Select Committee on Northern Ireland Affairs Minutes of Evidence

Memorandum submitted by the Northern Ireland Office


  1.  The Northern Ireland Affairs Select Committee has requested a memorandum to be submitted by the Northern Ireland Office (NIO) "on its work investigating the financing of terrorism and its actions to seek to counteract this". This paper provides guidance on the policies and measures that the NIO has in place to combat the financing of terrorism. The actual investigation of cases involving terrorist finance is a matter for the police and not the NIO.


  2.  In 1988, following a request for assistance from the Royal Ulster Constabulary (RUC) to the then Secretary of State, Rt Hon Tom King MP, the NIO established a specialised unit, the Anti-Racketeering Unit (ARU), with a remit to confront paramilitary fund-raising and reduce the flow of funds to terrorist organisations. This unit worked very closely with the RUC, who provided the necessary operational support and led on actual investigations. In 1993, the ARU was renamed the Terrorist Finance Unit (TFU). In 1996, following a fundamental review of the functions of the NIO, a joint NIO/RUC working party was formed to consider the work and future of the TFU. On conclusion of this process, responsibility for investigating terrorist finance passed formally to the RUC on the grounds that this would provide a greater operational focus for the work of the unit. At the same time, the work of the TFU was expanded to cover other areas including non-terrorist financial crime activity. To reflect these changes the TFU was renamed the Financial Crimes Services Unit (FCSU).

  3.  In 1999, following an internal RUC review, a specialised unit within RUC Special Branch assumed responsibility for investigating the financial activities of terrorist groups. Other research and analytical functions of the FCSU were taken over and enhanced through the establishment of the RUC Analysis Centre, which now provides an analytical service across the RUC, covering a wide range of crime activities. The RUC Analysis Centre also plays an import role in the work of the Organised Crime Task Force (OCTF) (see below).


  4.  The NIO is committed to ensuring that the law enforcement agencies in Northern Ireland have the powers they need to tackle terrorist fund-raising. The NIO worked closely with the Home Office in the development of the Terrorism Act, which received Royal Assent on 20 July 2000. The Act contains permanent UK wide counter-terrorism powers and procedures to replace the Prevention of Terrorism (Temporary Provisions) Act 1989 and the Northern Ireland (Emergency Provisions) Act 1996. The Act contains a new definition of terrorism, which replaces the previous distinction between Irish and international terrorism. The Terrorism Act also contains a temporary section (Part VII), specific to Northern Ireland, which is time-limited to five years and requires annual renewal.

  5.  Part III of the Act provides offences relating to fund-raising and other kinds of financial support for terrorism, together with power for a court to order forfeiture of any money or other property connected with terrorist offences. Part III also introduces a new power for the police, Customs and immigration officers to seize cash at borders and to seek forfeiture of the cash in civil proceedings. Terrorist property is defined to make it clear that offences apply not only to money but also to other property. Property is further defined to include property to be used for terrorism and proceeds of acts of terrorism.

  6.  The issue of money laundering is also addressed in Part III. Under the Act, banks and other businesses are required to report any suspicions they may have that individuals or organisations are laundering terrorist money or committing any other defined terrorist property offence. Such suspicions can be reported to the police without fear of breaching legal restrictions. Schedule VI of the Act makes available further powers to investigate terrorist finance, modelled on certain powers of "financial investigators" in Northern Ireland under Schedule II of the Proceeds of Crime (Northern Ireland) Order 1996. Under Schedule VI an order can be made to enable a constable to identify accounts and obtain customer information from financial institutions for the purposes of terrorist investigations.

  7.  Planned legislative changes aimed at the proceeds of crime will have an impact on terrorist finance where it is derived from any criminal activity. The Proceeds of Crime Bill, due for introduction in the new session of Parliament, will bring together in an updated and strengthened form the law relating to financial investigations, money laundering offences and confiscation. A key element will be the creation of an Assets Recovery Agency with new powers to pursue and recover assets that are the product of criminal activity and to secure the taxation of income derived from that source. The Assets Recovery Agency will operate in Northern Ireland and is expected to make an important contribution.


  8.  The NIO has played an important role in UK-wide initiatives to confront terrorist fund-raising, such as the Home Office-led Terrorist Funding Forum. This has proved a useful forum for exchanging information on a range of issues relating to terrorist finance.

  9.  This year, the NIO played a key role in a successful lobbying campaign by HMG and the Irish Government to persuade US authorities to designate the "Real" IRA as a terrorist organisation. The restrictions imposed by the US Government as a result of this designation are expected to have a significant impact on the ability of the "Real" IRA to raise funds.


  10.  The NIO recognises the threat that the legacy of terrorism poses to the development of a normal society in Northern Ireland and is committed to confronting the illegal financial activities of organised crime groups in Northern Ireland, many of which are linked closely to terrorist organisations. On 25 September 2000, the then Secretary of State, Rt Hon Peter Mandelson MP, announced the establishment of a multi-agency OCTF to tackle organised crime. The Minister of State, Ms Jane Kennedy MP, chairs the Task Force, which includes representatives from the RUC, HM Customs & Excise, the National Criminal Intelligence Service and other government agencies. The OCTF also works with the private sector to identify the nature of the problem posed to society by organised crime and help confront it.

  11.  On 23 March 2001 the OCTF published its first threat assessment of the problem and a strategy for confronting it. Copies of this document have been passed to the Clerk of the Committee. The threat assessment identifies 78 organised crime groups in Northern Ireland involving some 400 individuals. About half of the groups have links to paramilitary groups. The strategy document lays down the following priorities for the OCTF for the year 2001-02:

    —  reduce extortion, intimidation and blackmail;

    —  inhibit the development of drugs abuse and disrupt the supply of all illegal drugs;

    —  reduce the loss to the Exchequer from the smuggling of hydrocarbon oils, tobacco and alcohol;

    —  target money laundering activities; and

    —  develop a methodology for identifying and prioritising organised criminals.

  12.  Henceforth the publication of the threat assessment and strategy will be an annual event. Next year's documents will be published following the end of the financial year and will report on the progress that has been made to meet this year's strategic priorities. As the OCTF meets its first anniversary, a number of milestones have already been achieved, notably through the development of commodity-based expert groups to tackle areas such as smuggling, drugs and extortion. Both the RUC and HM Customs & Excise have restructured themselves to support and advance the work of the OCTF and co-operation arrangements have been strengthened and developed. The RUC is leading on efforts to combat extortion, illegal drugs and money laundering; Customs is leading the fight against fuel, tobacco and alcohol smuggling.

  13.  Throughout the year there have been a number of operational successes against organised crime groups in all of the strategic priority areas, building on the good work that the operational agencies were already having in this regard.

    —  So far this financial year, the police have seized drugs with a street value in excess of £2 million and have made over 500 drugs-related arrests. The police have also seized over £650K of counterfeit goods from illegal traders. In June, the RUC successfully brought charges against an organised crime group engaged in a major passport fraud involving significant links to organised crime groups and with the potential to generate profits in excess of £1 million.

    —  From 1999-2000 to 2000-01, Customs increased the number of cigarettes seized from 22 million to 51 million. Over the same period, Customs seized 120 per cent more fuel (an increase from 1.5 million to 3.3 million litres) and the number of vehicles seized rose by 220 per cent; 17 laundering plants were disrupted in the year 2000-01.

  14.  Experience elsewhere in the world indicates that it can take many years of focused inter-agency effort to disrupt and dismantle organised crime groups. The NIO and other government agencies are committed in the long term to the work of the OCTF, recognising that the initiative is an integral part of HMG's aim to secure lasting peace and a safe, just and prosperous society in Northern Ireland

24 September 2001

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