Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of Witness (Questions 40 - 59)



  40. On £3,000 or £4,000 a year.
  (Mr White) Exactly, but our problem, again, is if there is not an investigative trigger there, in other words I have no hook on which to investigate that individual, I may suspect and I may know to some degree where some of his assets have come from, but the inability is there at this moment in time within the law to bring that person in for living a quality lifestyle, unless I can associate that directly with an aspect of criminality that he has been engaged in.


  41. If you say the inability of the law is holding you back, what change would help you?
  (Mr White) That change is coming with the Proceeds of Crime Act whereby the Criminal Assets Bureau will allow us for the first time to start to look at people whose overt income does not support the lifestyles that are there. It is a reverse burden of proof in a sense.

  42. Do you think that will make a large difference?
  (Mr White) Again depending on the courts' approach to it. The courts have an attitude of mind which quite often frustrates those kind of things, especially when it comes to reverse burdens. The EU courts have not looked favourably in the past on law which places the onus on the individual to prove his innocence as opposed to us proving his guilt.

Mr Beggs

  43. There are indications that there is increased criminal sophistication in areas such as fuel laundering, electronic tampering with gaming machines, business fraud, counterfeit notes and documents. How far is this the case for paramilitary groups, and what are the implications for the Government's response?
  (Mr White) I think again I take you back, Mr Beggs, to what I said before, that each particular criminal enterprise needs to be studied in tremendous detail because each enterprise requires its own specific response. It is not a case in terms of the law of one suit fits all. I think you have to tailor the law to deal with the particular enterprise that you are examining. That is what we are basically engaged in at the moment in respect of each aspect. It is an incremental issue. Having started out, if you take the case of fuel laundering, providing what you call laundered fuel to existing retail outlets, it is a very short step to purchasing the outlet itself with the proceeds of the profits that are there. In that incremental way you can buy yourself in. Currently we are looking at fuel laundering having moved substantively to the mainland here. We are looking at one Scottish council which has through, shall we say, cost-saving desires engaged, as it were, in purchasing fuel which was coming to it at two or three pence a litre cheaper. The fuel was arriving in tankers that were unmarked and was arriving in the late hours of the night and the early hours of the morning. It was saving them money but when they looked a little deeper they became a wee bit worried. But by that stage something in excess of a quarter of million pounds had been paid to a certain company in Donegal. Needless to say, the contract has been cancelled. I am using it as being illustrative of the fact that the confidence is there amongst the fuel laundering people to enter into long-term contracts of supply, so it shows you the step-by-step process that these people are prepared to undertake, moving simply from one tanker of illegal fuel now and again, through to the business of the retail outlet, and now into what you would call wholesale supply, which is indicative of the entrepreneurialship that is there amongst the paramilitaries, amongst the organised criminals. If given the opportunity they will certainly take it to its limits and those are the issues, in essence, that we are up against. Each aspect of the criminal enterprises that are engaged in would be well worthy of detailed examination, simply to make sure that at the end of it the investigative opportunities are right, and that the right lead agencies are there with the right capacity to take those investigations through and, above all, that the right legislation is in place to enable us to tackle it because not all of it can be tackled successfully through the criminal law. Quite often the financial law that the Inland Revenue and others have is a much more powerful stick than that which the Police Service or anybody else can bring to bear.

  44. Which of the paramilitary groups do you consider to be the most sophisticated in these elements?
  (Mr White) I think that the sophistication runs through them all. If you look at different activities, for the Loyalist paramilitaries you could point to counterfeit CDs and Playstation games. They have invested in the setting up of pirate factories in that sense. They are all fairly well sophisticated in relation to cigarette smuggling. Long gone is the white van and now you are seeing shiploads of the stuff brought in in cords of timber, where purposely within the cord of the timber there is constructed a concealment. That does not get itself done in a back shed somewhere, that smacks of a factory operation and, as I say, with all the knowledge of shipping and everything else being there to bring it through. If you look at the fuel smuggling, again it is not being brought over just in one or two simple plastic containers, it is in taut liners with 13,000 litre tanks put into the back of them and shipped on through. Sophistication is increasing in terms of the means of concealment and in the volume of supply with counterfeit goods, clearly in relation to the markets, you are looking at a substantive turnover there. All paramilitary groups are engaged in that, the articles being purchased in and around Leicester and being brought back to the province. We have good working partnerships there with the Counterfeit Products Agency and others who can work with us and identify the goods. So I would not point to any one organisation being exclusive in itself. You only have to look at the RIRA bottling plants in relation to illegal alcohol or to some of the fuel laundering plants that are there in terms of the volume of turnover, to see that once they get a taste for the money how that gets itself reinvested and how they can carry it all through to a profitable outcome.

Mr Bellingham

  45. Can we look again at gaming/gambling, Mr White. What, in your view, are the problems faced by law enforcement officers in dealing with gaming/gambling and possibly lottery frauds as well?
  (Mr White) We do not have any casinos, thankfully we are not into that level of gaming and gambling. The revenue turnover to Her Majesty's Government in relation to the gaming and lottery system is £2.5 million a year and the betting trade in relation to horses and dogs is fairly well-regulated. Our weak spot, I suspect, is in relation to lotteries, and lotteries are viewed certainly by the PIRA as means of funding the local brigades. They are very difficult to detect in that they happen in-house within the pubs and clubs that are theirs. They may produce small sums of money on the face of it, it may be £100 or £200, but it is the volume in which they are done that produces the lump sum at the end of it. We do run a clubs unit where we still very much inspect the books of clubs and we make sure that club legislation is fairly well enforced, but you will appreciate that in terms of a lottery or ballot, unless you are in the premises at the time, there is very little left in the way of evidence and they are not the sort of pubs and clubs where I could too easily despatch police officers to spend the evening. So detection is a difficulty for us in that respect but it is a reasonably lucrative turnover in respect of the paramilitary groups.

  46. You would say it is quite significant? Just one very quick question. You mentioned earlier about lifestyles and the overt income that potential terrorists and former terrorists or people who might be connected with terrorism have, and obviously until the Proceeds of Crime Bill becomes an Act and is implemented you can in the meantime do a certain amount of work with Customs & Excise and other bodies. What you cannot do at the moment is demand to see people's bank accounts without due suspicion (and someone living well above their means does not rank as due suspicion), but you can work with other agencies. Can you point out the work you do with other agencies?
  (Mr White) The whole approach we have adopted is predicated on a multi-agency approach. I have provided the Committee with some evidence on that. We play to the strongest investigative line. With HM Treasury and Inland Revenue we can only exchange information in the sense we give it and they choose to act upon it or not. There is not a two-way flow. There are attempts being made to create gateways for information exchange. We do work very closely with HM Customs & Excise and we would follow up any investigation and by bringing the VAT side on board in terms of each investigation to work with our own financial investigators. So where we can, we certainly seek to take the financial issue to the individual, but again it has to be triggered by some criminal offence so that one or other of the agencies has the capacity to investigate. Again, it is a balance of resources. I have a finite number of detectives and they have to be spread across a fairly broad spectrum of criminal activity, and it has to be within that capacity. That said and done, HM Customs & Excise has enlarged its input in the Province from 25 officers to something in excess of 167 officers, so the manpower investment has been made there.

  47. Over what period?
  (Mr White) Over a period of 12 months.

  48. 12 months?
  (Mr White) There has been a substantive input there in recognition that, primarily, the fuel laundering aspect was something that needed to tackled head on, so the investment has been made where we can evidence the criminal enterprise warranting it.

  Mr Bellingham: Thank you.

Mr McCabe

  49. Mr White, let me try and ask you about a totally different sort of market. Can I just check if it is the case, as the Crime Task Force has said, that money laundering poses the most immediate threat to society in Northern Ireland, and if we are talking about significant sums of money, why do you think there have only been two major investigations in recent years and neither of those involved paramilitary organisations?
  (Mr White) You will not see us prosecuting any individual with a PIRA pedigree or an INLA pedigree or a RIRA pedigree, if the only capacity I have is to prosecute those that actually handle and deal with the money. We know where some of the monies have their origins and who it belongs to, but if there is no evidential chain I can produce for the court that will clearly demonstrate that it is PIRA money or money lodged by any given PIRA member. I cannot highlight the organisation.

  50. It does say in your brief that there is no suggestion that either of them would have benefited any paramilitary organisation, so I presume these were investigations that were directed at more conventional crime. If it is such a major threat, why do you think there have been only two and you did not focus on the paramilitary side of it?
  (Mr White) Again, we go where the evidential leads take us, and certainly money laundering has come to the fore simply because of the turnover there is in terms of money from organised crime. It is well recognised internationally and nationally that money laundering is a tremendously difficult issue to investigate and the Americans have spent something like 30 years developing R.I.C.O. And when they actually got to RICO it allowed them to tackle what you would call the financial infrastructures of organised crime. We are trying to get there in a much shorter period of time. I am not altogether sure that the complete body of law is there yet. In fact, getting the courts to recognise what you would call an organised crime infrastructure is difficult in itself because the law, by and large, only recognises individual criminal acts. In that sense, trying to present issues as being of benefit to an illegal corporate body is a fairly substantive step in terms of the criminal law. We are getting there. It is going to take some time to put the criminal investigative structure there. But before you can mount any investigation it has to be backed by intelligence. It is getting that depth of knowledge that allows you to mount an investigation. We are still very much focused on the intelligence stage. I would not come before the Committee and hold out any great hope that money laundering investigations will leap to the fore, but they are very much there in terms of an output to be achieved.

  51. Could you tell the Committee something about the kind of money laundering activities you believe the paramilitaries are engaged in? Can you give us some idea of the kind of things you are concerned about?
  (Mr White) It is not a matter of just taking the illegal proceeds of one particular operation. With the money raised in terms of the fuel smuggling, they cannot very well walk down the road and lodge it in an interest-bearing account, so it gets itself rolled over into perhaps cigarette purchases the next time, or it will get itself invested in property purchase. The PIRA at the moment run a fairly substantive fleet of vehicles which are given out to their members. In that sense, monies get turned over and poured into legitimate businesses. Certain pubs and clubs that come up for sale will get themselves purchased. You do not see the money passing through the financial institutions. It will pass through in the purchase of a property into which some clean individual will be put, so it is that churning that goes on. Obviously where they need to come up with fixed sums of money, they can draw that down having made the deposit with certain businesses. If they need it for arms purchases or anything else, that money can be very quickly found and taken in that sense. Or it can be cleaned in the sense that it can be put through a bureau de change, moved on to another country and then brought back on false invoices. The last case we uncovered involved Coca Cola. There was an awful lot of Coke being drunk in certain areas which never moved in the form of bottles but the invoices came through. In that sense, for anybody auditing the books it looks as if it is money legitimately received for services rendered. They will do that through setting up bogus companies and then perhaps letting that company go bust and move on and set up another one. There is a whole variety of scams. It is like everything else, we are very much on a learning curve.

  52. Have you any idea how much we might be talking about or is that just impossible to say?
  (Mr White) I would hesitate at putting a figure on it other than to say it is certainly multi million. You can start to build a picture by taking individual criminal enterprises and looking for the amount of money that is turned over in those, but I am not so much concerned about the actual figure or the exercise of producing the figure because I think there is sufficient evidence there to show that it is of the level where in Northern Ireland terms, we need to be extremely worried.


  53. Is the introduction of the euro in the Republic going to make this money laundering easier or more complicated?
  (Mr White) I would hesitate to say it would make it easier, it simply means that those punts that are buried need to be dug out fairly soon and put through the banks and converted into euro. You might see a rise in the money laundering aspect fairly quickly. The main concern at this moment in time is on the counterfeit side. We had our first counterfeit euro coin. You might say who would want to counterfeit a euro coin, and yet it appeared in Castleblaney over the weekend, and the first of the counterfeit bank notes have appeared in Dublin, so counterfeiting is alive and well in respect of the euro. The euro is initially the area we will suffer from as the unfamiliarity with the euro note will probably catch out businesses. We are engaged in an education process at this moment in time through the banks so that the business community gets a degree of education, certainly those businesses that operate along the border, so the detection of counterfeit notes will be there. I would hesitate to say what the euro itself will mean for crime investigation for the future, but I have no doubt they will find some means of benefiting from it.

  54. I gather interest free loans are available in punts to be repaid in euros or sterling?
  (Mr White) Yes, indeed.

Mr Bailey

  55. Just following on from one of the points made by my colleague on money laundering. * * * . How do they manage to hide that * * *?
  (Mr White) * * * investigations are underway, but I was simply using it as illustrative of where some of the profits get themselves used and expended. The same thing applies in relation to mobile phones. There is a major industry in the purchase and disposal of mobile phones in terms of operational planners with their own clientele, again on the basis that the interception of communication is an industry in which HM Government engages, and if you do not want to be too easily overheard you simply use your phone today and throw it away tomorrow and collect another one and that changes your number fairly quickly. There is a rapid turnover in mobile phones and if the price is going up to £100, if you go by the papers, and that will increase their expenditure in that area.

  56. That is an interesting beneficial by-product. Can I move on to an entirely different subject, social security fraud. I believe this is supposed to be considerable. What sort of percentage is paramilitary provoked or initiated?
  (Mr White) I would hesitate to say what percentage is there. The abuse, shall we say, comes in the sense that individuals are found employment in the building trade and encouraged at the same time to claim their unemployment benefit and would be tutored and educated in that sense, so there is an element of ghost workers there. There is an element of insurance fraud, there is an element connected with the exemption certificates which are there in relation to the building trade, where income tax and things do not have to be paid for six months afterwards, by which time the company disappears. Those individuals are encouraged to work perhaps for less than the going rate within the building trade but augment their income by registering for unemployment and being facilitated to do so. Perhaps it is indirect activity. It is not an area of investigation that we would take ownership of, but we would work with investigators through the DSS to identify those issues. It is an area which has been fairly well trawled by the Northern Ireland Audit Office. I think the figures are there to show the degree of leakage or abuse that is there. There is abuse there in relation to prescription fraud and things of that nature. It is back to what I said earlier to the Chairman, there is an attitude of mind in the Province that if you can defraud the Government it is not of a criminal nature. You may well know that it is said that 98 per cent of the Northern Ireland population appear to claim an entitlement to exemption from prescription charges and I do not think that sits too comfortably with the income of its people, it should not be that high. It is indicative of an attitude of mind that if you can strip money off the Government in any sort of way you are not doing anything of which you should be ashamed, and the paramilitaries will provide advice, quite often, as to how that can be done, and they will assist and condone ghost workers, things of that nature.

  57. Northern Ireland does not just have benefits advisers, it has benefit fraud advisers as well.
  (Mr White) Exactly. It is a culture that needs to be attacked and it is above and beyond anything the Police Service can do. It is an issue for Government as to how you turn out a more honest society. To do that you have got to point out to them that they are denying themselves hospitals and other facilities that the legitimate paying of taxes would produce.

Mr Robinson

  58. I have to say I am not convinced that some of the people who benefit from the proceeds of fraud are going to be greatly convinced as to the fact they can get hospitals and schools and new roads as a result of it because their altruistic tendencies are not their most commonly known asset. Can I ask you to look in a bit more detail at the issue of counterfeiting and forgery. In the document we have before us it shows a fairly formidable activity on the part of the police in relation to CDs, Playstation games, videos, clothing and software. In a year or thereabouts from 1 January 2001 police seized about £2.6 million of goods. By its nature, this probably is a more visible form of their activity. Does that mean that that is a large part of the money that they would be getting from that source or how much of the iceberg is below the water, do you think, in this case?
  (Mr White) Those agencies which are dealing in terms of counterfeit goods and those who look for counterfeit clothing and CDs—the theft of intelligence or property theft or knowledge theft in the sense of the CDs and Microsoft systems that find themselves copied—say that it is extremely extensive. I would say the Police Service for Northern Ireland, to some degree, is unique in the sense that we are the only Police Service that tackles in any structured way this whole area and we are doing it simply because of the funding and monies that flow toward the paramilitaries. You can see it most evidently in terms of the markets as being the outlet but that is not where the profitability lies. Quite often it lies at the manufacturing or wholesaling end, and we have clear indications that one individual purchase was for one million blank CDs, which is fairly indicative of the turnover.

  59. He is obviously a music lover!
  (Mr White) He is certainly sitting up all night listening, if that is the case. That is the visible end of it. We go at it in terms of the market, not only to try to highlight to the people that are buying these goods the fraudulent nature of the goods themselves, but also to try and get ourselves some evidential leads that take us back into the manufacturing sector again. It has been a qualified success in that we have turned over a number of music production and video production factories both this side of the border and across in Dundalk and elsewhere. Again, we are only touching, I would say, the surface of it. Some of the markets are hard to get at. It takes a substantive degree of organisation to get the military police and all the resources together to go and touch those markets. Again, I think it would be fair to say that we are still scratching the surface of what is a fairly lucrative business.

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