Select Committee on European Communities Second Report



22.  CO-OPERATION BETWEEN FINANCIAL INTELLIGENCE UNITS OF THE MEMBER STATES IN RESPECT OF EXCHANGING INFORMATION RECEIVED UNDER THE PROVISIONS OF THE COUNCIL DIRECTIVE ON PREVENTION OF THE USE OF THE FINANCIAL SYSTEM FOR MONEY LAUNDERING (CRIMORG 141 REV 2)

Letter from Lord Tordoff, Chairman of the Committee, to Barbara Roche MP, Minister of State, Home Office

  Sub-Committee E (Law and Institutions) considered the draft Decision at its meeting on 23 February. The Committee noted that notwithstanding the request of the European Scrutiny Committee last October, you have failed to provide any clarification of the Government's position. So far as the Policy Implications are concerned, all your Explanatory Memorandum does is to reiterate the present factual position, namely that the National Criminal Intelligence Service is involved in the exchange of information relating to suspicious transaction reports.

  The Committee also noted that the Government does not appear to have undertaken any external consultation on the proposal. The draft decision, which is intended to facilitate information exchange between national financial intelligence units, would have implications for the individual, the rights of defence and data protection. The Committee is concerned that you appear not to have seen fit to consult interested parties outside Whitehall or, if you have, you have not described the process and outcome to Parliament.

  The Committee has decided to hold the document under scrutiny, pending further information as to the Government's position. In the meantime it proposes to consult a small number of interested parties in order to obtain their reactions to the proposal.

23 February 2000

Letter from Barbara Roche MP, Minister of State, Home Office, to Lord Tordoff, Chairman of the Committee

  I am very sorry that it was not possible to send an earlier response to your letter of 23 February regarding the Explanatory Memorandum which we submitted on this draft instrument.

  The draft Council Decision will place on a more formalised and transparent basis the exchange of information between EU Member States about suspicious financial transactions, in the context of possible money laundering. Such transfers of information are operationally very important but they clearly raise some very sensitive issues and on reflection our Explanatory Memorandum did not discuss in any detail the issues to which you draw attention or emphasise sufficiently that substantive discussion is continuing on a number of the draft Decision's provisions.

  Perhaps it would be useful if I describe more fully the existing arrangements. Exchange of information in suspicious transaction reports by the National Criminal Intelligence Service (NCIS) is presently possible on a case by case basis in the interest of the investigation of crime. For countries with an administrative Financial Intelligence Unit (FIU) with whom information exchange takes place on a regular basis—such as France and Belgium—NCIS has signed a Memorandum of Understanding with the relevant FIU to formalise the exchange of information. Exchange of information with police based FIU's—which are the majority of EU FIU's—occurs through Interpol.

  Since the draft Decision was first tabled in July 1999, consultation has taken place with the enforcement authorities and we have also considered the data protection provisions with some care in the light of the UK's ratification of the Council of Europe Convention on Data Protection and our own data protection laws. Article 5.4 of the draft Decision currently states that personal data would be protected by the same rules of confidentiality as those that apply under the national legislation applicable to the requesting FIU; and Article 5.5 details that the requesting FIU are bound to comply with any conditions laid down by the requested FIU. This provides a high degree of protection (all EU Member States must for example have effective data protection laws in force, in order for instance to be able to participate in Europol), but this is one of the issues still under consideration in the Group.

  You refer in your letter to a lack of information about: the implications of the draft instrument for the individual; the rights of the defence as well as data protection; and the extent to which there has been external consultation about the proposals. As I have indicated these concerns are very understandable: personal financial information is sensitive. However it is difficult to see exactly what in practice the difficulties are likely to be as far for instance as the "rights of the defence" are concerned. The transfer of financial information will, if relevant, be the subject of disclosure requirements in the UK, could be excluded if the Court thought fit, and would not remove or lessen the obligation on the prosecution to adduce adequate admissible evidence to prove its case. As far as data protection considerations are concerned, as indicated above the instrument does contain specific provisions in this area, but a number of other amendments have been proposed, some of which might well strengthen the provisions further.

  As far as external consultation is concerned, it is true that we have not sought comments from outside organisations; however this is a law enforcement instrument for the exchange of information; it formalises an existing practice and will not for instance result in any further intrusive activity. We note that your Committee has sought comments from a small number of interested parties and, of course, I will certainly consider fully any such observations you may care to pass on.

  The central point therefore is that discussions on this instrument are continuing and many of the issues raised by the Committee will be fully discussed. We are consulting the enforcement agencies on the proposed amendments to assess how many of their amendments which have been proposed we can accept without unduly prejudicing operational efficiency. When a new text of the instrument does emerge it will of course be fully considered and submitted for scrutiny in the usual way, accompanied by a further Explanatory Memorandum.

20 April 2000

Letter from Lord Tordoff, Chairman of the Committee, to Barbara Roche MP, Minister of State, Home Office

  Thank you for your letter of 20 April. The further information given will, I am sure, be helpful to Sub-Committee E. We have now received the comments of Justice and Statewatch on the proposed Decision. I enclose copies for your consideration. You will see that a number of points have been raised concerning the rights of defence, data protection and the drafting of the Decision. We have assumed that you will be consulting the Data Protection Registrar.

  The Committee looks forward to receiving your detailed response to these points and any new text and further Explanatory Memorandum. In the meantime the draft Decision remains under scrutiny.

3 May 2000

Letter from Barbara Roche MP, Minister of State, Home Office, to Lord Tordoff, Chairman of the Committee

  Thank you for your letter of 3 May with which your forwarded comments you had received regarding this draft Decision from Justice and Statewatch. I hope that the responses in this letter—together with the latest text and Explanatory Memorandum—adequately address the various concerns which have been expressed. Both letters cover much the same ground so I will deal with the subjects they raise under single headings.

DATA PROTECTION (POINT 4—STATEWATCH/ARTICLE 1.2—JUSTICE)

  Justice state that because of the exemptions from the normal data protection rules for crime and tax-related activities which would apply to the data covered by the draft Decision, it is necessary, in the interests of transparency, for Article 1.2 to be more specific about the information to be exchanged. Whilst it is true that "information of any fact which might be an indication of money laundering" could cover a wide range of information, I do not see a need to detail in this instrument all the types of information which this could encompass or what doing so would achieve; moverover such a list would be difficult to formulate and could prove inflexible.

  Justice also point out that individuals will be unlikely to gain access to information held about them by FIUs. As you will know, as a general principle, individuals have a right to see and obtain a copy of personal data that is held about them. However in the United Kingdom that right may only be restricted in accordance with the exemptions provided for the Data Protection Act. There is a law enforcement-related exemption (section 29(1)) which exempts personal data from the data protection principles for the prevention and detection of crime. Given that any information which is transmitted from NCIS to another FIU will be concerned with the investigation of potential money laundering offences, the lack of access by an individual to this information as part of United Kingdom data protection legislation—or equivalent legislation in another member state—is certainly not an unacceptable weakening of an important safeguard but rather the maintenance of a vital and well precedented principle designed to ensure that potential money launderers are not tipped off that an enforcement agency has become aware of their practices.

  Statewatch made some cogent criticisms about the lack of specific data protection provisions in earlier versions of this instrument; we very much shared that concern and, together with other Member States, sought to remedy the omission. As you will see the text of the old Article 5.4 has been significantly revised under a new article 5.5 which provides extensive provisions on data protection. These have been formulated along the lines of the European Parliament's Civil Liberties Committee's suggested Article 5.4—which Statewatch favoured as a starting point together with a reference to the national law of the requested and requesting state. It sets as a basic common minimum standard the Council of Europe Convention of 28 January 1981 for the Protection of Individuals with regard to the Automatic Processing of Personal Data. This is the approach which was adopted with regard to Europol and the Schengen Information System, both of which also handle sensitive personal data. Whilst some discussion took place as to the suitability of also citing the EC Data Protection Directive 95/46/EC of 1995—as proposed in the new EP text—it was concluded that it would be inappropriate to come to a view on this question in isolation since a horizontal working group is currently examining how the 1995 Directive principles should apply to Third Pillar instruments. An additional reference has however been made to the Recommendation No R (87) 15 of 15 September 1987 of the Council of Europe Regulating the Use of Personal Data in the Police Sector. We are satisfied that these comprehensive provisions will provide a more than adequate degree of data protection and given that they follow well-established precedent there would appear to be no reason to consult more widely on the question.

  Statewatch also sought clarification of Article 5.3 regarding the need to refuse information if such transmission could violate EC, international, or national data protection law to disclose it. I assume that Statewatch are referring to Article 5.2 of the former text which deals with these provisions. The new text details these provisions under Article 5.3 and provides for a refusal of the provision of information on the basis of restrictions under its national law or any conditions referred to in Article 4.3. This latter allows for non-transmission on a wide range of grounds, ie where this would impair a criminal investigation, be disproportionate to the legitimate interests of a natural or legal person of the Member State concerned, or would otherwise not be in accordance with fundamental principles of national law. Taken together I am satisfied that these represent a formidable set of safeguards against Member States being required to transmit information against their wishes.

PROSECUTIONS (ARTICLE 5.2—JUSTICE/POINT 5—STATEWATCH)

  Justice have asked whether information should be used in a criminal investigation only if that use would be permitted in the actual Member State transmitting the information. Statewatch make similar points relating to the use of information being subject to the requested and requesting states' rules on the rights of the defence.

  The exchange of information referred to in this Decision is primarily for intelligence purposes. As the revised Article 5.2 in Crimorg 70 outlines, the transmitting FIU has a discretion to place restrictions on the use of this data for any other purpose. When a Member State wishes to use documents transmitted to it as evidence in a criminal investigation or prosecution for money laundering, under the provisions outlined in Article 5.3—(taken together with the provisions in Article 4.3)—the requested state shall be able to refuse its consent on a range of grounds. The use of the information which might not be admissible in the country where it was obtained is not specifically one of these grounds, but it is not the purpose of this instrument to harmonise the rules of evidence in Member States. Where the investigation or prosecution is for an offence other than money laundering, Article 5.2 allows the transmitting state to impose any conditions on the material's subsequent use.

HUMAN RIGHTS—POINT 1 STATEWATCH

  This Decision is about the exchange of information with regards to FIUs Whilst the recognition of basic human rights is of paramount importance, all Member States are party to the same international instruments which protect these fundamental rights. There is no need to restate this obligation in every instrument since observance of the European Convention on Human Rights is a formal obligation on the European Union by virtue of Article 6 (2) of the Treaty (as amended by the Treaty of Amsterdam).

CREATION OF FIUS—POINT 2 STATEWATCH

  All Member States already have their own FIUs. These were largely established in response to the Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering. Although this draft instrument does not impose any obligation on Member States to set up FIUs, this point is therefore academic.

STATUS OF FIUS—POINT 3 STATEWATCH

  Article 3 refers to the differing nature of FIUs within Member States—whether they be a police based unit or administrative in nature. It means that whatever their nature the unit will fulfil the function of an FIU as outlined in Article 2.1. There will be no obligation to change the status of FIUs in national law.

EUROPOL—POINT 6 STATEWATCH

  Under Article 4 of the Europol Convention, the designated National Unit—NCIS in the United Kingdom—which liaises with Europol—with regards to the tasks Europol has been designated to carry out—is required to:

    (1)  Supply Europol on their own initiative with the information and intelligence necessary for it to carry out its tasks.

    (2)  Respond to Europol's requests for information intelligence and advice.

    (3)  Keep information and intelligence up to date.

    (4)  Evaluate information and intelligence in accordance with national law for the competent authorities and transmit this material to them.

    (5)  Issue requests for advice, information, intelligence and analysis to Europol.

    (6)  Supply Europol with information for storage in the computerised system.

    (7)  Ensure compliance with the law in every exchange of information between themselves and Europol.

  Article 8 of the draft Decision merely puts beyond doubt the fact that exchange of information between Member states will not affect the obligations they have to Europol.

DRAFTING—POINT 7 STATEWATCH

  As far as the layout of the text is concerned, the old Article 6.2 has been revised and incorporated within article 5.2 of the new text. Article 6 provides for an important set of provisions imposing a national law compliance test.

  Overall the Home Secretary is satisfied that this latest text is not only a major improvement on the earlier versions but is the best which is likely to be obtained, given the need for consensus in the Council and the varying concerns of different Member States. The draft was discussed at the JHA Council on Monday 29 May where there was general agreement on the text with only the United Kingdom and Sweden maintaining their Parliamentary Reserves, the text also being subject to some further detailed amendment in relation to the extent of its territorial application. We anticipate that this point will be resolved and the Swedish Reserve lifted next week, leaving the United Kingdom's reserve as the only obstacle to adoption.

  Given that the latest text of this document has become available only so recently, we intend to maintain our Parliamentary Reserve until you have had the opportunity to examine it. However given our overall assessment of its merits and the fact that re-negotiation of any substantive elements would have virtually no chance of success at this stage, I am afraid we will need to consider lifting our Reserve if no new and substantive issues are raised on the text in the next two weeks or so.

9 June 2000

Letter from Lord Tordoff, Chairman of the Committee, to Barbara Roche MP, Minister of State, Home Office

  Thank you for your Explanatory Memorandum of 5 June and your letter of 9 June and for the full explanations of the draft Decision you have given. This was most helpful to Sub-Committee E (Law and Institutions) when it considered the proposal at its meeting on 21 June.

  As you will recall from our earlier correspondence two main matters of concern were raised by Justice and Statewatch. First, as regards data protection, the Committee notes that Article 5(5) has been amended by the inclusion of references to the Council of Europe Convention of 1981 and Recommendation of 1987. As regards safeguarding the rights of a particular data subject, much it would seem may depend on the status of the FIU in the requesting State and the extent of protection given by the local law in the light of any applicable exceptions or derogations.

  The second concern related to the rights of defence. You draw the Committee's attention to Articles 5(2) and (3) and we note the reliance you place on the reference to the "fundamental principles of national law" and on the requirements of Article 6(2) of the Treaty on European Union. The Committee wonders, however, to what extent the National Criminal Intelligence Service (as the UK FIU) will have regard to the rights of defence and rules as to admissibility of evidence when determining whether to impose a condition on the use of information on the grounds of the need to respect "fundamental principles" of the laws of the United Kingdom.

  This letter clears the proposal from scrutiny.

22 June 2000


 
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