Examination of Witnesses (Questions 480-500)|
WEDNESDAY 12 JUNE 2002
480. Could you appear every week?
(Mr Gerrard) On this occasion two individuals were
arrested. Where we can find individuals and, by arresting and
charging them and taking them out of the game, that has a real
impact on the fraud, we look to pursue that. Also, I think, important
is the element of not going after individuals but going after
their money. We described in the operations in December what they
were about, and I think going after the money is very important.
The Proceeds of Crime Bill will be a very, very powerful tool
Mark Tami: You spoke earlier of clamping down
on the retail side. I wonder what additional support and powers
will you be giving Customs to actually tackle this, particularly
bearing in mind, as was highlighted, the Misuse and Smuggling
of Hydrocarbon Oils, which talks of around 400 to 450 filling
stations in Northern Ireland being involved in this out of 700,
which I think equates to perhaps not 70 per cent but to 65 per
cent of actual stations in the province?
481. Those figures obviously pre-date this morning's
(John Healey) The question of new powers is important.
We aim, beyond the new programme, to tackle rebated fuel fraud
that I have mentioned, which is UK-wide, in the Northern Ireland
context. We have not taken firm decisions yet on the sort of new
powers and sanctions that may be required in order to clamp down
in the way we want to. That is a proper part of the process that
is taking place at the moment under the auspices of the Organised
Crime Task Force. It is very much, I think, a matter for discussion
between the agencies that have got a part to play in combined
role enforcement, because I think it is through the analysis of
their experience that we are going to be in a position to work
out what, in that area, we still need to put in place to assist
in doing the job we need them to do.
482. If these figures are right, and clearly
I have no reason to think otherwise, there is a massive task there,
is there not, for Customs to do? So, if not powers, what about
extra resources in terms of staffing and in terms of general support?
(John Healey) There is a massive task still. The retail
outlets are the most important focus because they provide the
mass market that gives the incentive and creates the profit either
for laundered or smuggled fuel. As we tried to explain earlier
on, I think, it is not simply a matter for Customs because Customs
have a range of competences and responsibilities, but we can put
alongside them the Inland Revenue, Trading Standards, local authorities,
the Health and Safety Executive and the Environment Agency and
start to equip ourselves by acting in that way with a method and
an approach of nailing these people much more effectively. That
may require additional powers and sanctions.
483. I wonder if you could tell me what your
best guess would be of the number of laundering plants in Northern
(Mr Gerrard) It is very difficult to know, by the
very nature of the market. In 2000-01 we broke up 17. It would
be a very brave man who said that we broke up every one; I am
sure we did not, so I would suggest it is more than 17, but I
cannot give you a figure on that. Our information is not that
accurate, and it would be unusual if it was.
484. Seventeen that you broke up. Have you any
reason to believe that those who were responsible for them did
not just go out and set up another one?
(Mr Gerrard) As I explained to Reverend Smyth, where
we can find the individuals who are behind this we will seek to
prosecute. We have not prosecuted all the individuals for all
17 so there must be a chance that those individuals went on to
do something else. Our aim will be to get after them straight
away, to keep bearing down on them and keep causing them financial
hardship by the seizure of their goods and the seizure of their
equipment. When we do actually find them then we do prosecute.
485. Can you give me a bit of a comparison between
the punishment they are likely to get from their operation when
caught and the profits they would bring in if they are not caught?
(Mr Gerrard) There is a range of offences that we
would seek to charge them with. If it was for the evasion of road
fuel duty that would be seven years under the Customs and Excise
Management Act 1979. If it was a money laundering offence the
maximum penalty is 14 years and if it is an offence under common
law of cheating the public purse then that is unlimited. What
the actual sentence is, of course, as you know, is for the courts.
They vary from suspended sentences through to full custodial sentences.
I sense in the sentences we have seen in the recent six to nine
months that those sentences are increasingly become tougher, with
several years being given for large laundering offences. Individuals
charged as part of operations we ran in December have not come
to court but I would expect them to receive significant custodial
sentences if they are found guilty.
486. What could one expect for having one's
vehicle seized for bringing in illegal fuel?
(Mr Gerrard) If we caught someone smuggling fuel that
vehicle would be seized and it would not be restored. A replacement
for a new tanker is £50,000 I understand, so seizure of the
vehicles can be very, very hard-hitting. We have seen it in other
areas, particularly at Dover in relation to tobacco and alcohol
smuggling, and it is also true in Northern Ireland. Vehicle seizure
against certain criminality is very effective.
487. Within the last fortnight the front page
of our local newspaper ran a story about a crackdown, with stations
being closed, vehicles being seized, and even those who had purchased
fuel were having their vehicles confiscated, taken off, whatever.
I have to say that was the first occasion when I started to get
a feedback from up and down the country of people saying "Can
this happen to me if I purchase illegal fuel?" What was the
nature of the story? Was it an accurate story? Is it happening?
What are your powers to take somebody's car off them if they have
knowingly purchased illegal fuel?
(Mr Gerrard) The operation you are referring to was
a five-day operation, and we seized 107 vehicles.
488. Is that people's motor cars or is that
(Mr Gerrard) It was buses, taxis, tankers, HGV vehicles,
private vehiclesit was a mixture. We lifted 40,000 litres
of fuel, of which 16,000 was laundered and we also hit two filling
stations. In terms of what our powers are, any vehicle transporting
smuggled fuel is liable to seizure, and whether that vehicle is
restored or not is at the discretion of the Commissioners of Customs
and Excise. If an individual is found with red diesel, for example,
or laundered fuel in their tanks, again that vehicle is liable
to seizure, and restoration, again, is at the discretion of the
Commissioners of Customs and Excise.
489. If you went to a petrol station, whether
it is through the marking or whatever the mechanism is, can you
tell whether there is illegal fuel being sold there?
(Mr Gerrard) If we were to call cold, as it were without
prior intelligence, we could find out pretty quickly through our
specialist testing units whether there is laundered fuel or whether
there is red diesel or kerosene in there. With smuggled fuel it
is more difficult. We do have certain techniques that we can use
on the fuel and in terms of auditing techniques on the books.
We can, in general, identify illicit fuel. Sometimes it is very
quick and sometimes it can take a little longer.
490. Can I ask the obvious question? I know
that it must be very time-consuming, and, indeed, in terms of
resources a very considerable requirement for an operation such
as the one I have referred to, but if it produces the kind of
outcome that that one did and if the figures that have been quoted
here are accuratetwo-thirds of petrol stations in Northern
Ireland are, to some extent, guilty in this areawhy on
earth can we not have more of these operations?
(Mr Gerrard) This was not the first operation we have
run. We have increased our resources, as you know, from 25 to
163 and we have been seizing significant volumes of fuel. What
we were targeting, particularly in the first 18 months, was large-scale
commercial fraud. What this operation was aboutand it is
not the first oneis targeting retailers and private motorists.
491. It may just be that we are not being entirely
fair to you, because what has surprised us is the very low level
of prosecutions. Is it unfair to say that (a) it is much easier
and (b) it hits them harder if you take away their vehiclesthe
tankers and the rest of itrather than prosecute them for
a sentence which might not even begin to be custodial and which
will take up many resources in taking the thing through the courts?
Is that unfair?
(Mr Gerrard) No.
492. Do you say to yourself "Right, I have
got £50,000 worth of tanker. That will do. On your way"?
(Mr Gerrard) I think using different sanctions will
hit different individuals. Seizing the vehicle of a criminal who
is part of a fuel fraud may not have a huge impact on him but
locking him away will. However, seizing the vehicle of a low-level
smuggler where that is his only vehicle will have a massive impact
and it will wipe out his smuggling business. I think the sanctions
need to be used to the maximum effect on different levels of criminality.
Sometimes a vehicle seizure will have that impact.
493. In that case, I think it would be very
interesting if you could let us have, in due course, a list of
the seizures, the approximate value of the seizures and the number
of people and firms/organisations you have taken them off, because
that will give us a better picture of this lamentably low figure
which is just simple prosecutions.
(Mr Gerrard) I can certainly provide you with whatever
information we have available. Whether it is available in that
detail or not, I am not sure. What I would say, though, is that
in 1999-2000 we seized 98 vehicles. The following year we seized
312. I would expect when the figures are confirmed for last year
that we will see significantly more than that.
Chairman: A breakdown of it would be very helpful,
because the old banger we saw you seize at Belfast Docks did not
make much difference to the price of fish, but I am sure you were
doing other things as well.
494. The 98 vehicles seized in 1999-2000 might
be more significant than the 312 seized in 2000-01 if 300 of the
312 are clapped-out Volkswagen Beetles.
(Mr Gerrard) You are absolutely right, but my impression
is that of that 312, having seen a lot of the vehicles that were
seized, an awful lot are HGVs, tankers and large commercial vehicles.
(Jane Kennedy) Mr Chairman, one of the frustrations
in this process is that, because of the multi-agency approach,
we may well prosecute a fuel-launderer for something entirely
different simply because we find a whole range of other criminal
activity that they have been engaged in, be it VAT evasion or
something else. Whatever we believe is going to be the most successful
form of prosecution, that is what we will take forward to the
court. So you would not necessarily see the correlation between
prosecutionssuccessful or otherwiseand the impact
upon the trade. If it was so easy we would be using it already.
Chairman: No one is suggesting it is easy.
495. Just pursuing this particular line of inquiry,
when a tanker is seized what happens to it? Is it just crushed
or is it re-sold as a second-hand tanker?
(Mr Gerrard) It is a very important point. If the
vehicle is not roadworthyand we do find, unfortunately,
plenty of vehicles which are not roadworthythey are destroyed.
If the vehicle is roadworthy we auction it, but we auction it
not in the island of Ireland. Indeed, a lot of tankers are sold
496. Who gets the proceeds?
(Mr Gerrard) They are returned to the Exchequer, although
there is not a huge amount of money made from the auctioning of
497. It is very interesting, because I would
have thought that there was a potential avenue of investigation
there. Oil tankers are not insignificant vehicles, and it must
be possible to monitor the import of them (I do not know if there
is any manufacturing of them on the island of Ireland). In effect,
if there is an organisation that is importing a lot, because you
know you are confiscating so many, at some stage there may be
some sort of deficit that can help you and you can use that information
to identify the organisation. I do not know enough about the trade
to make any hard and fast points but I would have thought, by
the very nature of the vehicles that they have to use, there was
an opportunity which could be used, provided all the potential
information sources were put together, to focus on the real operators
of this trade.
(Mr Gerrard) I think we do use all the information
that is available to us. One point I would make is that over the
last twelve months, because of our increased activityour
very visible increased activitythe amount of tankers that
are being used has reduced because they are very visible and easy
to pick out. We have seen an increased use of concealments. Some
of them are sophisticated, some of them are not sophisticated,
but we do see HGVs and curtain-sided lorries, etc, being used
with tanks inside. So I think there are avenues to pursue in relation
to tankers, but often we see more sophisticated concealments.
(Jane Kennedy) Which actually increases the health
and safety risk because there is no baffling inside the tank.
If I can very quickly give you this anecdote as to how alert Customs
and Excise have to be: sitting in South Armagh they were taking
a rest from doing vehicle checkslike coiled springs, as
you know our law enforcement officers always arein a quiet
backwater and a fire engine went past. The Customs officer said
"That is interesting", went after the fire engine, pulled
it over and found it was carrying smuggled fuel. What had attracted
their attention was that it was a fire engine and emblazoned on
the side of it was "Belfast International Airport, Aldergrove".
The ingenuity of the people who were engaged in thisthey
were using a fire engine, filling up the water tank with diesel
and using that to smuggle diesel across the border. That is just
an example of how Customs really do have to be alert to all the
tricks of the trade.
498. I am interested by some of the comments
about vehicle seizures and prosecutions, because one of the things
we have been told is that the penalties and the level of sentencing
for people who are involved in fuel fraud are actually so low
that they do not act as any deterrent at all. In fact, I think
one witness told the Committee that people involved in the retail
trade who engaged in fuel fraud do not fear anything from the
Customs and Excise or, indeed, some of the other statutory agencies.
I have got here the figures that the Home Office gave us for England
and Wales for the year 2000 and for Northern Ireland 1998, which
I gather is the last year that they were available, and they do
show that the average custodial sentence for evasion of duty etc
in Northern Ireland was 18 months, but that applies to only one
person, and in England and Wales it is about 11 and a half months.
Do you think there is any validity in that criticism? If so, are
there any plans to actually review the penalties and the sentencing
and, perhaps, particularly in the Northern Ireland context in
relation to the fuel related offences?
(Mr Gerrard) In terms of Customs and Excise and vehicle
seizures and penalties and seizures of equipment, etc, I think
my own view is that we have powers and sanctions available to
us. We need to make sure that we do use them robustly. The Committee
made a recommendation the last time round that we should not be
restoring vehiclesand indeed we do not now in Northern
Ireland. In terms of sentences handed out by the court, those
are obviously matters for the court. What I would suggest is that
through the work of the Organised Crimes Task Force, in particular,
as the appreciation of the damage that oils fraud does increasingly
in Northern Ireland I think we are seeing an increased robustness
from the court. There are only a couple of examples that I can
point to. Again, these things take time to come through the court,
but I do believe that there is an increasing willingness by the
courts to use more robust sentences.
499. You say you believe that there is more
willingness in the courts, but I think, if I am right, what the
Committee was told was that, as I say, custodial sentences are
extremely rare and, if they are passed, extremely short, and the
level of fines in relation to the potential profits are so insignificant
that it is no deterrent at all.
(Mr Gerrard) I think, historically, that may have
been true. As I said, these things take time to come to court
but one example I can point to is that on 9 February a County
Armagh man was sentenced for fuel smuggling and he got two-and-a-half
years. That is not an insignificant custodial sentence. As a law
enforcement officer, if officers are going to prosecute we will
want to see as large sentences as we can get, because we have
taken that prosecution through. I do think it is the intention
of the courts to take a tougher line on this, and that is because
the appreciation of the damage that oils fraud does has increased
over the last 18 months.
500. Is there any likelihood that the sentencing
issue will be looked at again?
(Jane Kennedy) The appropriateness of the sentences
is something that we keep under review and we would look at it
on an on-going basis. One of the things I would expect to come
out of the expert group is real, practical experience of making
the law work and making the Criminal Justice system work, from
a law enforcement point of view. I have to say, in my short time
in chairing the Task Force complaints about severity of sentences
have not been one of the causes of concern from the agencies involved;
it tends to be practicalities of catching the individuals involved.
Also, one of our objectives is, obviously, to catch and convict
those who are breaking the law, but in terms of organised criminals
and their networks and what they are engaged in, we count it as
a success if we have gone so far as to disrupt their operation
or to cause an organisation to have to disband because the law
enforcement agencies have, either through an increased physical
presence or through other activity, caused them not to be able
to carry out the work they were doing. So we measure success in
different ways. One of the things that we are trying to do this
year in drawing up the targets for the agencies is precisely thatnot
just looking at who we manage to put behind bars, but how many
of those networks we have managed to disrupt. Granted some, as
Mr Robinson was saying, will re-form, and we are conscious of
that. We are satisfied that we are impacting on some but we are
not impacting on as many as we would like.
(Miss O'Mara) Could I just pick up the point that
Paul was making about general awareness and, possibly, an awareness
in the courts? We are very conscious, as he says, that sentencing
is a matter for the courts, but precisely because of this a number
of my colleagues went and talked to the Judicial Studies Board
about the work of the Task Force, in general terms raising their
awarenessnot speaking specifically about oils fraud but
about a whole range of things that we are involved in and why
we regard this as important, just as we are trying to work amongst
the community generally, talking about "there is no such
thing as victimless crime". We are trying all sorts of areas,
and the courts, magistrates' courts and judges are another area.
Chairman: First of all, can I thank you both
for coming. Can I say how very helpful it has been to have two
ministers from different departmentsit is not common. We
are very grateful to you, in particular, Minister and your predecessor,
for agreeing so readily to do this because it is an area that
goes across both departments and both sets of responsibilities.
Can I perhaps reserve my parting shot for you, Mr Healey. The
moral of the story is this: when you spend money on enforcement
you make a profit and by increasing the resources you increase
your take. We have heard in evidence that it costs you somewhere
in the region of £5 to £7 million a year to police this
and a 7 per cent increase in the legitimate deliveries of fuel,
which you are rightly welcoming, brings you in between £20
and £25 million. So your investment is already showing a
very good return. If I can point to the assets recovery, which
is something that is coming in the future when we get the legislationwhich
again is very welcome and robust legislationif it is not
matched with the resources to take robust actions, because the
Treasury does not provide those resources, it will be a lame duck.
If you look at the Irish example, which has a recovery bureau,
it is already showing the Irish Exchequer a most enormous profit.
I know you have fixed spending rules and you have spending rounds
and all the rest of it, but I do beg you to remember that when
you spend a little extra on this we, the taxpayer, get a lot back.
That is something which I hope you will bear in mind and I hope
that you will allow, particularly those in Northern Ireland, to
cope with the rise in organised crime with the resources which,
first of all, are necessary intrinsically and, secondly, will
bring you the Treasury a greater profit. If I can leave you with
that message as you start your job it is something we will, I
hope, be reporting on shortly in terms of asset recovery and I
must not pre-empt what the Committee is going to say about this.
Thank you both very much indeed.