Select Committee on Northern Ireland Affairs Appendices to the Minutes of Evidence


APPENDIX 4

Supplementary memorandum submitted by the Home Office

EVIDENCE FROM OTHER JURISDICTIONS TO BE USED IN ASSETS RECOVERY AGENCY PROSECUTIONS OR CIVIL PROCEEDINGS

CONFISCATION INVESTIGATIONS

  I should start by explaining that the Assets Recovery Agency will not have a role in the investigation of criminal offences or undertake prosecutions. Although four of the investigation powers in Part 8 of the Bill will be available to law enforcement agencies for the purpose of money laundering investigations (which are criminal investigations), the Agency itself will only be able to use them for confiscation and civil recovery investigations. The Agency's power to obtain disclosure orders (the fifth power provided by Part 8 of the Bill) will not be available to law enforcement agencies and will therefore only be used for confiscation and civil recovery investigations, and not for criminal investigations into money laundering.

  Insofar as the Chairman's questions relate to criminal investigations or prosecutions by the Agency, therefore, they reflect a misunderstanding of the Agency's role. We have therefore interpreted the questions in Part A as relating to the Agency's confiscation functions.

1.  What arrangements have been, or will be, put in place enabling the ARA to obtain documents from overseas jurisdictions (eg establishing the beneficial ownership of an overseas bank account or company or other assets) which can be introduced as evidence in ARA prosecutions?

  1.1  The UK is able to request information from overseas jurisdictions for use as evidence in either criminal or confiscation proceedings via mutual legal assistance (MLA) channels. In domestic law this mechanism is governed by Section 3 of the Criminal Justice (International Co-operation) Act 1990, under which a prosecutor may ask a judge to issue a letter of request to a foreign jurisdiction seeking help in obtaining evidence. Such letters are transmitted via the Secretary of State (in practice the UK Central Authority located in the Home Office). It will be open to the ARA to ask the Crown Prosecution Service to make an application under the 1990 Act.

  1.2  MLA is the formal process by which countries assist each other with criminal investigations or proceedings. MLA can be used for the purpose of confiscation investigations or proceedings. MLA assistance can take many forms: forwarding summonses, obtaining witness statements, gathering evidence, carrying out searches and seizure of property, conducting complex investigations etc. Thus, the UK can request another jurisdiction to obtain and transfer to it documents relating to ownership of assets or businesses located abroad which are suspected of representing the proceeds of crime or which might be needed in order to satisfy a confiscation order.

  1.3  Much MLA between the UK and other countries is covered by treaties and conventions. The 1959 Council of Europe Convention on Mutual Assistance in Criminal Matters and its 1978 Additional Protocol govern our MLA relationship with European states, setting out how assistance should be requested, and what may be requested and provided. There are two new EU agreements, which have not yet entered into force. These are the 2000 Convention on Mutual Assistance between the Member States of the EU, and its 2001 Protocol. When the Protocol comes into force, Member States of the EU will be obliged upon receipt of a request from another Member State, to provide banking information, including lists of accounts held by a particular individual. The Protocol specifies and limits the conditions which must be met in the request, and Member States cannot apply additional discretion as to whether to execute the request.

  1.4  Also relevant are the 1990 Council of Europe Convention on the Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, the 1988 UN Convention Against Drug Trafficking and the recent (not yet ratified) UN Convention against Transnational Organised Crime.

2.  What is the specific legislation or treaty, etc enabling the provision of beneficial ownership or other documents by overseas jurisdictions for use in criminal proceedings by the ARA (or to the UK Government Officer or agency acting on behalf of the ARA?)

  2.1  In the case of EU and Council of Europe countries, the 1959 Convention enables them to assist the UK. It refers in broad terms to processing evidence or transmitting articles to be produced in evidence, records or documents. In the case of Commonwealth countries, the Commonwealth Scheme for Mutual Assistance governs the provision of assistance. Bilateral treaties with some other countries, including Canada and the US, contain similar arrangements. Some countries do not require the existence of a treaty or convention in order to provide assistance, and can do so under their domestic law.

3.  Would the overseas jurisdiction have to have a comparable criminal offence in their legislation before they could obtain documents from the person or entity located within their jurisdiction and then provide such documents to the ARA for use in criminal proceedings?

  3.1  Whether the overseas jurisdiction requires a comparable criminal offence in its own domestic legislation in order to provide such assistance will depend entirely on the' law of each individual country. Most of our main MLA partners, eg the EU and the US, do not require the existence of dual criminality in order to provide assistance, although most do require dual criminality if the request involves coercive measures such as search and seizure orders.

4.  Which jurisdictions within the EU would be legally entitled to provide beneficial ownership or other documents to the ARA for use in criminal proceedings?

  4.1  All states that are parties to conventions or agreements containing MLA provisions are required to have in place a legal framework which enables them to comply with MLA requests. However MLA agreements tend not to contain absolute obligations: there tend to be restrictions and conditions, and a level of judicial discretion. All EU Member States are required to have and do have arrangements for providing MLA to other Member States.

  4.2  On receipt of a request from a competent UK authority, the requested EU authority will assess whether it meets the appropriate conditions under their domestic law and/or the Convention in force. Assuming the request was complete, accurate and formulated in accordance with the Convention, and that there was no successful appeal, then any EU country should be able to provide the requested assistance.

5.  Which of the 33 Tax Havens (ie jurisdictions with secrecy provisions concerning bank accounts, ownership of companies or other assets etc) included at pages 16 and 17 of the OECD 2000 report "Towards Global tax Co-operation" would be legally entitled to provide beneficial ownership or other documents to the ARA for use in criminal proceedings? I enclose a copy of the OECD list identifying the 33 Tax Havens.

  5.1  We are researching this question and I will write further as soon as possible.

6.  If some, or all of the EU jurisdictions and Tax Havens were not legally obliged to provide documents to the ARA for use in criminal proceedings, how would the ARA be able to obtain documentary evidence from those jurisdictions to establish in court proceedings the nature, beneficial ownership and economic value of overseas bank accounts or other assets located in or controlled from those jurisdictions?

  6.1  The UK could not obtain information from countries which were unable to provide it under their domestic law, and would have no redress if such a country was not a party to a relevant convention or agreement.

7.  If an EU jurisdiction or Tax Haven was legally obliged to provide documents to the ARA for use in criminal proceedings and did so but the ARA did not succeed in obtaining a conviction in those criminal proceedings, or the totality of evidence was such that it was not possible for the ARA to continue or institute proceedings, would the ARA be able then to use the documents in alternative civil proceedings?

  7.1  Whether the foreign jurisdiction would agree to the ARA using evidence that had been provided for confiscation proceedings in civil recovery proceedings would be a matter for the jurisdiction concerned. Experience shows that many foreign jurisdictions are quite restrictive about alternative use of evidence given via MLA. In relation to evidence obtained for use in criminal proceedings, Section 3(7) of the 1990 Act requires that the consent of the providing authority must be obtained for it to be used for any purpose other than that originally specified.

CIVIL PROCEEDINGS

8.  What arrangements have been, or will be, put in place enabling the ARA to obtain documents from overseas jurisdictions, which can be introduced as evidence in ARA civil proceedings before the High Court or Court of Session (clause 248 of the Proceeds of Crime Bill) or before the Special Commissioners when the Director of the ARA exercises general Revenue functions (clause 320 of the Proceeds of Crime Bill)?

  8.1  Exchange of evidence for use in civil proceedings is governed by instruments such as the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil and Commercial Matters and by a number of bilateral agreements. Some states not covered by such instruments are sometimes prepared to respond to requests for help in obtaining evidence from witnesses in their jurisdiction for civil proceedings. It is not yet possible to ascertain to what extent foreign states will regard the civil recovery scheme as falling within the scope of civil judicial co-operation, but at least some states may regard it as excluded.

  8.2  Revenue information about specific persons can only be exchanged between tax authorities under a legal instrument. In this respect the UK is currently a party to the EU Mutual Assistance Directive and over 100 bilateral Double Taxation Agreements.

  8.3  Information disclosed under these instruments can usually only be used for purposes and all instruments contain provisions to protect taxpayers confidentiality. Broadly speaking, the Inland Revenue is able to disclose information obtained under these instruments in a hearing of the Special Commissioners.

  8.4  It is envisaged that there will be a Memorandum of Understanding between the Inland Revenue and ARA. This is likely to contain guidance on the exchange of information and evidence obtained under these international instruments.

9.  What is the specific legislation or Treaty, etc enabling the provision of documents by overseas jurisdictions for use in civil proceedings by the ARA?

  9.1  See previous section.

10.  Would the overseas jurisdiction have to have a comparable civil liability or other obligation in their legislation before they could obtain documents from the person or entity located within their jurisdiction and then provide such documents to the ARA for use in civil proceedings?

  10.1  As with criminal proceedings, this is entirely a matter for the relevant domestic jurisdiction. Certain countries may view the proceedings as an administrative matter—not civil or criminal—and therefore outside the scope of the relevant convention. This is an issue for their domestic law, interpretation and judiciary.

  10.2  The scope for judicial co-operation in relation to civil recovery is hampered by the limited number of states which have so far introduced this form of litigation. The Performance and Innovation Unit Report—Recovering the Proceeds of Crime (June 2000)—concluded that the UK should publicise and implement the conclusions within that report to share developing practice and set a higher international standard in the attack on criminal assets. In G8 and other international for a on crime reduction, the UK has drawn attention to the advantages of civil recovery and it is hoped that other states will consider introducing similar schemes in future.

11.  Which jurisdictions within the EU and which of the 33 Tax Havens listed in the Report would be legally entitled to provide documents to the ARA for use in civil proceedings?

  11.1  We do not have a definitive answer to this question. As noted above, it is likely that at least some states will regard civil recovery as falling outside the scope of civil judicial co-operation.

12.  If some or all of the EU jurisdictions and Tax Havens were not legally obliged to provide documents to the ARA for use in civil proceedings, how would the ARA be able to obtain documentary evidence from those jurisdictions to establish in High Court, Court of Session or Special Commissioners proceedings the nature, beneficial ownership and economic value of overseas assets located in or controlled from those jurisdictions?

  12.1  In accordance with normal civil discovery procedures, respondents in civil recovery proceedings will be under an obligation to disclose relevant documents even if located abroad.

Godfrey Stadlen

Financial Crime Team

24 May 2002



 
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