Select Committee on Northern Ireland Affairs Fourth Report


Visit of the Northern Ireland Affairs Committee to the Republic of Ireland 5-6 February 2002

Meeting with officials of the Criminal Assets Bureau

  1. The Criminal Assets Bureau was established by Act in 1996. This followed widespread public concern over the growth in organised crime in the Republic of Ireland; these concerns were heightened by a number of gangland style murders, culminating in the murders of Detective Garda Gerry McCabe in Adare on 6th June 1996 and of the investigative journalist Veronica Guerin on 26th June 1996. The Irish Government introduced a programme of legislation to address the growing influence of organised crime including drug trafficking. The new Acts passed included the Proceeds of Crime Act 1996 and the Criminal Justice Act 1996, which provided the statutory framework for the new Agency.

  2. In 1994 the Irish Government had introduced legislation to criminalise money laundering and to permit the confiscation of assets proved to be the proceeds of drug trafficking and other criminal activity. This was Ireland's implementation of EU Directive 91/308. However, as this legislation could not operate confiscation procedures except after a criminal conviction it did not affect the most serious criminals who were able to insulate themselves from prosecution. They did this by intimidating witnesses or by operating their criminal enterprises through the use of intermediaries. The new civil confiscation system tackled this problem by adopting the procedures of civil recovery. The Act provided that once the Bureau established on a low threshold (civil standard) of proof that the property was the proceeds of crime, the burden shifted onto the respondent to prove that the asset did not derive directly or indirectly from criminal activity; if the respondent did not do so by evidence the property would be frozen.

  3. Prior to 1996, there had been difficulties in sharing information between various Government agencies. This had enabled some criminals to avoid the force of the law. The new Criminal Assets Bureau adopted a multi-agency approach, bringing together officials from the Garda Siochana (Police); the Revenue Commissioners; Customs; and the Department of Social Community and Family Affairs. While the Agency was established as an independent body, the CAB Act provided for officials of the various agencies, once appointed to the Bureau, to retain the powers afforded to them by their membership of those agencies. This provided the Bureau with the powers vested in those individuals: for example, police powers of arrest, search and seizure. It also provided the Bureau with immediate access to the databases of those organisations, enabling very effective cross-referencing and sharing of information.

  4. The inclusion of the Department of Social Community and Family Affairs was said to be very important as social welfare fraud was often associated with other forms of crime. Social Welfare savings of IR£1.25 million had been achieved by the Bureau between 1996-2001, partly through the disentitlement of individuals found to be engaged in criminal activity, and partly through recovery of overpayments through the courts. The database of the Department of Social Community and Family Affairs, to which the Bureau had access through its officers, was always particularly comprehensive and had greatly enhanced the Bureau's effectiveness in preparing cases and in tracing assets.

  5. While the Agency was able to draw on the skills of legal, financial and IT experts, the forensic nature of financial investigations carried out by CAB was outside the previous experience of many staff. The Bureau had invested heavily in training staff in financial investigation and awareness of money laundering. It employed both tax officers and specialist forensic accountants.

  6. In setting up the Bureau it was considered important that the new agency should have internal access to legal advice. A statutory position of Bureau Legal Officer was created. That person was appointed by the Minister for Justice after consultation with the Minister for Finance and the Attorney General. The present Bureau Legal Officer, Mr Barry Galvin and the Chief Bureau Officer, Detective Chief Superintendent Felix J. McKenna are the only two individuals working for the Bureau who are excluded from most of the anonymity provisions and the prohibitions on publication. Mr Galvin was seconded from the private sector.

  7. The statutory remit of the Bureau was to trace the proceeds of criminal activity and deprive the persons involved of enjoyment of the benefit of that activity. Action by the Bureau, whether under the Proceeds of Crime Act, the Revenue Acts or under the Social Welfare Acts, was not dependent upon a criminal conviction. When targeting individuals the Bureau had two underlying requirements which were, firstly, suspected criminal activity and secondly, assets. Once the Bureau's investigations and inquiries were complete, or during the course of inquiries if the need should arise, appropriate action would be taken either by way of civil confiscation or by applying the Revenue Acts, according to the level of evidence available.

  8. In its investigative work the Bureau co-operated closely with the Police Service Northern Ireland, and with agencies in Great Britain, the Channel Islands and the Isle of Man. It had co-operated to a lesser extent with agencies in the United States of America, Spain and Portugal. It had also traced assets to Europe, the United States of America, Spain and Mexico. It had taken civil confiscation action on assets which had been channelled into Ireland from Europe, the USA, Australia and the United Kingdom.

  9. The way in which the Bureau chooses targets was discussed. When the Bureau was formed there was considerable information available to the Irish Police, Customs and Revenue services as to persons who were known to be wealthy and whose wealth was suspected to be derived from criminal activity. These were a fruitful source of work for the Bureau at the outset. Targets continued to come from information supplied by these agencies on an ongoing basis. Part of the continuing police information was the forwarding of suspicious transaction reports received from financial institutions. The Bureau had enjoyed wide public support and a significant number of targets had arisen from what had been called a "CCR" (Concerned Citizen Report), through which a member of the public had submitted information. In other cases the investigation of one individual's financial affairs had quite often led to further investigations of others involved in transactions. An example was given showing how the investigation of an underground bank had led to the targeting of a number of its customers.

  10. Officials of the CAB stressed that anonymity of the Bureau's staff had proved very important in the agency's effectiveness. In the past some organised criminals had avoided attention from government agencies by using extreme violence to intimidate officials. Anonymity had therefore been provided statutorily to all non-police staff of the Bureau excluding the Bureau Legal Officer and the Chief Bureau Officer. There were strict statutory prohibitions on the identification of families of Bureau Officers. Assessments for tax and demands for tax did not need to be signed by individual officers. This anonymity made it possible to pursue serious criminals without endangering staff. Disclosure of the identity of a member of CAB staff was a serious criminal offence. Similarly, offences had been created of obstructing, intimidating or assaulting Bureau Officers.

  11. Equally, however, it was possible under the Proceeds of Crime Act 1996 for an individual who claimed to have been wrongly subjected to a Freezing Order to receive compensation. Section 16 of the Proceeds of Crime Act provided that the Minister for Finance would compensate any person who could prove to have suffered a loss where orders had been wrongly obtained or set aside. On a wider basis some individuals backed by organised crime money had endeavoured to obstruct and challenge the Proceeds of Crime Act and the Bureau through the courts. None of the cases had succeeded. Recently the Supreme Court had upheld the constitutionality of the civil confiscation procedures set out in the Proceeds of Crime Act.

  12. The Bureau took approximately fifty Proceeds of Crime cases through the courts between 1996 and 2001. All of the cases had been successful, or were pending before the courts. There was a seven year time scale between the Interlocutory Freezing Order and the ultimate transfer of the relevant property to the state, so no case had as yet been fully completed. Officials said that there was considerable community support for the Bureau, particularly where the confiscation of criminal assets was visible to the community through, for example, the sale of a house. It was believed to be often the case that the criminal lifestyle of the individual was well known within the community and the confiscation of assets, sometimes after many years of an individual operating without hindrance from the police, gained a positive reaction. The Proceeds of Crime Act targeted the assets, rather than the individual; the Respondent was only named to give him an opportunity to contest the action.

  13. One problem which had been encountered by the Bureau (and which was a reflection of what had happened in other jurisdictions) was the propensity of lawyers to seek to dissipate the frozen funds through legal fees, and the willingness of respondents to permit this to happen rather than allow those assets to go to the benefit of the state. The Proceeds of Crime Act 1996 provided for interim payments out of frozen assets for various purposes including legal expenses. The High Court in Ireland had a conceptual difficulty in paying out what had already been found to be the proceeds of crime for legal expenses. In order to solve the situation the Irish Government had established an ad hoc CAB civil legal aid scheme which provided payment for defendants' costs on a parity with the costs paid to state lawyers, and to protect the assets. This had worked extremely well.

  14. The Revenue arm of the Bureau had been most successful in recovering financial assets. The Criminal Assets Bureau Act provided that the Revenue Acts should be applied "fully" to the proceeds of suspected criminal activity. The clientele were suspected and/or convicted criminals: it was for this reason that tax officials working for the Bureau did so anonymously. In dealing with respondents, Bureau tax officials worked strictly in accordance with the letter of the tax laws. The Bureau did not apply the Revenue Acts to persons other than those suspected of criminal activity, although proof of criminal activity was not necessary to process the tax issues. After investigations, which encompassed police and social welfare information, tax assessments were issued. There was a high rate of statutory interest charged on unpaid tax bills, which increased the value of the assets recovered and provided a strong incentive to the clients to pay. In the early days of the Bureau all of the tax cases were vigorously contested. The persons involved were mainly professional criminals, some of whom had almost achieved respectability within the community. The High Court in Ireland upheld the Revenue activities of the Bureau and even though appeals were pending, a number of prominent respondents settled for large tax payments. These got wide publicity in the national press and as a result a significant number of persons targeted had now demonstrated a willingness to submit information and to make voluntary settlements. Where appropriate, Revenue cases were pursued vigorously through the courts.

  15. The majority of Bureau Revenue cases involved Income Tax. However, to a lesser extent Capital Gains Tax and VAT had been targeted. Since 1983, in Ireland, it had been possible to levy tax without having to identify a specific source for the funds and/or in circumstances where it was known that the funds were from an illegal or unlawful source. The Bureau applied the ordinary principles of tax law and procedures found in the Revenue Acts as they applied to every citizen of Ireland, and was proactive in the collection of tax found to be due. Mareva injunctions were taken at an early date where it was feared that assets would be removed from the jurisdiction. Attachment notices could be sent to banks where funds in accounts were located, to require assets to be sent by the bank directly to the Bureau. In instances where the individual had left the jurisdiction leaving assets behind, the Bureau continued to pursue the assets.

  16. Officials stressed that the persons being targeted by the Bureau were modern style upwardly mobile criminals who had the benefit of extensive legal and accountancy advice to hide their assets and their activities. In order to counter this situation and to be effective the Bureau had been provided with a new Statutory Search Warrant, under s14 of the CAB Act. This was an advance in Irish Jurisprudence in that it permitted - on a low threshold - a search warrant to be issued by a Judge of the District Court for any place where assets or evidence of the whereabouts of assets might be found. It also permitted persons other than police to attend to assist in the carrying out of those searches. It had been established that the assistance of Revenue, Social Welfare and Customs Officers in searches had been significant.

  17. The warrant issued by a District Judge remained in force for seven days. In emergency situations (such as the discovery during a search that another place needed to be searched and either a District Judge was not available or there would not be time to prepare an application to the District Judge to prevent the evidence being moved or destroyed) a police Bureau Officer having the rank not less than Superintendent might issue a search warrant in similar terms which would remain in force for 24 hours.

  18. While it might be suggested that recovery of tax was not, from an enforcement point of view, as desirable as prosecution of serious organised criminals or the application of civil confiscation procedures to their assets, it had proved a very valuable tool in instances where there was otherwise insufficient evidence. In some cases individuals who had been targeted, upon realising the extent of the case against them, had volunteered to pay tax upon their assets rather than go through the courts. For example, one leading criminal had volunteered to pay IR£1.2 million in instalments. Subsequently other criminals with links to him had also volunteered payments. Tax recovery was used in 70 per cent of cases investigated by the Bureau: in many instances the individuals targeted had always previously evaded pursuit. It was believed that the Bureau's work was profoundly psychologically unsettling for such individuals as well as disruptive of their criminal activity.

  19. The majority of work carried out by the Bureau had focused on individuals. In many instances these individuals were members of criminal organisations. Assets of corporate bodies could be frozen under Offences Against the State Acts if the organisation were to be convicted of scheduled offences. Corporate bodies (ie. private limited companies) had been made defendants under the Proceeds of Crime Act, and under tax legislation, where they had been operated by suspected criminals. However, officials commented that in the majority of cases assets would be held by an individual on behalf of an organisation and therefore, in terms of recovering the assets, the pursuit of the individual under the CAB Act was as effective as targeting the organisation itself. It was sometimes difficult to prove that assets arose from crime where an individual - even a well-known criminal - also carried out entirely legal business.

  20. While similar operations in some countries, most notably America, made provision for assets seized to be shared, or used for social and community projects, the view had been taken by the Irish Government that all assets seized should be returned to the Exchequer. This was because it was feared that giving the Bureau any benefit from assets seized would introduce a 'profit motive' which might prove detrimental to its activity.

  21. In spite of the absence of asset sharing arrangements, considerable international co-operation had developed formally through bilateral and multi-lateral agreements, and less formally through workshops and conferences. The Bureau had found that it was often useful to send an official to a jurisdiction where it was suspected that an individual was hiding assets, or from which assets found in Ireland had originated, in order to develop diplomatic channels. As a consequence it was now possible to exchange information between jurisdictions very rapidly when necessary. Co-operation was especially strong between the Republic of Ireland and agencies in Northern Ireland such as the Police Service Northern Ireland and Customs and Excise. There was a bilateral agreement between the Republic of Ireland and the UK in respect of money laundering. Links were also well established with the Isle of Man, the Channel Islands and the United States. Links were developing in the Cayman Islands and the West Indies.

  22. Between 1996 and 2001 the Bureau had carried out over 600 searches and obtained over 800 production orders. It had frozen IR£21 million through actions under the Proceeds of Crime Act, and IR£4 million through Mareva Injunctions. IR£56 million of tax had been demanded, of which £28 million had been recovered.

Meeting with officials of the Department of Justice, Equality and Legal Reform

  23. Officials provided an introduction to the Criminal Assets Bureau.

  24. The Criminal Assets Bureau is a statutory multi-agency body with officers from the Gárda Síochána (national police), the customs authorities, the Revenue Commissioners (tax collection authorities) and the Department of Social, Community and Family Affairs (social assistance and benefits authorities). The Chief Bureau Officer is a member of the Gárda Síochána holding the rank of Chief Superintendent.

  25. Bureau officers retained their original powers to exercise and perform duties as officers of the agency from which they had been nominated and the exercise of such powers was performed in the name of the Bureau. Information and material could be disclosed to other Bureau officers. A Bureau Legal Officer assisted the Chief Bureau Officer in the pursuit of his statutory objectives and functions.

  26. Following public concern arising from a number of murders between 1994 and 1996, many of them drug related, but especially the murders of Detective Garda McCabe and Veronica Guerin, the Irish Government enacted legislation in 1996 concentrating on the identification of the proceeds of crime and the taking of appropriate action to deny persons such proceeds. The legislation was intended to provide a remedy for a situation where persons involved in drug trafficking and other serious crime were openly enjoying the proceeds of their crimes and where sufficient evidence to prosecute and/or convict was not available. The core legislation enacted in 1996 to give effect to the new strategy consisted of:

    - the Criminal Assets Bureau Act 1996;

    - the Proceeds of Crime Act 1996;

    - the Disclosures of Certain Information for Taxation and Other Purposes Act 1996; and

    -amendments to the Revenue and Social Welfare Acts.

  27. The overall effect was to provide a statutory mechanism to deny criminals the proceeds of serious criminal activity and to charge the Criminal Assets Bureau with primary responsibility for enforcement. On application, the High Court could make orders which effectively "froze" property which could be shown, on the civil standard of proof (ie. the balance of probabilities) to be the proceeds of crime and which had a value of no less than £10,000. The effect was to freeze the property for a period of seven years unless the Court was satisfied that all or part of the property was not the proceeds of crime.

  28. The mechanism for recovering criminal assets following a conviction had been available to the Irish authorities since 1994. However the establishment of the Criminal Assets Bureau, and the enactment of the Proceeds of Crime Act, for the first time created a body with an appropriate, statutorily based, mechanism for the recovery of criminal proceeds without the need for a criminal conviction to be obtained. The real significance of the Bureau was that it represented a multi-agency approach to the targeting of criminal assets. It was also able to operate anonymously, which had increased its effectiveness in dealing with serious criminals. Previously, there had on occasion been a real element of personal risk for officials dealing with serious organised criminals, particularly in respect of decisions to withdraw benefits, and subsequent consideration of appeals. In some cases extreme violence had been threatened and even used against officials in order to intimidate them.

  29. While crimes would normally be investigated by the Gárda Síochána, the Criminal Assets Bureau investigated the assets of individuals, seeking to identify evidence of crimes. Although the actual benefit from the Proceeds of Crime Bill lay in the seizure of criminal assets, there was a strong intangible advantage in the psychological effect of Bureau investigations on organised criminals, who might at any time find their assets subject to confiscation.

  30. The reason why there was a discrepancy between the amount of tax claimed, and the amount recovered was because of the appeals process, which could be lengthy. The Bureau quite often claimed very significant sums in tax: this arose in part because the proceeds of crime had been taxable in the Republic of Ireland since the mid 1980s. If the Bureau were able to identify assets which had been in existence since that time, it was able to claim tax covering the entire period: with interest and other penalties the sums could become substantial.

  31. In general terms, the work of the Bureau appeared to be accepted by the general public, although it had very significant powers. While some concerns had been voiced over civil liberties, there had not been strong opposition to the Bureau's establishment. The Bureau had faced legal challenges, but had its constitutionality upheld by both the High Court and the Supreme Court. Certain remedies were provided by the legislation if the Court took the view that there was a risk of injustice: an important section of the Act provided for compensation in certain circumstances.

  32. The Criminal Assets Bureau was empowered under the Proceeds of Crime Act to target assets over a £10,000 threshold in value, including assets held for organisations or individuals, where those funds could be seen to be directly or indirectly the proceeds of crime. The Offences against the State Acts 1939-1998 made separate provision for the forfeiture of the property of unlawful organisations subject to suppression orders, including provision whereby the Minister for Justice could order the forfeiture of funds held by a person for the use or benefit of such an organisation. The £10,000 threshold had been inserted into the Proceeds of Crime Act in order to enable the Bureau to concentrate on serious rather than petty crime.

  33. The main focus of the Bureau since its inception had been the proceeds of drug trafficking. However, the statutory remit of the Bureau covered all forms of criminal activity and a number of actions had been taken against the proceeds of criminal activity other than drug trafficking. Property targeted included cash, transportation and real and personal property. While in some cases there could be a paramilitary connection it was often difficult to determine with certainty that criminal activity was being carried out in order to fund future paramilitary activity.

  34. Five years on from the establishment of the Bureau, a further bill was being brought forward to fine tune its approach. The Bill would enable the Bureau to take proceedings in its own name rather than in the name of the Chief Superintendent of the Bureau as previously. Provision was also being made for variations to orders, and for more effective use of affidavits and oral evidence. These improvements were being sought as a consequence of the Bureau's previous experience in the courts.

  35. The role of the courts in the assets recovery process was considered to be very important. The fact that the Bureau's objective was primarily to target criminal assets, rather than those controlling them, had helped satisfy the courts as to the Bureau's constitutionality. The courts provided further safeguards as they could also refuse or vary orders where there was a danger of injustice. It was conceivable that on occasion an individual with a criminal background would enter into business with an entirely innocent party, whose assets might then fall under suspicion. The Proceeds of Crime Act therefore allowed a person affected by an order (whether or not that person was the defendant or another such as a business associate) to prove to the courts that some of the money being considered for confiscation was legitimate. The courts could then separate out the legitimate assets and prevent that individual being unfairly punished.

  36. A further power under the Act enabled the High Court on appeal to demand that an individual make a declaration of property acquisitions dating back ten years. This was a very significant power, which provided the court with the information necessary to separate out legitimate and illegitimate assets.

  37. The events of 11th September 2001 had had a significant impact, and had prompted a review of all existing legislation relating to terrorism. Legislation was being prepared to ratify the pre-existing UN Convention on the Suppression of the Financing of Terrorism. Existing legislation provided for the seizure of assets arising from the proceeds of crime, but did not make provision for legitimately acquired money which might be used in future for terrorism; the future legislation would create a new offence of funding terrorism, and allow the seizure of assets which might in future finance terrorist acts.

  38. These provisions would still require evidence to be produced in the courts to justify confiscation. Under the proposed legislation, the standard of proof required to determine whether a person held funds which were subject to confiscation due to the commission of a terrorist act and, if so, the value of such funds, would be that applicable in civil proceedings.

  39. The Government was also considering amendments to the Offences Against the State Acts, whose focus was primarily domestic, with a view to making any further changes necessary for the purposes of dealing with international terrorism.

  40. The recently enacted Criminal Justice (Theft and Fraud Offences) Act 2001 strengthened the law relating to dishonesty in general. It provided that stolen property included property which had been unlawfully obtained and also created an offence of making a gain or causing a loss by deception. The Act also amended the money laundering provision of the Criminal Justice Act 1994 so that a person would be guilty of money laundering where that person, knowing or being reckless as to whether property was, or represented, criminal proceeds, did any one of a number of things in relation to it. It would also be an offence to acquire, possess or use such property. Under the new provision the penalty for money laundering would be an unlimited fine or imprisonment for up to 14 years or both.

  41. It was believed that the Irish Government had been able to establish the Bureau and the surrounding co-operative network without major organisational change as the various agencies involved were centrally administered: for example, there was only one police force, which also handled intelligence and security matters. There had been initial difficulties to overcome in the traditional proprieties of information protection within agencies such as the Revenue Commissioners; the multi-agency approach of the Criminal Assets Bureau had helped to overcome these barriers.

  42. Officials said that there were very positive relations between the Department of Justice and the Northern Ireland Office of the UK Government, and that co-operation between the Garda Siochana, the Police Service Northern Ireland and the Customs officers of both jurisdictions had led to very effective joint operations. The Belfast Agreement and the Patten Report provided a range of recommendations relating to police co-operation, which were under discussion by the two governments. Further enhancements of joint working were being developed.

  43. Memoranda of Understanding existed between the Customs and Excise agencies of the two jurisdictions, and a framework for co-operation in this area existed at European and wider levels. A new international Customs and Excise convention on tobacco smuggling was under discussion, and if ratified would significantly enhance Customs' powers.

  44. The events of September 11th 2001 had prompted Governments to re-evaluate their response to the problem of terrorism at both the national and international levels. Both the United Nations and the European Union were playing an active part in the international response by creating increased opportunities for international co-operation. UN Security Council Resolution 1373 and the European Union Framework Decisions on combatting terrorism and a European arrest warrant were examples of measures adopted in the aftermath of September 11th which were intended to improve the ability of States to respond to terrorism.

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