Memorandum submitted by HM Treasury
UN Counter Terrorism Resolution
United Nations Security Council Resolution 1373
(28 September 2001) calls upon States to freeze the financial
assets or economic resources of persons who commit or facilitate
the commission of terrorist acts; of entities owned or controlled
by such persons; and of anyone acting on behalf of or such persons.
This is implemented in the UK by SI 2001 No
3365 and is made under Section 1 of the United Nations Act 1946.
This instrument, which became effective on 10 October 2001, empowers
the Treasury to designate individuals and entities suspected of
being linked to terrorism and to direct banks and financial institutions
to freeze these accounts. Failure to do so is an offence.
The Bank of England, as agent for the Treasury,
issues these lists by post, fax and e-mail to some 600 banks and
other financial institutions in the UK. The lists are also published
by way of a Bank of England Press Release.
Part 2 of the Anti-Terrorism, Crime and Security
Bill replaces older emergency powers and allows the UK to freeze
the assets of individuals or groups unilaterally. The Treasury
will be able to make a freezing order when an individual, group
or government outside the UK threatens action against UK economic
interests, or against the lives or property of UK nationals and
residents. The orders can designate those who plan such action,
and anyone (including people inside the UK) who provides them
with material assistance. Since the threat must be from people
outside the UK, this power may not be as relevant for the terrorist
groups operating in Northern Ireland. However, part 1 of the ATCS
Bill provides for the freezing of terrorist assets when there
is a police investigation underway in the UK, at an earlier stage
than is currently possible. Part 1 also puts in place new powers
for in-country cash seizure, and for 90-day account monitoring
The Northern Ireland Threat Assessment (published
in May 2000) estimated that 18 per cent of all known criminal
organisations in Northern Ireland are engaged in excise fraud.
The same assessment estimates that just over half of all criminal
organisations have current or historic links to paramilitary organisations.
The two most serious problems in the excise sector in Northern
Ireland are tobacco smuggling and road fuels fraud.
Customs estimate that cigarette smuggling in
the UK as a whole cost in the region of £2.8 billion in 2000-01
with 21 per cent of all cigarettes smoked in the UK illicit; Customs
does not break this assessment of the illicit market down to a
regional level for Northern Ireland alone. The illicit cigarette
market has been growing rapidly since around 1996-97 and without
action Customs estimate that it could have accounted for one-third
of the market by 2003.
The Government has set in place a £209
million strategy to put cigarette smuggling into decline within
three years. This strategy includes an additional 1,000 Customs
officers throughout the UK, a national network of mobile x-ray
scanners and the introduction of tough new penalties, including
the compulsory marking of all UK duty paid cigarettes and tobacco.
The results of the first year of the strategy,
announced by the Government as part of the recent Pre-Budget Report,
show that Customs are on track to deliver their key outcomes.
This confirms that their analysis of the problem was sound and
that the operational responses have thus far been effective:
most importantly, Customs have hit
their key target to hold the market share of smuggled cigarettes
to 21 per cent in 2000-01, thereby succeeding in slowing the growth
in cigarette smuggling;
in 2000-01, Customs seized 2.8 billion
cigarettes: 1.9 billion in the UK and 0.9 billion en route to
the UK through joint operations with overseas agencies. This represents
almost a billion more cigarettes than were seized in 1999-2000,
and 0.8 billion more than Customs' target for the year;
Customs investigators have also broken
up 56 major excise smuggling gangs, 43 of them involved in the
large-scale smuggling and supply of cigarettes.
While the targets for the strategy remain extremely
challenging, the Government fully expects that Customs will achieve
the outcome of reducing the market share of smuggled cigarettes
by 2003. Given the strong upward trend in smuggling before implementation
of the strategy, this would be a considerable achievement.
As part of this strategy, enforcement activity
in Northern Ireland has increased. Among recent operational successes
350,000 cigarettes in air passenger
traffic from Tenerife;
30 million cigarettes in two seizures
by Republic of Ireland agencies following close co-operation between
UK Customs and Republic of Ireland agencies;
2 million cigarettes in freight traffic
1.5 million cigarettes from two national
strikeforce exercises targeting air passenger smuggling; and
43 million cigarettes seized at Warrenpoint
in freight traffic from Eastern Europe.
Road Fuels Fraud
Customs estimate that in the calendar year 2000
the revenue lost from use of non-UK duty paid petrol and diesel
in Northern Ireland was approximately £380 million:
£150 million from petrol; and
£230 million from diesel.
These revenue losses are a result of legitimate
cross-border shopping and fraud which include smuggling from the
Republic of Ireland and the misuse, laundering and mixing of rebated
and duty free oils.
The Government has already recognised this problem
and has taken action. Since April 2000 Customs increased the number
of staff engaged in tackling this form of fraud from 25 to more
than 160. As a result of this action seizures of fuel have more
than doubled, vehicle seizures have more than trebled, and 17
plants for laundering the chemical markers out of rebated fuels
have been dismantled.
While there is some evidence that this increased
Customs activity has slowed the growth of the fraud the Government
believes that it remains at unacceptably high levels and is considering
further initiatives to counter road fuel duty evasion.
The Government is also committed to tackling
all manifestations of serious crime and has set up an Organised
Crime Task Force in Northern Ireland to combat all forms of serious
criminality, including oils fraud.
Part 3 of the Anti-Terrorism, Crime and Security
Bill, currently passing through Parliament, contains provisions
to allow for information disclosure from Customs and the Inland
Revenue to law enforcement agencies and the intelligence and security
These will allow the Revenue Departments to
disclose otherwise confidential information for the purposes of
criminal proceedings, criminal investigations and for the purpose
of facilitating whether a criminal investigation should begin
or end. In addition, the provisions will permit disclosure to
the Intelligence Services "in support of their functions".
These gateways will significantly assist in
combating terrorism, allowing information held by Customs and
the Inland Revenue to be disclosed urgently, for example, before
a case reaches the stage of a proceedings or when the police may
be unaware of the activities of a particular individual. In such
instances, the Revenue Departments will be able to disclose voluntarilyhowever,
there will be no element of compulsion and the relevant provisions
of the Data Protection Act and the Human Rights Act will continue
In addition, steps have been taken to ensure
that money service businesses (bureaux de change, cheque cashers
and money transmission agents) fulfil their obligations under
the money laundering regulations. A new regime for the regulation
of money services businesses came into force on 12 November. Under
this regime, all MSBs not already regulated by the FSA are required
to register with Customs, who have new powers to enter premises,
inspect documents and prosecute for breaches of the money laundering
10 December 2001