Select Committee on International Development Minutes of Evidence

Memorandum submitted by the National Criminal Intelligence Service (NCIS)


  1.  The National Criminal Intelligence Service (NCIS) was formed in 1992 and gained statutory status on 1 April 1998. It is tasked with providing leadership and excellence in criminal intelligence to combat serious and organised crime. With a total budget of some £48 million and 700 staff, NCIS is an interagency organisation working in partnership with others and acts as the criminal intelligence hub for law enforcement activity affecting the nation. It specifically seeks to tackle individuals at the top tier of criminality. All significant investigations instigated by law enforcement agencies are reported to NCIS to ensure that any relevant intelligence is utilised, as well as to ensure that two or more agencies do not commit resources targeting the same criminal operation. It should be noted that NCIS is not an investigative or operational body—the organisation seeks to provide intelligence and services to other operational agencies to ensure that they act in the most efficient manner in tackling criminality.

  2.  NCIS has six regional offices throughout the UK and a headquarters building in London. The regional offices liaise closely with all law enforcement and governmental agencies within their area. Whilst the headquarters unit focuses on both strategic and policy issues. A number of specialist units exist within the headquarters to provide expertise with regards to particular types of criminality. One such specialist unit is the Economic Crime Unit (ECU), which acts as the Financial Intelligence Unit (FIU) function for the United Kingdom. This is the central, national unit responsible for receiving, analysing, and disseminating financial disclosures received in the UK and forwarded to Law enforcement for investigation.

  3.  The ECU brings together personnel from a range of law enforcement and government departments, including Police, Customs, Benefits Agency, Financial Services Authority, Inland Revenue, and the Gaming Board, in order to pool resources and skills in the fight against money-laundering. It also directly employs a number of specialist staff. The unit undertakes the following functions:

    —  provides an educational service to United Kingdom law enforcement agencies on matters relating to financial investigation and money-laundering issues;

    —  assists the UK central authority with information regarding financial investigation and money-laundering issues;

    —  provides a central advice and consultancy service for financial intelligence and money-laundering issues;

    —  liaises with financial institutions, trade associations, and regulatory bodies (including the FSA) over the education and training of Money-Laundering Reporting Officers at all financial bodies within the UK;

    —  exchanges financial intelligence and training with foreign FIUs, as well as providing assistance to other countries in the formation of new FIUs and the drafting of appropriate anti money-laundering legislation;

    —  provides input to money-laundering policy formation at international level by being part of the UK delegation to the Financial Action Task Force (FATF); and

    —  exchanges financial intelligence with Foreign FIUs in 53 nations around the globe as part of the Egmont group.

The current legislation

  4.  Over the past decade and more, a range of legislation designed to prevent money laundering has been introduced by successive governments. In summary, current legislation obliges any individual who, in the course of his or her business, gains knowledge or suspicion that funds are the proceeds of drugs trafficking or terrorist activity, to disclose details to a constable. For all intents and purposes, the "constable", in this case, is the ECU at NCIS. Failure to so disclose may leave the individual open to prosecution for a money laundering offence, carrying a maximum sentence of 14 years imprisonment, and/or prosecution for failing to disclose, attracting a maximum sentence of five years imprisonment. It is not an offence to fail to disclose knowledge or suspicion of funds linked to other crimes—including corruption. However, failure to do so would leave the individual open to prosecution for mainstream moneylaundering offences—carrying a maximum sentence of 14 years. If an individual has made a disclosure, he or she may have a defence against prosecution for laundering, but such a defence is not automatic and depends upon the timeliness and proportionality of the disclosure.

  5.  The above legislative framework means that financial institutions (and, on occasion, individuals) make disclosures to the ECU when they have knowledge or suspicion of that funds they are handling are criminal in origin. A table summarising the levels of disclosure in recent years is attached at Annex A. As can be seen, the overall level of disclosures—some 14-15,000 per annum on average—has been said by some observers to be low in comparison to the size of the UK financial services sector.

  6.  In additional to the mainstream anti-money laundering legislation the UK introduced the Money Laundering Regulations 1993 which created a series of obligations for the financial services sector. The obligations included: the appointment of an individual responsible for evaluating disclosures and overseeing compliance with the Regulations (known as the Money Laundering Reporting Officer or MLRO), training of staff; customer identification requirements; record keeping requirements; and the need for adequate procedures to prevent and detect money laundering. Breach of these provisions carry a maximum sentence of two years imprisonment and/or an unlimited fine.

  7.  However, there have been no convictions for breaches of the Regulations to date. In part, this has been due to no particular organisation being designated to deal with such breaches. The recently published Cabinet Office document "Recovering the Proceeds of Crime" acknowledged this weakness. It is the view of NCIS that the new powers granted to the FSA under the Financial Services and Markets Bill will allow a more proactive regulatory approach, and the recent issuing of the FSA consultation paper 46 on money laundering was a welcome development.

The disclosure process

  8.  Unfortunately, current UK legislation does not stipulate the format in which a suspicious transaction report (STR) should be made to the `constable'. This causes a tremendous variation in detail contained within STRs and effectively reduces the speed and effectiveness of the overall system. That said, some institutions have worked closely with the ECU to achieve greater standardisation. As a matter of good practice the ECU normally only accepts STRs in writing by post, fax, or electronic secure link. Upon receipt the ECU evaluates the disclosure in terms of apparent urgency—a small number of cases, "fast tracks", must be handled immediately due to the circumstances surrounding the suspect or the funds. Such "fast track" cases are disseminated to law enforcement within 24 hours of receipt. Other reports are processed in the order they arrive. An acknowledgement letter is provided for all disclosures, which in the majority of cases gives permission for the financial institution to continue normal business. It is a common misconception that NCIS can force an institution to continue with a transaction; it should be noted that the final decision as to whether or not to continue the business rests with the financial institution as a commercial judgement.

  9.  All disclosures are checked against the financial disclosure database and against other NCIS databases and, where necessary, the databases of other law enforcement agencies. All information relevant to the disclosure is collated and analysed to determine the most appropriate investigating unit, and an intelligence package is forwarded to that unit for action.

  10.  The unit receiving the disclosure will usually institgate its own investigation, obtaining evidential matter from the financial institution by means of a production order. The financial investigator and financial institution will typically have a high level of contact as the investigation progresses, to ensure that the burden on the financial institution is kept to an acceptable minimum whilst gaining the best evidence and intelligence. This relationship also allows for direct feedback between investigator and institution as to the quality of the initial disclosure.

  11.  After the operational unit has concluded its investigation, it should submit a feedback report to the ECU. The ECU is then able to inform the financial institution which made the initial disclosure as to the quality and suitability of the disclosure in order to promote best practice. Here the ECU is dependent on the operational units providing them with the original feedback for onward transmission to the institutions. This has, at times, caused problems, but the new ECU database system has automatic reminder procedures for operational units to encourage more timely and meaningful feedback information.

Developments within NCIS ECU

  12.  The conclusions of the recent Cabinet Office report drew attention to the need for additional investment in the ECU as the United Kingdoms' national FIU. The Home Office has granted a limited increase for the current financial year which has already allowed for an expansion in staff numbers to improve the throughflow of disclosures. NCIS is hopeful that for the financial year 2001-02 the full amount recommended in the PIU report will be made available in order to allow the unit to meet its responsibilities more fully and to recruit more specialist staff.

  13.  NCIS has also invested significant funds in recent years to the development of a new computer database for disclosures, which allows a more rapid and accurate analysis of disclosures, secure electronic receipt of disclosures from financial institutions, and electronic dissemination of intelligence packages to financial investigation units in Police forces and Her Majesty's Customs & Excuse. The database has been operational since January 2000. Further monies have also been secured through the Government's "invest to save" funding, with the objective of further developing electronic communications between NCIS and a wide range of public and private sector bodies, including overseas Financial Intelligence Units to facilitate the exchange of both intelligence and educational material.

  14.  NCIS ECU is also attempting to further links with the FSA, and to this end we are currently working on a new partnership agreement to formalise our relationship. Whilst the partnership agreement will form a sound basis for co-operation, other legislative provisions are awaited allowing for adequate legal gateways to enable the passing of confidential information between the two agencies. The secondment of a new FSA employee into the ECU is also due to occur shortly which will further cement this relationship. NCIS sees the education of financial institutions as key in the fight against all types of laundering, and a close relationship with the FSA will be vital in order for the fight against laundering and corruption to succeed.

  15.  NCIS ECU has also had a long running relationship with trade bodies, including the BBA, and is a key contributor to the Joint Money Laundering Steering Group (JMLSG). NCIS also assisted the JMLSG to produce the Money Laundering Guidance Notes for financial institutions. It is our opinion that the BBA and other professional associations have a vital role to play in the education and encouragement of the financial services industry in the fight against money laundering. The ECU plans to increase the level of contact and communication with such trade bodies in the light of aforementioned budget increases, through mediums such as seminars and trade conferences. The aforementioned invest to save funded communication project will also be seeking to create educational material accessible electronically by both institutions and professional bodies.

National Criminal Intelligence Service (NCIS)

November 2000

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