Select Committee on International Development Minutes of Evidence

Examination of Witnesses (Questions 60 - 79)



  60. No action was taken by you?
  (Mr Welsh) We took action in the context of referring them to the appropriate authorities.

  61. You had no conviction, you have taken no action.
  (Mr Welsh) It is out of our hands. We do not have independent investigatory responsibility. We rely on the appropriate authorities in the United Kingdom to do those investigations and to bring charges.

  Chairman: That sounds like part of the problem. We must move on to money laundering and asset recovery.

Ann Clwyd

  62. In the Government's memo to us you say corruption is aided and abetted by money laundering, it allows those involved to protect the proceeds of crime and benefit from them. You talk about the laundering process involving financial centres in London, Geneva or New York, as well as centres in some developing countries. Can you tell us how much money is being laundered through the world financial centres, in particular through London, and what proportion of the money stems from corruption?
  (Mr Smith) In terms of estimating the magnitude of money laundering, there have been several studies, none of them entirely successful. By definition they do not advertise that they have successfully laundered their money. This has caused a great deal of measurement problems. The IMF using 1996 figures suggested that the total global laundering problem was between 590 billion and 1.5 trillion US dollars a year. I personally think that is not guesswork, but it is certainly not a particularly reliable figure, simply because of the problems of measurement. There have been no estimates of the problem within the United Kingdom of any reliability, and consequently there is no estimate of the sums within that which are attributable to corruption. My understanding is that those academics who studied the problem believe that about half of the criminal proceeds laundered throughout the world are due to drugs trafficking and that the other half is related to all other criminal activities. Again, that is only an estimate.

  63. Is the problem getting better or worse?
  (Mr Smith) If one uses proxies, for instance there are professional money launderers and if you were to do a search on the worldwide web you would find certain people advertising their services.

Mr Robathan

  64. How very useful.
  (Mr Smith) Some are the American authorities.

  65. I do not have the money to launder.
  (Mr Smith) You can use the commission charged as proxy, and if that commission is going up it would indicate it is getting harder to launder the funds. I believe that commission has been rising, which we take as an indication of success in either creating barriers to entry into the financial service market or, indeed, increasing the risks associated with and rewards demanded by criminals who are laundering proceeds.

Ann Clwyd

  66. What are the current UK problems of legislation on money laundering?
  (Mr Smith) Last summer the Cabinet Office published a Performance and Innovation Unit Report which identified a range of difficulties that currently exist within the anti-money laundering system in the United Kingdom. I think an example of some of the difficulties has been the piecemeal way in which money laundering law has developed in the United Kingdom. We have three separate pieces of primary legislation: the Prevention of Terrorism Act, which relates to terrorism funds, the Drug Trafficking Act, which relates to the proceeds of drug trafficking, and the Criminal Justice Act, which relates to all other criminal activities. Due to the way in which the legislation was implemented, there are differences in the definition of money laundering and the actual nature of the crimes within those. That is one area where there has been some lack of clarity in the definition of money laundering.

  67. Are there plans to introduce new legislation?
  (Mr Smith) The Performance and Innovation Unit Report, which has been published as agreed Government policy, has stated that there are recognised problems and the Government certainly has intentions to change those.
  (Ms Harris) If I can just add to that, there is a financial crime team within the Home Office specifically looking at recovering the proceeds of crime. The report to which Mr Smith has referred is currently considering legislation. It is hoped that the legislation on financial crime generally would be introduced either in the next session or in the one after that.

  68. What prosecutions have there been in the United Kingdom in recent years on money laundering proceeds of corruption?
  (Ms Harris) The difficulty here is I do not have specific figures available to me at the moment, but obviously money laundering is an activity which follows a predicate offence. There has to be criminal activity which led to the proceeds being available to be laundered. The tradition of the United Kingdom law enforcement is to prosecute the substantive offence rather than the money laundering. Money laundering as a stand-alone offence is rarely prosecuted. Usually what the prosecutor will go for is the predicate offence.

Mr Rowe

  69. Am I not right in thinking that in the case of auction houses the selling of goods which the auction house has good cause to believe is actually criminal or improper is actually prosecutable? What you are saying is that the theft of the picture would be proceeded against by the British authorities but the selling of the picture by Sotheby's would not. In fact, in that case it is. Why do you not have the same kind of law that says that both the laundering and the original theft are proceeded against?
  (Ms Harris) I may have given the wrong impression. Money laundering is criminally actionable in the United Kingdom. The point I was making was that normally what is actually prosecuted by the authorities is the predicate offence. Very often the person who committed the predicate offence is the launderer as well. The prosecution will then decide not to prosecute the same person for the laundering.

  70. Are you saying that the bank through which the money passes is exempt from the likelihood of prosecution?
  (Ms Harris) If the money launderer is not the person who committed the predicate offence then there will be an investigation if it is reported to the appropriate authorities at the right time. The point I was making is, if the money launderer is the person who committed the predicate offence then very often the prosecution authorities will take, in common parlance, one bite of the cherry only.

Ann Clwyd

  71. What prosecutions have there been? You said you do not have figures at the moment. Does that mean zero or 100?
  (Ms Harris) I have would to get the figures for that. I would have to come back to the Clerk of the Committee.[15] On money laundering alone it is not a significant number of prosecutions and convictions.

  72. An article in the Financial Times about a week ago claimed that many of the transactions that enabled the former Nigerian dictator Sani Abacha to launder money through the United Kingdom were reported to the British Authorities and the authorities failed to act. What do you say to that?
  (Ms Harris) Again, I have some difficulty with that because this is an active case which is currently being investigated. In a public hearing I do not think it is appropriate to answer questions, with respect.

  Ann Clwyd: That is okay.


  73. Are there judicial proceedings?
  (Ms Harris) Again, that is not something that the Home Office would either confirm or deny, the state of proceedings.

  74. What are you claiming, that you cannot answer the question?
  (Ms Harris) I cannot answer the question in public. I will give you all the details you want if the session is in private.

  Chairman: All right.

Mr Worthington

  75. Let us take the case of where one knows that there is a dictator overseas who is milking his country and it is known to everybody, would you ever have a situation where the British Government said, in foreign policy terms or in development terms, it is crucial to get that person's money that is being laundered in London or do we sit back and wait for someone to find a specific instance? Is there really serious proactive action ever taken by the British Government to say it is crucial in foreign policy terms that we get that money and we return it to X country?
  (Ms Harris) In nearly all cases one would wait for a request from the foreign Government. However, I can conceive of a possibility of a situation being outlined as being so extreme as to make the United Kingdom authorities, for example the CPS or another law enforcement authority, itself suggest to the police, perhaps, that an inquiry be opened to see if there is any truth in the allegations and rumours surrounding the apparent criminal source or origin of the funds.

  76. It has never happened!
  (Ms Harris) I cannot say that it has never happened. I am afraid I am not in a position to say that.

  77. You cannot say it has happened?
  (Ms Harris) I can certainly think of cases where international media attention has focused the authorities in the United Kingdom on transactions and events, to the extent that the police have been asked to make enquiries

  78. The point I am making is, if you take people like Milosevic and Saddam Hussein—we did this on the Sanctions Report—we could not find any evidence at all that in the major areas of foreign policy, where you want to stop Milosevic salting money away or Saddam Hussein or others—the British Government had said, "We need to act on this". We are waiting for others to act all of the time, are we not?
  (Ms Harris) If one is looking at the system for reporting potential money laundering, there is the Financial Intelligence Unit within NCIS which has responsibility for receiving the suspicious transaction reports. If there is an allegation or suspicion that money is being laundered in the United Kingdom, the first authority to know about that will be the FIU and NCIS, a branch of the police, which will lead, if the suspicions are borne out, to an independent investigation.

Ann Clwyd

  79. How many various reports do they receive in a year?
  (Ms Harris) For suspicious transaction reports last year there was about 15,000.
  (Mr Smith) Perhaps I can clarify the system of reporting. If a United Kingdom bank knows or suspects that the funds that are being deposited within it are the proceeds of an indictable offence, then that bank is required to make a report to NCIS. It would be a criminal act for that bank to assist in the laundering of those funds. It is quite clear that corruption falls within that and that if any United Kingdom institution knows or suspects that the funds it is dealing with are, in fact, the proceeds of corruption, then it would be criminal for them to assist in that unless they were to make a report to NCIS, which provides them with a statutory defence.

15   See Evidence p. 31. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 5 April 2001