementation.

Article 7 - The Committee had no objections to this Article.

Article 8 - The Committee had no comments on this Article.

Conclusion

The Committee agreed the format of the draft Report and that it should be amended to take account of today's debate.

7. Agree Motion

The Committee agreed the following motion:

"That the Report of the Ad Hoc Committee set up to consider the draft Financial Investigations (Northern Ireland) Order 2001 referred by the Secretary of State should be submitted to the Secretary of State as a Report of the Northern Ireland Assembly."

Action: Clerk

8. Any other business

None.

9. Date and time of next meeting

The next meeting of the Committee is to be held on Monday, 22 January 2001 at 11.00am in Room 152 in Parliament Buildings.

The Chairperson adjourned the meeting at 12.20pm.

Alban Maginness MLA
Chairperson, Ad Hoc Committee - Financial Investigations (NI) Order 2001
16 January 2001

MINUTES OF PROCEEDINGS

MONDAY, 22 JANUARY 2001
ROOM 152, PARLIAMENT BUILDINGS

Present: Mr Alban Maginness MLA (Chairperson)
Mr William Bell MLA (Deputy Chairperson)
Mr Fraser Agnew MLA
Mr Seamus Close MLA
Mr David Ervine MLA
Ms Patricia Lewsley MLA
Mr David McClarty MLA
Mr Pat McNamee MLA
Mr Mark Robinson MLA
Mr Sammy Wilson MLA

In Attendance: Dr Andrew C Peoples (Committee Clerk)
Mr John Conlan
Mrs Gillian Lewis
Mr Percy Johnston

Apologies: Ms Sue Ramsey MLA

Meeting opened at 11.02am in public session.

1. Apologies

Apologies are listed above.

2. Approval of draft minutes of previous proceedings

The minutes were agreed and signed by the Chairperson.

3. Matters arising from meeting of 16 January 2001

The Committee agreed that a letter received from the Police Ombudsman for Northern Ireland to the Northern Ireland Office and copied to the Committee should be included as a written submission in the Report.

11.03am Mr McClarty joined the meeting.

11.04am Ms Lewsley joined the meeting.

11.04am Mr Agnew joined the meeting.

11.05am Mr Wilson joined the meeting.

11.08am Mr Ervine joined the meeting.

4. Agree draft Report

Mr Bell proposed the Committee should agree the Report subject to minor amendments. This was seconded by Ms Lewsley.

5. Order Report to be printed

Mr Wilson proposed that the Report be printed. This was seconded by Mr Close.

Action: Clerk

6. Any other business

The Committee agreed to place a copy of the Criminal Assets Bureau 1999 Annual Report in the Assembly Library.

Action: Clerk

Members agreed that the Minutes of Proceedings will be agreed and signed by the Chairperson.

The Chairperson concluded the meeting at 11.24am by thanking members and staff for their assistance in enabling the Report to be completed on time.

Alban Maginness MLA
Chairperson, Ad Hoc Committee - Financial Investigations (NI) Order 2001
22 January 2001

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APPENDIX 2

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:
Detective Supt D Thompson
Detective Ch Insp A Mains

1. The Chairperson: I welcome everybody back from the Christmas holidays and wish you all a happy and peaceful new year. We are providing a good example to the rest of the Assembly by starting fresh and early in the year.

2. The main item of business of the Ad Hoc Committee-Financial Investigations (NI) Order 2001 is to take evidence from the RUC and from Customs and Excise. There are two apologies - one from Ms Ramsey and another from the Deputy Chairperson, Mr B Bell. Are there any others?

3. The evidence being given today will be recorded, and, in order to assist the note takers from Hansard, I ask you to address formally other Committee members or witnesses, so that the note taker knows exactly who is speaking and to whom. Also, please ensure that mobile phones and pagers are actually switched off and not left on standby, because apparently if a call comes in, that disrupts the tape recording.

4. I am happy to invite Detective Superintendent David Thompson and Detective Chief Inspector Alan Mains to address us. Thank you, gentlemen. I welcome you here today.

5. We are grateful for the briefing note you sent us. Members have had an opportunity to read it. The Committee is obviously very interested in the subject and we are grateful to you for coming along to assist us in our deliberations.

6. Det Supt Thompson: Thank you very much, Chairperson. The submission I am about to put to the Committee is an extension of the written note. Unfortunately, you received the note late, but I was given this to put together on my return from Christmas leave.

7. The proposals in the Financial Investigations (Northern Ireland) Order 2001 strengthen or amend powers provided for in The Proceeds of Crime (Northern Ireland) Order 1996, and are intended to prevent criminals profiting from unlawful activities. Before examining the proposed new powers, it is important to be aware of those already in existence. The 1996 Order brought Northern Ireland broadly into line with the rest of the United Kingdom 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, which are unique to Northern Ireland. Article 49 permits the appointment of a person who is not a police officer as a financial investigator, provided a County Court judge is satisfied that certain criteria have been met.

8. Once appointed, a financial investigator has his or her own investigation powers. Those are quite detailed and - working on the premise that the Committee may have some knowledge of them - unless otherwise requested, I would propose only to summarise the powers.

9. Essentially, a financial investigator may, by notice in writing, require (a) a person to attend before him or her to answer questions or furnish information; (b) require a person to furnish information; (c) require a person to produce documents; and (d) require a bank to furnish information. Details requested must of course be relevant to the investigation for which appointed.

10. 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 Her Majesty's Customs and Excise. Suitable police officers or customs officers can also be appointed as financial investigators, although they do not command the same range of powers as are given to non-police or customs officers. Their powers are confined to those conferred by paragraphs 3 and 3A of schedule 2 of the 1996 Order, as amended.

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

12. Two other noteworthy changes have been proposed. First, 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. Secondly, in paragraph 3 of schedule 2 of the 1996 Order "the business of banking, (the bank)" becomes "relevant financial business: (the respondent)." The amendment widens the application of the requirements to include all relevant financial business as defined by the Money Laundering Regulations 1993. It also increases the level of information that must be furnished to the investigator.

13. In terms of usage of the financial investigation powers between 26 August 1996 and 31 December 2000, financial investigators were appointed in respect of 28 cases; 97 notices to attend interview were issued; 781 notices to produce material were issued; 23 general bank circulars were issued, these resulting in the identification of 1,232 accounts. Seven persons have been prosecuted with failing to comply with financial investigator requirements.

14. It is the RUC's submission that, since their introduction in 1996, financial investigation powers have been used to good effect. They are only used in selected cases, following a determination that the appointment of a financial investigator could substantially enhance the investigation. The criteria for appointment, as previously indicated, must satisfy a County Court judge.

15. An example of their assistance is the identification of 1,232 previously unknown accounts connected to those persons under investigation. 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, the ability to require a solicitor to confirm if a person was his/her client and to obtain details of transactions carried out on his or her behalf in respect of certain types of businesses should prove beneficial.

16. The ability to have selected police or customs officers appointed as financial investigators 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.

17. The effects of drug trafficking, and acquisitive crime of a highly profitable nature, must not be underestimated. Their impact on society in general and on 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 advisors, those ill-gotten gains can often be hard to identify and retrieve. Therefore, it is important for law enforcement to have the necessary tools to combat such activity. This proposed new legislation will go a considerable way to meeting those needs.

18. The Chairperson: Chief Inspector, do you wish to add to that?

19. Det Ch Insp Mains: I will be here for question and answers from an operational viewpoint.

20. The Chairperson: Thank you very much, Superintendent. You talked about article 49, which provides additional investigative powers and for the appointment of a financial investigator. You said that that was unique to Northern Ireland. Is there any reason for that, or how did that arise?

21. Det Supt Thompson: It originates from the previous Northern Ireland (Emergency Provisions) Act, when an authorised investigator, which is very similar to a financial investigator, could be appointed for a terrorist finance investigation. The powers in article 49 emanate from that. I should say, on appointment in Northern Ireland, a financial investigator's powers do have a remit throughout the rest of the United Kingdom; they are not solely confined to Northern Ireland.

22. The Chairperson: In your experience, has the appointment of a financial investigator been profitable, in terms of advancing investigations into the proceeds of criminality?

23. Det Supt Thompson: Absolutely. As indicated, financial investigators are only used in a select number of cases. Obviously, in investigations where the police have, or can gain, the evidence without the assistance of a financial investigator, we would not go to a County Court judge to seek an application for appointment. It is most unlikely that a County Court judge would appoint a financial investigator if we could advance the case without such assistance. We must satisfy the criteria, and satisfy the judge that the investigation could be enhanced by his or her assistance.

24. The Chairperson: I have one final question before throwing it open to the other members of the Committee. What sort of evidence would you need to have in order to satisfy the County Court judge?

25. Det Supt Thompson: At this time, only a financial investigator can apply for a general bank circular. In circumstances in which we are pursuing a proceeds of crime investigation, it is important to be able to trawl the banks, where accounts may be hidden, for information. We can only do that with a financial investigator. That is an example of when we go to the judge to seek an appointment.

26. The Chairperson: What evidence would you have to present to a County Court judge if you want to investigate a man's affairs?

27. Det Supt Thompson: The judges, as you can well imagine, ask us very detailed questions. We have to go into considerable depth on what we have already done in the investigation, what evidence we have gleaned so far, and what is absent in the evidence trail to try and bring the individual or individuals to justice. It is very detailed and we are accountable to the judge.

28. The Chairperson: Is this done in private?

29. Det Supt Thompson: Yes. It is generally done in chambers.

30. Mr S Wilson: I have a couple of questions for Mr Thompson. First, you identified 1,232 previously unknown accounts. When those accounts were identified, were the proceeds seized or confiscated, or is there a further procedure? In how many cases have confiscation orders been imposed by the courts?

31. Det Supt Thompson: There is a further procedure. A bank may identify an account simply by the name and address of the account holder. To get details of that account, a production order has to be sought from the courts. That depends on whether there is anything in the account at that time, because money can be transferred in and out in a short space of time.

32. If we had evidence on which we could arrest and charge an individual with a serious crime under The Proceeds of Crime (Northern Ireland) Order 1996, we would be in a position to seek a restraint order on that account, if funds were in it. On conviction, we would then seek a confiscation order against the individual concerned.

33. Mr S Wilson: In how many of those 1,232 accounts has a restraint order and then a confiscation order been made?

34. Det Supt Thompson: I do not have that information with me today.

35. Mr S Wilson: That brings me to my second point. I would have liked to know how effective it was. It is one thing to identify an account, but there might be a legitimate reason why that account is held. In relation to the Order that the Committee is examining, are there additional powers that should be included in it to make more effective your investigations into crimes with a financial aspect?

36. Det Supt Thompson: Overall, there is much legislation that allows the police to conduct their investigations. The difficulty that we invariably encounter is finding that final piece of evidence proving a criminal offence. Currently, confiscation can only take place following conviction, and that, as you may be aware, is why the National Confiscation Agency may be created in the near future. Although it is called the National Confiscation Agency, to some degree that is a misnomer, because it will deal with civil forfeiture cases. It will not be necessary to secure a conviction. Confiscation will occur on the balance of probability that an individual's assets are derived from their criminal activity. Therefore, the proposed new powers enhance the legislation for criminal matters by extending the previous general bank circular to all the relevant financial businesses under the Money Laundering Regulations 1993. That is very useful.

37. Also, for the first time, it will allow us to issue a general solicitor circular. As you are probably aware, organised criminals are capable of receiving professional advice - be that from accountants, solicitors or independent financial advisors. They have the wherewithal to seek assistance from these individuals. In case anyone thinks that I am castigating people in those particular professions, I should say that many people work innocently on behalf of a client.

38. Det Ch Insp Mains: With regard to the figures quoted by Mr S Wilson, it is not uncommon for an investigation, under the general bank circular, to establish one, two, or three people working in a criminal partnership who have thirty or forty accounts. They are obviously trying to spread their assets. While there is a figure of 1,300 - Interruption

39. Mr S Wilson: They are not all individuals.

40. Det Ch Insp Mains: That is correct.

41. Mr Close: I want to follow up the last reply to Mr S Wilson. There were 1,232 previously unknown accounts and seven people were prosecuted. That is about 176 accounts per person.

42. Det Supt Thompson: No. They do not relate to each other.

43. Mr Close: However, the bold statistics show that 1,232 previously unknown accounts were discovered. Are you saying that there were seven prosecutions in the same period?

44. Det Supt Thompson: There were seven prosecutions against people failing to comply with the requirements of financial investigators. That could be a requirement to appear at a certain time and place, which they failed to do, or they may have failed to furnish requested information. It is not necessarily connected to the accounts. Indeed, it is not related to the accounts, because, by and large, those accounts were provided by the banks and building societies, and they have never failed to comply with a requirement.

45. Mr Close: Are there any direct statistics available to respond to Mr S Wilson's question about what those 1,232 accounts actually produced?

46. Det Supt Thompson: There may be, but I do not have them.

47. Mr Close: Is it possible to supply the Committee with details of the assets that were confiscated as a result of those accounts?

48. Det Ch Insp Mains: Many of our current investigations are protracted. Investigations into money laundering and similar offences take a long time to complete. During those investigations we issue general bank circulars, and those are probably the statistics that we are discussing. It would be necessary to wait for several trials to conclude before it was possible to obtain accurate figures.

49. In answer to your question - and the Committee must understand this - we are talking about a mindset against the criminal fraternity. They continually try to be one step ahead of us when it comes to money laundering.

50. Mr Close: Until we get to the civil forfeiture position, we are scratching on the surface. The proverbial dogs in the street could identify and point out individuals, and would have question marks over how they can afford such a lifestyle. Any of us in our towns and cities throughout Northern Ireland could effectively do that and pose the question: how can they manage to have such a lifestyle because x, y or z? That is one example.

51. For the other example, one only has to look at the drug scene. There are obviously numerous people profiteering and benefiting from the drug scene. The current legislation is effectively ineffective and if it were cracking down on drug trafficking, we would not be seeing these sort of statistics. We would not be seeing the increase of drug abuse that is destroying our society and the increased numbers of confiscations. There must be more coming in to have such a large volume being confiscated. In many respects, we are losing the battle. I hope you can correct me and tell me I am wrong.

52. Det Supt Thompson: The vast majority of criminals in Northern Ireland are what we would class as "spend as you go" criminals. In other words, they get money in, and it quickly goes out to drink, gambling, fast cars and holidays. The money goes through the system very quickly. They virtually have no assets when caught and you can only confiscate if someone has assets. It is not necessarily the picture that you portray. As a previous head of the RUC Drug Squad, I can assure you that when individuals who have been caught for drug trafficking offences have assets, we will then seek confiscation. But we can not seek what a person does not have.

53. In addition to confiscation, if an individual caught in possession of cash at the time he is caught with drugs, that money is generally forfeited under section 27 of the Misuse of Drugs Act. It is a straightforward forfeiture, and we do not have to go through a procedure of doing an investigation to satisfy a confiscation order. When some of them are caught with for example, £27,000 cash and 3 or 4 kilograms of cannabis, that cash would simply be forfeited at the trial.

54. Mr Close: What sort of connections are made with Social Security computer data, for example? When people are on the dole, everybody knows what they are getting per week or per month because the figure is fixed. When those same individuals are driving round in flashy cars worth £15,000 to £20,000 there are questions to be asked. Yet it is happening and to the man, or proverbial dog on the street, their only source of income is the dole. Are there computer checks to provide the data that this individual is registered as unemployed and this is his only source of income, so that questions can be asked on how he gets x, y or z?

55. Det Supt Thompson: Of course that happens, but we have got to be investigating a criminal offence, and have to get the evidence to prove the criminal offence before we can satisfy the courts that a confiscation order should be put into effect. The difficulty is to get that evidence, although I know what type of individuals you are talking about.

56. Ms Lewsley: Obviously there is co-operation between yourselves and Customs and Excise. Can you explain the difference on how you will maximise the potential with the powers you will get in the draft Order?

57. Det Supt Thompson: As regards this particular draft Order, Customs and Excise were not previously involved in the application of this particular legislation. Only a police officer could apply for the appointment of a financial investigator. For the first time it now allows a senior Customs and Excise officer to apply for the appointment of a financial investigator, who is not a customs officer. Equally it allows for the appointment of a suitable customs officer as a financial investigator, with reduced powers. It is difficult to speculate on how Customs and Excise will use these powers. Perhaps my colleague from Customs and Excise will be able to inform the Committee about that.

58. In terms of what assistance we provide to Customs and Excise and vice versa, we work very closely as regards proceeds of crime investigations, particularly in those crimes which come under the remit of Customs and Excise. These could involve the importation of drugs or any other illicit goods, or the smuggling of goods such as alcohol, petroleum and tobacco products to avoid excise duty.

59. Ms Lewsley: What mechanisms will you be adopting to ensure that the powers contained in the draft Order will be exercised fairly and with due consideration to human rights?

60. Det Supt Thompson: That is fairly evident given that with the overall number of investigations, we have only sought 28 applications over a three-and- a-half year period. We are quite discriminating in the occasions when we seek appointments. As indicated before, we have to satisfy the County Court judge on certain criteria for the appointment of a financial investigator.

61. Det Ch Insp Mains: It is also fair to say that we have a mechanism within our own particular department to apply certain criteria before deciding to go forward to the County Court judge.

62. The Chairperson: Is it a type of last resort power?

63. Det Supt Thompson: It very much depends on the evidence we have gleaned at a particular point in the investigation. In certain circumstances, after examining the evidence, we would determine that the investigation could be enhanced by the appointment of a financial investigator. Conversely, we might determine that there would be no merit in such an appointment.

64. Det Ch Insp Mains: Even though in some circumstances we would feel that an investigation could be enhanced by an appointment we would then have to go forward together to prove that to the County Court judge. We really have to get it right. There is a safety net throughout the process.

65. Det Supt Thompson: I would stress to the Committee that we would not approach a judge on a wing and a prayer. There is very detailed questioning by the County Court judge, which is right and proper, as to why an appointment should be made. Ultimately, the judge would be responsible for the appointment should any review of that appointment take place.

66. The Chairperson: Have any applications you have made to a County Court judge been refused?

67. Det Supt Thompson: No.

68. Mr McClarty: What degree of co-operation exists between yourselves, other police forces within the UK, and the Gardaí?

69. Det Supt Thompson: We have excellent relationships with all UK police forces and the Garda Síochána, and we work with many forces depending on where investigations lead us. These relationships are not confined to the British Isles; they extend to European law enforcement agencies and to other agencies throughout the world. We have to operate under certain mechanisms. As one of 52 UK police forces, a lot of our work has to be routed through the National Criminal Intelligence Service because that is the method adopted in the UK for channelling certain enquiries to Europol or Interpol. We cannot go to those organisations directly.

70. Mr McClarty: If the proceeds of criminal activity are within the UK or the Republic of Ireland then the draft Order will make it easier to seize those assets. How difficult is it to seize offshore assets?

71. Det Supt Thompson: It depends on where the offshore assets are located and what agreements the UK Government has with those jurisdictions. In some places it is absolutely impossible to seize assets.

72. Mr Ervine: I would preface my comments by wishing you all the best and greater productivity in the future. Hopefully the legislation will be advantageous to you.

73. As I assess the situation at the moment, if I am "Mr Big" - the drug dealer - but I do not actually handle drugs or place myself in the company of drug dealers, then you are unlikely to catch me. In fact, even though we are concerned about achieving the removal of finances that were gained by crime, we effectively need a crime in order to carry out the investigation properly. Is that correct?

74. Det Ch Insp Mains: That is correct.

75. Mr Ervine: What do you do if someone says "I got a bet up on the horses, and of the £5,000 that I had when I had those drugs only £500 of it was related to those drugs"? How do you prove him wrong, if you need a crime to deal with the proceeds of crime - which may be more than one crime?

76. I will roll all my questions into one because I fear that they may be interlinked. You have mentioned that you have a department, how convinced are you that your department will achieve the resources that it requires? Can we expect a commentary in the future that you are perhaps only going to do two-thirds of the things you could do, on the basis that you are inundated? It is a bit like the parking tickets situation. I am conscious that there are things that you cannot say at a public meeting, but at what point are we dealing with political policemen?

77. That brings me to the second point. As head of the Drug Squad, Mr Thompson, this will be an interesting question for you. Are you absolutely convinced that you are the sole arbiters of whether you prosecute or go for those people whom you believe are involved in criminal activity? Within the police service, are you the sole arbiters of that - the experts? That is why you have that department.

78. Det Supt Thompson: I was previously head of the Drug Squad. The department which operates this legislation is the Financial Investigation Unit, of which Mr Mains is head. I am head of the overall Economic Crime Bureau, which consists of a number of units, one of which is the Financial Investigation Unit.

79. That unit does not investigate the criminal offences per se. Those investigations are carried out - for instance, if it is a drug trafficking offence - by drug squad or drugs liaison unit personnel attached to subdivisions. If it is major crime such as armed robbery, extortion, or kidnapping, those investigations are carried out by regional CID. Our work is referred to us by regional heads of CID, the head of Drug Squad or by other specialist units who conduct the principal investigation.

80. Our work is to conduct the financial investigation and ascertain the assets that an individual has for the purpose of providing a financial profile and statement to the investigating police officers of the main criminal offence - to say "This is the amount of assets that your target has". It is up to them to prove the criminal case to the satisfaction of the courts, and it is then our function to provide the necessary material for the confiscation order to be applied for.

81. Mr Ervine: On the basis that everything is referral, is there no likelihood of proactivity from your department?

82. Det Ch Insp Mains: There were quite a few questions in your overall deliberation. If I could first take you back, and then I will come to what you have just asked. Regarding the £5000 through the bookmakers, there is a certain trend within the laundering of money and proceeds of crime, and you would be naïve to think that we do not know 99% of them. In fact, it is probably one of the few situations where we are well ahead of what is actually going on in terms of how they are getting rid of their money. If an individual says "I won £5000", we can prove that - potentially there is a whole line of enquiry there.

83. Secondly, I understand what you are trying to say about "Mr Big", the guy who does not touch drugs or anything but perhaps is getting the proceeds. We are dictated to by crime and predicated offences - by somebody being charged. But there is also, bear in mind, an offence here of money laundering, which is an offence in itself. It is very difficult to prove, but it is achievable.

84. As Det Superintendent Thompson said, the RUC responds to and acts on the tail end of what the detectives on the ground do. The RUC is also proactive in investigating the major criminals and the laundering of their proceeds.

85. Mr Ervine: I wish you well and I will watch your productivity levels with great interest.

86. The Chairperson: The draft legislation permits a police officer or a Customs and Excise officer to act as a financial investigator, albeit with less power. Why should they have less power and are you satisfied that members of the RUC could act as financial investigators with reduced powers?

87. Det Supt Thompson: It is clear why the RUC and Customs and Excise officers will not have the full powers that a person appointed as a financial investigator will have. Non-police or Customs and Excise officers have the power to require a person to appear at a time and place and provide information. The RUC and Customs and Excise officers in Northern Ireland have to work under the Police and Criminal Evidence Order, whereas a financial investigator who is not a police or customs officer does not have the same imposition.

88. A person is obliged to do certain things for a financial investigator and the RUC will never have those powers because it has to work under confined legislation. The RUC lives with that and it is beyond our expectations to have the same powers as a non police or customs officer.

89. The Chairperson: Thank you for attending this afternoon. The Committee session has overrun, but it has obeyed the spirit of the time limits. You say that your submission was late, but given the rushed nature of the process and the intervention of the Christmas and new year holidays, it was well done.

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".

290. Prof Dickson: Absolutely, and I am on record as having said that I want the Human Rights Commission to help make Northern Ireland a better society. We share your goal of a more crime-free, paramilitary-free, safer environment for everyone who lives here. Of course we desire that, but we also share the Secretary of State's desire for Northern Ireland to be a model for the world with regard to the protection of human rights. That is why the Human Rights Commission has been established by statute, as has happened in many other countries around the world - and not just in countries emerging out of conflict, but in well established Commonwealth countries such as Canada, New Zealand and Australia.

291. We see it as our duty to draw the attention of decision makers, yourselves included, to the possible human rights implications of certain legislation, but always within the framework of having to strike a balance between the rights of individuals and the rights of society. Yes, I share with you the goal of making Northern Ireland a crime-free society. One could do that quite easily by making it a police state, if you like, but that would be too high a price to pay. One must always strike a balance and, as we have said in this paper and as I have said orally, so much depends on how powers are implemented in practice rather than on how they read on paper. On balance, there is not a lot in this that worries us, but we draw the Committee's attention to a few potential difficulties.

292. Mr Close: I thank you for that. I do not think anyone here would be looking for a police state, and I want to put that clearly on the record. I am concerned because I see this proposed legislation as a precursor to a new proceeds of crime bill, or whatever. The South has the Criminal Assets Bureau, and I shudder to think what the reaction of the Human Rights Commission would be to that if it has these concerns over the Financial Investigations Order. I would like you to reassure me that we are not going to be running up against an absolute brick wall if we try to build upon the 2001 Order.

293. Prof Dickson: I am not totally au fait with the Republic's legislation on this, but I am aware that at a recent conference in Dublin various concerns were expressed by high ranking politicians and lawyers about the compatibility of the legislation on the Criminal Assets Bureau with the European Convention on Human Rights. When the Republic eventually gets round to incorporating the European Convention on Human Rights, the law on criminal assets may well have to be amended to make it compatible.

294. Mr McNamee: I am not against the concept of confiscating the proceeds of criminal activity, and I do not think anyone on the Committee would be. We must not be blinkered on the issue of legislation which is directed towards gathering information that will enable the proceeds of criminal activity to be confiscated.

295. You stated that this lies not in the actual powers but in the exercise of those powers and in how other individuals are affected by them. One may wear blinkers and think that it is fine to investigate a person who is suspected of being involved in criminal activity, but we have to consider the implications for other individuals.

296. We have already heard about the difficulties bank officials face when, for instance, issued with bank circulars. They may be providing information on an individual other than the one on whom the information is being sought. If information is being sought on a John Smith, then information on every John Smith will be released given that this Financial Investigations Order will extend those powers of trawl to other institutions, police officers, Customs and Excise officers, financial investigators and solicitors.

297. In situations where information will be acquired in the course of those trawls, what is your view on the number of people who will have absolutely no connection with the individual being targeted? What is your view on the large amount of information that will be assembled on a particular name and whether that information is manageable? Much of it will be relevant to the individual being targeted. However, what is your view on the number of other people whose information will be disclosed and the potential effect of that?

298. Prof Dickson: There is the danger that you identify, but it can be avoided by careful work by the financial investigators. When they are asking questions of financial institutions or solicitors, they ought to be able to identify in specific detail the person about whom they are asking questions. Therefore there should be little risk of other John Smiths having their private details divulged.

299. Under existing law everyone has a legal obligation to report a crime. If one knows that an offence has been committed, one has a duty to report that. That already goes some way towards protecting society against the illegal money laundering activities that are being carried out through financial institutions, for example.

300. Ms O'Conor: The Proceeds of Crime (Northern Ireland) Order 1996 specifies that anybody who has knowledge or a suspicion that the proceeds of crime are involved in a particular activity has an obligation to report that to the relevant authorities. Therefore it appears that the extension proposed covers something that is already covered.

301. The Chairperson: Leaving aside the problem with solicitors, you do not have a problem or any difficulty with what is proposed. Is it fair to say that your submission highlights potential difficulties in practice?

302. Prof Dickson: Yes, except that it is not just in relation to solicitors that we have reservations.

303. We have serious reservations, as dealt with in paragraph five of our submission, about the overall compatibility of the legislation with the European Convention insofar as the new Order would permit assumptions to be made about where money has come from when a person has been convicted of relevant offences. Assumptions can be made about where that money has come from and it can be confiscated even though it may have nothing to do with any crime and may be property belonging to a member of the family of the person who has been convicted rather than to him. The McIntosh case in Scotland illustrates the dangers here, and the Government need to be aware of them.

304. The Chairperson: Does that comment relate to article 9 of the Proceeds of Crime (Northern Ireland) Order 1996?

305. Prof Dickson: Yes.

306. The Chairperson: Is there a cloud looming in relation to the application of article 9 as a result of the McIntosh case?

307. Prof Dickson: Yes, and also as a result of the incorporation of the European Convention into our law by the Human Rights Act 1998.

308. The Chairperson: While it has not been challenged here in our courts, is there the potential of a challenge along the McIntosh lines?

309. Prof Dickson: I think so.

310. The Chairperson: That does not specifically relate to the proposed draft legislation here, does it?

311. Prof Dickson: No, it relates to the original Order.

312. The Chairperson: Does the power to obtain a general bank circular exist in Great Britain? Do the police or Customs and Excise have that power there?

313. Prof Dickson: I do not know.

314. The Chairperson: Article 49 of the Proceeds of Crime (Northern Ireland) Order 1996 allows for the appointment of a financial investigator. Does that power exist in Britain? My understanding is that it does not exist in Britain. It is unique to Northern Ireland. Is there any similar power there to that?

315. Prof Dickson: I share your understanding that that provision is unique within the United Kingdom. I do not think that there is a comparable power even under the anti-terrorist laws in Great Britain.

316. The Chairperson: You suggested in your submission that it would be helpful if the Code of Practice was amended in the light of the proposed draft legislation. Do you have any specific amendments to propose, or is it too early to suggest any proposed amendments to the Code of Practice?

317. Prof Dickson: I cannot put forward specific suggestions because we could not get a copy of the Code of Practice prior to today's meeting.

318. The Chairperson: In general terms you are saying that the Code of Practice should be looked at in the light of the draft legislation to see if amendments would be appropriate.

319. Prof Dickson: I think that should happen.

320. The Chairperson: In relation to the general solicitor circular, you have said that schedule 2, paragraph 4 of the 1996 Order preserves legal professional privilege. If a solicitor decides not to comply with the Order on the grounds of professional privilege between himself and his client, is that reconcilable? Is this something that could cause difficulty? If you have a means of preserving professional privilege, how can you then have an Order which, on the face of it, seems to conflict with that professional privilege?

321. Prof Dickson: Representatives of the Law Society could better explain this. However, I understand that there is a difference between the existing confidentiality requirement between lawyer and client and legal professional privilege. The former goes much further than the latter. Under the cover of legal professional privilege, one is only entitled to keep back information in certain very confined situations. Otherwise the duty of confidentiality can be breached.

322. It may be that legal professional privilege does not protect the information which a financial investigator is seeking in non-contentious business such as house conveyancing or the drafting of wills.

323. The Chairperson: What do you mean by non-contentious business?

324. Prof Dickson: I mean business that has nothing to do with a particular dispute. For example, you could engage a solicitor to deal with conveyancing just as you might engage a building society employee. That you have a solicitor, rather than someone else, to do the job might be accidental.

325. The Chairperson: If you engage a solicitor to deal with a legal action against a third party, is that regarded as contentious business?

326. Prof Dickson: Yes.

327. The Chairperson: In that situation, would professional privilege be activated?

328. Prof Dickson: I am not an expert on the law concerning professional privilege. I understand that it bites on the type of relationship in which there is a good reason for a client to have a close and honest relationship with his solicitor, and that that would not obtain in situations in which non-contentious business was being conducted.

329. Mr S Wilson: The more I listen to Prof Dickson, the more I am convinced of my original assertion about this submission. There are two references in the submission to the Code of Practice's probably needing to be amended. You think that the amendment in article 4 should only come into force after the Code of Practice governing the exercise of powers for financial investigators has been amended.

330. In your response to the Chairperson you said that you could not tell the Committee what amendments are required because you do not yet have a copy of the Code of Practice. How on earth can you know that the Code of Practice needs to be amended if you have not seen it? Is this not more evidence of the flavour of your submission?

331. The bankers - and they have to work with this on a day-to-day basis - said that they could not think of any amendments. You have not seen the Code of Practice yet you think that it needs to be amended. Can you explain that to us?

332. Prof Dickson: I will try to. I was assuming that if changes were being made to the substance of the law, the implementation of which the Code of Practice is designed to give guidance on, it would logically follow that the Code of Practice would need to be looked at, and probably amended, to reflect the changes to the substance of the law.

333. Mr S Wilson: With respect, I would have thought that one of the prerequisites for making any judgement like that would be to look at the current wording of the Code of Practice to see how specific it is. You are telling us that you have not even seen it yet you are saying that it needs to be amended. It comes back to my original assertion that your submission appears to be more interested in guarding what you see as the rights of the people being investigated rather than in ensuring that the proceeds of crime are found by the relevant authorities so that criminals cannot use them. The fact that you said at the start that you were not convinced of the need for this legislation bears that out. If there is one person in this country able to hold on to the proceeds of illegal activities without the police or Customs and Excise being able, under the current law, to get at that money, we should have legislation to deal with that. It is not a matter of there being an upsurge in crime or not. You seem to want to be convinced that we have a crime wave before we act. You also want all these safeguards built in regardless of whether you have read the Code of Practice. I am amazed that this attitude is being adopted by the Human Rights Commission. However, given the decisions made yesterday about criminals - also based on human rights legislation - perhaps I should not be surprised at the apparent favour being shown towards wrongdoers.

334. Prof Dickson: I think that that is a misinterpretation of my written and oral presentations. One of the reasons that we headed the written presentation "provisional" was we had not had sight of documents such as the Code of Practice. You will understand that we were asked to make a submission to the Committee at relatively short notice. There have also been the Christmas and new year breaks. It is difficult to track down these documents. When we track down the Code of Practice we will scrutinise it. When we submit our final views to the Committee, we will say clearly whether or not there should be amendments to the Code of Practice.

335. The Chairperson: In conclusion, the bankers indicated that they were reassured by the Code of Practice and that it was a very important element in their dealing with the implications of the 1996 Order. To be fair to the bankers, I do not think that they have considered the matter of amendments. They neither sought them nor ruled them out.

336. Ms Ramsey: Just to be fair to the Human Rights Commission, the bankers had an input into the consultation process but it did not.

337. The Chairperson: That is true.

338. I thank you for coming this morning. We have had a very useful exchange of views. I also thank you again for your very helpful written submission.

339. Prof Dickson: Thank you, Mr Chairman.

MINUTES OF EVIDENCE

Tuesday 9 January 2001

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

Witnesses:
Mr J Bailie )
Mr N Broderick ) The Law Society of
Mr P Kinney ) Northern Ireland
Mr J Neill )

340. The Chairperson: Mr Neill, your colleagues and you are very welcome to this meeting of the Ad Hoc Committee. We look forward to hearing your views on the matter before the Committee - the draft Financial Investigations (Northern Ireland) Order 2001.

341. As you know, the Secretary of State has, under the Northern Ireland Act 1998, referred this matter to the Committee for our consideration. We are anxious to hear from the Law Society, particularly as article 6 will apply to solicitors. We are keen to hear your views on the other draft articles too. Would you like to introduce your colleagues?

342. Mr Neill: Thank you very much for this opportunity to appear before the Committee. We heard the previous witnesses mention the short amount of time that was available for preparation, but we do have a written document, which I propose to read from and hand in. Although it is an interim document, it will bring the matter forward to a certain extent.

343. We represent the Law Society of Northern Ireland, a professional body which regulates and represents just under 2,000 practising solicitors in this jurisdiction. My name is John Neill, and I am a solicitor in a private practice firm with offices in Belfast and north Down. I am the society's current president. I am accompanied today by two other members of the governing council of the society, Mr Patrick Kinney, who has an interest in human rights and is a partner in a private practice firm with offices in Belfast and Newry, and Mr Nigel Broderick, an experienced criminal practitioner in a firm with offices in Belfast, Newtownards and Armagh. We are also joined by Mr John Bailie, the society's chief executive and secretary and, as such, our senior policy adviser, who is also a qualified solicitor.

344. Given the limited time available to everyone, our purpose today is to address the main policy issues raised by the proposed Order. Following this meeting, we intend to provide the Committee with a formal note which will record the main points made in this presentation and deal with any other points that the Committee may wish to raise with us today. Due to time constraints, the Committee may find it most beneficial if we concentrate upon those aspects of the proposed Order on which we can offer some experience and expertise from a professional perspective.

345. In essence, these provisions will impinge on the relationship between any client and his or her solicitor. For ease of reference I refer you at this stage to article 6 of the Order and the comments in the Explanatory Document, with which you are all familiar.

346. I want to begin by making one point clear. The Law Society of Northern Ireland does not condone the activities of criminals, nor do we have any interest in affording protection to drug barons, terrorists or racketeers. We therefore understand and appreciate the objectives and sentiments which lie behind the proposed legislation.

347. However, we are obliged to draw attention to the right of every citizen to due process and equal treatment before the law. The reservations we have about these proposals are relevant to every Committee member and his or her constituents. The proposed Order will further encroach upon the principles of solicitor/client confidentiality and legal professional privilege. These principles do not afford privilege to lawyers - they provide vital protection to individual citizens. Solicitor/client confidentiality and legal professional privilege are of a different order to other forms of confidentiality not recognised by law.

348. 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 to do so. 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 about encroachment on lawyers' territory.

349. It is the right, which each of you has, 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 interests. The principles do not provide carte blanche for criminals.

350. 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, therefore, 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."

351. 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, or for the selection of Northern Ireland for special treatment in this respect, has been presented to date. 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.

352. A significant extension of these powers is now proposed by the Government, and it seems clear that the level of protection generally and against abuse of the additional powers to be conferred on the investigating authorities is less than that given by the safeguards which apply at present under the Proceeds of Crime Order. For example, I 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 infringe- ments 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.

353. 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 in 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 that exercise might be challenged or issues of legal privilege resolved.

354. 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 an exchange of information and experience about the operation of the present provisions and evaluation of any problems and the exploring of alternative means by which the concerns of the authorities might be addressed.

355. As it is, the Northern Ireland Office has produced an Order about which, for the reasons I have mentioned already, we have reservations.

356. We are concerned that these measures are to be limited to Northern Ireland and will be taken forward by way of the Order in Council procedure. 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 that would apply to a Westminster Bill. The decision to legislate by way of this unsatisfactory method is perhaps harder to understand in the light of the fact that the Government have signalled an intention to bring forward during this parliamentary session a Westminster Bill, which will deal broadly with the same issues. There is a reference within the Explanatory Document to a consultation exercise on the report Recovering the Proceeds of Crime. The Government propose to legislate in respect of that report. It is understood that it appears viable for that Bill to be used to deal with any legislative amendments for Northern Ireland which are considered necessary in due course.

357. It seems inappropriate that, without any persuasive justification, the Government propose 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 consider 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 suggest that the Government should make this clear.

358. Our other main concerns are twofold. First, 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. Secondly, the effect of the amendments to the 1996 Order now proposed appears to be to make client information available to the financial investigator retrospectively. On commencement of the proposed Order, it will be possible to have an inquiry on a transaction which was entered into by an individual prior to the introduction of this legislation on the basis that his/her confidence with his/her solicitor would be respected and preserved by law.

359. In conclusion, it may be helpful to summarise for the Committee the position of the Law Society of Northern Ireland at this stage, pending discussions with the Northern Ireland Office and preparation of a further detailed submission as part of the current formal consultation progress. We invite the Committee to consider supporting the position of the Law Society in the following respects: first, to acknowledge the importance of safeguarding the public interest in the principles of solicitor/client confidentiality and legal professional privilege; secondly, to have regard to the importance of those principles, to affirm that they should not be interfered with lightly without careful consideration of other options or without the provision of effective safeguards; thirdly, to accept that any legislation on the lines proposed should not be carried forward or, at a minimum, implementation of the provisions affecting solicitor/client confidentiality and legal professional privilege take place before full and meaningful consultation between the Northern Ireland Office and the Law Society. Furthermore, if and when legislation on these matters is brought forward, it should not be by way of Order in Council. Finally, legislation on these matters should not be applied to Northern Ireland on a selective and experimental basis.

360. I hope that the Committee finds these observations of some interest and value when assessing the proposed Order. These reservations are not being expressed in the interests of lawyers. They are in the interests of anyone who needs to consult a lawyer, secure in the knowledge that his confidence will be respected.

361. The Chairperson: The 1996 Order appears to protect professional privilege. Do you consider this proposed amendment as conflicting with that protection of professional privilege?

362. Mr Kinney: One of the concerns we have about the provisions of the 1996 Order is that the definition of legal professional privilege is not the widest definition of that term. It is confined to the privilege that attaches to High Court proceedings. The definition of legal professional privilege, as it has evolved over centuries of judicial consideration, is much wider. It applies to advice supplied by a lawyer to his client and the circumstances in which a client should approach a lawyer to seek such advice. The protection afforded by the 1996 Order is not complete. This draft legislation goes further in that it requires specific information from solicitors which may well conflict with that principle of privilege and certainly with the principle of confidentiality.

363. The Chairperson: Can you explain the demar- cation between professional privilege and confidentiality?

364. Mr Kinney: It is difficult to find an accurate and precise demarcation between the two areas. We have a professional obligation of confidentiality towards our clients in all respects. When people consult a solicitor, they should feel that they have the right to consult that solicitor and have none of their business divulged to anyone. As Mr Neill mentioned, there are restrictions, both professionally and legally, on that right to confidentiality or privilege. For example, if there were any question of furthering criminal intent, that would not be covered by privilege or confidentiality. Where the precise boundary between confidentiality and privilege lies is not clear. That is why so much of this has come before the courts at all levels, up to the House of Lords, and it has been considered judicially on many occasions. What is clear is that when someone consults a lawyer and seeks advice, information given in relation to the seeking of that advice is privileged information.

365. Mr S Wilson: Let us imagine that a solicitor was with a client and that during the course of the discussion it became clear that the client was seeking advice on an illegal activity that he had been involved in. Let us say that it was something about money and that it became clear to the solicitor that this money had been obtained illegally. Are you obliged, as the bankers told us they are obliged, to report that immediately to the police?

366. Mr Kinney: My understanding is that, under the terms of the 1996 Order, if I have any suspicion regarding any transaction that comes to me in the course of my business, I have an obligation to report it. A provision within the Order also says that if legal professional privilege applies, I must not disclose it. However, in circumstances such as you have given, where there is a clear criminal intent and no doubt about it, then it should be disclosed.

367. Mr S Wilson: I suppose confidentiality has already been breached anyhow. Is what we are looking at not simply an extension of that, namely that the police or Customs and Excise will be able to seek to obtain information? On quite a number of occasions, Mr Neill spoke about a speculative trawl. Our understanding from both Customs and Excise and the police - the police are the ones who have been exercising the power so far - is that this is not speculative at all. They must have built up a case and they must have come to the point where they know that they need further information. They must then convince a County Court judge. The judge, who, the police told us, carries the can at the end of the day, questions them fairly closely before allowing them to set up the investigation. Given all of the safeguards, do you not agree that it is wrong to describe this as speculative? The police have already built up a body of evidence. They have to show that they are pursuing a case and need this additional information. Surely this is not a matter of confidentiality such as was described earlier on; rather it is an extension of their means of obtaining information which would help where a crime is already suspected anyhow?

368. Mr Kinney: There are two answers to that, a general answer and a more specific one. The general answer is that a fundamental plank of our legal system is that conversations and other communications between a legal adviser and his or her client are privileged and should be confidential. It is important to remember this. Any alteration of that principle should be looked at very carefully and should be proportionate.

369. To be more specific, I used the phrase "speculative trawl" because that is what is happening. This is a general circular to solicitors, not a request to a particular solicitor for information. A circular is sent in the hope of trawling some information. I think the word "trawl" is used in the Explanatory Document.

370. The police and the relevant authorities do have powers under the 1996 Order to seek production orders which give them the power to seek particular information about particular clients. That can be very broadly phrased. A production order can be phrased to encompass all dealings by a particular person in an office. One of the safeguards that the 1996 Order provides is that, if there is any concern that privilege is being affected, an application can be made by a solicitor to the judge who made the order. He can do this without reference to the client, because the privilege attaches to the client and not to the solicitor, and we have a duty to the client to protect that. We can apply to the judge to express our concerns, and the judge can then make a decision on what is or is not properly covered by the production order.

371. There are already systems in place for dealing with such situations, and we think that this is speculation on how the information is being sought.

372. Mr Close: I would like to raise the issue of privilege as I am a bit confused about it. Is information the same as suspicion when privilege relates to information which you may have obtained through your relationship with your client? Your suspicion might be based not on information that you have gained from your client, but on common sense.

373. If an individual's lifestyle is far above what he can possibly maintain on his legal income - he might be on the dole - you may well have the same suspicion about that individual as I would have. Does your privilege extend to suspicion?

374. Mr Kinney: We are addressing two different, although related, issues and I think you are quite right to draw the distinction. You are quite right that there is an obligation to report one's suspicion. Suspicion can arise from any number of a client's activities which cause one concern. The obligation to disclose that comes under the 1996 Order. That is different from having possession of communications which may be considered privileged, because they have been handed to a solicitor to provide advice to the client. There is a distinction between the two areas.

375. Mr Neill: It is often a matter of degree. When one has a suspicion one can face agonising decisions on whether one is under an obligation to report it to the authorities or whether it is on the other side of the dividing line. Like so many things in the law there is a balancing act to be done.

376. The Chairperson: Mr Kinney raised an interesting point about the general solicitor circular. Say, for example, that all banks are informed that there is a "Joe Smith" living at such-and-such an address and are asked to trawl on him. Is a general solicitor circular similar?

377. There are in Northern Ireland, I imagine, about 1000 firms of solicitors. Does that mean that those 1000 firms would be told to trawl their records to see if there is a Joe Smith at such-and-such an address? Is that how it works in practice?

378. Mr Kinney: That is our understanding of it. At this stage, as was highlighted by Mr Neill in his presentation, we have not been involved in any consultative process with the Northern Ireland Office. We are simply going on the information we have been provided with, and that is our understanding of how it would work in practice.

379. The Chairperson: It would be a difficult exercise to inform and check up on all those firms. It seems an impractical sort of order to give.

380. Mr Broderick: The legislation assumes that every solicitor's office will have exact information on each client and that information will be retained for a number of years. Each office is run on an individual basis, but there is a certain amount of over-emphasis on the fact that solicitors may or may not have all these records.

381. The Law Society shares your concern that this information may not be available or may be difficult to obtain. It places individual solicitors under a very onerous obligation. However, that does not take away from the general point, and we emphasise this at the end of our submission. This is not about lawyers' difficulties with the legislation; it is about every one of us around this table. This is about clients' confidentiality not the lawyers'. We are more concerned with the implications for clients than the implications for lawyers.

382. Mr Bailie: There are just under 600 solicitors' firms in Northern Ireland at present. As regards your point about the logistics or practicalities of implementing this legislation, we are operating on the basis of the information we have. The word "trawl" - a fishing term - is the word used in the Explanatory Document.

383. With regard to the way in which it will operate, we are referring to the terms of draft article 6 and the amount of discretion that appears to be conferred on the financial investigator. There is a process whereby, in order to get a financial investigation underway, there has to be a court's approval. These are wide ranging, non-specific powers which confer a great deal of discretion on the individual investigator without any opportunity for any formal review or oversight by a judge.

384. The Chairperson: The financial investigator will be appointed by application to a court. A County Court judge will look at the application and agree to the appointment. Then the financial investigator in the exercise of his power can send a general solicitor circular to solicitors in order to conduct a trawl. He will not have to go back to the court to get another order. He will be able to do that if he feels it is the right thing to do.

385. Mr Bailie: That is our understanding.

386. Mr Neill: On that point the understanding is that the application is made ex-parte, in other words unilaterally by the authorities without any particular target having the opportunity to make representations at that stage. Thereafter, there may be a complete lack of control or supervision.

387. The Chairperson: I can understand its being made ex-parte, in the sense that if somebody is engaged in crime, you do not want to be tipping that person off. However, once an order has been granted by a County Court judge, is there any provision in the 1996 Order for the named person to appeal against that order once that person is under investigation and knows about it?

388. Mr Broderick: There would be the normal legal remedies such as challenging by way of a judicial review.

389. The Chairperson: But apart from that?

390. Mr Broderick: That would be the main focus. If a final order is made, then obviously the first application is ex-parte. I am thinking about an application specified, not to a solicitor but to a specific defendant in a criminal case.

391. Once the order is made, that person is involved in an interlocutory order - that is the first step. That person would then have the opportunity to account for what he says are legitimate funds. He can then submit a replying affidavit. That application to court takes on its own life, usually at the end of the criminal proceedings. That can form the basis of an open hearing before the court. Each party can make representations, which is more like a hearing than an appeal. The initial step is taken without his knowledge.

392. The Chairperson: Are you referring to a situation begun after a criminal conviction has occurred?

393. Mr Kinney: Mr Chairman, I would like to help clear up some of the confusion about this matter. Provisions in the 1996 Order allow for a County Court judge to make specific requests for information - for example, an application by the RUC. This is a "production order" which is served on a solicitor asking for the production of documents or information. There is provision in the Order for a solicitor to go to that judge or to another County Court judge to open the issue of privilege if he or she is concerned about it, as I said earlier. If your initial question was addressed to the new draft Order, however, to my knowledge there is no provision in the 1996 Order that will capture the powers of the financial investigator. You could ask for a judicial review application in relation to the initial appointment of that officer. Once the financial investigator starts to use his wide discretionary powers, you have no effective recourse to a court to ask for further assistance.

394. The Chairperson: Does the production order relate to an individual solicitor as opposed to solicitors at large?

395. Mr Kinney: Yes. I am not aware of any situation where a trawl or general production order can be made. It is normally addressed to one or perhaps two or three firms of solicitors.

396. The Chairperson: Article 6 of this draft Order would make it general.

397. Mr Kinney: That is correct - it would be a blanket application to solicitors' firms for unspecified information.

398. Mr McNamee: You have said that under the 1996 Order specific requests can be made for information. If, as Mr Kinney has said, there are concerns about confidentiality or privilege, they can be raised in a court. Under the proposed Financial Investigations Order there is no recourse for dealing with concerns regarding confidentiality or privilege. I note that the Law Society was not consulted about the Order.

399. Mr Kinney: That is correct.

400. Mr McNamee: Do you feel that it should not be introduced as an Order in Council? The point has been made that this is specific to Northern Ireland, as opposed to any other part of the United Kingdom. A study was done on the effects of the Proceeds of Crime Act 1996. Has the Law Society had access to or any participation in that study?

401. Mr Kinney: We have seen nothing of that nature.

402. Mr McNamee: I would like to inform you of the difficulties this may present. The Explanatory Document states that

"solicitors increasingly specialise in their areas of practice and therefore there is a growing likelihood that the solicitor who represents the defendant in the criminal proceedings will not be the solicitor used by the defendant to carry out a property transaction for him."

Perhaps you could comment on that point.

403. You have mentioned the blanket trawl of solicitors which would be available under this Order and the investigator's extensive discretion. Do you envisage its affecting people other than the individual identified? For instance, if an investigator required information on a named individual, irrespective of any address provided or held, would the sole focus be on a name? You are concerned about people with the same or a similar name whose solicitors will have to release information to the investigator though their clients may not be the people identified as the targets of the trawls. However, given its wide nature, how many totally unconnected people might be drawn in? How many solicitors will face the issues of privilege and confidentiality even though their clients may not be the people targeted?

404. Mr Broderick: Perhaps I might address that question. We share the concern that the trawl is highly speculative. There could be countless people with similar names. It is difficult to give an exact figure, but if only a name is given, the numbers could run into hundreds. These people's personal details and confidential transactions - quite legitimate business - would be disclosed to other parties though the individuals might have legitimate reasons for keeping their matters private. Our concern is that dealing simply with a name will jeopardise the duty of confidentiality quite rightly placed upon us as solicitors.

405. The first point you touched on was the assumption made in the Explanatory Document that Northern Ireland firms increasingly have a degree of specialisation. We do not share that assumption. Northern Ireland is a very small jurisdiction where most, if not all, practices are of a general nature. There are very few, if any, practices specialising in a particular area of the law. Though a firm like my own has a large amount of criminal work, it continues to deal with a vast array of other legal issues. With respect, no firm can afford to specialise in one particular area.

406. Since we are a small jurisdiction, a solicitor will very often know - or know of - his client before he comes through the door. The situation is different to that which perhaps obtains in England, where there is a far larger population, some of which is transient, and where one might be approached by people from different ethnic backgrounds. That is not a problem that we have in Northern Ireland. Most of us would say that we know our clients and their backgrounds and would have an idea of where their funds were coming from.

407. Mr Bailie: By "consultation" we mean consultation prior to the framing of legislation rather than the presentation of legislation based on certain assumptions. We do not merely mention consultation as a semantic point, for it would allow examining assumptions made about the legal profession in particular, and our experience of the Order's operation, as well as taking into account that of the prosecutors. That is what has been missing from this equation and the preparation of the legislation. That is why we specifically request the Committee to endorse our view that the Northern Ireland Office should now enter into full and meaningful discussions with the Law Society to establish whether these powers are necessary and to allow us to see whether these concerns might not be addressed in a way that is less offensive to solicitor/client confidentiality.

408. Mr Kinney: In conclusion, perhaps I might add a further point in response to the Assemblyman's question. The issue of people with like names is not the only way in which confidentiality could be breached. It is foreseeable that, on many occasions, third parties involved in dealings would also have to be identified to fulfil obligations to the financial investigator. For example, in a conveyancing transaction, if one party is suspected of some kind of illicit behaviour, it is foreseeable that the police may wish to know the name of the other party in the transaction to see if he is in any way connected. I see that kind of information as also being a risk. People who have no connection with any illicit affairs of any kind may clearly have their confidentiality breached.

409. The Chairperson: I do not think there are any further questions. I should like to thank you once again for coming. Thank you for the submission you have made. We look forward to reflecting on the written copy which you will be leaving with us. The presentation and discussion have been very useful.

410. Mr Neill: Thank you very much, Mr Chairman and Committee members.

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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 surveyo^r 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