House of Commons Northern Ireland Affairs Committee

Organised Crime in Northern Ireland

Third Report of Session 2005–06

Volume II

Oral and written evidence

Ordered by The House of Commons to be printed 28 June 2006

HC 886-II Published Wednesday 5 July 2006 by authority of the House of Commons London: The Stationery Office Limited £18.50

The Northern Ireland Affairs Committee

The Northern Ireland Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Northern Ireland Office (but excluding individual cases and advice given by the Crown Solicitor); and other matters within the responsibilities of the Secretary of State for Northern Ireland (but excluding the expenditure, administration and policy of the Office of the Director of Public Prosecutions, Northern Ireland and the drafting of legislation by the Office of the Legislative Counsel).

Current membership Sir Patrick Cormack, MP (Conservative, South Staffordshire) (Chairman) Mr David Anderson, MP (Labour, Blaydon) Gordon Banks, MP (Labour, Ochil and South Perthshire) Mr Gregory Campbell, MP (Democratic Unionist Party, East Londonderry) Rosie Cooper, MP (Labour, West Lancashire) Mr Christopher Fraser, MP (Conservative, South West Norfolk) Mr John Grogan, MP (Labour, Selby) Mr Stephen Hepburn, MP (Labour, Jarrow) Lady Hermon, MP (Ulster Unionist Party, North Down) Meg Hillier, MP (Labour/Co-op, Hackney South and Shoreditch) Dr Alasdair McDonnell, MP (SDLP, Belfast South) Stephen Pound, MP (Labour, Ealing North) Sammy Wilson, MP (Democratic Unionist Party, East Antrim)

Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.

Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at: www.parliament.uk/parliamentary_committees/northern_ireland_affairs.cfm

Committee staff The current staff of the Committee are Mr James Rhys (Clerk), Hugh Farren (Attached Second Clerk), Dr Aileen O’Neill (Committee Specialist), Paul Derrett (Committee Assistant), Julia Kalogerides (Secretary), Laura Kibby (Media Officer), Jim Lawford (Senior Office Clerk).

Contacts All correspondence should be addressed to the Clerk of the Northern Ireland Affairs Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2172/3; the Committee’s email address is [email protected]

Witnesses

Wednesday 1 February 2006

Mr Nigel Smyth, CBI Northern Ireland; Mr Wilfred Mitchell OBE, Mr Glyn Roberts, Federation of Small Businesses Ev 1

Mr Tom Wilson, Freight Transport Association and Mrs Val Smith, Road Haulage Association Ltd Ev 11

Wednesday 15 February 2006

Sir Hugh Orde OBE, Mr Peter Sheridan, Mr Philip Aiken and Mr Mark Evans, Police Service of Northern Ireland Ev 18 Wednesday 1 March 2006

Ms Jane Earl, Mr Alan McQuillan and Mr Anthony Kennedy, Assets Recovery Agency in Northern Ireland Ev 30

Wednesday 8 March 2006

Mrs Nicola Carruthers, Federation of the Retail Licensed Trade Northern Ireland Ev 42

Wednesday 22 March 2006

Mr Paul Gerrard and Mr Donald Toon, HM Revenue and Customs Ev 53

Wednesday 3 May 2006

Mr John McGrath, Mr Dave Wall, Ms Linda MacHugh and Mr John Nevin, Department for Social Development Ev 62

Wednesday 7 June 2006

Mr Paul Goggins MP and Mr Nick Perry Northern Ireland Office Mr Nigel Hamilton, Northern Ireland Civil Service Ev 77

List of written evidence

1 CBI Northern Ireland Ev 90 2 Federation of Small Businesses Ev 91 3 Freight Transport Association Ev 92 4 Road Haulage Association Ltd Ev 93 5 Police Service of Northern Ireland Ev 94 6 Assets Recovery Agency Ev 107 7 Federation of the Retail Licensed Trade in Northern Ireland Ev 127 8 HM Revenue and Customs Ev 130, 164 9 Department for Social Development Ev 134 10 Northern Ireland Office and Northern Ireland Departments Ev 139 11 Public Prosecution Service Ev 145 12 National Criminal Intelligence Service Ev 146 13 Metropolitan Police Special Branch Ev 147 14 Northern Ireland Policing Board Ev 150 15 Northern Ireland Bankers Association Ev 152 16 Department of Justice, Equality and Law Reform Ev 154 17 The Petrol Retailers Association Ev 155 18 Dawn Primarolo MP Ev 155 19 Northern Ireland Federation of Clubs Ev 155 20 Crimestoppers Ev 157 21 Attorney General Ev 158 22 Law Society of Northern Ireland Ev 160 23 Lord Chief Justice Ev 161

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Northern Ireland Affairs Committee: Evidence Ev 1 Oral evidence

Taken before the Northern Ireland Affairs Committee

on Wednesday 1 February 2006

Members present:

Sir Patrick Cormack, in the Chair

Mr David Anderson Mr Stephen Hepburn Mr Gregory Campbell Meg Hillier Rosie Cooper Dr Alasdair McDonnell Mr Christopher Fraser Stephen Pound Mr John Grogan Sammy Wilson

Written evidence from the CBI Northern Ireland is on page Ev 90 Written evidence from the FSB is on page Ev 91

Witnesses: Mr Nigel Smyth, Director of CBI Northern Ireland, Mr Wilfred Mitchell OBE, Chairman of the Federation of Small Businesses and Mr Glyn Roberts, FSB Parliamentary OYcer, gave evidence.

Q1 Chairman: Good afternoon and welcome. This Q2 Chairman: Would either of you like to add to is the first public evidence session in the that? Committee’s inquiry into organised crime. We have Mr Mitchell: My name is Wilfred Mitchell; I am had a visit to Belfast before Christmas and to the Chairman of the Policy Unit at the Federation Dublin last week where we had informal of Small Businesses in Northern Ireland. I am background briefings and discussions with a wide joined by Glyn Roberts who is the Parliamentary range of people, but this is on the record evidence. OYcer. I would like just to make a few remarks. If there is any evidence that you do wish to submit V to the Committee o the record we would be very Q3 Chairman: Can you just tell us how many small happy to see you in a private session briefly when businesses you represent? the formal evidence is concluded. If there are points Mr Mitchell: Five thousand. which you wish to bring up following your reflection on this evidence session you can of course submit further paper or papers to our clerk and the Q4 Chairman: What is your definition of a small Committee will see those. If they are for business in Northern Ireland is employing less publication we will publish them; if they are for than . . .? background information we will not publish them. Mr Mitchell: Close to 200. We are very conscious of the fact that there are Mr Roberts: The majority of our members would some extremely sensitive and delicate issues be in the region of nought to ten. involved. Mr Smyth, would you like to introduce Mr Mitchell: We also welcome this opportunity to your colleagues? contribute to the inquiry on organised crime and, Mr Smyth: I am Nigel Smyth; I am the Director of as you aware from our submissions, we have the CBI in Northern Ireland. I have a brief number focused on extortion and racketeering by of comments then I will hand over to my colleagues paramilitaries and illegal organisations at a local in the Federation of Small Businesses. We welcome level. While we recognise that the Organised Crime the opportunity both to submit written evidence Task Force has had a measure of initial success and to be here today. Organised crime is an with some individuals, we believe not at the grass important issue of concern to the business roots level. To date there has never been a serious community—and indeed particular sectors of the attempt by government to fully identify the core business community—in Northern Ireland. It is a problem and find a solution to extortion of the Y di cult issue to comment on in detail. As you SME business sector. Northern Ireland is rightly said there are very many sensitive issues dependent on the SME sector and the FSB can particularly around the area of extortion and it is demonstrate through research that illegal extremely hard to get hold of firm evidence. From a donations are a hidden cost of doing business. Due business perspective the four most significant issues facing us in Northern Ireland from the CBI’s to the sensitivities we are unable to speak in a perspective are firstly fuel smuggling and public forum on specific case studies that we have laundering, violent and armed robberies, extortion obtained. However, the FSB survey has identified both in and across the construction sector and the that 6% of businesses are aVected by perceived retail sector, and counterfeiting. There is a final illegal donations. Replicating this sample study we area which has maybe a less direct impact on would suggest that up to four thousand businesses businesses which is organised crime involvement in could be aVected. As well as the economic impact, illegal drugs. That is all I intend to say at this stage. the fear that many businesses face is unacceptable. 3356921001 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 2 Northern Ireland Affairs Committee: Evidence

1 February 2006 CBI and FSB Northern Ireland

It is unrealistic for an individual business to report think the view there would be that that is this type of crime as the consequences in terms of continuing at a very high level. The view is that this personal security and business sustainability are has exploded in the late 1990s and I have no too high. The problem is growing throughout the evidence to indicate that the situation there is Province and into new locations outside the easing. It does vary between areas, certainly where historical Belfast area. SMEs make a vital social paramilitaries are involved both in terms of the and economic contribution to Northern Ireland nationalist and in the loyalist side our major and the Federation of Small Businesses concern is both across the construction sector and recommends that the Organised Crime Task Force in terms of the retail side. In the final area of makes racketeering and extortion against the counterfeiting I think the view there is that the business community a core priority. Research into situation continues to get worse. There have been some very major finds by the PSNI prior to the cost and impact of racketeering and extortion Christmas. The view out there is that there are should be commissioned and the present politicians more and more counterfeited goods—alcohol, who are responsible for making decisions must DVDs, these types of things—distributed through demonstrate a willingness and take a leaf in dealing markets across Northern Ireland but also through with this issue. The FSB recognises that reforms people and skills, hospitals, local markets and proposed for charity administration and legislation various other markets. The PSNI have had some would be useful in assisting to tackle this issue. We success there but the people in the industry say also believe that a marketing campaign with a there are various distribution mechanisms in dedicated independent brief could be piloted to Northern Ireland. Overall in one or two of the encourage businesses to report incidents or to seek areas certainly in the last couple of years there has advice on racketeering and extortion which again been some easing but a number of areas are still is very sensitive. All this appears to be spreading continuing at a high level in most cases. throughout the Province and the FSB recognises that time is of the essence in tackling this issue Q7 Chairman: From your conversations with your before it becomes rooted in future generations. The colleagues in the rest of the United Kingdom is it FSB would recommend that these issues are moved your impression that it is much worse in Northern up the agenda and an immediate course of action Ireland than in the rest of the United Kingdom? be implemented. Mr Smyth: Absolutely. If we look at construction the view is that this is very widespread in Northern Q5 Chairman: Thank you for your opening Ireland, particularly at the moment in loyalist statements. Before I begin the questioning, could I areas. It is a much bigger issue in Northern Ireland. just ask, would you wish to have quarter of an hour with the Committee in private? This is a public Q8 Chairman: Would you like to add to that? session, being televised; everything you say is on the Mr Roberts: I think it is important to put on the record. Do you wish to have quarter of an hour oV record that looking at the wider context on the the record afterwards? basis of a survey that we did two years ago— Mr Smyth: Not from my perspective at this stage. “Lifting the Barriers to Growth”—it actually Mr Mitchell: Nor from ours. showed that two out of every three business owners were the victims of crime. Northern Ireland itself Q6 Chairman: Thank you very much. Mr Smyth in is among the top four in terms of regions for the your CBI evidence you talk about organised crime highest level of business crime. Obviously that is increasing in Northern Ireland. Would you like to overall crime and not just organised crime, but explain to the Committee how you come to this there is a real problem in terms of the business community and crime. There is a perception that conclusion and what evidence there is to support V the assertion, and whether you believe this is going the PSNI are not making much of an e ort to to be a continuing and growing problem? engage with the business community to tackle this Mr Smyth: If I take the four areas I have identified, problem and this is backed up by our own survey I think in terms of fuel smuggling that certainly which showed that up to 36% of all businesses increased rapidly during the 1990s. It is fair to say believed they will not achieve anything by reporting it probably peaked around 2000/2001. Certainly incidents. That figure was reinforced by the recent statistics indicate that the level of legitimate Minister, Sean Woodward, yesterday when he said fuel is actually increasing and has increased maybe it was somewhere near 40%. by about 25% in recent years, but that would still highlight the very vast amount of fuel smuggling Q9 Chairman: When was that survey done? and fuel laundering continuing. If you look at cash Mr Roberts: It was done in the last two years. robberies in the 1990s there were probably less than ten armed robberies a year; that peaked at around Q10 Chairman: Did that include all your members? 90 or 100 again around 2000/2001. It appears to Mr Smyth: The “Lifting Barriers to Growth” survey have fallen back and is now levelling oV at round is a bi-annual survey which we do across the UK maybe 50 or 60 partly I think because companies and obviously we have the Northern Ireland have more stringent measures in terms of safety figures, but it was also useful in terms of crime to precautions plus the additional resources from the have a look at a comparator in terms of other PSNI. In terms of racketeering and extortion I regions of the UK. Crime is one of the top issues 3356921001 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Affairs Committee: Evidence Ev 3

1 February 2006 CBI and FSB Northern Ireland for the business community to deal with in Northern Ireland OYce in that respect and how Northern Ireland; there is absolutely no getting you think the performance indicators will aVect the away from it. recording of crime? Mr Roberts: I think that is basically FSB national Q11 Mr Anderson: In your submission you talk policy and we would like to see the Home OYce about a perception from the CBI that one of the take that line as well, so that is a consistent line we main reasons why organised crime is still getting have put across the UK. We have put forward a worse is the reduction of the police as a result of range of suggestions in terms of tackling crime, for the Patten proposals. Do you have any idea what instance if a small business invests in security that the numbers have been reduced by? they should get tax relief, that they themselves will Mr Smyth: I spoke to many people in preparing perhaps take part in a business confrontation our written evidence before coming here today. I scheme. There are practical things, but what we think it is a very broad view that the PSNI is want to do is to ensure the PSNI have business extremely stretched in terms of its resources. Many crime right at the top of their agenda. It is of our members, particularly those involved in cash unacceptable in any serious economy that two out and transit, have a good relationship with PSNI but of three small business owners are the victims of there is a general view that the numbers on the crime, from the very low level crime right up to the ground are significantly less, the scale of experience more serious. I think that there is a real problem is significantly less and it was certainly put to me in that many people are not contacting the police that some of the intelligence is not as good as it was and what you have is a huge diVerence between the some years ago. It is starting to improve but it is figures that we produce and the figures that the going to take time. The view is that there is a big PSNI produce. The PSNI are relying basically on threat out there; the PSNI are under-resourced and what is recorded crime and there is a diVerence under a lot of pressure in terms of meeting the between what is recorded crime and what our threat that there is there in a whole range of areas. members are telling us on the ground.

Q12 Mr Anderson: Has the number come down? Q16 Chairman: From what your members are Mr Smyth: In terms of the number of police on the telling you are they consistent victims of crime, not ground that has come down quite significantly over just one oV? a number of years but I cannot give you a figure. Mr Roberts: Yes. I am aware that in Dr McDonnell’s constituency on the Lisbon Road Q13 Mr Anderson: We understand from Her there is one small retailer who in one year had six Majesty’s Revenue and Customs there has been an burglaries. That in itself is unacceptable. You are increase in the number of oYcers engaged in all aware of the small businesses in your tackling oils fraud from 25 to over 160. You say it constituencies, you are aware of all the pressures seems it peaked in 2000 and the police are getting they are under from things like insurance and better now. Do you think that has had an impact? energy costs and to have this level of crime is a Mr Smyth: I think it has had an impact. I think burden too much. you have to look at a number of things. I think you Mr Smyth: : I was looking in detail at the Policing need to look at exchange rates, particularly the Board’s target and when you look at it in detail the exchange rates in the 1990s when it increased that first two priorities are public order and road traYc. discrepancy. You also need to look at excise duties The third priority is reducing crime and the fear of and they have narrowed slightly. So those are two crime. If you look at the business aspect of that it things on that side but I think at the same time comes well down the list. From a business there has been more coordinated action and more perspective we are seen to be coming well down the resources put into this. However it is still quite list rather than right at the fore. frightening. I think we are down to about 610 filling stations at the moment, about half of those are Q17 Mr Campbell: I just wanted to establish what we call branded petrol stations and half of beyond any doubt about what Mr Roberts and Mr them are not branded. I believe from the previous Mitchell have said about this figure of 2000 small Committee’s inquiries it suggested that a majority businesses suVering some form of criminal activity of filling stations use some degree of illegitimate or whether it is low level or high level. That is a huge illegal fuel. indictment surely of where we are in 2006. On a national scale if that were replicated it would be at Q14 Chairman: We will be taking evidence from the the top of the political agenda in terms of finding a petrol retailers in about a fortnight’s time. Do you solution. What I wanted to ask you was, obviously wish to add anything to that? criminals in Northern Ireland as elsewhere will Mr Roberts: Not at this stage. Our colleagues in the evolve and, as police forces crack down on their petrol retail trade will take care of that. present activities, they will then move into other activities. In terms of human traYcking how much Q15 Mr Fraser: You are calling on the Northern evidence is there that criminal activists and Ireland OYce to look at the performance indicator organised gangs of criminals are getting involved in for business crime to give the same priority, as I that type of activity and the crimes that flow from understand it, as for domestic crime. Can you tell that (there are a number of crimes that flow from us about the discussions you have had with the the illegal traYcking itself)? 3356921001 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 4 Northern Ireland Affairs Committee: Evidence

1 February 2006 CBI and FSB Northern Ireland

Mr Smyth: I think as to illegal immigration obviously in terms of victims of extortion and traYcking we have identified that as one of the new racketeering that figure would be a lot higher issues. I think it is also probably one that Northern than that. Ireland is less exposed to than in the GB. I think it is also one where you are going to be looking at Y UK networks and the networks for the Republic of Q20 Mr Campbell: I know it is di cult to generalise Ireland on the back of that. It is a relatively new but given what you have said about the scale and phenomenon in Northern Ireland. Obviously the response or lack of response, if I were to ask migration has been increasing very significantly you, generalising insofar as you can, on a scale of over the last number of years. It is certainly not one one to ten where would most of your members put we would see linked with paramilitary type activity the confidence of the police today to deal with the but it is a fairly new area that has appeared in the crimes your members are facing, between zero last few years. being not confident at all and ten being very Mr Roberts: Crime is crime whether it is carried out confident? by paramilitaries or criminal gangs; we do not see Mr Mitchell: I would say about five. any diVerence in the two. It is extremely hard to Mr Smyth: I would have to say six. get small businesses to go on record and come in Mr Roberts: I suppose as well it depends on the front of committees like this even if it is in camera small business owner you are talking about. or behind closed doors. Obviously you are aware of the circumstances that prevail and that is always Q21 Mr Fraser: What measures would you put in very diYcult. What we are looking at is to ensure place so that there is more openness and less fear that at the grass roots level there is the attention of retribution? on the small retailers who are facing the problems Mr Mitchell: We believe the PSNI have been aware of organised crime. One of the comments we got of this in the past. This knowledge that we are back in our survey which is in your submission was: giving today has been out there and it comes back “If the small amount to be paid is seen to be paid to the point that we are saying that the decision there is no problem. My windows and personal makers and the politicians responsible have to safety are worth a lot more than £100 a year”. That demonstrate the willingness to kick a leaf in dealing is from a barber’s shop with two employees. That with this. They might have to put money and one statement gives perhaps a human face to what resources in the proper places. quite often can be statistics and reports and I think we have to remember the sheer pressure that many business owners are under as a result of organised Q22 Mr Fraser: If there was that resource and crime, as a result of extortion and that is why we money what are the specific measures you have want to see this issue addressed on the ground for in mind? small business owners. Many of the areas that have Mr Roberts: One of the points that we have put small business owners that are victims of extortion forward is for research. It does not really matter are crying out for investment, they are crying out who does it but as long as we get the information for jobs. Let us face it, it is not Sainsbury or Tesco there and have researched into the cost and impact that are the victims of this; it is the small retailers, of racketeering and extortion so we actually know the small newsagents, the small grocers, the small the impact on the whole economy. It is diYcult to barbers on the ground who find it hard going get that and I think that is one of the things that enough. we would like to see out there. Obviously we need to see the Organised Crime Task Force put this grass roots extortion at the top of the list. Q18 Chairman: Is it your impression that most of Mr Smyth: There are a lot of very small family them are subject to some form of this? Y owned retailers, corner shops, who are being Mr Roberts: It is di cult to say every small targeted for £100 or £200. If you look at business but certainly within our survey there is a construction sites, building sites, you are looking at very significant amount. It is very hard in one sums of £10,000 to £30,000. Certainly in a number respect to put a complete figure on it because when of cases a lot of developers do not work with the other organisations have tried to do surveys in the Y PSNI because they have been threatened; some do. past they have always found it di cult to get a Resources are put in quietly by specialised response. resources and various things. I think you have to create more confidence. There have been one or Q19 Chairman: I appreciate that very much, but it two cases of suspicions of leaks over the past is helpful to the Committee to have a steer. You number of years. You have to get a lot of are intimately involved in all of this. Is it your confidence that if you are going to go down that impression that 50% of the crimes are reported? Or route and expose yourself that those people are 20%? Or 80%? What sort of figure would you put going to be behind bars for your own personal on it? safety. People are put on diVerent levels of safety Mr Roberts: In terms of an overall figure it is and security once they start working with the PSNI. somewhere in the region of 36% who believe There are two diVerent levels, the serious stuV in reporting crime will not achieve anything because terms of the big stuV on building sites which even there is a lack of confidence in the police to actually though it is very damaging to the individual and catch the criminals. That is on overall crime but damaging to the business and maybe much more 3356921001 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Affairs Committee: Evidence Ev 5

1 February 2006 CBI and FSB Northern Ireland diYcult to get hold of when people walk in and say, things we have now is the District Police “Can you give some money to charity?” or Partnership. There has not been an engagement whatever it might be. with the business community with them. Many of their public meetings are badly attended and it is Q23 Sammy Wilson: You have highlighted a lot of not seen as a forum to address this type of thing. the problems that the police have with numbers, One of the things we have suggested in our lack of confidence, leaks and the belief that the submission is that it has come to our knowledge police cannot actually do anything, and also lack that many paramilitary groups are actually using— of intelligence. However, the police would tell us or abusing—the charity status and using setting up that intelligence is not just for them to gather; front groups and we would like the Government intelligence comes from the people who are victims again to ensure that that door is closed. of crime as well. I have listened quite intently to Mr Smyth: Everybody I spoke to wanted a more what you have said and the only measure which significant visible presence of police to create that you have mentioned so far which you believe would confidence and various things on the ground. There get people to respond to police is a confidential line. are examples of some success in various things. If 36% of people are not even reporting crime to There are cases of where things have been the police what do you believe in practical terms addressed and how you go about that. Touching needs to be done to get people to come forward and also on what my colleagues have said, it is about give the information to the police? After all, they service and responsiveness. Some people have had are the people who are most likely to be able to a car stolen or whatever, you are not going to find give the police this information to catch criminals. the thief so the view is what are the police going to What practical steps can be done to encourage that be able to do about it anyway? You have to try to 36% of people who currently do not even go near challenge that in some way. the police to come and give this information which Mr Mitchell: It is a two way process and, as I said enables them to start the process of catching the earlier, you need to get to the core of the problem. criminals? Once the business world can see that there is Mr Smyth: Obviously there is the Crimestoppers genuineness on the police side to get to the core line but what we want is something that is specific, they will feel safer in reporting. manned by people who have the understanding of the pressures that businesses have who are going Q25 Mr Hepburn: Can I just ask some questions through this particular problem and who can give specific to the construction industry? Racketeering advice. There are no easy solutions for the small is widespread in the construction industry: can you business owner who is the victim of this type of tell us something about the size of it? For example intimidation and their concerns for their business, are the Laings and the Wimpeys on Belfast dock their livelihood, their family. One of the local aVected the same way as the spec builder? Can you commanders in Belfast said that if an owner of a tell us something about the mechanics about how business does contact police it is usually not the it is actually done? Y local police o cers from the local station who go Mr Smyth: I cannot give you any details about the down, it is usually somebody from headquarters mechanics; you would have to speak to individual because they do not want the risk of being construction companies and builders. In terms of identified by the local police. There is no easy the scale, our view is that it happens mainly well answer. What we need firstly, as we put forward in down the supply chain. The top strand—the top ten our submission, is to find out the extent, to have or twelve—(we have certain multinationals, a the clear facts, figures and statistics of the problem number of big construction companies in Northern and obviously use the Organised Crime Task Force Ireland) there view is they do not pay and it is on to ensure that they themselves have a key role. the record. Most of the work in construction is They have had some success but they need to get at done by sub-contractors anyway. We certainly the grass roots. They have already moved forward believe—and it is the evidence I have collected from because the respective agencies are all coordinating various members—that it is the small and medium and working together through the Crime Task sized family owned builder who is going to be most Force and that is a start in the right direction. exposed to that. I do not know the mechanics but the view is that someone comes along and suggests Q24 Sammy Wilson: You have told us there are a contribution to something or whatever it may be people who are being robbed four or five times a (but I think there are a number of mechanisms year. We already know there is a significant there) and then they get invoiced or whatever on problem. Knowing how much is being done does the back of that. It tends not to be the top line not lead to criminals being put behind bars; they construction companies. They generally have a are put behind bars when the police have evidence policy not to pay. The site manager would say, to put them behind bars. What I want to know is “Look, we don’t do that”. It is the small family what practical steps do you believe could be taken guys who are most exposed in terms in some sort in order to gather the evidence from the victims of personal threat. Interestingly a comment that I with confidence so that the police can pursue this? did pick up on is that there is more prevalence in Mr Roberts: The PSNI have a big role themselves loyalist areas. In the catholic areas the local in ensuring that they themselves are more user community has got behind this. They see the friendly to the business community. One of the damage in this. You are not going to get 3356921001 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 6 Northern Ireland Affairs Committee: Evidence

1 February 2006 CBI and FSB Northern Ireland redevelopment and regeneration; no-one is going to catch the criminal and they just see the crime rate come into some of these sites. Developers are not being endemic in their areas. In terms of the charity going to go in there if they see this significant point, as I understand it Northern Ireland does not threat. In a number of catholic communities there yet have a charity commissioner although I is much stronger community leadership and local understand there are moves within our Department political leadership and some of the problems that of Social Development to update that legislation. may have been there over the years tend to go It is a rather diYcult thing to quantify but in the away. The criminal activity is more subtle now. The course of preparing our evidence today it was one loyalist view is that it is just thugs out there, of the points that was made to us. intimidating and threatening. Mr Smyth: As far as I am aware there has not Rosie Cooper: Somebody who is just sitting recently been any coordinated high profile listening to the evidence being given, is hearing campaign to say, “Right, over the next number of phrases like, “Well, people are not expected to months we are going to go in with big resources”. report it for various reasons; reporting crime does Certainly in terms of the construction side it is very not achieve anything” and the throwing up of sophisticated. A number of big developers are hands. I have listened very carefully to some of the reporting but it probably is a minority. A lot of it exchanges and you have been asked about finding goes unreported; people are too worried about their a solution. You mentioned research and confidence own safety. building, but why can these small businesses not be set up as part of the process to try to catch these Q27 Chairman: We are just beginning to touch people and send out a big signal: “Look, this is specifically on the paramilitary involvement. You going to be tackled”. Has that type of thing been made that comment—a fairly low key comment but tried? I know the scale is huge and I am not a rather important comment—about two mini underestimating it, but the reality is that I almost mafias. Is the correct inference for me to draw from hear you are almost giving up, that people are not that that you are saying that Northern Ireland engaging and if you do that I do not see how you could be in the grip of a catholic and a can make progress. protestant mafia? Chairman: I think I must appeal for slightly shorter Mr Mitchell: Yes. questions.

Q28 Chairman: Do you believe that that is what Q26 Meg Hillier: Can I just ask something on the will replace the bloody and dreadful things that back of that about third party reporting? Have you have happened in the past? thought of that as a solution? You mentioned the Mr Mitchell: I think that will come out as a issue about charity fronts; do you have criticisms consequence of what has been set up previously. of the Charity Commission? Perhaps you could just expand on how you think that can be tackled. Mr Mitchell: I do not believe this is ordinary crime. Q29 Chairman: Do you think one side is more We are on the verge of having two mini mafias in involved in this than the other? Northern Ireland and we need to use the same Mr Mitchell: One seems to be more professional tactics to address those issues. We are on the verge than the other. of that becoming established in Northern Ireland. It is very important that something is done quite Q30 Chairman: Can you specify? quickly. Mr Mitchell: We were concentrating on Mr Roberts: Very recently we met with the Deputy racketeering in that area and it does not seem to Chief Constable and we put a number of these be as sophisticated; it seems to be more ad hoc. Fuel points to him. The PSNI, particularly in Belfast, we laundering could be more professional. have bobbies on bikes and many of the city centre traders feel that is a positive move. We are working and engaging with all the major stakeholders on Q31 Chairman: Are the more professional ones in this and we are determined that this issue does get the catholic community? serious political attention. The PSNI have their Mr Roberts: As we said earlier on, we do not make work cut out in addressing this problem of business any diVerence between whether it is crime by the crime, as have the Policing Board. Obviously they paramilitaries or crime by criminals. There is no have a key role to play in ensuring that crime does diVerence at all in our view; it is all wrong. In the go down. The diYculty is that the PSNI then survey that we produced—with responses from broadcast some months ago that crime in Northern right across Northern Ireland—it indicated that Ireland was reducing and the situation that we see this problem is right across Northern Ireland in on the ground is the opposite of that. I think there every community. Obviously there are respective is a further point as well. Obviously if you are a groups within that and there are going to be victim of paramilitary extortion then it is that much diVerent ways of operating, but it is the same harder to contact the police. I think that should be outcome. I think that what we are concerned about, made clear. In terms of the other aspects of crime obviously some time after the cease fire because the problem is that many of the police record these there is a vacuum there, the paramilitaries could things and that is the last thing the small business turn into mafia organisations and that is a concern owner actually hears from the police. They do not that we have. 3356921001 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Affairs Committee: Evidence Ev 7

1 February 2006 CBI and FSB Northern Ireland

Q32 Chairman: It is a concern that we obviously Q34 Rosie Cooper: I am sure it is not beyond out have and what Mr Mitchell said is very significant. wit to find a mechanism whereby you could get an He said that he felt that there could be a catholic expert witness or somebody to witness what is mafia and a protestant mafia developing. I asked going on, give evidence, but not necessarily the him which was the more sophisticated and he did person being threatened. You have not answered not actually answer that question. my question on balance. On the one hand you are Mr Mitchell: I believe the nationalist community saying you have two mafias; do these two mafias could be more professional. manage 90% of the organised crime? Mr Smyth: From the CBI perspective it is diYcult Mr Roberts: It is not an easy thing to survey. It is to generalise. If you look at cash robberies the diYcult to comment on but I suppose we could give perception there is that 90% involve paramilitaries a precise figure on and how that breaks down. Y or ex-paramilitaries probably on both sides. There Mr Mitchell: It is even more di cult because is a lot of small scale stuV and what you are seeing maybe the mafia is controlling it within their is joy riders being brought in to rob the local corner own area. shop and then they are enticed into bigger and Mr Smyth: The feedback I got from my members more sophisticated operations by those involved in is 89%. Of the four big areas that we identified— that. In terms of extortion I think it has already fuel smuggling, armed robberies, extortion and counterfeiting—the perception certainly is that the been commented on construction both sides vast majority of that is paramilitary or ex- involved, perhaps more subtly on the republican paramilitary. I would say it is more than just two side but certainly pretty blatant on the loyalist side. mafias, particularly in the loyalists; there are a lot As to counterfeiting I think the view there is the V of splinter groups. You just need to read the majority of stu has paramilitary or ex- Organised Crime Task Force annual report to see paramilitary links and a particularly high level of that these groups get addressed, they keep merging loyalist activity. and coming together and various things. There are Mr Roberts: We very much want to see this being a lot of sub-groups with all of that. addressed but one thing we are not going to try to Mr Roberts: It is certainly in extortion and do is get dragged into what has become obviously racketeering. Yes, the vast majority of that is a political crossfire. We have identified the paramilitary, but in terms of other organised crime problem; we want to see action taken on the basis and other crime it is perhaps a little bit diYcult to of our submission. We want to get on; we want to give a break down of paramilitary and non- see the politicians in Northern Ireland taking and paramilitary. addressing this problem and using their expertise. They have the knowledge on the ground and I Q35 Meg Hillier: I wanted to ask about the impact think that has always been the best thing in trying it has had on people who are in business and then to tackle this and many other problems in who might choose not to be in business. Do you Northern Ireland. have any idea of the numbers of people who close down their business as a result of this? Or, as you say, because they are on the margins will they just Q33 Rosie Cooper: We have quite extensively gone go along with it in order to survive? Is the eVect of into the overview of the paramilitary involvement. all this that people may choose not to set up You have suggested there may be two mafias at the businesses or to move businesses from certain parts bottom of the layer which is the ordinary criminal of Northern Ireland to other areas where they feel element. What would you say the balance would there is less opportunity? Is there any be, paramilitary, non-paramilitary? What would geographical link? the inherent criminal activity be? You did not Mr Mitchell: I think it is clear that inward mention before about third party reporting, not investment is restricted because of the risk factors necessarily going to the police. What would you see and the control. the level of crime being in the sense of how much of that is just ordinary criminal activity? Where Q36 Meg Hillier: People coming into Northern should we direct our resources? Ireland? Mr Roberts: Certainly we will look into third party Mr Mitchell: Even within Northern Ireland there reporting and pass on information. We cannot are certainly areas they will not go into because of directly answer your question today and we will loss of control. That will hamper development and look into that to see what the options are. There if they have to pay something if they are successful was a point asked earlier about PSNI setting up it is not a very wise thing so far as business is some sort of false businesses basically to try to concerned. catch the racketeers. That has been tried but as the commander said they clock onto the fact that it Q37 Meg Hillier: Looking at the wider impact on looks rather suspicious, in terms of two policemen those local communities, does that mean that some trying to run a newsagent for six months. In terms individuals living there are losing the opportunity of the response and the number of arrests they get to shop in certain areas? from it I think from what we have heard from local Mr Smyth: Yes, particularly in services whether it commanders it is not worthwhile in terms of getting is DVDs, oV licensing, retailing, there are certainly the results. companies in Northern Ireland who have decided 3356921001 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 8 Northern Ireland Affairs Committee: Evidence

1 February 2006 CBI and FSB Northern Ireland they could not make money in certain areas other respective agencies have managed to do. The because there is too much illegitimate activity going Northern Ireland members here all know that this on. They would either be extorted or the business is taking place in their constituencies; every local is not going to be there because they would be counsellor in Northern Ireland knows it exists. The undermined by the level of illegitimate business. problem is that it has always been a very hard thing Mr Roberts: Many of the communities with these to set down and give firm facts. small businesses and small retailers are actually Mr Mitchell: We know certain things like the added crying out for investment, they are crying out for increase to rent in certain areas and the value of jobs and to have this further burden put on them land when people sell sites. There is a clear could well push businesses over the edge or they impact there. decide to close down. In Northern Ireland we already have the highest insurance energy rates Q40 Mr Fraser: You mentioned the big anywhere else in the UK so with a further burden organisations—Tesco, et cetera—because of the on a business it becomes extremely hard to start sheer size of the organisation they are able to say and run a business. In some of the areas where no, but with all respect both organisations there is a particularly high level of paramilitary represented here are large organisations, national intimidation or racketeering or extortion it is very, organisations. Are you saying that you need to be very hard. As we said earlier on, they are not empowered so that all your members, by chasing after Tesco or Sainsbury; it is quite often membership, are able to say, “We say no”? Is that the small local shops that are bearing the brunt of the point you are trying to make? all that. Those local shops provide a valuable Mr Roberts: Obviously in a perfect world we would service for many, particularly the elderly. We have give advice and say, “Don’t pay” but we are not in had a problem in Northern Ireland with out of their shoes, we are not there when these individuals town shopping centres and many of our smaller come and ask for donations. The fact that we are businesses, particularly in urban areas, have lost here today, the fact that we have spoken in public out considerably and obviously the paramilitary on numerous occasions about this in terms of every element is yet another burden on them. If you are aspect of crime and have produced a broader going to start a small business you are not going report. to start it in areas that are blighted by particular Chairman: You are very eloquently making your problems of paramilitarism and high crime. point this afternoon.

Q38 Meg Hillier: Do you have any idea of the costs Q41 Dr McDonnell: I would like to dwell on some incurred by businesses of giving in or accepting of the points you have made but time does not oVers of extortion? permit that. I want to mention the Organised Crime Mr Roberts: Obviously there would need to be an Task Force. I was picking up that the FSB were analysis of widespread business failures and fairly critical of the approach taken by Government bankruptcy and so on and obviously there are a lot to tackle organised crime and it argues that of reasons for that. As we said, it could be relatively politicians and government are aware of the small amounts. I read out the quote there from a geographical areas where such activity takes place barber; these could be very small amounts but it but choose not to tackle it, whereas the CBI on the does make the diVerence for a very small business other hand appears to welcome the strategic to have this level. If they have staV as well they are approach of the Organised Crime Task Force and worried about friends and family who do live in the work undertaken, emphasising the need for these areas as well and they are part of the suYcient resources et cetera. The FSB claim that community. the Government is ignoring the problem; what Mr Mitchell: I would suggest you check with the steps do you think the Government ought to be PSNI. If you see what happened to the families who taking? did report things to them that would paint a picture Mr Mitchell: I think, as I said earlier, a lot of for you. evidence that we are hearing today has been out there for some time and the Government has been Q39 Meg Hillier: You talk about £100 for the aware of it. We consider there have been no serious barber’s shop, do you have any analysis of the sorts attempts to fully address the matter. of figures that extortionists are demanding and also the racketeering and other illegitimate business? I Q42 Dr McDonnell: Why? realise this is diYcult because people may not Mr Mitchell: That is what we would like to know. report it, that is why I asked about third party We are concentrating on businesses so it is the reporting. Government who need to answer that question. Mr Roberts: We would not have a precise figure in Mr Roberts: We do give credit where credit is due terms of amounts; again it would vary. It is in terms of the Organised Crime Task Force. They extremely hard to get this type of information. Our have had initial successes. They have been very survey looked at business donations and other successful in tackling the godfathers, if you like, but aspects as well. It is extremely hard to get this what we want is for them to concentrate on the information because of confidentiality and we work ground troops, so to speak, of the paramilitary extremely hard to try to get even this level of organisations. We are also now involved with the information but it is something that none of the Organised Crime Task Force in an advisory 3356921001 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Affairs Committee: Evidence Ev 9

1 February 2006 CBI and FSB Northern Ireland capacity; the CBI, the FSB and the Chamber of what they are doing there. They have certainly Commerce are now part of the Organised Crime made some inroads with some success but it is Task Force in terms of advisory. We will keep our probably fairly limited compared to what we are eye on the ball. It is one of our core objectives and actually looking at. we will not rest until this issue is addressed, and there is light shone on this particular problem. It Q45 Chairman: You think they are more eVective is fine confiscating the assets of the godfathers but in the south than in the north. we need to get down to the grass roots. If there is Mr Smyth: Certainly they have been established one point that we want to make today, it is that. longer. I do not know the technicalities of the rules Mr Mitchell: There needs to be a clear strategy and V and regulations and what their strategy is, but then at least monitoring how e ective they are at certainly from some comments coming back to me implementing this strategy. That has not been the CAB appears to be having more eVect, they happening to date. seem to be out there more pro-actively.

Q43 Dr McDonnell: Would you care to comment Q46 Mr Grogan: What about cooperation between on the eVectiveness of the multi-agency approach the Customs and the PSNI, is that good in your that has been adopted by the Organised Crime experience? Do they work together? Task Force? It is pulling together various agencies; Mr Smyth: It is good and it certainly has improved how can the joint working there be improved? in recent years. The HMRC tend to take a lead in Mr Smyth: It is early days but one needs to read this and the PSNI tend to come back only when the annual report from the Organised Crime Task they are having raids. I do believe that cooperation Force; it does give you some confidence that there there is good. is a lot of activity happening out there. There are certainly some resource issues. Certainly from our respects it is maybe not the priority that it would Q47 Mr Fraser: Do you agree with the IMC’s take if I look at the policing plans. In terms of the observations about local councils and the courts Asset Recovery Agency we believe it should have being fully brought into the system in terms of their a more pro-active approach; it seems only to come roles in tackling organised crime? into play at the last resort. We are maybe looking Mr Roberts: I think we are here primarily talking at the Republic there is a more pro-active approach about our own submission and I think we have a out there on the back of that. It is quite clear that big enough job getting our message across and there is a sort of educational role in getting the articulating what we have said in our submission community on board and educating them about the without perhaps getting on to what the IMC are damage this is doing, so probably more eVort and doing. As I said, we are very careful not to get resource could be put into that too. It is a very caught in a political crossfire; we want to see this complex, diYcult area and there is a lot of work issue addressed. We want to see crime, we want to and eVort going in to try to address it but it is see paramilitary extortion and racketeering made a not easy. top priority. It should not be dragged into politics. Mr Roberts: The Organised Crime Task Force has We know what the problem is; let us try in terms brought together all the main agencies responsible of bringing all the agencies together in a united for this and that coordination can only be a good response in tackling this. thing. I think that they themselves recognise that. I think they recognised as well that the business Q48 Sammy Wilson: There was one issue that was community themselves, as we have demonstrated raised at the end of your list and that was about today, have a particular view on this and that is immigration crime. You mentioned perhaps that it why we are now in an advisory capacity with the is not a big issue but it is an increasing one. The Organised Crime Task Force. We will ensure that Government in the Asylum and Immigration Act our analysis, our views and the views of these grass is going to place the onus or asking for greater onus roots small business owners will be heard loud and to be placed on employers to do checks on those clear by the Organised Crime Task Force. who they employ to ensure that they are legitimately in the country and have work permits Q44 Mr Grogan: Just to follow up a point that Mr et cetera which will be a big way of tackling some Smyth made earlier, you were beginning to make a of this crime. There has been some opposition to comparison between the work of the Assets it but I would just like to hear the views of your Recovery Agency and also the Criminal Assets both your organisations as to how you believe that Bureau. I think you were implying that one was will impact on your members and would you more pro-active than the other. welcome checks at that low level as a way of Mr Smyth: From feedback that I have received combating this crime? from members is that CAB in the south appears to Mr Smyth: I am going to dodge that one to some be more pro-active. The ARA in Northern Ireland degree. I know the CBI have been working on this; appears to just come in at the last resort when every it is not something I am familiar with. Clearly from other channel has been gone through. Our view an employer’s representative any additional there is, could they not have a more pro-active regulation on a business is a concern but there is a approach? I do not know how they are instructed recognition that employers have a role and or whether they are hamstrung or not in terms of responsibility here. I am afraid I am not in a 3356921001 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 10 Northern Ireland Affairs Committee: Evidence

1 February 2006 CBI and FSB Northern Ireland position to respond; I am not aware of the details that word is “drugs”. Is there a significant element of what is on the back of that. I am willing to come of that in crime in Northern Ireland that aVects back if necessary and put in a short submission. your members or not? Mr Smyth: I suppose it indirectly aVects our Q49 Chairman: That would be an easy way to deal members if people are oV sick and absent and with that, yes. various things. I think it would be fair to say that Mr Mitchell: There are terms of employment where the level of drugs in Northern Ireland has been people have to be registered and meet certain increasing but coming from a relatively low level. criteria and they are asked for photographs and Certainly the problem is getting worse. things like that to identify them and to be sure about responsibility and qualifications. We Q53 Chairman: Crime is not as drug fuelled as it is welcome that. elsewhere in the UK? Mr Smyth: It is certainly on the increase. Q50 Sammy Wilson: A number of us probably receive lobby letters lobbying against that Q54 Chairman: How far do you believe that the provision. It seems an eminently sensible provision drugs are being peddled by the perpetrators or because it is a way of checking at employer level as organised crime? Is there evidence of that? to whether or not people are being drawn into the Mr Roberts: It would be diYcult for us to come up country illegally and even being brought in as part with figures for that. I understand you are speaking of organised gangs. I really just wanted to hear the to the PSNI and I am sure the chief constable and views of yourselves. his oYcers would be more than helpful in Mr Mitchell: What we have heard so far we have answering that question. There has been a supported. perception in the past that Northern Ireland did not have a drugs problem. The fact is that we do Q51 Chairman: You can certainly add to that. We have a drugs problem and that dimension of our are at the beginning of this inquiry. We shall make problems cannot be ignored. our report to Parliament in due course, probably May/June time, and our report will obviously Q55 Mr Fraser: Are you entering into information contain a number of recommendations. If your sharing with other organisations world-wide in the wishes were fulfilled would you like to tell us what light of international terrorism? in particular you hope that we would recommend Mr Smyth: We as an organisation are not. My that would make life a little easier for your understanding is that the PSNI and the Organised respective members? Crime Task Force is quite actively involved up Mr Roberts: I think that we have put forward three there and have participated in a numberof or four main ideas that we would like to see put international conferences and meetings in various forward. As we have said it is perhaps to get the things. We have just been invited to participate in recognition out there from decision makers, from the Organised Task Crime Force in the last few Government about the impact that this is having months. on a vital part of our economy in Northern Ireland: 99% of all businesses in Northern Ireland are small Q56 Chairman: Are there any points that you and this is a critical burden upon small business would like to make to the Committee before I bring owners. If we get that recognition of the pressures this session to a close? Do you feel you have been on these business owners on the ground and an able to say to the Committee everything you really awareness of their problems and a commitment at wanted to say, and the points you have wanted to every level to tackle this, then I think from the make you have been able to make? point of view of the FSB we would be very happy. Mr Smyth: Yes. Mr Mitchell: We would clearly like to see Chairman: Good. We are very grateful to you. Government demonstrating a lead role and seeing There are bound to be things that will occur to you something happen. maybe even as you listen to some of our other Mr Smyth: We would be looking for resources, to evidence which you may see on the television. Of make sure that this is a priority; pro-activity on the course you may want to come and listen to some ground and educational campaigns to educate the and you are welcome to attend. We shall be taking community and get the community on side to some evidence in Northern Ireland in March and recognise the damage that this is doing to the fabric of course you are welcome to all those public of society. A culture has been created out there and sessions. If anything does occur to you, please do that culture takes some eVort to change. not hesitate to contact the clerk. Anything which you say, before the termination of our inquiry, will Q52 Chairman: If your equivalent in the rest of the be taken carefully into account. We are grateful to United Kingdom were giving evidence to a you and I do personally appreciate that it has not committee looking at crime in England or Scotland been all that easy for you to be as frank as you have or Wales or indeed all three, and you were talking been, but thank you. Thank you for what you do about burglary and breaking into shops and things, in Northern Ireland and we wish you continued there is one word that would keep cropping up and success. 3356921001 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Affairs Committee: Evidence Ev 11

Written evidence from the Freight Transport Association is on page Ev 92

Written evidence from the Road Haulage Association Ltd (RHA) is on page Ev 93

Witnesses: Mr Tom Wilson, Manager of the Freight Transport Association Ireland and Mrs Val Smith, past National Chairman of the Road Haulage Association Ltd and Manager of Bondelivery Northern Ireland, gave evidence.

Q57 Chairman: Could I welcome you both, Mrs Q62 Chairman: What do you see as the major Smith and Mr Wilson. As you know the Committee problem facing your industry in the field of has embarked upon a major inquiry into organised organised crime? crime in Northern Ireland. We have taken informal Mr Wilson: I mentioned the well-being of the evidence and had informal briefings both in Belfast industry. We all like to see a level playing field in the and in Dublin. Today we have seen representatives business community and if there are competitors from CBI Northern Ireland and the Federation of working at an advantage which is using illegal means Small Businesses Northern Ireland. I think you have that has to be stamped out. My objective is to try to heard some of that evidence. We are grateful to you see measures brought into play very quickly in for coming to give us some more specific evidence. Northern Ireland that will stamp that out. Some of We are going to be seeing the petrol retailers and that will be heavy criminal activity and some of it others at later stages in our inquiry. You have very will maybe not be particularly heavy criminal kindly submitted some written evidence, but before activity, but it is something that the law enforcement we begin the questioning is there anything that you oYcers would certainly not be happy with and I would like to say by way of opening submission and think the people need to be brought to book. could you tell us precisely what your role is in your organisations? Mrs Smith: My name is Val Smith. I am the past Q63 Chairman: Do you see organised crime in your sector as a growing problem, a growing threat? Chairman of the Road Haulage Association; I also Y run a company in Northern Ireland which is a Mr Wilson: I think is di cult to quantify. As I say, distribution company; I am a member of the board I know it goes on; it can be people who apparently of Crimestoppers in Northern Ireland. Because of run a fairly legitimate business for half of the time the job that I do in Northern Ireland organised crime and the other half of the time they are dipping their aVects me greatly and I think that is why I am here toe in doing something which is definitely not legal. as the Road Haulage Association’s representative. In terms of an increase I think in the last ten years we have seen a lot of criminal activity, more so than ever before. Q58 Chairman: You are most welcome. Mr Wilson? Mrs Smith: As far as I am concerned in the business Mr Wilson: I am Tom Wilson, Regional Policy that I run—because I deliver high value goods— Manager of the Freight Transport Association, organised crime has aVected our business looking after the membership in Northern Ireland. I substantially, in particular over the last few years. I come from a background of almost 30 years in would certainly say that in the last few years in petroleum distribution and much of the activity that Northern Ireland crime has been worse than it was is going on is familiar to me. On behalf of our all through the troubles. membership in Northern Ireland we welcome the opportunity to put our points across today, to say Q64 Chairman: Really? how certain activities in Northern Ireland are Mrs Smith: Yes; 2004 was a particularly bad year adversely aVecting the well-being of what is a very with organised crime in Northern Ireland and the valuable industry to the economy of Northern type of kidnappings which carried over into 2005. Ireland. Already in 2006 my company has already experienced two instances. Q59 Chairman: Could you just tell us how many members your respective organisations have? Q65 Chairman: Would you like to tell us about Mrs Smith: As a whole the RHA has ten thousand them? members; in Northern Ireland we have about three Mrs Smith: Mr Kincaid made a statement a couple hundred members. of weeks ago when he said that paramilitaries were Mr Wilson: We are really very similar. I think in still involved in organised crime. Perhaps I should total throughout the UK we have twelve and a half elaborate, to deliver in some areas of Northern thousand members and some three hundred in Ireland you cannot deliver with just a driver on a Northern Ireland. vehicle; I have to have a helper on the vehicle and a Securicor escort for that vehicle. We had a very well Q60 Chairman: Will some of the three hundred organised hi-hacking in west Belfast where my belong to both organisations? security escort was stabbed in the chest with a screw Mr Wilson: Yes. driver and guns were put to the head of the two people in the vehicle. They were made to drive the vehicle away to an area where the vehicle was Q61 Chairman: A large number of them? unloaded and the goods were taken. The Mrs Smith: Not really; we represent diVerent repercussions of that are that I now have three sections but there would be a cross-over. people now oV sick—long terms sick—because of 3356921001 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 12 Northern Ireland Affairs Committee: Evidence

1 February 2006 Freight Transport Association and Road Haulage Association Northern Ireland the experience of that. I would certainly say that diVerences based on the number of commercial organised crime is hurting businesses in Northern vehicles only in Northern Ireland and based on that Ireland. assumption, 90%. It is coming in at over £200 million currently per year just for trucks. Fifty per cent of all Q66 Chairman: Were the villains apprehended in cars sold in Northern Ireland are now diesel cars and that case? they are making that journey. My number one point Mrs Smith: No. The goods were recovered because is that for legitimate purchase of fuel the Treasury is of our own extensive security which we have on losing anything between £250 million to half a our vehicles. billion pounds. That is a bit of a guess but it is at least £250 million. Mrs Smith basically said what I was Q67 Chairman: What were the goods? going to say: car ownership has risen enormously 1 Mrs Smith: Cigarettes. with a 28% growth . It is great to hear that, but I think digging down deep I could tell you that there is some fuel imported into Northern Ireland and then Q68 Chairman: The other thing that comes across moved south and there is exchange of duty2. That is when we were talking in Northern Ireland and not telling us that the problem has gone away. I indeed in the south is the great problem of fuel would argue that it is not less than it was. Edward smuggling and fuel laundering. Would you like to Leigh MP in a statement in February 2002 said that comment on that? in Northern Ireland large quantities of petrol and Mrs Smith: If you go back in time to when Professor diesel are smuggled over the border from the Goldstein (who had looked into organised crime in Republic. It is estimated that the revenue losses have New York) came across to Northern Ireland, I think increased in 1998 from £140 million to £380 million part of his report said that until the Government in 2000. This sum is an astonishing proportion of the looked at the diVerential in fuel duty between the overall revenue from hydrocarbon oils expected north and the south of Ireland the perpetrators of from the Province of around £750 million so half of organised crime were still going to be able to carry the potential duty that the Government should be on that criminality because of the monies that they getting we are not getting. This comment continues were making out of fuel smuggling. That is still going to say that over half of the filling stations in on today; the evidence is there. My colleague has Northern Ireland sell illicit fuel and over one third some information on what we believe are the losses sell only illicit fuel. I know that the Petrol Retailers to the Exchequer. Association will be speaking to you separately; they may well be repeating what I am saying. If we come Q69 Chairman: We have had indications from HM to the laundering of fuel, it was reported that 77 Revenue and Customs that the receipts for illegal plants have been shut down—I am not sure if legitimate fuel sales have gone up by something like that was last year—but it is so easy to start up 28% over the last four or five years. another one. It really is an easy job so fuel with a Mrs Smith: There are more cars in Northern Ireland green dye from the Republic, usually brought into a than there were five years ago; I think that has to be remote location in the border area, can very quickly taken into consideration. I would certainly say so far be laundered. The county councils in the border as the haulage industry is concerned the majority of areas are plagued with having to clean up this acid hauliers—certainly those in the higher bracket, the residue which is harmful and it costs a lot of money 38–40 ton vehicles—all fuel up in the south of to dispose of it. That is happening on a regular basis. Ireland where fuel is just under 20 pence a litre I really do believe that Revenue and Customs are cheaper than it is in Northern Ireland. only scraping the surface and there is a lot of crime going on continuously. The penalties do not fit the Q70 Sammy Wilson: Could I just divide the crime. The people who have the power to hand out questions into three: firstly around the fuel, secondly penalties are frustrated because they are so around the organised crime and thirdly around some miniscule. of the measures which you have been critical of— and I think quite rightly critical of—in your Q71 Sammy Wilson: That brings me nicely onto the responses to us? First of all on the fuel, in your next area I wanted to look at. You were critical of the evidence you talk about the level playing field and courts indicating that very often when people appear the eVect on competitiveness. In a perverse way does before the courts no action is taken and the courts the availability of laundered fuel, smuggled fuel et are simply recommending that Revenue and cetera in Northern Ireland give some road hauliers Customs recover the lost duty. Is this a common in Northern Ireland a competitive advantage occurrence? against, say, road hauliers in Scotland or other parts Mr Wilson: Yes. One of the points we were going to of the United Kingdom? make was that Revenue and Customs use their best Mr Wilson: In my submission I stated that some 90% endeavours. We have had joint meetings that a of fuel used by Northern Ireland based operators is Customs industry Intelligence group that meets on a sourced in the south. It is only 40 or 50 miles from regular basis with Revenue and Customs and that is the greater Belfast area down to the border points made up of the oil distributors and the petrol and if you are in those areas you will see the retailers and they are feeding back information, magnitude of the operation. It is several artic loads per day servicing those bunkering sites. It is all quite 1 From witness: over the past 10 years. legal. I did some sums just recently on current 2 From witness: with Customs in both countries. 3356921001 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Affairs Committee: Evidence Ev 13

1 February 2006 Freight Transport Association and Road Haulage Association Northern Ireland there are confidential lines, they have all the that they have to deal with these people once they are channels you can possibly imagine to lead Revenue caught. As I said earlier, they are made to go back to and Customs to the door of where these activities are work to pay back the duty. going on, but I do not think the phone rings very often, they do not say a lot. I think the diYculty is Q76 Chairman: You have some power yourself the frustration that was told to us by Revenue and because any trade association can set its rules. Do Customs. It takes almost five years to get oVenders you strike oV people you find are using illicit fuel or to a court. When Customs get them there the judges if you suspect some of your members use it? have said Revenue and Customs are not proving Mr Wilson: Our trade association has a very clear set that this person has committed a criminal act. They of criteria as being part of membership. If a member owe the duty so they must be left to carry on to is found to be of poor repute their membership does recover that duty. So they are allowed to carry on not continue with our association. operating. I know of a number of cases where they were apprehended in the late 1990s owing the Q77 Chairman: Have you expelled many? Customs a quarter of a million pounds in unpaid Mr Wilson: Not many. duties and those companies are now bigger than they Mrs Smith: We represent organisations that believe ever were before because they have cleared their debt that their members are of good repute. The majority with Customs and they are now good boys. of the members of our organisations would not buy illicit fuel because illicit fuel will ruin your vehicle; it Q72 Chairman: Are they really good boys now? ruins the engines of your vehicles. When you have a Mr Wilson: Probably not. rig that has maybe cost you £90,000 or £100,000 you are not going to put illicit fuel in that. Our members will buy their fuel legally in southern Ireland; they do Q73 Sammy Wilson: Obviously Revenue and not buy fuel from the roadside. The people who use Customs have a role to play here but many of your this roadside fuel are in the main cowboy operators members are probably aware of either who is selling or the general public who do not know any better; the laundered fuel because they purchase it for their they are buying it from filling stations that are selling lorries, or where the laundered fuel is being stored. it. I would really like to make that point, that we Are there any particular actions which you believe represent legal hauliers. the authorities could take which would encourage Chairman: It is very important that these questions your members who are aware of where are the stores are asked and emphatically answered and put on or the sellers of the illegal fuel are located to come the record. forward and give information which would speed up this process? Mr Wilson: Over the three years I have been Q78 Dr McDonnell: You almost pre-empted my involved in this fraud there is a frustration from question because we have a figure here of 95% of all those people who have submitted information diesel fuel used by registered commercial vehicles confidentially to Customs, to an extent that they and not bought through recognised supply outlets would even be reluctant to go back to further paying UK revenue. How do we get that broken meetings. They say they have given them all this down? I am trying in my own mind to decipher information, they have pointed the finger, they have where good business practice ends and where crime phoned them up and told them where to be at a begins. I am conscious of a number of hauliers— certain time and it has not been followed through. indeed, people who may be members of your organisations—who moved their registration south a few years back. Q74 Sammy Wilson: Have you any explanation from Mrs Smith: That did happen, yes. your involvement in the forum as to why these things are not followed through? Q79 Dr McDonnell: That is not a crime. There are Mr Wilson: As I said at the very beginning, the some hauliers who would use southern fuel when Customs have used their best endeavours with the they pass through; there are even some hauliers who resources available to them. They are frustrated with would tank up at Dundalk on the way back north. I being unable to strike these people oV the map. do not see that as a crime and I think what we need There is a combination in there of a lack of will and here is to try to focus in better because the 95% a lack of resource. The information is being fed eVectively involves all of your members and when I through, businesses are being damaged and are very see that I begin to think that I would not be buying frustrated that the good information they are giving diesel fuel in the north at all because nobody else has not resulted in what they want to see. seems to be doing it. How much of the 95% do you think falls into what we might describe as legitimate Q75 Sammy Wilson: Is this one or two isolated and how much of it falls into illegitimate? I think it instances or would you say it was very common, this is the illegitimate that we need to get after. It has flow of information and lack of action afterwards? become common practice that anybody within 20 Mr Wilson: I have not been a giver of information. miles of the border a couple of years ago was I have been at these meetings where I have witnessed travelling because they were saving 25 pence or 30 people saying that they are disappointed with the pence at that stage but it is a totally diVerent ball results of people being caught. I think it goes on game they get into when they bleach fuel or further than that. I think it is an issue of the power whatever. That is where I think we see the crime. 3356921001 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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Mr Wilson: The 95% referred to there is my figure. I Q81 Sammy Wilson: Is there not a diYculty with am referring there to the legitimate operators, the what you are suggesting insofar as Northern Ireland bona fide operators who are in the transport is 22 miles from Scotland; hauliers in Scotland business, who are sourcing their fuel from the border would then say the diVerential in fuel rates give either when they are passing through to do a delivery hauliers in Northern Ireland an unfair competitive in the south or making specific journeys—as a great advantage to them? At what point do you stop this lot of them do, it is only 40 miles down to the rolling across? You have made a fairly important border—every week to top up their tanks. That is all point but I just want to know how you answer it? legitimate fuel I am referring to. I am talking about Mrs Smith: For a start you put a timescale on it. You the bona fide operators who do things properly by give a timescale so that the Government could put the book. Aside of that there are companies in the money it is saving into other resources—in business whose rates are constantly undercut. The defences, the PSNI and the Organised Crime Task supermarkets are saying they can get the job done Force—to try to defeat organised crime. At the for less; members are saying to me they do not know minute there is smuggling going on to the UK how they are doing it. Those companies then can be mainland. There is an accident waiting to happen. sourcing fuel which is either smuggled in, a good Hauliers are coming over from the UK who never quality product, same colour as available in the came into Northern Ireland or Southern Ireland north, delivered into a storage tank in the north. before, they are bringing loads in because they know That goes on. There are all the dodges you can think they can pick up cheap fuel in Southern Ireland and of. The 95% I am referring to is the bona fide they are not just taking out cheap fuel in their tanks, operators who are sourcing the fuel but they are they are taking cheap fuel out in the trailers they are paying the Irish Government duty not HM Treasury bringing out as well. At some stage there is an accident going to happen. There is something going to happen to one of these ferries; there is the possibility of one of these ferries going to the bottom of the Irish Sea. It is happening all the time but at least if you can put all your resources onto the ports Q80 Dr McDonnell: How bad does it have to get you can catch what is going on and what is being before the Government say “We need money for exported out of Northern Ireland and Southern things in Northern Ireland and here is £350 million Ireland into the UK and stop that happening. a year” or whatever that figure is? How long are they Hauliers are buying their fuel in Southern Ireland prepared to let this go on? now. They are doing it legally but they are doing it to Mrs Smith: Some time ago when I was National survive. Every country knows that Northern Ireland Chairman of the Road Haulage Association I wrote needs it haulage industry; that is how it moves its a letter to the Treasury and I asked the Treasury to goods. We have to support our haulage industry and look at the harmonisation of fuel on the island of at the minute if our haulage industry was not buying Ireland to try to take away the monies that were its fuel in Southern Ireland we would not be going in to fuel organised crime. My suggestion to competitive. him then was: “You are going to get your £350 million back into the Exchequer and the resources Q82 Sammy Wilson: You have talked about how that you are currently wasting chasing around after long it takes to get a case to court and the lack of these fuel tankers that are crossing the border—and action by HM Revenue and Customs, is there any remember there are probably more fuel tankers in indication that that is because the oYcers cannot Northern Ireland operating illegally than legally— operate in areas where much of this fuel laundering you can put those resources to the ports for instance is occurring due to threats and therefore need police and you can try to stop us exporting the problems back up and that is not available to them? that we have to the UK and you can use your Mr Wilson: I have not heard that personally as a resources better elsewhere.” The return letter I got reason but I do believe that is probably correct. from Mr Healey said that because of European Therein lies the question: how good is the legislation that was something that the British communication between Revenue and Customs and Government could not do. I still believe that it is a PSNI? I am not sure personally; I just do not know possibility and I think the European Union would if they were really well coordinated collectively probably look quite favourably on something that is together whether they would have more results. going to help Northern Ireland out of its present Another point mentioned earlier, we talked about problems. I think that one of the Scottish MPs has the increase in crime I think with the peace process actually brought to Parliament that he would like to coming along there is much less evidence of troops see some dispensation on fuel duties for the and police on the ground on a daily basis. It used to highlands and islands and he has gone back to be that on every corner you saw the armed forces France who I think have managed to give something and thankfully now that is not the case but that for some area in France. I am saying I think these makes it so much easier for these guys to operate. things are possible. The Government paid to bring across a professor from the United States to give Q83 Chairman: You heard the evidence we had them advice on how to defeat organised crime in earlier this afternoon and the gentleman from the Northern Ireland but they do not listen to what he Federation of Small Businesses said that he felt that has to say. They are really only tipping the iceberg there were two mafias operating in Northern with the measures that they are taking at the minute. Ireland. Did you hear that evidence? 3356921001 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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1 February 2006 Freight Transport Association and Road Haulage Association Northern Ireland

Mr Wilson: Yes. Q89 Mr Fraser: Going back to the point you were just making, Mrs Smith, in 2003 you had a security Q84 Chairman: One from each side of the sectarian seminar and there was a DC Kerr who admitted that divide. Do you believe that is the case as well? If it is, the road haulage industry was not at the top of what is their involvement in the subject we are police priorities despite its obvious links to currently addressing? organised crime. At that time certain initiatives were Mr Wilson: Personally I do not have the experience set up, one of which you perhaps alluded to just now, to comment on that. I read what I see in the papers the National Stolen Lorry Load Help Desk and the and there have been some high profile cases of other one was TruckPol. people who appear to have been living a very high Mrs Smith: They are here in the UK, not in lifestyle having come from very meagre upbringings Northern Ireland. and they have come to the attention of the authorities or come to the attention of other people Q90 Mr Fraser: When one looks at how such things who did not want them to stay around for much have been set up, how would you use such a group longer. or organisation or entity like that to help yourselves in Northern Ireland if you could? Mrs Smith: We do have links with other haulage Q85 Sammy Wilson: There are parts of Northern companies. We have an association where we do Ireland where currently it is well-known that speak to one another and we do have meetings with cigarettes, for example, are not taken over the the police. People who are involved in the border they are shipped to Liverpool and then back. Y distribution of high value goods and the Maybe you could tell us the di culties in putting warehousing of high value goods would have regular high value loads across the border. meetings with the police. We do have some Mrs Smith: The hijacking that took place on the communication happening there. border was my company and it was my security oYcer who found our vehicle because the police Q91 Mr Fraser: V would not go into the area where the stolen vehicle Is it e ective? was taken. Our company no longer transports the Mrs Smith: I know that the people I speak to work goods across the border but the goods are not taken tirelessly to try to defeat organised crime but the via the UK to Dublin. That is still happening resources are limited and the problem we have now because the threat is still felt to be such that it is not in Northern Ireland is that we do not believe the safe to take those cigarettes across the border. PSNI have the resources to do the job and defeat organised crime.

Q86 Sammy Wilson: You mentioned that you Q92 Mr Fraser: Another point with regard to recovered the load that was stolen in west Belfast. evidence given by your organisation to the What kind of cost does that impose on a company Transport Select Committee in November 2005 was like your own to put those security measures in about the automated facility to notify Truck Watch place? within minutes of a stolen report. Are you aware Mrs Smith: Absolutely huge. We are spending of that? phenomenal amounts of money. We have to track all Mrs Smith: Yes. our vehicles. We have to have our own control room. Q93 Mr Fraser: They then go on the police national Q87 Chairman: How many vehicles do you have? computer. What representations have been made by Mrs Smith: We have over 50 vehicles in Northern yourselves? Ireland; we also operate in Southern Ireland as well Mrs Smith: Because we are a high value goods so I have experience of what goes on on both sides company we do have links into the police control on the border. We have to track all our vehicles, we room so when this happened a couple of weeks ago have to monitor them from our own control room our control room contacted the police control room and we also have two full time people out on the road in Northern Ireland and it was my control room that doing ad hoc tracking for vehicles. In certain areas, led the police to where the vehicle was. as I say, we would not send a vehicle in to deliver cigarettes in particular without a helper on the Q94 Mr Fraser: Am I correct in saying that this vehicle. scheme is presently stalled? Mrs Smith: In Northern Ireland or in the UK? Q88 Chairman: Could you just answer my earlier question about paramilitary involvement? Q95 Mr Fraser: Generally in the UK, but do you Mrs Smith: If I told you that my vehicles get hit all know any more than that? over Northern Ireland, it is not just in one particular Mrs Smith: I could not bring you up to date. I can area, but there are certain areas in Northern Ireland certainly get some more information; I can get where it is much more diYcult to deliver in and the someone from the RHA who is involved in what you drivers themselves know when they are picking up are asking and get them to update you on it. I know tails and when they know there are people watching in Northern Ireland we have worked very hard. No them. It is very organised; you have to see these matter how much eVort we have put into the high things to believe them. It is from both sides of the value goods haulage that I represent we are still not community. winning. Organised crime is still there and it is still 3356921001 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 16 Northern Ireland Affairs Committee: Evidence

1 February 2006 Freight Transport Association and Road Haulage Association Northern Ireland defeating us. If you go back to what happened in Q102 Chairman: You do presumably keep a log of Northern Ireland in 2004 where you had the these. Northern Bank robbery, prior to that two other Mrs Smith: We do, yes. companies took substantial hits from the organised crime gang and in fact it was stated publicly that the Q103 Chairman: Would you be kind enough to send gang who hit those two companies—one of which a copy of that to the clerk? was my own—actually robbed the Northern Bank. Mrs Smith: Certainly. So far as I am concerned we Not one person has been apprehended for the are not the worst hit company in Northern Ireland. robbery on our premises and not one case that was Securicor, the cash in transit people, are a hundred stolen has been found. times worse than I am. At one stage they were having one incident a week. Q96 Chairman: What did they do and what did they take? Q104 Chairman: It certainly would be enormously Mrs Smith: It was a type of kidnap and they held one helpful to us. What we are getting at the moment is of my staV and his family hostage. He was made to very riveting anecdotal evidence but if we could have do certain things and they eventually came to the some of those facts and figures and the amounts depot and he loaded a trailer of cigarettes. Over £2.5 involved, the number of people who have been million of cigarettes were stolen. Not one case, not hijacked or held hostage or injured (you talked one packet has been recovered and not one person about the man who was stabbed in the chest with a has been apprehended. You are asking here, what do chisel) it would be very, very helpful and we would we need to do in Northern Ireland? If we do not be most interested. Obviously we are going to be apprehend the criminals and if we do not bring them having the chief constable and others giving to the courts and if we do not put them away we are evidence and we are going to be seeing people both never going to win in Northern Ireland. privately and publicly. I do want our report to be able to make some very sensible recommendations. Q97 Chairman: A moment ago you were blaming If any of the information you send to us is lack of police resources. Is it just a question of information you would rather the Committee did resources or do you have the impression that the not publish but would have for its own information, police are not interested in this aspect of things? then on behalf of the Committee I give you that Mrs Smith: It is obviously in the interests of the guarantee that we would not publish it, but it really police in Northern Ireland to cease organised crime. would be helpful. I am frankly staggered by what They want to do that. I would believe they do not you say about these crimes and nobody being have the resources having unfortunately experienced apprehended. serious robberies and serious hijackings. I can see that they do not have the resources to be able to do Q105 Mr Hepburn: I would like to know something anything about it. about labour costs because I think if I were a truck driver in Northern Ireland I would want an awful lot Q98 Chairman: Have any of the people who have more than I would working in England, Scotland or perpetrated crimes against your company been Wales. You are describing a scene out of the Wild apprehended? West! Mrs Smith: No. Mrs Smith: It is not all bad in Northern Ireland because not everybody carries high value goods. Q99 Chairman: Not one? Mrs Smith: No. Q106 Mr Hepburn: You say you employ assistants in the cabs. Mrs Smith: Only for certain areas and only for Q100 Chairman: How many crimes are we talking certain deliveries. about? Mrs Smith: Last year we had seven incidents of note. That is not counting attempts. Prior to that in Q107 Mr Hepburn: Would you say your truck driver October we had the robbery in the warehouse; I is on a higher labour rate than elsewhere in the UK? could go back further. I can honestly say in the last Mrs Smith: Absolutely, yes. few years the situation in Northern Ireland is worse than it has ever been. My company has had more Q108 Mr Hepburn: Is it substantial? Obviously it is incidents against our vehicles and against our going to have a knock-on eVect with the industry, premises in the last three years than in the 30 years the business costs. previously. Mrs Smith: Yes.

Q101 Chairman: I am sorry to press you on this, but Q109 Chairman: It must be significant with all your it is very important and very helpful to us. In the last overheads. three years how many incidents are you talking Mrs Smith: It gets harder every year because the about? more you have to invest in security it is always Mrs Smith: I am only talking about notable coming oV your bottom line. It is not just me in the incidents, but in 2004 we probably had about 15 to business that I run. We deliver to customers in 20. Then in 2005 we had seven notable ones. Northern Ireland and it is your corner shops and 3356921001 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Affairs Committee: Evidence Ev 17

1 February 2006 Freight Transport Association and Road Haulage Association Northern Ireland your small supermarkets who are having to invest in Mr Wilson: I have personally not heard of that. more security as well because there is more crime Certainly it is widely spread, counterfeit CDs and against them as well. tee-shirts and whatever. There seems to be a disease of that. I think it is transported in smaller types of vehicles than the ones that our members would use. Q110 Chairman: You mean goods you have actually Mrs Smith: It is coming into the sea ports. delivered? Counterfeit cigarettes, for example, will come in Mrs Smith: Yes. Then you have insurance from places like China and will come in with implications as well. furniture, built into the wood or packaging material or whatever. I would not imagine that an awful lot Q111 Chairman: I was going to ask you about of our members would be involved. I do not know insurance. In the same way that Mr Hepburn asked of any members of either of our organisations that you about the wage bill, presumably the insurance would be involved in that. has gone up very significantly. Q115 Chairman: Or put under pressure to be Mrs Smith: Yes, insurance cover would go up and involved? you would find it harder to get insurance. Mr Wilson: No. Mrs Smith: No. Q112 Mr Fraser: Are there any areas where you cannot get insurance? Q116 Chairman: Are there specific things—you have Mrs Smith: We can get insurance to a certain level touched on one obliquely, which was deterrent but it would depend. There are some smaller sentences—that you would like us, if you had your businesses which perhaps would not be able to get way, to recommend in our report to Parliament? insurance and would have to take the liability Mrs Smith: I think we would like to see more people on the ground working to defeat organised crime. themselves. Q117 Chairman: You mean more police? Q113 Chairman: Do you wish to add anything to Mrs Smith: More police. Perhaps more customs. this, Mr Wilson? Would the experiences that Mrs Perhaps, as I suggested, if we were to look at some Smith is having with her company be reasonably way of saving money we could use that money and typical among your members? build the resources that are currently being used in Mr Wilson: Maybe some of our members who those areas in other areas which will maybe have V engage in that type of goods. We do have some more e ect. Until the people in Northern Ireland members carrying spirits and that sort of thing and actually see that the Government or the agencies— we have some evidence there. It is amazing the the police, Customs and Excise or whoever—are knowledge that seems to pass across for the incidents having major successes and are actually seeing that Mrs Smith has expressed: the planning ahead, notable people arrested and convicted, you are not going to get the support of the whole community. the knowledge, the watching. It is frightening to Does that make sense? think what is going on. I understand that my organisation is currently involved in a House of Q118 Chairman: We understand entirely what you Commons inquiry into security. I am also aware that are saying. there is an American initiative; I think it is called Mrs Smith: If the people of the community see, if the Customs Transport Partnership Against Terrorism people of Northern Ireland see that these people are and it is likely there is going to be an EU directive getting away with it, there is nothing to be gained by coming out on supply chain security. I think it is very trying to do anything about it. evident from cargo shipping into ports, but whether or not when it gets down to the EU level, it will cover Q119 Chairman: That of course is where the this aspect of the final delivery chain, I suspect it deterrent sentence also comes in. If somebody gets a might. Perhaps if that EU directive comes out there derisory sentence, resources having been devoted to might be something positive coming out of that apprehending him, then it does not give which is going to help towards eliminating this type encouragement to the others. of crime. Mrs Smith: To these fuel smugglers it is nothing to pay the duty on a load of fuel; even to lose the vehicle is nothing because they are making so much money Q114 Chairman: When we were in Northern Ireland out of it. and indeed in the south we had private briefings which I cannot obviously discuss, but one of the Q120 Chairman: We are going to have a short things that came out both sides of the border was the private session with you, but before we do, are there amount of counterfeit goods, not only counterfeit any other questions or points you wish to raise? cigarettes but counterfeit goods of all types. Is there Mr Wilson: No thank you. anything you can tell us about that and are your Mrs Smith: We have covered everything, thank you. members sometimes put under some obligation to Chairman: In which case I declare this public carry such things? session over. 3356921002 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 18 Northern Ireland Affairs Committee: Evidence

Wednesday 15 February 2006

Present:

Sir Patrick Cormack, in the Chair

Mr David Anderson Mr Stephen Hepburn Gordon Banks Lady Hermon Mr Gregory Campbell Dr Alasdair McDonnell Rosie Cooper Stephen Pound Mr Christopher Fraser Sammy Wilson Mr John Grogan

Written evidence from the Police Service Northern Ireland is on page Ev 94

Witnesses: Sir Hugh Orde OBE, Chief Constable, Mr Peter Sheridan, Assistant Chief Constable and Head of the Crime Operations Department, Mr Philip Aiken, Head of Organised Crime Branch, and Mr Mark Evans OBE, Director of Analytical Services, Police Service of Northern Ireland, gave evidence.

Q121 Chairman: Sir Hugh, could I welcome you a matter for today in terms of organised crime, but once again at your second appearance before the it is essential to our communities and shows our Committee. Obviously there is some sort of jinx on commitment to reducing crime over time. These are your meetings with the Committee because the last statistically accurate figures. We are clear that it is a time you came, the House was debating terrorism real decrease rather than something in our and our session was punctuated by a number of perception. I am sure the Committee will be seeking votes. Because I was somewhat embarrassed by this, to set organised crime in the context of the UK when we did advise your people that the same was going you report, to enable you to form an independent to happen this afternoon, but I understand that you view of where we sit perhaps in the 44 forces that said that you would rather stick to the date, and we currently exist in the United Kingdom. I think it is will do the best we can. We will have to play it a little critical for obvious social and economic reasons that bit by ear because I do understand that you have a Northern Ireland is benchmarked in that way so that plane to catch and you have to leave by about we are not seen in a way that we would feel is perhaps quarter past five. So we will try and conduct the slightly unfair. That having been said, nothing I have session as snappily as possible. Thank you very said there detracts from the fact that we do take much for coming. Would you like to introduce your organised crime extremely seriously, and I will touch colleagues and then, if you want, say a few words by on that in a moment. Our considered view is that this way of introduction? is a winnable battle against organised crime. I Sir Hugh Orde: Thank you, Chairman. Mark Evans, personally do not like playing the “unique” card. on my right, is my Senior Crime Analyst who does Northern Ireland is not unique necessarily in all our research for us. Peter Sheridan, to my policing terms but it is diVerent in some ways, as has immediate right, is my Assistant Chief Constable been evidenced by evidence that you have already who is just about to take over organised crime (that heard from some around paramilitary crime. We are is trying to solve it rather than causing it!) from Sam still not a normal society and therefore policing does Kinkaid, who has retired. Phil Aiken, to my left, is have to be done in a diVerent way. I am delighted the Deputy Chief Superintendent in charge of the that you are visiting to look at some of the particular day-to-day running of the Organised Crime Unit, challenges around the border, and I hope we have and Ken Devlin, who is just behind me, is one of my put together a schedule of events that you will a) find Senior Press OYcers, just in case I say something I useful and b) find informative. should not. Q123 Chairman: Could I just say that we are Q122 Chairman: Please do! extremely grateful. I communicated that to the Sir Hugh Orde: Chairman, if I may, we have Committee earlier this afternoon. We very much submitted some written evidence to Members and I appreciate your help. hope they have found that helpful. We took that Sir Hugh Orde: You may not say that having flown very seriously for a number of reasons. I have read in one of the Army Pumas, but we will try and keep with interest some of the submissions that you have you inside of it! already heard. If I can put it on the record, Northern Ireland is not the “Wild West” of the United Q124 Chairman: That is reassuring! Kingdom. Having spent 25 years policing London Sir Hugh Orde: The Secretary of State, when he did before I had the privilege of commanding my current it, was slightly concerned that he may have been command, in my professional judgment, Northern tipped out at one point, I understand. For me, the Ireland is still a safe place to be. It is a matter of fact key word around how we fix this problem is that in overall terms crime in Northern Ireland over “partnership”. I am very mindful of the evidence the last two years is down 17%, in particular in that you have already heard. For me, the other key relation to burglary and car crime, which may not be word is “responsibility”. Dealing with organised 3356921002 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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15 February 2006 Police Service of Northern Ireland crime is not something that is just a matter for the crimes, ie disruptive tactics. I would ask the question police. It is for the police and business and where are these so-called brigadiers now? The main communities working together, and I do not think it brigadiers who were known far and wide in is any longer enough for industry to say, “We have Northern Ireland are in custody charged with either no control,” or, “We cannot get our people to money laundering oVences or serious crime oVences, engage with the police because it is diYcult.” I think ranging from murder through to extortion, so what that we can reach a critical mass where businesses we have done is make sure that we are organised in can say, “We will not tolerate (for example) that sense so strategically we are fit for purpose. It is extortion any longer. We will report it to the police.” very hard to judge what is paramilitary crime and, in And if that is through the small business community, the current debate, what is ordinary crime being the small business community through its federation committed by paramilitaries for their own gain becomes a big business. If that big business were to rather than the organisation’s gain, certainly in make a statement like that, my commitment would relation to the Provisional IRA, which is why the be to make sure that those early complaints were IMC is vitally important in making that assessment acted upon. It is important to note that every time we in the grey areas because of the obvious political get a complaint we make arrests and we convict consequences. I would make a broad distinction people for extortion. I am pleased to say that the before I ask my colleagues to comment. I think it average sentence for extortion in Northern Ireland would be fair to say that Republican crime is more has increased from 36 months to seven to eight years, organised and more sophisticated than Loyalist and the Lord Chief Justice’s most recent guidelines crime, which is disorganised, by and large. for a defended case is for a sentence of between ten Disorganised crime is equally diYcult to deal with and 14 years, and I think that is a vital part of that and parallels can be drawn from, for example, strategy. If industry will talk to us we will certainly respond to industry’s needs. Chairman, I will end my Operation Trident in the Metropolitan Police initial comments there because I am mindful of the around crack cocaine where crimes are committed time. I will take the easy questions and defer the very quickly without much planning but can be V diYcult ones to my colleagues! devastating to communities, so we have di erent types of crime, but I do not know if Peter wanted to comment. Q125 Chairman: Thank you very much indeed. That Mr Sheridan: Chairman, I suppose it would be fair is obviously your privilege! We are particularly to say that in the nature of things the total proceeds concerned in this inquiry with organised crime and, of crime are unlikely to be known. Nor is it easy to in particular, the association of paramilitaries with estimate the extent of proceeds that are kept for this. This is a dimension that does make this very individual or personal gain or that are used for V di erent from the rest of the United Kingdom, but organisational gain. Again, I do not think that could you just briefly give the Committee an remains stable over time either, I think that assessment of the scale of organised crime as you see fluctuates. Nor is it easy to have a single pattern of it, and could you, picking up on your own remarks involvement in organised crime by paramilitaries about being one of the forces within the UK, just because of their own diVerent structures and types of make a few comparative comments because that organisations. Some of them have a bigger and more would help to set it in context? sophisticated level of expertise in it. I would say that Sir Hugh Orde: First of all, all paramilitary crime is we are not able to say confidently to what extent the crime against the criminal code as well as the substantial proceeds of crime are passed to the obvious links to terrorism. It has certain diVerent organisation as opposed to the individual. features and I will ask Peter Sheridan, and indeed Phil may want to comment briefly on that. The first Mr Aiken: I think my colleagues have covered the thing we did three years ago to make sure we were fit point about how crime is organised. If I could just for purpose was to re-organise our whole organised develop further some of the points that the Chief crime structure so that we were organised to deal Constable made in respect of our organisation. We with organised crime. I think that is a real success have seen considerable success and impact in respect because in less than two years we had completely of organised crime, and how we have tackled it due restructured the organisation into a group of 1,200 to the reorganisation and dissemination of oYcers under the command of a dedicated Assistant intelligence to investigators in the Organised Crime Chief Constable and we had centralised all Branch to bring these people to book. Furthermore, intelligence, be it criminal or be it national security the placement of oYcers who have these specific so that it could be assessed as a whole. I am aware skills in various diVerent areas of the Province such that the IMC have given evidence of our analytical as in the north west in Derry and also in Garvogh has capacity, so I will not repeat their comments, but I secured success against organised criminality in think we probably lead the world in terms of analysis these particular areas, and not just the Belfast area. from a zero base. As a result, most of the people we We also have ensured that there are oYcers with would call paramilitary criminals have been arrested distinct capacity and skills to deal with the various for ordinary crime. About a year and a half ago, I groups that make up organised crime such as drugs, was roundly criticised by certain so-called extortion, robbery, intellectual property crime and, experienced journalists for using this idea of very importantly, economic crime. There has been following the money and arresting people for minor success in that particular area leading to major oVences whom we knew were committing other criminals being arrested and got before the courts. 3356921002 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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Q126 Chairman: You were going to make one point, Q128 Mr Fraser: I do apologise for missing your Sir Hugh, about setting it in the context of the UK. opening remarks; I was in another place at the time. You introduced that topic and I asked you to put it Could you just answer the question about the areas in context. of sophisticated crime that are expanding and can Sir Hugh Orde: In terms of rates of crime, for you give us some practical examples to demonstrate example armed robbery is one that I know is a major the sophistication and who is involved and how you concern, last year we averaged, in a territory of 5,500 are going to work proactively rather than reactively square miles, 1.2 Cash-in-Transit robberies per with the situation? week. We are not the worst area at all. We are fifth Sir Hugh Orde: We have done a substantial amount on the scale of armed robberies. The Metropolitan of work. Strategically I would highlight the Police, the Greater Manchester Police, the West Organised Crime Task Force as a unique structure Midlands Police and one other I cannot remember in the United Kingdom which I think is a force for have far more serious armed robbery problems than good. It does bring together all the agencies under us. In terms of intellectual property crime, we would one roof fairly regularly. It has just been say we are a major player. That is not something we reorganised, of which you will be aware because I would be proud to say in that sense, but until think evidence has been given in relation to that, but recently we seized more counterfeit goods than the it is chaired by a minister, which underlines its other 43 police forces put together. It is a huge importance. It does enable us to identify who is in charge of what bit of the business and various work amount. In one operation in Jonesborough, which I groups stream oV that. That has enabled us to think you were keen to see, there is not much to see identify a number of what we would call “serious” because we have closed it; Jonesborough is now shut organised criminal gangs and who should target for business. In one operation, just under £850,000- those gangs and at what level. In terms of the worth of counterfeit goods were seized in one analysis, Mark may be able to help on that. weekend’s operation. These were seen as places that Mr Evans: What we have seen, certainly as a result were very hard to reach, right on the border. We do of the paramilitary involvement in organised crime have 290-odd miles of border, which is a unique activities, is a degree of sophistication which is feature. We can now get into those areas and deal technically diYcult to deal with, which is why we with that. The last operation was without military need structures which are proactive and as advanced support, which I think says a huge amount about as we can possibly make them in order to be how far we have moved on in that sense. In terms of eVective. To take one practical example in the area the context of crime generally we are still seen as a of economic crime, we will know that criminals are low-crime area. involved in a wide range of more sophisticated ways to scam money out of people. This includes using the Internet and it includes various techniques to Q127 Sammy Wilson: Sir Hugh, you have mentioned withdraw money from cash machines, those sorts of about the comparisons with London and Greater things. We need resources and structures to deal Manchester, but given the fact that Northern with that eVectively. We also do see people with Ireland is mostly a rural area, what would the previous paramilitary connections being comparison be like with areas with a similar forensically aware, for example, in terms of the way geographical spread of population and small towns, that they deal with a particular type of crime. So we et cetera? have ex-paramilitaries or people with paramilitary- Sir Hugh Orde: What we do again—and you will be type skills who are able to carry out kidnap-type aware of it—as a police board in terms of volume of activities and who deploy techniques which are crime is we indentify comparative forces. We are diYcult for the police sometimes to deal with. So we excluded from the HMIC baseline system of need structures that allow us to deal with the more comparative forces because we are still seen as too sophisticated crimes of that type. diVerent, so we are not benchmarked against similar forces. We did that piece of work ourselves. If you Q129 Lady Hermon: What additional tools do you take, for example, Northumbria, a population of feel you need? about 1.6 million, we are similar to that with a large Sir Hugh Orde: I have currently about 8,400 police city and very rural areas as well; we do not have a oYcers to police a population of 1.6 to 1.7 million crime level as high as Northumbria. We do not have people. Most chief oYcers would cut oV their right a crime level as high as Avon and Somerset, which arm to have that level of policing. We are diVerent, again has Bristol and also has Somerset which is very as you will see when you visit the border areas. rural. The point I think I was trying to make is that Policing and enforcing the law in areas where the it is very important to get us into context, as people culture of disorder is routine is hard to do and does within Northern Ireland tend to look inwards rather take extra resources, but before I come back to ask than compare themselves to other parts of the UK. I for more I have got to be satisfied that we are think there is a danger in that because it can be seized maximising the use of our current staV. That was the upon by those who want to cause diYculty in terms whole principle behind the Crime Operations of the level of crime. Group. It is a large, dedicated “red circle” of 1,200 Chairman: I think that is very helpful and very oYcers to deal with this bit of the business. I can positive. Sir Hugh, thank you very much. Mr Fraser also, as you are aware, call upon military support to is taking the first question. enable me to deal with policing in areas where 3356921002 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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15 February 2006 Police Service of Northern Ireland terrorism is still high, although the principle is that that we will have a clear run through until a quarter we try not to do that for obvious good, sound to five when there will almost certainly be two votes, policing reasons. I do not think it is a matter of so it would be my intention to conclude this session resources; it is a matter of making sure that we are by a quarter to five so that you are able to get your focused in the right areas. I think that is what we are plane without any problems or worries. I appeal to doing. I think where we can make a seismic shift colleagues to be as sharp and focused with their would be increasing partnerships with agencies who questions as possible. Mr Wilson, would you take are victims of crime who still feel that the the questions on the paramilitaries. paramilitary bit of the business makes it very Y di cult for them to engage with us in a proactive Q132 Sammy Wilson: Sir Hugh, you have probably way. It is hard to convince the small businessman touched on some of this anyway about the degree of who may be losing £100 a week to come and tell the paramilitary and non-paramilitary involvement in police if he or she sees that as an economic decision organised crime. How successful have the police to enable them to continue to function, which is why been in infiltrating paramilitary organised crime? I think we have got to get to this critical mass. If we Sir Hugh Orde: In terms of intelligence, I think the can get small business to organise through its major success for the Crime Operations Group was associations to come in more holistically, I think we the fact that we have centralised all intelligence. As then give them the same powers as you give Tesco or Phil Aiken has already highlighted, what that meant Asda or whatever else in big business to combat this was that investigating oYcers and proactive teams area and send a very clear message: “This won’t got the whole intelligence picture, which historically, work; we will tell the cops.” There is no evidence, for all sorts of very understandable reasons, simply interestingly, of where we have had complainants V was not the case, so we have a far better picture. In and we convict, that those people have su ered on terms of levels of infiltration, we comply strictly with the back of making a complaint. We have a the Regulation of Investigatory Powers Act in terms substantial witness protection scheme which enables of formal handling. Some Members will be aware us to give people protection, but I have no record of that on the back of one of the Stevens people being attacked having given the police the recommendations we reviewed every single leads we need to get these people locked up. informant under our control to make sure they were necessary, proportionate and appropriate to be Q130 Mr Fraser: Is there an increasing number of controlled under the regulations, and that resulted in foreign nationals involved in organised crime? some being “decommissioned” for want of a better Sir Hugh Orde: We have done a piece of work. description. That did not cause us any loss of Mr Evans: Across Northern Ireland it is true that intelligence in the overall sense. I am confident that there are more foreign nationals in society. I would we still have a very good picture of what is going on not suggest for a moment that there is any link in terms of paramilitary activity. I do not know is between the numbers and particular types of crimes, Phil wants to touch on that. but certainly it is something that we have looked at Mr Aiken: To ensure that we are tackling the right and it is something that we are aware of, and I guess people, we adopt a process whereby we examine we need to be alert to the fact that there may be those groups and those individuals who are involved particular types of crimes that may be more in organised crime in respect of paramilitary links. prevalent in the future than they have been in the By adopting that process, we feel comfortable that past. we are targeting the right people and the right groups in order to make Northern Ireland a safer place for Q131 Mr Fraser: Are you working with people to live. organisations like the FSA with regard to financial crime and money laundering? Q133 Sammy Wilson: And yet there are claims, I Mr Aiken: Yes we are, Chairman. Furthermore, of suppose sometimes by former police oYcers, that great assistance to us is the Government’s incentive because of the changes in the way in which you scheme whereby monies are able to be brought back handle informants, et cetera, that you do not have into the organisation. We are currently looking at the flow of intelligence, and that sometimes the using that money to employ people with financial police are caught out. What would your answer be skills to assist us to further enhance our capability to to those kinds of claims and the fact that many of the tackle organised crime and deal with those who are witnesses who have been with us have said, “Look, involved in money laundering. the police do not seem to be able to intercept these Chairman: There is the division. Before I formally gangs in recent years in the way they did before,” declare this session adjourned, could I just say that because there has been such a big increase in armed we will be back here to resume questioning at half robberies, et cetera. past three promptly if there is one division, and if Sir Hugh Orde: A number of things. In terms of there are two divisions promptly at 3.40 please. I intelligence failures, my understanding of the last 30 declare this session adjourned. years is that armed robbery is not a new The Committee suspended from 3.17 pm to 3.35 pm phenomenon. Any crime is, by definition, a failure of for a division in the House intelligence. So do we have the whole picture? Chairman: We are quorate. I hope more colleagues Answer: no, we do not. Did my colleagues in the past will come back. Again, Sir Hugh, I do apologise for have the whole picture? Answer: no, they did not. So the ragged nature of this session. 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15 February 2006 Police Service of Northern Ireland committed because we cannot get ahead of the Mr Sheridan: It is probably true to say that in the curve. What I am saying is that in terms of the shift from paramilitarism to where we are today in availability of intelligence we have—and I would organised crime, where people used to have a argue strongly that there is no significant loss of strategic intention around shootings and bombings intelligence in the current world from the previous and murders, the strategic intention is now that world and, indeed, I do not tend to listen to too money is an asset, and so some of our processing much advice from retired colleagues, and I am fairly systems that we are putting in place in terms of the relieved that many of them are actually retired Economic Crime Unit and forensic accountants will because we operate in an entirely professional way in have to start to look in-depth at economic crime. strict compliance with the law. We have given some evidence already, and I will not repeat the written Q135 Chairman: I must just put one question to you evidence, of some substantial successes in proactive arising from a session when we were all somewhat police operations against highly organised and concerned, to put it mildly, a couple of weeks ago. highly dangerous gangs, and I would draw We had evidence from a lady who ran a road haulage Members’ attention in particular to the armed firm and she said that she had had more problems robbery team we arrested two days before Christmas with organised crime over the last two or three years on 22 or 23 December, a team two of whom were out than in the times of the Troubles. She also said that on licence through having committed armed as far as she was aware not a single person had been robberies and a team that was without doubt en apprehended for any of the crimes committed route to committing armed robbery and were we against her vehicles. This was in the wake of a session intercepted them. There are many examples of that where a gentleman from the Federation of Small and we have done case studies. Businesses described what he called two “Mini Mafias” developing in Northern Ireland, and I think it would be quite wrong to have you before us this Q134 Sammy Wilson: It seems that a high afternoon and not give you the opportunity to comment on both the general and the specific there. proportion of the receipts of crime are now Sir Hugh Orde: I will ask Peter Sheridan to deal with laundered through legitimate businesses. That is that. A number of things: first of all, it is back to my certainly the evidence we have been given. Has that opening comment. I think the more we get organised aVected the way in which the police have got to with business, in partnership, and the more those operate? What changes have you made with that? organisations take some responsibility, ie it is a Sir Hugh Orde: I will ask Phil to deal with that. In shared responsibility. I would be happy to discuss in strategic terms, yes, you are right, and over 30 years private session some specific concerns which we have people have become very good at making raised with private industry, but it would not be illegitimate money legitimate. So there are now appropriate to do so in this session. I will ask Peter many businesses operating entirely legitimately but to touch on some of those key issues. which were funded way back in history from illegal V funds, which does make a di erence. That is not Q136 Chairman: Would you like ten minutes unique to Northern Ireland. Many businesses in privately with us today? Would that be helpful? London were funded in exactly the same way Sir Hugh Orde: That would be helpful if that is of through the cocaine trade in the past. I think the big particular interest, and I can understand why; I have strength we have through the OCTFand working read that evidence as well. with the Assets Recovery Agency is we have a pretty sophisticated group of people who are very good at Q137 Chairman: I think we would all appreciate following money. Phil, did you want to just touch that. Could I just say to colleagues, we will bring this on that? to a conclusion by 25 past four so we have that Mr Aiken: One of the benefits we have is we are now opportunity. starting to see the impact of the Proceeds of Crime Mr Sheridan: We may be able to explain some of the Act whereby that legislation enables us to deal detail in that private session. eVectively with people who are involved in cleaning Chairman: In that case, we will leave that alone for up money through businesses and, again, with the the moment. formation of the Assets Recovery Agency and our interaction with them, and the ability that we now Q138 Lady Hermon: I was particularly struck by have to be involved in joint organisations, I am phrase, Chief Constable, that the battle against confident that further success will accrue from that. organised crime is winnable. Is it your view that In fact, when you look at the figures in respect of just intercepted telephone conversations should be last year alone, when we looked individually at 294 admissible in court as an additional tool in the consents to transact (that is where the police had an winning of that battle? involvement through the National Criminal Sir Hugh Orde: At the risk of upsetting the 43 other Intelligence Service to look at major deals that were chiefs, I think the answer is yes. I have been going through and the police were asked to advise in consistent in this since my appointment. There are respect of these) when we looked at the number of very understandable reasons and very real concerns suspicious activity reports that were notified to us within some agencies that it would cause big and which we examined, I think we are starting to see diYculty, but the facts remain, in other jurisdictions the positive benefits of the Proceeds of Crime Act. it is used and it does work. 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15 February 2006 Police Service of Northern Ireland talk” is quite accurate; criminals have to Mr Aiken: The Organised Crime Branch has several communicate, and whilst there is an issue around diVerent departments within it. There is the awareness of what we can and what we cannot do, Organised Crime Squad, which deals with extortion, sadly, too many of our retired colleagues, who have robbery, intellectual property crimes, vehicle theft been referred to, spend their time writing books and immigration issues. That sits alongside the anyway, but it still can be done, and it can be Drugs Squad, which deals with level 2 and level 3 achieved. There are actually convictions in this criminality at the higher levels of drug importation country achieved through intercept evidence and transportation. Then there is the Economic obtained outwith this jurisdiction and introduced in Crime Bureau, which is part of the Fraud Unit, and court. So it can work and in my judgment, subject to the Financial Investigation Unit, which deals with a proper system of warranting, it can be a dual money laundering, and finally the other part of the system or a diVerent way of making sure it is Economic Crime Bureau is the Cheque and Credit properly overseen, that it is done for serious crime Card Unit. Those units work cohesively together to when other systems have failed, I think it would add identify criminal gangs and to see where the best big value. opportunities lie to maximise the potential for bringing people to justice and before the courts. Q139 Lady Hermon: Have you had an opportunity Sir Hugh Orde: Chairman, if it would help, I can to put those views loudly and clearly to the Home provide a “wiring diagram” to the Committee of Secretary, and if so, did he listen? how the structures work. Sir Hugh Orde: The answer to that is no, but I have put my views forward to various consultation Q143 Chairman: That would be extremely helpful documents which have, without doubt, ended up at and I am sure we would all appreciate that. Thank the Home Secretary’s door. This has been an active you very much indeed. If it would be possible to have debate for certainly the last three years. that before our visit of 15 March, that would be super. Q140 Chairman: You have put them to Mr Peter Sir Hugh Orde: You can have one now. (Same Hain, the Secretary of State for Northern Ireland? handed in)3 Sir Hugh Orde: I do not think he has raised it with Chairman: Thank you very much indeed. me actually, but now Lady Hermon has reminded me of my enthusiasm for it, perhaps I will. Q144 Dr McDonnell: I think this is where some of Chairman: I am sure he will be following this session the crucial things can operate in terms of the with great interest. backdrop, and one of the things that concerns me is that 35% of all organised crime appears to arise Q141 Mr Grogan: I am interested in the co- outside the jurisdiction. In our case, there appears to operation with the cash in transit companies. I think be a big cross-border element. How can we move to a joint control group has been set up for co- tackle organised crime on an all-Ireland basis? I say ordination of deliveries and so on. How is this that purely on a policing basis; I am not interested in working? Could it even be used with cigarettes and the political perspective. spirits, or is it specific to the cash in transit? Mr Sheridan: In the same way as we have a Mr Aiken: We have seen particular benefits accruing structured Organised Crime Task Force in Northern from the joint control group. Police were made Ireland, we also have a similar one with the Garda. aware of routes and were able to prioritise routes I sit as joint Chair with a colleague down south on an diVerent gradings in respect of the vulnerability of Organised Crime Task Force where we go through the loads being carried. That information can be exactly the same processes. We look at who are the passed in a timely manner to uniformed colleagues key gangs that we want to target over the next year to ensure that, if and when appropriate, cover is between us to try and impact on them cross-border, provided. I think that is a benefit, and there are and we were very successful this year in a number potential benefits in spreading that further. There of cases. are, of course, cost issues, and we are very willing to Q145 Chairman: We did meet some of your Garda interact, as the Chief Constable says, with partners colleagues when we were in Dublin, and they spoke to deal with this matter. highly of the co-operation they received. Mr Evans: Over Christmas, in appropriate Mr Sheridan: As a group, we meet every two circumstances, we did provide additional support to months, and we see how progress has been made on some of the types of deliveries that you talked about, the gangs we have identified that we want to tackle, cigarettes, etc, and I believe the industry response to and we share information and share intelligence. So, that has really been quite favourable. So where it is quite a lot of work goes on behind the scenes. proportionate and where costs are appropriate, we can do that and we have been doing that. Q146 Dr McDonnell: Could that be strengthened? Mr Sheridan: I suppose everything can be improved Q142 Mr Grogan: A more general question: you upon, and as the opportunities arise, we will spoke about the benefits of the Crime Operations continue to do that, and success grows. I think that Department and the Organised Crime Branch. At is where the improvements happen. the moment what is the focus of the Organised Crime Branch? 3 See Evidence page Ev 104. 3356921002 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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Q147 Dr McDonnell: As another corollary, can I That is not to say as far as illegal dumping that express the anxiety that some of us have, and it fits comes from further afield, but most of the work in here very nicely with the discussion around the would be around the border, so it may be slightly role of MI5 on security policing and the eVect that diVerent. that might have to erode some of those things. One Chairman: Let us move from border co-operation to of my concerns would be that in fact an all-powerful a more international theme. MI5 would eventually emasculate some of the intelligence gathering and some of the security- Q149 Sammy Wilson: To follow on from Alasdair’s gathering by the PSNI. Would you care to question, as far as the links with MI5 are concerned comment? and the intelligence gathering, you have quite rightly Sir Hugh Orde: I have no intention of us being pointed out, Chief Constable, that a lot of the emasculated. I understand the concern; it is a very intelligence will be a cross-over between what may real concern. One of our more unique features, I well be regarded as national security stuV, but also suppose, is the fact that there is a cross-over between gathering information about crime. You have said paramilitary activity and “ordinary” crime, for want that you are happy that you have the framework in of a better description. First of all, let us be clear on place, but ultimately who will be responsible for what is a threat. You cannot devolve a national passing intelligence gathered by MI5 on to the power, so in terms of the national security side of the police? Who will make the decision that that might business, it is actually quite an uncomfortable fit to be useful in combating crime and might that be the Chief Constable responsible for national compromise other information which you are security and dealing with policing. I am unique in gathering? that respect. MI5 leads for the rest of the United Sir Hugh Orde: The flow of intelligence will be non- Kingdom, and I have no diYculty about Y negotiable because the protocols and memoranda of transferring. I would have huge di culty if I do not understanding will be such that, if it involves crime get an absolute guarantee that I get all the in Northern Ireland, we will know about it. The intelligence back I need in relation to ordinary crime. debate will not be around whether we know or not; it We have over 18 months to get this right. We are will be around what we can do with it. We have those working very closely with MI5. We do not disagree debates now. I have those debates when I control all on this point one bit. Let us also be clear that we are of it, because once one has the whole intelligence talking about national security. The vast majority of picture, you then have to make very diYcult informants, for example, that I handle are not to do decisions around what you can do. Are we going for with national security. Currently, I do not see a criminal operation leading to people being arrested Loyalist activity as a threat to national security, for and put in front of our courts, or are we going for a example. The vast majority of the information we disruption operation because of our overriding get from the other side of the divide would be firmly Y obligations under Article 2? Depending on the under my control. My o cers will still be responsible sensitivity of the information, we have to make those for handling it, so the notion that there is going to be decisions. The principle in my world is that we go for some disconnect I think we can deal with. I do prosecution. The default position is that we will go understand the concern, but we learn from our for prosecution whenever and wherever we can. If history. The primary objective of Crime Operations the overriding constraint issues around Article 2 Group was to make sure all intelligence could be override that, then so be it, and we have to make a assessed by Mark’s people and analysed and then conscious decision then that we will not go to court, acted on where appropriate, ie the whole picture, because if you are going to do disruption, then you and we can have a situation where that changes have to interfere with evidential chains and such like, because we have more than one group operating in which therefore you will never get into the court, that arena. I think we can fix that and I am not going certainly in Northern Ireland, where our defence to sign up to a system where I do not have total lawyers are very good at digging and digging and confidence that that is going to be the case. digging, certainly around disclosure, which is an Chairman: It is very good to have that on the record. issue which causes me serious concern. So we make that decision. Q148 Lady Hermon: This question is picking up on something that Peter Sheridan articulated in an Q150 Sammy Wilson: Will that be your decision or answer in relation to the very good working will that be MI5’s as to how you use it? relationship between the Garda and the PSNI. Sir Hugh Orde: It would be a debate. It would be a Would it be enhanced if the Republic of Ireland had conversation. Let us be very clear: the vast majority the equivalent of the Organised Crime Task Force? of information we get is criminal. One has to ask the They do not have an umbrella group in the Republic question how much of a threat to national security of Ireland. is current activity in Northern Ireland, as a bottom Mr Sheridan: It is for the Republic of Ireland to line. The vast majority falls into the criminal bag, comment on its own structures. As much not the national security bag, but I am very clear that harmonisation as possible, obviously, has the security of the state is paramount, so if it goes advantage, but we concentrate mostly on what into that side, so be it. The other point you referred happens along the border and that border corridor to was gathered by MI5. We will be responsible for where people cross back and forth. So I am handling most informants in Northern Ireland. The interested in what happens close along the border. leadership will transfer but the reality is that we have 3356921002 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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15 February 2006 Police Service of Northern Ireland the expertise and so we will be doing that bit of the Chairman: That would be very helpful. business. So the notion that we do not know, in terms of additional comfort for people about Q153 Mr Anderson: The brief we have shows that the whether we know, yes, we will know. task force is multi-agency; it has a list about a mile long. You said you have recently restructured. Has Q151 Sammy Wilson: Can I just come on to the that worked positively or are there other things you framework which you have developed for assessing need to do? these criminal gangs? You have given us a very Sir Hugh Orde: It is early days, but that we have useful brief here. Maybe you can just give us some created a stakeholder group is important. I think information on the number of gangs that you also the fact that business is coming on board is currently have, that you prioritise there, and then I important. suppose what we would be most interested in is the Mr Sheridan: By way of example, I sat on the section on response, arrests, seizures, assets stakeholder group two weeks ago where for the first restrained, dismantled, significantly disrupted and time we had business people involved: various small businesses, the CBI and the Chamber of Commerce, disrupted. Can you give us some information or just for them to understand the amount of work and could you supply the Committee with some the eVort that we were putting into it, because each information first of all as to how many gangs you are of the groups represented, the assets recovery, the currently dealing with and how your assessment has police, the Customs, give a presentation of what they shown the eVectiveness of the police? were doing with organised crime for them to help Sir Hugh Orde: As Mark put it together, I will ask understand that, and then they started to have that him to dismantle it for you. debate as to how they could help in it. That was Mr Evans: Let me just say that the purpose of the where it started to become important for me. For framework is to provide a very clear strategic focus example, somebody from the CBI said, “We run a for the work that we are engaged in in respect of monthly newsletter for all our people. We could give organised crime and as a result of the creation of the you space in that as the police to get some messages Crime Operations Department. This is a tool to across.” So just having that group of people bring all of this information to the same place, so together, thinking in the same direction, having a that we can take the best possible action in respect of coordinated eVort, is hugely helpful. That is where it it. In terms of the framework itself, when the Crime has been restructured, around bringing in the Operations Department was created we did a good business community. deal of work to try and understand the size and the scale of the problem. That was done using this Q154 Mr Anderson: What is the working framework. So in terms of the number of gangs, relationship like between yourself and the ARA? Do what I would suggest to you is that this is a very you think it would help them if they had powers to dynamic framework and it changes to reflect the confiscate, as they have in Ireland? operational basis. So there are not 20 or 30 or 50; we Mr Sheridan: We have a really good relationship look at the problem and we assess it and we prioritise with the ARA. In fact, as you have probably seen in on the basis of what we can actually achieve. In some of the evidence, we gave more work to the terms of the arrests, seizures, dismantled and Assets Recovery Agency than all of the other police disrupted, again, that is an ongoing process and, as forces4 in the United Kingdom put together. We Sir Hugh Orde has indicated, there are successes that have made 70 referrals this year, a lot of work. are reflected within this framework. We decide Unfortunately, for Assets Recovery, it has not come whether we need to continue to work on it or take on to fruition in the courts because of judicial reviews a new target. and so on, but they will come to court and I think that will help build confidence in people so they can Q152 Sammy Wilson: That is a bit of a cop-out. start reporting more and more of this type of crime, because they will see that it ends up in court. But in Surely, at any one time when you are doing your terms of whether they should have the same assessment you must have a snapshot of how many responsibilities as CAB, it is the same issue. As I said gangs you are dealing with and how eVective you to Lady Hermon, it would be useful in policing terms have been in dealing with those. just to have the same harmonisation of legislation. Mr Evans: I simply want to get away from the fact Sir Hugh Orde: As a principle, the default position that somehow the number of gangs being targeted is for us is criminal compensation first, if we can. The a reflection, for example, of the business, because we current changes have helped. I do not know if Phil might work very hard and commit significant wants to touch on that. Y resources to a very di cult, high-profile, dangerous Mr Aiken: One thing that has further enhanced our gang, for example, and we might have other gangs relationship is the setting up of a joint intelligence which are less dangerous. So if we were tackling 20 cell, whereby we make available intelligence to the or 200, it would not necessarily be a very good Assets Recovery Agency in order that they can use indicator of the work that is being done. Having said the information that is within the police systems to that, clearly if you need and want the figures we can speedily process their activity through the courts and provide for you an indication of the number of gangs through their investigations in respect of criminality. which we are interested in and the work that is ongoing. 4 Correction from witness: the four largest police forces. 3356921002 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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15 February 2006 Police Service of Northern Ireland

So what we have undertaken is a review of our consumer base for the drug. What I would suggest is memorandum of understanding. We see it as a that that is well identified by the Drugs Squad and in living, evolving document, whereby our processes their control strategy, their set of priorities, cocaine will be continually enhanced, and that is starting to is at the top of that particular list. Again, in terms of bear fruit. To take the Chief’s point, we get first bite cannabis, it is still the most widely seized drug and at the cherry, in so far as it is not unless there is a still the domain largely of the paramilitaries in terms failed investigation that we pass something on. That of fund raising and other activities, but we are seeing is why we have a lot of money under restraint at the some early signs of an attempt to try on behalf of moment which we are endeavouring to progress some of the paramilitary groups to distance through into a certificate of realisation. themselves from that type of activity. But the market remains diVerent from the rest of the United Q155 Stephen Pound: Turning to drugs, on the Kingdom. Sammy snapshot principle, last time we took a look at drug abuse in your area, we had specific problems Q158 Stephen Pound: Just to follow up that last of prescription drug abuse, Nubain, temazepam, question, are you saying it is paramilitaries dealing diazepam, in the Western border region. We had drugs to raise money for paramilitary activities or is information about ecstasy and cannabis, and we had it drug dealers working with paramilitary groups some information about heroin in Ballymena. It was who then get the money? Is it push or pull from the geographically located and it seemed to be uniquely paramilitary groups? geographically centred. What is the current situation Mr Evans: I think you could argue it is a bit of both, (a) with the geography of drug abuse and (b) with the in a sense. There are paramilitary figures involved in type of drugs abused, and (c), the key question, the certainly the cannabis trade and particularly, I paramilitaries? would suggest, on the Loyalist side. Sir Hugh Orde: In terms of geography, heroin in Sir Hugh Orde: In terms of how we are operating Ballymena is a strange phenomenon that I cannot now, you mentioned the international dimension to quite get my head round. It still exists but is not crime, but a number of seizures we know were major. coming to Northern Ireland we have had interdicted well outside our jurisdiction. In fact, the most Q156 Stephen Pound: When we asked, it was pointed significant case, I think it would be fair to say, was out that there was a group of students who had in Merseyside, where the guy caught traYcking was returned to Ballymena from a GB university. sentenced to 25 years, a sentence that I have yet to Extraordinary. All the evidence we have had, see within the jurisdiction, I have to say. including from the local Member of Parliament, is that that is the case. Q159 Sammy Wilson: You are still having arrests Sir Hugh Orde: But the reality is that our drugs outside Northern Ireland? picture is not the same as the rest of the UK. Since I Sir Hugh Orde: Yes. It is part of our strategy quite was last speaking to you in the broad sense, the one often, but also in Europe, seizures in Holland, drugs thing that we are seeing, the big change, is taken out in Dover, ie further down the supply increasing cocaine. chain, for all sorts of very good operational reasons. So we are very much aware of the international Q157 Stephen Pound: Is that cocaine or crack dimension to this particular crime. cocaine? Sir Hugh Orde: Cocaine. We are not seeing crack. In Q160 Gordon Banks: Sir Hugh, in your presentation fact, since I have been in Northern Ireland, there has to us you made a suggestion that money laundering been one rock seized in three and a half years, which should become a scheduled oVence. What sort of is very strange, bearing in mind my previous life in discussions have you had with the Northern Ireland Operation Trident where it was all crack cocaine. OYce about that? How was their response? What Cocaine is increasing in terms of seizures, and I will would be the overriding eVect of that other than the ask my colleagues to touch on the volume of crack. bail issue? Linking into the money laundering issue, In terms of cannabis, it is still inextricably linked to over 7,000 suspicious activity reports, less than 1,000 paramilitary activity, and that is why we spend a lot examined. On what basis do you come to 993? of time dealing with cannabis, where again, of Sir Hugh Orde: I will deal with the easy one, and I course, many forces spend little time because they will ask Phil to cover money laundering and bail. In are more focused on the other drugs, and ecstasy. It terms of suspicious activity reports, they are is still broadly recreational drug abuse, and that valuable for two reasons. I actually had a meeting includes cocaine. Cocaine is actually appearing in with Sir Stephen Lander on this particular issue very working class communities as a recreational drug. It recently, and our overriding message is the system is not appearing, touch wood, as crack cocaine. needs to remain as it is, so the obligation on Mr Evans: I think, as the Chief Constable has institutions to give us all information on suspicious mentioned, we are seeing a growth in the cocaine activity reports is absolutely vital to the picture. Just market locally. There is no doubt whatsoever that because not all of these are acted on—and there are that has changed over the last three years. You only many reasons for that—does not mean we should have to look at the size of some of the most recent not get them, because we need the whole picture. The seizures to indicate that the market has become more reason for that is quite simple. One of the first sophisticated. It must mean that we have a larger checks, if we are targeting individuals, is that we 3356921002 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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15 February 2006 Police Service of Northern Ireland would go into that database to look at any reports Mr Sheridan: We had an example recently of people that may be in that database which, whilst they may who got bail for quite a considerable amount of not have been acted on because there is a big volume money because it was at the lower court. issue here, it is hugely important when we start targeting individuals who we think through intelligence are laundering money. It is vital from the Q162 Mr Hepburn: We have learned that the bottom up, the proactive as well as the reactive. The construction industry is particularly vulnerable to extortion. Can you tell us something about that? other point, which was not made by me but made by Why, and who is targeted? What is the mechanics of the Serious and Organised Crime Agency, is in terms it? Is it brown paper envelopes passing between of the number we act on. We act on far more than hands? At the end of the day, what are you doing to any other police service. tackle it? Sir Hugh Orde: In broad terms, last year 26 people were arrested for extortion, 24 were charged. When Q161 Gordon Banks: Can I just make a quick we get a complaint we are quite good. It is the tactics generalisation. People may think 7,315 suspicious we can deploy. One of the big challenges of activities but that is not 7,315 diVerent people, is it? extortion, if it is one on one, is that corroboration Many of these activities that are reported to you are is vital. If we are going to convince our DPP the responsibilities of one group and I suppose for a prosecution, quite properly, he wants investigating one of those may put to bed a whole corroboration, and there are huge opportunities for lot. us in this field if we have the information up front Sir Hugh Orde: That is the importance of getting the and we work in partnership with the victims to whole thing. Quite rightly, as far as industry, this is deliver. When we do do that, as I have said, we are an expensive bit of business for them to deliver. It is very successful. I will ask Peter and Phil to touch on vital we keep it in exactly the same way as it is, so the the detail of why. obligation is to supply everything to us. In fact, some Mr Sheridan: I suppose the same question could be of our best hits have not necessarily come from big asked for why people buy counterfeit cigarettes, why financial institutions. It is very hard now to buy a car people buy counterfeit alcohol that is made up of for cash in Northern Ireland, which is very part white spirit, why people buy perfume that has important when you are trying to stop people getting urine in it, to try and understand why people buy the money in this particular field. that because they think they are getting a bargain Mr Aiken: Chairman, a lot of the suspicious activity out of it. I think it would be fair to say that there is a reports are legal. What we quite often find is that degree of tolerance around this. This probably came people such as the owners of carry-out restaurants along with the troubles. That is no fault of the are taking in a lot of cash, and they go to deposit this general public but there is a degree of tolerance that in the bank and it has been put through as a comes with it. Some of it is because not all of our suspicious activity report, and when we examine it politicians unite behind us to support law and order we find it to be quite legal and proper. I do on this. You create that culture that allows it to be appreciate the figures in respect of those examined OK not to make a statement to the police about against those we have an awareness of. We have an something. That is the culture in certain parts of assessment unit in the Financial Investigation Unit, society. I think that is where some of our diYculties and each suspicious activity report is examined. come from. Some are examined in greater depth due to the fact Mr Aiken: I take the point as to why, and why the that the person who they relate to may be construction industry. What we often have is highlighted on our computer systems and therefore subcontractors coming into a particular area and, are deserving of some further attention. We do not because of the area and the paramilitary have the capacity to examine them all but we are involvement in that area, they are vulnerable to happy that our processes are in place to ensure that approaches being made by paramilitary groupings those that should jump out at us, that we have a to attempt to blackmail them for monies. It is a recognition of why they are and we take the particularly diYcult oVence to investigate because appropriate action. One important area that we quite obviously, corroboration in respect of the must consider is the fact that they are not time-based threat is required to progress to the courts, and there and they perform a great benefit to investigations. are the additional problems of providing the When we start to look at a particular individual or necessary support to the complainant and the a gang and go back and find evidence of a previous potential implications for that person in giving suspicious activity report, it gives us a hook, evidence to the police. So it is a diYcult oVence to somewhere to start our particular line of inquiry or investigate. Where complaints have been brought to investigation. our attention we have been successful in dealing with Sir Hugh Orde: The important thing for us in respect them all. of money laundering is that if it is a scheduled Mr Evans: It is probably just worth making the point oVence, it means that bail is granted at a higher court that the construction industry worldwide tends to and gives the police an opportunity to make have some diYculties in this area. Professor representations. It is also seen as a more serious Goldstock, for example, who has brought to the oVence, and that would be to the benefit of the Task Force his experiences in New York, where they overall investigation. have many of the same diYculties in tackling 3356921002 Page Type [E] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

Ev 28 Northern Ireland Affairs Committee: Evidence

15 February 2006 Police Service of Northern Ireland infiltration by criminal gangs within that industry. It through a lot of the work we did with Customs, we is not particularly diVerent, although the were able to successfully close that operation down. manifestation is slightly diVerent. It is almost on a weekly/monthly basis that we are involved in recovering fuel that has been smuggled Q163 Rosie Cooper: What is your assessment of across the border. Either laundered fuel or fuel that paramilitary and non-paramilitary involvement in has been VAT-paid in the south of Ireland comes criminal activity? We have actually asked this into Northern Ireland and evades VAT in Northern question of people who have given evidence before Ireland. So some of it is legal fuel from the south and and, other than suggesting that there are two mafias some of it is laundered fuel. in Northern Ireland, we have not really progressed that question. Q165 Rosie Cooper: Can I ask whether you are Sir Hugh Orde: First of all, it is diYcult. It is a hugely making any impression on the fact that the public’s grey area. What is crime committed by people who view is that this is a victimless crime? happen to be paramilitaries for their own gain, Sir Hugh Orde: This is back to Peter’s point. It is which is what we are seeing? We think we are seeing seen as exactly that. It is seen as a victimless crime, a shift in some areas. What is crime committed for although the Exchequer is clearly a substantial their so-called organisation? Within each crime is victim. Bizarrely, the use of laundered fuel, there a sub-divide, which there clearly is, around Customs, who quite rightly lead on this, have had people siphoning oV from their own organisation, ie many campaigns to make the point that it wrecks stealing from their own illegal organisation, if you your car, but it is cheap, it is rather like you buy the like. Then there is what used to be referred to, vodka that wrecks your liver because it is cheap. bizarrely, as “ordinary, decent crime”, which is just There is that mindset. It is not unique to Northern your ordinary armed robbers, the sorts of people we Ireland. The victim is seen as the taxman rather than arrested just before Christmas. I am deeply nervous the fact that it increases all sorts of other costs and about trying to say X% of our crime is one and Y% detracts from investment in Northern Ireland simply is another. I do not know if Phil can put some gloss because the money is not here. on that. Mr Aiken: It is very diYcult to have a determination Q166 Rosie Cooper: It encourages unlawful activity in respect of involvement. We assist Her Majesty’s in other places. Revenue and Customs, who have primacy in this Mr Sheridan: Most important is the health issue, in regard. It is their responsibility, but quite obviously, particular where there is laundered fuel and you find we assist operationally in respect of the intelligence. large amounts of waste, producing huge health We have had considerable success, for example, in problems for the environment. the latter part of last year, 15 million cigarettes Chairman: I want to move on to our private session recovered, which represented a potential loss to the in a couple of minutes, therefore, I think what we Exchequer of somewhere around 3.5 million— will do, there are some questions on illegal dumping again, a smuggling problem, a police-led operation, and reporting of organised crime which we will send which had considerable success. to you, if we may. I would like to finish with sentencing on the record. Q164 Rosie Cooper: Could I ask about fuel smuggling more directly? I have always wondered: Q167 Dr McDonnell: There is the impression that for smuggling at this level there must be a storage sentencing is far too lenient by the courts in problem and a logistics problem. I would presume Northern Ireland. Would you care to comment on that you are working with Her Majesty’s Revenue that? and Customs, but the actual operations, are they Sir Hugh Orde: Yes. At the risk of getting into joint operations? As the sale of legitimate fuel has trouble, I think there is a number of issues here. First risen by a quarter, is that telling us that you are now of all, what is good news is we now have a right to being more successful? appeal a sentence which we see as too lenient. By way Mr Aiken: Again, it is an area where Her Majesty’s of example, two years ago now two of my oYcers Revenue and Customs have primacy, and they are went to a call where they were faced with armed driven, quite obviously, by their national strategy, paramilitary masked men pointing an AK47 in their which gives the local groups their targets, and it is a direction. It happened to be a de-activated AK47, matter for them how they set those targets. Where but you are not to know that when you are looking there is discussion in respect of gangs or individuals, down the wrong end. As a result of their actions, the police provide intelligence and operational their pursuit and very heroic arrests, the individuals support, and that operational support is both by went to court and were given a suspended sentence, way of detectives in respect of the organised element which we, quite obviously, appealed. I think having to it, and quite obviously, because of the particular that right to appeal is very important, (a) for the areas and the fact that this problem is based in the confidence of my oYcers but (b) for the confidence border areas, there is a big involvement of our of the community. uniformed colleagues. Mr Sheridan: Just to give you an example, we have Q168 Chairman: Was your appeal successful? had four retail sites in Ballymena and County Sir Hugh Orde: I am awaiting the outcome. I raised Tyrone that were being used. £6 million of duty and it with the Lord Chief Justice only recently. He VAT had been evaded in a three-year period, and actually sat himself so obviously cannot comment. 3356921002 Page Type [O] 29-06-06 23:46:54 Pag Table: COENEW PPSysB Unit: PAG1

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The point he made, which I think is important, is, was seen as redeemable and was given a suspended because we are slightly diVerent, those sorts of cases sentence. Now, in terms of delivering a message to allow the Appeal Court judges to give guidance on my oYcers, who put huge eVort into bringing that sentencing. We have seen that now in extortion, person to justice yet again, it is very diYcult from a where three years ago, giving evidence to the morale point of view, but also the public perceive Policing Board, my head of operations said the this to be ineVective policing rather than perhaps a average sentence was between 18 and 36 months. It collective failure of the judicial system. I think in is now around seven years and the guidance from the cases like that, if we could have a right of appeal for V Court of Appeal is it should be 10-14 if it is a not hybrid o ences, I think we could further increase guilty plea, so I think there is some very good news confidence, but I do think the analysis will be very in the system. We have requested, and it is now being important because it will nail once and for all the undertaken, an independent review, a comparative facts around this issue. My perception, coming from here, is that sentences are lower. analysis of sentencing in Northern Ireland Chairman: Thank you very much indeed. That is compared to the rest, and I think that is to be extremely good for the record, and obviously we welcomed, because it will deal with facts rather than receive other information there. Could I very briefly individual cases—which are important. Sadly, we thank you formally in the public session, you and had a case recently I tried to appeal, was not allowed your colleagues, for the very interesting evidence to appeal because we have no right of appealing you have given, and for being so extremely V V hybrid o ences, that is to say, an o ence that can be cooperative. I thank my own colleagues for being triable either way. This particular example was a cooperative likewise; we have covered a lot of person who had 90 previous convictions for ground. I would now like to declare the public burglary. Quite properly, the magistrates’ court session closed. You remain where you are with your submitted it to the crown court, feeling it was too colleagues, Sir Hugh, and would members of the serious for them to deal with, where the individual public kindly leave. 3379331001 Page Type [SE] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

Ev 30 Northern Ireland Affairs Committee: Evidence

Wednesday 1 March 2006

Members present:

Sir Patrick Cormack, in the Chair

Gordon Banks Meg Hillier Mr Gregory Campbell Dr Alasdair McDonnell Rosie Cooper Stephen Pound Mr Christopher Fraser

Written evidence from the Assets Recovery Agency is on page Ev 107

Witnesses: Ms Jane Earl, Director, Mr Alan McQuillan, Assistant Director, and Mr Anthony Kennedy, Head of Legal Services, Belfast OYce, Assets Recovery Agency, gave evidence.

Q169 Chairman: It is my very pleasant duty to Thirdly, we want to share with you the maximum welcome you this afternoon. Thank you very much possible information that we can and any question indeed for coming. As I think you know we are now that you ask we will try to answer fully. There may well into our inquiry into organised crime. The Chief be some questions which you wish to ask us which Constable and a number of his senior colleagues relate to cases which we are still involved in gave evidence to us a fortnight ago and before that litigating, and I hope that you will understand why, we received evidence from representatives of the if we say that we would perhaps not perhaps business community and we have others yet to see, necessarily be able to answer that to the very fullest and we shall finish up in our final session with the extent in a very public session. Minister who has responsibility in this area, Shaun Woodward, and that will be in May, and we are Q171 Chairman: On that very last point, when Sir hoping to report to the House around about the end Hugh came a fortnight ago we had a brief half hour of May/early June with recommendations. So you session at the end in camera and that was very come at a very appropriate time. You are most helpful to the Committee because we do appreciate welcome. Would you like to introduce your that there are sensitive areas which you may not wish colleagues, Ms Earl, and anything you would like to to go public on. Would you like the same facility this say by way of opening submission we would like to afternoon? hear. Ms Earl: Sir Patrick, thank you very much indeed Ms Earl: If you would find it helpful from the for the invitation to come and speak to the Committee’s point of view then we would be very Committee this afternoon. We have been very well happy to make ourselves available for that. supported by the Northern Ireland AVairs Committee under its previous chairmanship and we Q172 Chairman: I think it would be helpful for us very much appreciated the support you have given to and helpful for you in a sense that you could tell us the work we do. I have with me this afternoon Allen things so fine, we will do that. In which case the McQuillan, the assistant director responsible for the period from half past four until five o’clock will be Northern Ireland operations of the Agency, and private. Thank you very much indeed. Picking up on Anthony Kennedy, our head of legal casework in something you said and just to start the questioning, Belfast. we have had people before us who have said that the last few years have been particularly troubled from Q170 Chairman: We met Mr Kennedy when we were the point of view of crime. Sir Hugh tried to put this in Belfast. in perspective when he talked about Northern Ireland not being the “wild west of the United Ms Earl: We have sent you our formal submission Kingdom” and so on, but there is obviously a will obviously focuses on the work the Agency does problem and you yourself have said that your in Northern Ireland. I did just want to make three Northern Ireland operations are very important to brief points, if I might, to start with. First, that our the work of your Agency, and when we were in Northern Ireland work is a very key part of the work Belfast Mr Kennedy gave an admirable presentation of the Agency overall. We are a single Agency which for which we were extremely grateful informally to covers diVerent parts of the UK but our work in the Committee when we were on our first visit. Belfast is very important to us in terms of the impact Would you like to say something about how we have in the community and in terms of the public Northern Ireland compares to the rest of the United awareness we have managed to build. Secondly, we Kingdom? are clear that whatever we do we only do it with the support of our other partners in law enforcement. It Ms Earl: Let me deal with the overall picture and is important to place on record at the very earliest perhaps Alan would like to add something. In terms stages the close working relationships we enjoy with of our resource allocation the Belfast operation PSNI, HMRC and the other parts of the law takes up about 30%–35% of our total resource enforcement community in Northern Ireland. across the country, so given the share of population 3379331001 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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1 March 2006 Assets Recovery Agency that gives you some clue as to the amount of eVort we operate in diVerent ways, but over the last three we want to put into the Northern Ireland operation. years we have increasingly built up relationships on We see a good supply of cases coming forward in a personal and professional level; we have gateways Northern Ireland but then we see a good supply of in some circumstances in order to exchange cases coming forward in the organised crime arena information; we are running in some cases almost across England and Wales too, so I do not want you joint operations across the border where we will to leap to the assumption that we have put resources attack part of an organised crime network in the into Northern Ireland simply because the organised north and they will attack the same group in the Irish crime problems are that much worse. That is not to Republic and we try to co-ordinate our eVorts say there are not some very interesting cases we are between the diVerent jurisdictions, and we share as dealing with, cases which have clearly caused severe much evidence as we possibly can between the harm in the community as a result of the type of jurisdictions, and that has proved very beneficial in activity that has been going on for a number of assisting us and assisting law enforcement on both years. sides as well.

Q173 Chairman: It would be true to say, of course, Q175 Chairman: Having touched on relations with that a number of your other operations in the United those from the Republic, would you like to say a Kingdom but outside Northern Ireland have a word or two about Northern Ireland organised Northern Ireland connection, would it not? crime and how far it extends beyond the United Kingdom and not just into the Republic of Ireland? Ms Earl: Yes. There are some which do fit that category. Ms Earl: Let me have a try at that because I think there are two elements in which organised crime Mr McQuillan: I think in terms of the overall pattern might extend its activities. One is in where the in Northern Ireland there are some unique features criminality takes place and the second is in where the to organised crime in Northern Ireland. First, assets which result from that criminality are obviously the existence of the terrorist paramilitary V ultimately housed. Certainly on the latter point we groups. They are in di erent states of are seeing cases in Northern Ireland exactly as we do disorganisation or organisation but they do have an in some of the England and Wales cases where impact. Next is the critical element of the border. people have thought it would be easier to hide them The border is exploited by organised criminals in all if they were property in other European countries or sorts of ways. It is exploited to commit crime, for even further afield. Northern Ireland criminals are example, smuggling; to frustrate law enforcement by no diVerent to their counterparts on the mainland. trying to commit crimes across the border to hide Do people who are operating criminally in Northern evidence, and it is also exploited to hide assets. Also, Ireland have outposts elsewhere on the mainland? I a feature we should point out is that in terms of the think that is absolutely the case. Our observation totality of our case work the average case that we about the types of people we are dealing with is that work on in Northern Ireland is actually about a third they will adopt a business-like approach to what smaller in terms of value than the average case size they are doing, look at where the markets of their in the rest of the United Kingdom, so there is a services are and where the weakest points are in pattern of slightly smaller organised crime and a V order to be able to operate criminally and will go slightly di erent pattern of crime and slightly lower there, and simply because they are based in a unit value per case. Some particular features that particular community does not mean they will come out of that. The border is of particular restrict their activities to that community alone. importance to us and our relationship with the Criminal Assets Bureau in the Irish Republic, and the other factor is the fact that we do have some Q176 Gordon Banks: Very quickly, you mentioned advantages. In Northern Ireland we are dealing with that it would not be unreasonable to imagine that a unitary police force, PSNI, and we also have a Northern Ireland criminals have got outposts framework with OCTF, so those collectively help elsewhere. What about the other way round? Is give us some advantages in terms of the rest of the Northern Ireland an outpost for Eastern European United Kingdom where we deal with a multiplicity criminals? of forces. Mr McQuillan: From our perspective, and Q174 Chairman: When we were in Dublin a few obviously we only view the case work we are dealing weeks ago we had private briefings from your with, there is no sense that that is the case. From counterparts, and we came away with the distinct what we have seen so far it is more Northern Ireland impression that relations between your Agency and criminals going outside to source product, to theirs were extremely close and good and launder money through other jurisdictions and to productive. Would you endorse that? hide assets in other jurisdictions, rather than other groups coming in. Now, obviously, when Northern Mr McQuillan: Absolutely, and they have improved Ireland criminals go abroad to buy product they over the last three years. There are significant may well buy it from organised crime cartels in diVerences in the frameworks. We have been Turkey or Eastern Europe, but it is very much led by working with diVerent legislative frameworks and the homegrown criminals. 3379331001 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q177 Rosie Cooper: The Agency suggests that you prosecution cannot be successfully mounted and do not initiate your own cases but act on referrals, would then go after the assets, so I think one does and I would like to really ask you to questions about have to review the totality of the picture. the referrals you have had in terms of numbers, trends, and perhaps the referring organisations and Mr Kennedy: I think what Sir Hugh said, if I what they would do there. remember correctly, was that he was comparing the activity of the PSNI as compared with other police Ms Earl: Let me again just put the headline pitch, if forces in England and Wales. What he did not I might. What we have seen over the three years that perhaps say was that in England and Wales most of we have been in existence has been a much the work, I think, on intellectual property crime is improving trend of the sort of referrals coming from done by trading standards agencies, so I am not sure other parts of the law enforcement community. The he was necessarily drawing a comparison between reason we take cases on referral is because that is intellectual property crime in England and Wales what the Act says and that is what the guidance, versus Northern Ireland, but merely activity in which I operate under, from the Secretary of State police forces. says. We will normally take cases on referral from law enforcement. We have seen, as people have Q179 Rosie Cooper: I was trying to develop that in started to become more aware of the power of being asking whether any of the agencies which refer to able to remove the profit from crime, a growing you have shown any significant delays in the referral number of referrals across the piece nationally and pattern, and why would they do that? seen a continued high level of support from referrals from the police service in Northern Ireland in Ms Earl: I think we are always mindful that when particular who have continued to be one of our people send us a referral we want them to be very major suppliers set across the entire national picture, clear that they do not send us a box of papers and and I think that is good news. The referrals which then think that their job is done because we are, as I come to us from HMRC clearly in the days when said at the beginning, absolutely dependent on their they were still Customs & Excise were a significant continued co-operation throughout the process. proportion of our work load. We will need to see One of the things we work very hard with our how that changes going forward in light of the referring agencies to do is to try and make sure that emergence of the Serious Organised Crime Agency we have the best possible exchange of information at which obviously will have taken quite a significant all stages, not just as the initial referral but right the amount of work previously done by the old Customs way through the length of time it takes to litigate the & Excise operation. In terms of the types of crime, I cases. What I think we have seen in a number of will turn to Alan. referring agencies is, if you like, a bit of a bottleneck of cases where things have been sent over initially; Mr McQuillan: We have given some figures on that we have then needed further information, and the in the briefing but broadly the pattern of organised organisation has had to sequence the way in which crime we are seeing follows the sort of priorities that they pass that further information to us. That is in the past the Organised Crime Taskforce have probably the case in Northern Ireland as in other identified as key areas of organised crime, so we have forces and other referring agencies. seen for example a lot of drugs cases, a lot of smuggling cases, then some property crime. I Mr McQuillan: In that context, I would add that one suppose the one area that is perhaps a little bit out of the key learning points across all the partner of sync is intellectual property crime. We have not agencies over the first three years has been the extent seen so many of those cases as perhaps we might to which our work involves work for them as well. have expected, but the broad spectrum follows the They cannot just hand a package of papers across to pattern of what we would expect from OCTFand on us. When they refer a case to us we data-mine the the figures we have at the moment around 63% of the records for perhaps 12–15 years to find out cases to date have a terrorism or organised crime everything we can about the people involved. That link, and 46% have a terrorist component in them. is quite intensive, and we have now progressed with PSNI, for example, to a point where we have established basically a joint intelligence cell staVed Q178 Chairman: That is surprising what you say by both organisations which does a lot of the basic about IP in respect of what Sir Hugh said, when he work of digging the material out, but it has been a said there were more intellectual property crimes in gradual process of developing to that point volume Northern Ireland than in the rest of the United as the case volume has grown. Kingdom altogether, and you are low down on the referral list. Mr Kennedy: There is a very real education process going on here. From the point of view of the other Mr McQuillan: Again, that may depend. One has to agencies they are looking to us and thinking: “Well, look at the whole system end to end, and if PSNI or what does the Assets Recovery Agency actually other agencies are able to investigate and prosecute need? What does it want? How can we supply those people then that is the best way to deal with whatever raw material it is?” because we are a new them. We would come in, and we have dealt with creature and they have to understand and come to a some intellectual property cases, where a point where they recognise what it is that we can 3379331001 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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1 March 2006 Assets Recovery Agency work with, so it is very much a co-operation and Mr Kennedy: I think when comparing figures education process whereby they come to understand between Criminal Assets Bureau and the Agency in what it is we can do and what they need to do to help. Belfast one has to realise they do their work in a very diVerent way. 70% of their income, if I can call it Q180 Rosie Cooper: Can I ask you about recovery that, is gained through the use of the taxation really and your success in 2005 and so far in 2006, powers. The vast majority of our cases, certainly how you compare against the Criminal Assets 70% and upwards, actually goes through the High Bureau? I note today we have the press release with Court for civil recovery proceedings and I suppose the major figures involved there, £3.5 million, but the question therefore is why is their taxation regime not only how much you are recovering but from of criminal assets looking more eVective and eYcient what areas of crime? than ours? I think the reality is that when the Proceeds of Crime Act 2002 was passed by Ms Earl: How do we compare with Criminal Assets Parliament we made an attempt to replicate what Bureau? Let’s deal with that first. They are very was in Ireland and we have not quite managed it, so successful operation and we have learnt an awful lot there are in fact a number of changes that one could from them but, as I think you alluded to, Chairman, make to Part 6 if one wanted to make it more in line they have diVerent legislation and have been with what the regime is that the Criminal Assets operating for a considerable period of time. What we Bureau applies. have discovered, slightly I have to say to my chagrin, is that this is a much longer process than I had ever Chairman: Could you let us have a note on that assumed in order to get people from the very early because that I think is better than having a long stages where we can go in and do the sort of things discussion on legislation, but thank you for the we have done today, to restrain assets, to get to the question1. final point where we get a recovery order. The recovery orders we have achieved this year, so far three in number in Northern Ireland, have all been Q183 Stephen Pound: Pertinent to the point Rosie cases where we have reached settlements with the Cooper asked you will not be surprised to hear that three individuals so our total value of settlements in as soon as you start talking about a “tin box” of assets in this current financial year is running at goodies most members of the Committee show a about £350,000 and we have put about another considerable interest, but when looking at the press £450,000 into the notional “tin box” as a result of release you did on the McKinney case, and I am not cases which we completed last year because of the personally expressing an interest in buying a time lag between getting a recovery order and Bentley, a Jaguar, a helicopter or Range Rover, I turning it into realisable assets which could be paid was intrigued by what you said about the process of over to the Home OYce for use for incentivisation conversion. In the Jim Johnston case, which we purposes. So we are seeing that it is a very lengthy studied in some detail, I understand the property was sold at public auction. When we first started the process. We are hoping that as we get more cases Y completed there will be more of our respondents inquiry we were told there would be di culties in who decide that settling rather than litigating to the public auction sales as purchasers would be full extent will be the right way to go. We have reluctant to identify themselves a a purchaser. Is included in the evidence we submitted to you some that, in fact, the case? Do you have a problem with of the factors which have caused that lengthy the process of realising the assets and diverting that process, including the availability of legal aid, the precious stream into the tin box. number of legal challenges which have been made to diVerent parts of the statute. I am sorry to have to Ms Earl: I think we had a bit of nervousness about tell you that we are still really struggling to prove whether or not public auctions would be diYcult in some of those bits of legislation. We are in it for the realising full value and our experience of doing this long term so we are not worried about that to the in the main house in the Johnston case was that it extent that we are not going to go away because it was not a problem. In fact, we exceeded the reserve has not been resolved quickly, but it does mean we price and there were clearly people who were very are not showing the final tin box results we had happy to go and buy his former home. Some of the hoped for. other properties in that case, the smaller residential properties, we sold by private treaty for a variety of Q181 Chairman: If there are particular legislative reasons because of the tenants who were living in changes you would like to see, and because this is of them, and the one we had a diYculty in realising the necessity a fairly tight session, would you please full value of was the commercial property in write to our Clerk and let us know so we can Newtownards Road. consider that? Mr McQuillan: Yes. That had formerly been a Ms Earl: Yes. drinking club with a shop underneath but the primary problem in selling it was the fact that there Q182 Rosie Cooper: I was going to ask you the very was so much commercial property in the area up for final question about your proposal to amend Part 6 sale because it was for redevelopment, and there was of the Act to make it more like the Criminal Assets Bureau? 1 See note page Ev 115. 3379331001 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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1 March 2006 Assets Recovery Agency no sign of redevelopment in the next 3–5 years Q187 Dr McDonnell: So your answer is you deal people were reluctant to buy for commercial with them as they come to you but it may be at reasons. another level that the diVerential has arisen. You deal with what you get? Q184 Stephen Pound: My problem was entirely related to the Scottish experience with asset sales Ms Earl: Yes. when people deliberately would not buy seized goods. It was a political statement rather than Q188 Dr McDonnell: And the fact that there is a anything else then, but for the record that is not the diVerence of 2:1 is not significant? case so far? Mr McQuillan: For example, with republican Mr McQuillan: We have not seen that so far and, as organised crime the biggest single area of organised the Director has said, I was present at the Jim crime tends to be around excise oVences, so if for Johnston auction and there were something like example we had a significant number of extra excise 13–14 bidders for some of the properties. There was oVences we would expect to see the republican a huge amount of interest. percentage go up. Loyalists, by and large, not exclusively, do more on drugs so if we got a focus on Chairman: Thank you. We just hope they did not drugs from the referring partners then the loyalist have northern bank notes in their pocket when they percentage would go up because the diVerent were bidding! communities groups tend to be involved in diVerent types of activity. Q185 Dr McDonnell: Moving on, the impression has been gained that most of the referrals have Q189 Chairman: What about the actual sums of loyalist links rather than provo links. Are the money in broad general terms? The 29 represent a lot provo associated paramilitary operations too more than the 14, or the 14 represent a lot more than sophisticated, or are we not tackling them or not the 29? getting referrals, or is it just that they are mostly loyalist? Mr McQuillan: I do not have those figures, Chairman. We could get them2. Ms Earl: Alan can talk you through the specifics on this but the point I would want to be very clear with Q190 Chairman: That would be very interesting you about is that we act on the referrals that come to because that is very relevant to what we are asking. us from other organisations and we can give you an The implication of my question, as you clearly absolute assurance that we have not failed to act on understand, is are the loyalists involved in a lot more any referral we have received simply because of the but rather minor, and the others involved in less but background of the body. If we have sent them back rather more major? it would be because we have either discovered other criminality which would be more appropriate for Ms Earl: We will get that information to you. PSNI to try to prosecute or because we have not linked the property there to the unlawful conduct Q191 Dr McDonnell: The other thing I wanted to alleged. Those are the only reasons we would send ask, to take the flip side of that coin, if you like, some things back. Alan might like to talk about what we of the figures we have suggest that 31 of those have seen in terms of the trends coming forward. referrals that you have had in over three years have been purely criminal organised crime links. Can you Mr McQuillan: In terms of the referrals to date, the tell us something about the nature of those criminal figures are in the brief but so far we have dealt with gangs involved? Is there even indirect paramilitary 29 cases that have a clear link to loyalist paramilitary involvement with those gangs? Do they pull in a bit groups and 14 to republicans, so the ratio is about of paramilitary support? Do they get paramilitary two loyalists to one republican. There are diVerences muscle? Are they former paramilitaries, in other in the structure of organised crime in Northern words? Ireland. There are diVerences in the types of organised crime that the various paramilitary Mr McQuillan: I think there is a definitional issue groups get involved in, and I think those figures here. In terms of the way we have prepared these probably are a reasonable representation of the figures we would only count something as having a diVerent groups, but as the Director has said we get paramilitary connection if we had been given specific cases on referral and have never yet turned away a intelligence by law enforcement that there was a link viable case, and as the paramilitary cases come to paramilitaries. So within that 31 crime figure there forward I have no doubt those numbers will change could be people who, for example, could be as well. operating in areas like South Armagh or the Shankhill Road in Belfast where one might expect Q186 Dr McDonnell: So you are saying 29 and 14 that there would be some paramilitary interest or out of a total of— influence or protection money paid, but one cannot say that because quite simply we do not have any Mr McQuillan: Ninety-five. So that gives a total of 46% with a terrorist connection. 2 See note page Ev 115. 3379331001 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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1 March 2006 Assets Recovery Agency evidence or intelligence of that. So that is one issue. reason for that is that we will only take cases if I can In terms of those groups themselves they cover again be satisfied that there is genuinely no chance of the entire spectrum of crime. We have people there prosecution leading to conviction and a confiscation who have been involved in counterfeiting, an order, so to some extent we are always driving by individual who specialises in the robbery of elderly looking in the rear view mirror. We can tell you that people in their homes; we have an entire range of what we have at the moment reflects a pattern of diVerent types of criminality in there. referrals relating to historic criminality. I think that is where we find ourselves in some diYculty giving Q192 Mr Campbell: On this issue of referrals, the you properly informed advice about what is going numbers you have supplied us with are numbers of on now. I think Sir Hugh is in a much better position referrals. In terms of taking the referrals to the point, to do that. for example, that you are at today with the case of Portadown, if you were producing a graph for that stage of events, would that reflect the 29/14 that is Q195 Chairman: Could you comment on something? reflected in the referrals, or would it change? From other witnesses we have been told, based on paramilitary either individuals or groups, there are Mr McQuillan: We can look at producing those two emergent mafias in Northern Ireland, and to put figures for the Committee3. I honestly would not like it very crudely it was said to us that the loyalists on to give you a view on that at this point. the whole are less sophisticated in their criminality than the republicans. Is this something your Q193 Mr Campbell: If you could give us those. The observations would bear out, or not? reason I am asking is that there is a general view in Northern Ireland, and right across the spectrum, Mr McQuillan: To an extent, yes. On the loyalist that the more cases you can produce the better. side, first of all, they are much more fragmented. Everyone irrespective of political label wants to see There is a lot of history behind this, and I think I action taken against groups of parasites living oV the backs of their own community, but there is a general have given evidence on this perhaps to this view that you have been quite eVective in dealing Committee before, but there is a lot of history on with loyalists, particularly those involved with this. The loyalist organisations have always been drugs, but not anything like as eVective against much more fragmented and in comparison to the republicans. Now that is a general view that is held Provisional IRA, for example, there has always been that will probably be reinforced by the press release much more criminality for personal gain within the today. After three years is it not getting easier or less loyalist groups than there was necessarily in the diYcult to take action against the fuel smugglers, republican groups. That pattern is probably going to against those on the border, who perhaps it was change in the future but at this stage that is the more diYcult to take action against in the past, and historic position we face, and therefore when we are to get referrals for in 2006 than it was in 2004? investigating, and bear in mind that we go back 12 years, that is one of the patterns we are going to find Mr McQuillan: In terms of our operations what I reflected in the figures. So in answer to the question would say is this: every case that has come forward from Mr Campbell, if I am looking at a typical to us that has been referred to us by other agencies loyalist paramilitary I would probably see much we have investigated, and every case that has been more of the assets derived from crime have been viable as a civil recovery or tax case we have taken, diverted to personal gain, and for some of the so what you will see in the figures are the products of republican paramilitaries I would find pro rata the viable cases put forward to us. Cases only cease probably less of the assets are as visible. Now, the net to be viable if we cannot get suYcient evidence of the overall republican assets may be greater and it is criminality by the individuals concerned or if they do therefore harder to find them, it is a bigger job to find not have suYcient assets, so those are the strict legal them, but on the loyalist side it is much more tests that we apply. Everything else we go for. fragmented and there are a lot of people out there flaunting their wealth, much more so pro rata than Q194 Mr Campbell: I can put it another way: do you what we have seen in the republican communities. think on the basis of the referrals we have, which is twice as many loyalists and republicans, and I accept that you deal with referrals, but do you think on the Q196 Mr Campbell: On this sophistication issue, I basis of that there is twice as much loyalist criminal can well understand in the first year or so of your activity as republican criminal activity in Northern operation, even though you may not say it is easier Ireland? to go after the more fragmented groups, that is what many people believe has happened, after three years Ms Earl: Let me have a go at that as a slight outsider. surely you will be getting much more sophisticated I do not think you can draw that conclusion because and even more professional than you already are at what we are seeing are the cases that are referred to pursuing the more diYcult cases, and surely we us which by definition will be criminality which has should be starting to see that graph starting to even been happening at some point in the past. The up. Do you expect in the next year to be seeing a much more emphatic pursuit of the more 3 See note page Ev 115. sophisticated criminals? 3379331001 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Mr McQuillan: That graph actually reflects the cases looked at it and said: “That is prima facie evidence of that are referred to us, so if more cases from people money laundering.” We brought in PSNI who said from a republican background are referred to us that “Yes, we will take this case back”. They took it would be reflected in the graph. I can encourage away, investigated it, and for various reasons could referrals by talking to partners but I cannot control not eventually prosecute the individual concerned, the process, and again I have to come back to the so they then handed it back to us again. So there is point that we are part of an overall system and that this continual interplay which is conditioned largely other people may be dealt with preferentially in the by the phrasing of the Act. criminal justice system because they may be actively being criminally investigated by the police or Q199 Mr Campbell: Moving on to the Organised HMRC at any given time, so one has to look also at Crime Taskforce, obviously the Agency approach is the totality of the picture. one which I presume is working to some considerable success. Are there any gaps or changes? Q197 Meg Hillier: You mentioned that you can Are there any recommendations or thoughts that encourage people to make referrals to you and you have that could be implemented to make it even Gregory Campbell was saying that you will have got more successful? more sophisticated obviously as you have been working at this. Do you find that there have been Ms Earl: I think we have gone through a phase in the times when you have been investigating an life of OCTFwhich has grown up in another sense individual case and in that investigation you have again. We were fully involved with NIO in looking found out intelligence that you then pass back to the at the complete restructuring of the OCTFto try and agencies that refer to you, and how often has that make it more dynamic and more positive and more increased the referrals that you receive? eVective. That is part of a natural learning process. We are still developing that. I am very pleased to see Mr McQuillan: I think it is fair to say that in virtually the way OCTFis developing and I certainly am every case we investigate we find intelligence. Again working hard, and I think our partners are working in the memorandum to the Committee we have hard with us, to look at how we can use that to identified the number of cases we have referred back improve both the number and quality of referrals because we have found criminality, and when we coming forward to the Agency. So at the moment I find evidence of significant criminality through our am very happy with the way things are developing investigations we usually conference the issue with with OCTFbut, as in everything else, the proof of the relevant LEA, and if the law enforcement agency the pudding will ultimately be in what we collect and wants to take the case then we turn in our produce and the result of that. investigation, hand our materials over to them and oVer them every assistance to pursue it as a criminal Mr Kennedy: At the moment the OCTFis investigation. developing an asset recovery strategy which is quite exciting in that it will focus for the first time in a very Meg Hillier: But in a convoluted way if you could joined-up way on asset recovery work in Northern find evidence of some other assets, if the case were Ireland and the responsibility of agencies across the referred to you for another criminal you could then board, including PPS, who I do not think has been investigate those assets, but presumably you cannot mentioned yet this afternoon, Customs & Excise, when you have it referred on an individual? PSNI and ourselves.

Q198 Chairman: Do you have sophisticated Q200 Mr Campbell: On the issue of some reciprocity? secondments to Criminal Assets Bureau from Northern Ireland staV of the ARA, how has that Ms Earl: We can always go back to the referring worked? Has that helped in the issue of cross-border Agency. Let me give you an example not of a criminal activity such as fuel smuggling, money Northern Ireland case but of a case where an laundering and so on? individual was referred to us. He turned out to have very little property in his own name but the woman Mr McQuillan: I think it has certainly helped. I think with whom he lived appeared to have a remarkable certainly over 80%, possibly almost all of our amount of property and appeared not only to be investigators, have all spent at least a week on holding property for him but for a number of other secondment with Criminal Assets Bureau in Dublin, people in that locality. We went back to the law and that has been hugely beneficial to us in the first enforcement agency and said, “It would be awfully couple of years. It has also established very strong helpful if you could refer not only him but her as personal relationships between investigators in the well”, and that has enabled us to build a much Agency and CAB and we have regular visits between bigger case. each other’s oYces on operational issues. So I think that has been extremely valuable and we will be keen Mr McQuillan: In another Northern Ireland case, to build on that in the future. To give another for example, we began an investigation which PSNI example, because we were talking about how we referred to us and we recovered some could make more eVective use of tax and because of documentation in relation to that in relation to a Criminal Assets Bureau’s success in using tax they property transaction involving a third party. We recently hosted a tax seminar for us. We brought our 3379331001 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Affairs Committee: Evidence Ev 37

1 March 2006 Assets Recovery Agency tax team from London, our specialist tax staV and explain what we do, find out how we can best get some of our ops staV across to Dublin and they ran a other jurisdictions to be able to help us, and to take it very successful seminar for 2–3 days. We are actually forward on that basis. There is a further set of issues meeting in about 10 days’ time to look at how we can about enforcement later but perhaps Anthony might build upon the experiences of that. want to expand on those points.

The Committee suspended from 4.00 pm until Mr Kennedy: The first thing to say is there is a very 4.15 pm for a division in the House. extensive and well-recognised system of Letters of Request for assistance and investigations. There are Chairman: We had I think dealt to your satisfaction, criminal investigations, but there is no similar Mr Campbell, with organised crime, and I would infrastructure for civil investigations. We are not in like to move on therefore to the links with national a position, we do not think, according to counsel, to and European and international bodies, and for use the various Conventions that are in place for Stephen Pound to take the lead on that. assistance for civil proceedings because we are, in eVect, a State party rather than a private individual Q201 Stephen Pound: We are very grateful for your or commercial entity. So the question is then what written submissions; they are extremely helpful, and can we do to foster mutual legal assistance between the press release. One of the things you talked about jurisdictions in the kind of work we do in the civil in your submission, just quoting your own words arena? Early on, for example, we paid our first visit back to you because they are rather better than mine, to the Criminal Assets Bureau and we pointed out to was that you felt you could be even more eVective them that their legislation said they could assist a through “the creation of international mutual legal police force, a revenue authority and a social assistance arrangements in respect of civil recovery security authority, and we explained to them that we investigations and procedures. I want to ask you a were neither but there was a provision in their question about that in a minute but, firstly, what are legislation to extend that. They went away and you doing to persuade the government to support thought about it and I am delighted to say that the you in this? Irish government, and the Dail passed an amendment to their legislation which allows them now to assist any assets recovery agency worldwide. Ms Earl: Let me cover that bit first and then perhaps So we are engaging in things like that. I had an Anthony will talk about precisely the work. First, opportunity to make an input to the legislation to the Proceeds of Crime Act 2002 contains Part 11, Caribbean jurisdictions recently to encourage them which is the part which enables international co- to put similar provisions in their legislation, which is operation to take place. I am delighted to say that one case currently before a Parliament and in was actually brought into force on 1 January this another still at the draft stage. In terms of our own year so we only have so far two months of experience legislation it is probably the most advanced in the of that but certainly that helps us to clarify the world in terms of providing assistance on a civil relationships we have with other jurisdictions and recovery front but there is still probably more that enables us to support even better the mutual we could do to amend ours, and in fact I would criminal legal assistance regime which has been in anticipate that there is one suggestion that we will operation. Having said that, there are some Y take the Chairman up on in terms of making di culties, which is not about what our own suggestions of how things could be made more government is doing but is about our ability to have eVective. our powers recognised in other countries. For a number of jurisdictions the concept of using civil powers to deal with crime reduction and to tackle Q202 Stephen Pound: Is this a question of existing criminal purposes is a very diYcult one to legislation being implemented on a bilateral basis at understand, so we are finding in our discussions with your instigation, or do you feel that there is primary other jurisdictions that we have to talk a lot about legislation you still require that would enable you to the purposes behind our activity, and it is one of the drive this forward? reasons why in some circles we will talk about non conviction based forfeiture rather than civil Mr Kennedy: There is an amendment to the Proceeds recovery, because the word “civil” in front of “civil of Crime Act 2002, or perhaps better still the Crime recovery” can set us into a number of diYcult areas. (International Co-operation) Act, that would be of So we are out, if you like, on a campaign of assistance to us, but the more important thing is that missionary work, evangelising just how these powers in fact jurisdictions around the world in a sense can help, talking to a number of countries within the apply the current regime of criminal mutual legal European Union and alongside some of the assistance to civil investigations and proceedings in dependencies, Jersey, Guernsey and the like, to be relation to criminal proceeds. able to talk about how best to use the powers we have and to be able to collaborate with them Q203 Stephen Pound: You have actually seized properly within the confines of their legal systems, property in foreign jurisdictions in Ireland and because what has to be paramount for us is that we Spain. I take your point about the legislation never ask a jurisdiction to do something which through the Dail but is that on the basis of would be illegal or unwise for them to do. So part of reciprocity or on the basis of individual our approach has been to say how can we best representations that you have made? 3379331001 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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1 March 2006 Assets Recovery Agency

Mr Kennedy: Neither. What we have done in 1 April the Serious Organised Crime Agency willbe relation to the Irish property is in eVect that the unveiled. What diVerence will that make to the work receiver required an individual to sign a power of you do? attorney allowing property to be sold abroad. Ms Earl: We hope it will be another support to us in Q204 Stephen Pound: And what if that had been the sense that a number of our larger referring refused? agencies, the National Crime Squad, parts of the old Customs & Excise, will be part of the Serious Mr Kennedy: We would have had to do some more Organised Crime Agency. They have been very clear creative thinking! that one of their key priorities is not only to catch and convict but also to take the proceeds out of crime, and therefore they will see us as an important Q205 Stephen Pound: That is pretty damned adjunct in those cases where they have not been able creative, a power of attorney. It sounds quite to take criminal conviction and confiscation action. impressive. What about Spain? That may be where cases have failed to be prosecuted successfully but it may also be in Mr Kennedy: The Spanish case was one of the circumstances where they are seeking to prosecute London cases so I am afraid I am not sighted on key individuals at the centre of an organised crime that. operation and we might then want to look at some of these people on the periphery who have been Ms Earl: We have done something very similar there involved in facilitating perhaps or handling the and the court was very constructive in helping us and property as a result of that activity. the receiver to transfer property that was held by an individual into the name of the receiver, again acting Q208 Stephen Pound: Finally, there is a perception under a power of attorney. I think it is fair to say we which is probably wrong, as most are, that you are a are operating as creatively as we can within the reactive rather than proactive body and that people international legal frameworks available to us. We bring cases to you rather than you going to them. Is are still at very early days but we are quite happy to this a perception within the organisation and do you try some of these things and see if they work. If they feel there is more you could be doing to go to other do not work then we will need to go back and talk to agencies, identify sources, rather than waiting for the various authorities about other forms of what you described earlier on, the boxes of papers legislation. Sometimes it will not be our legislation being brought to you? that is needed but other legislation in other jurisdictions. Ms Earl: I think we should not confuse the fact that we take cases on referral from other organisations Q206 Stephen Pound: I appreciate that. When we with a lack of proactivity. What we have spent quite went to the Netherlands in the previous Parliament a lot of time doing over the last three years, and we spoke to senior Dutch drug squad oYcers particularly in Northern Ireland, is going to talk to and we asked about this arrangement the answer a whole range of agencies in the law enforcement was “we all know Alan”. I am not entirely sure world and discussing where we might be able to help whether it is an informal basis or a formal one. In them to meet some of their over-arching targets, so terms of Europol and Interpol do you have a formal not only to the financial investigation capacity in the relationship, advantageous as the original contacts police service but also the drug squad and other are? parts of PSNI about how we might help. Similarly talking to people in the Department of Work and Ms Earl: We do, and we are active members of an Pensions and the Benefits Agency about how our organisation called CARN, Camden Asset powers can be used to tackle those people who have Recovery Network which is being sponsored committed benefit fraud. We have some very through support from the European Union and powerful deterrent roles to play both in taking through Europol, and eVectively what it is trying to money from people who should not have them and do is promote good exchange of information across also sending out a very clear message to the law a number of countries within the European Union abiding community that we are acting on their and also some countries outside. We have been behalf and are on their side. taking an active part, as indeed have the Criminal Assets Bureau, and if all goes according to plan the Q209 Stephen Pound: How would you publicise that United Kingdom will take the Presidency of that in deterrent role? 18 months’ time, and again we hope that will be the opportunity to start to raise the profile of what other Ms Earl: That is why we have such an active places need to do in order to make some of these communications policy. I have seen the press orders more easily enforced. releases you have picked up from this morning. Whenever we do something where we legitimately Q207 Stephen Pound: I should hasten to add that the feel we can tell the community that we are taking familiarity of the Netherlands police with Alan action on their behalf we will put things out into the McQuillan was purely professional, and was media at the earliest opportunity. We will not do it certainly predicated on admiration on their part! 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1 March 2006 Assets Recovery Agency the proof of that eVectiveness is in Northern Ireland, Ms Earl: Because we are absolutely dependent on where our market research tells us there is something the good will— like an 80% recognition rate of the Assets Recovery Agency which is pretty high. Q212 Gordon Banks: Just to foster good relationships? Chairman: Politicians will be very happy with that. Let’s move on. Ms Earl: To foster goodwill and relationships, but also to demonstrate the point that this is a Q210 Gordon Banks: On the distribution of assets, in partnership activity. There is nothing my Agency 2005 the Recovered Assets Incentive Fund that had can do without the support of the law enforcement been previously announced by the Home Secretary community at large and the last thing we would want in 2004 was extended to cover asset recovery to do would be to enter into an arrangement which agencies in as much as they would be able to benefit said “We will keep whatever we bring in”, because in 2006–07 and would be entitled to receive a share the likely eVect of that will be, or that it would be of the assets recovered, the figure I believe was 50%. possible for the referring agencies to say “Well, why Bearing in mind the calendar, what diVerence do you don’t we keep those cases ourselves, why don’t we do expect this will make as additional funding, and them ourselves and see if we can get a criminal “will” and “additional” really being the key words in conviction or confiscation”. In some cases they the question. might be able to; in others they would not, and in that case the only person who benefits might be the person who holds the unlawfully acquired property, Ms Earl: Let me take this as a collective agency-wide and I do not think that is sensible way for us to question. You are absolutely right, for any money implement the will of Parliament. we obtain as a result of our civil recovery action which goes into the tin box we will be entitled to a payment of 50% of that back out again. Because of Q213 Gordon Banks: Moving on to the assets that the partnership nature of the work we do, because of you have seized in the past year, a certain percentage the fact we are continuing to be dependent on those of this can be returned back to the communities in a who refer cases to us and we want them actively certain shape or form. How is this done? In involved, we have taken a policy decision that we Northern Ireland is there a communities fund? If will share our share of the receipts, usually on a 50/ there is, how does it operate? 50 basis with the referring agency. We think that is about putting the values of partnership into practice Ms Earl: I think that is a question better addressed and it will involve us finding ways to write cheques to the Home OYce and colleagues in the Northern to other organisations, but we think it is important Ireland OYce. EVectively all assets are paid over to that we do that. What we put into the tin box will the Home OYce who then decide how to use those. also be dependent on the amount of money that we They have in the past used money to support things spend on the fees we pay to interim receivers, people like the employment of additional financial we bring in to help us investigate and manage the investigators within the Police Service for Northern assets. One of the things that was agreed in the early Ireland and they have in other parts of the country stages of the Agency was that where we have paid put money into specific community projects which out interim receivers’ fees we can recover that as first might relate to this year tackling gun crime, in the call from any of the assets we bring back into the past supporting community rehabilitation projects Agency. That is really important because that has around drug use and drug abuse, but I think in terms enabled us to increase the capacity of cases that we of how those decisions are made that is probably a can take through the system quite significantly. question for the Home OYce rather than us. Interim receiver fees in cases can range from £150,000 up to a million depending on the size of the Q214 Gordon Banks: So you are not aware of a assets that we are dealing with, so our projections for communities fund for Northern Ireland? next year are still not entirely clear but we would hope there will be some additional capacity as a result of incentivisation which we will plough back Ms Earl: Not to the best of my knowledge. into the Agency share, into resourcing further investigators and lawyers to be able to take on an Q215 Mr Fraser: Can we turn to the issue of increased number of cases, and we hope as a result sentencing? We had a written submission from PSNI of that slowly we will be able to build up a virtuous that stated that the level of deterrent in Northern circle. You will understand if I am not entirely clear Ireland is often perceived as lower in terms of with you about exactly what that is going to look like sentencing than it is in the rest of United Kingdom, at the moment because we are still doing some of the and sentences tend to be significantly shorter. Do modelling. you have a comment on that?

Q211 Gordon Banks: I am intrigued by the fact that, Ms Earl: I think it would be inappropriate for us to of the 50%, you are writing a cheque for 50% going make comment on that because we are not part of back. Can you tell us the reasoning behind that? the criminal justice system or have any locus in that. Why do that? We operate in a slightly diVerent space of civil 3379331001 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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1 March 2006 Assets Recovery Agency recovery, so I am sorry to be unhelpful but I think Q221 Chairman: And are you not under-resourced, probably “No comment” is the right answer on if this is true, as well? that one. Chairman: Do you have any thoughts on that at all? Ms Earl: I think that is almost “if I had a wife I would have stopped beating her at this point”! The Q216 Mr Fraser: What about the standard of first thing to remind you is that when the Act was proof? No? being considered by Parliament there was a very clear and I think proper view which said these were Ms Earl: Cannot be drawn. powers which assist in the normalisation process going on in Northern Ireland and as a result of that Q217 Chairman: You are entirely proper, of course, there is a statutory requirement for my Agency to but maybe we can write to you on one or two little have Alan as an assistant director in Northern issues surrounding that. Ireland; I do not have a statutory requirement to have an assistant director in any other part of the Ms Earl: Of course4. United Kingdom. So there was always a very clear understanding that we would put a significant presence into Northern Ireland, and I have to say I Q218 Mr Fraser: Can I turn to resources, then, am very happy that we do that because I think we which I hope you can comment on? Do you have Y can make an impact. I think what is interesting for su cient resources to do the job you are supposed to us is to be able to operate in a concentrated way to be doing? see just what impact we can have on both the perceptions of the risk to reward criminality and also Ms Earl: I think it would be unlikely that you would the perceptions by the community at large about ever find anyone who is a director of a public whether or not we are genuinely all working together organisation telling you they had suYcient resources to try and make them feel safer and to take action to do the job, particularly given some of the figures perhaps against some of those people who have been you have seen in terms of the organised crime very adverse role models in the past, but I do not networks that operate in England and Wales as well think you can do the mathematical calculation and as in Northern Ireland. Having said that, one of the say it is 10 times worse there. jobs I am given as Director of the Agency and Accounting OYcer is to make sure we maximise the eYciency of every single pound of public money we Q222 Chairman: At the end of the day when this have, and I think I am happy to tell you that we are Committee makes it report and makes continually looking for other ways to be able to recommendations to Parliament are there particular spend the money you grant us as eVectively as we things you would like to see in those can. recommendations insofar as your operation in Belfast is concerned? You are not beating your wife but if I were your fairy godmother what would you Q219 Chairman: You are a United Kingdom-wide like me to give you to make your operations in organisation, as you made plain, but you also said a Belfast more eVective and comprehensive? third of your work was to do with Northern Ireland and yet very much less than a third of your resources, either in manpower or money, is based in Belfast. Ms Earl: I think there are some of the legislative Are you happy about that? changes which Anthony can certainly talk about, and making better use of the tax powers. I think Ms Earl: Sorry, I think I explained myself badly. A there is a second issue which would be fantastic to third of our investigative resources is actually based see in Northern Ireland, as it would across the in Belfast; that is not that a third of our casework is England and Wales police, which is back to this issue based in Belfast. In fact, on this year’s figures about delays, about putting some firm timetables something like 22% probably is done by Northern into the legal system with which we operate so that Ireland compared to the rest of the Agency covering if people have not responded by a given time then we V England and Wales. It is that sort of order of draw di erent inferences from those who are magnitude. I can let you have the exact figures, if prepared to engage in the process, and I think we you like. would be looking for better ways to enforce on some of our internationally obtained property because we need to be able to make that very clear deterrent Q220 Mr Campbell: Just on those figures, you have message. said that is an explanation of it but if Northern Ireland is roughly about 3% of the population of England and Wales and Northern Ireland and Mr McQuillan: Coming back to resources, whether the figure is 22% or 30% of your work or obviously it would be nice to have more but I think investigative responsibilities of Northern Ireland, the other important factor to realise is that we are does that mean Northern Ireland is 10 times more totally dependent upon our partners and they are prone to criminality or that you are underactive in very committed but every referral involves them in a England and Wales? significant amount of work, and just pumping more money into the Assets Recovery Agency would not 4 See note page Ev 115. resolve anything unless there were a comparable 3379331001 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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1 March 2006 Assets Recovery Agency commitment in other areas to resource the provision Mr Fraser: So you could hypothetically put a of the information. That would be critical as well. It proposal forward that you need as much short is a systemic approach that is needed. money as political parties that do not get their seats get?

Q224 Chairman: I do not think we can expect you to Q223 Mr Fraser: Obviously the point has been made comment on that mischievous question! Moving on about financial resources but it is also management before our private session, you quite rightly and and professional skills resources. Can you share with understandably said you could not comment on us briefly your priorities in that respect over the next sentencing. This is a slightly diVerent point. The few years? IMC have recently recommended that there should be a licensing regime whereby if a business did not perform ethically it could be closed, and this is Mr McQuillan: In terms of management and something that came through in the evidence we had professional skills we reckon quite clearly that the from the road hauliers as well, and that was on-the- record evidence. Would you welcome a tighter opposition will become cleverer as time goes on. We regulation of businesses that operate within have a comprehensive training regime for our staV. Northern Ireland? Would that make your job easier? We are the national accreditation agency for financial investigators and as part of that we have a Ms Earl: I think it would. I think we are supportive comprehensive programme for continuous personal of the line which has also been taken by the emerging V development for sta , and we are continuously Serious Organised Crime Agency which is that we all seeking ways in which we can improve that. We have collectively involved in the widest sense of possible developed relationships with our colleagues in the law enforcement have a range of powers and on Criminal Assets Bureau building on their occasions we have to look at how we might widen experience. We are looking at colleagues elsewhere regulatory powers in order to better, in that case, a in other areas of the world to see if we can learn more level playing field for those who are operating anything from experience there, and therefore we are legitimately, so certainly I think we would have no trying to build up that area of the skills base in the diYculty with being on the record saying that that Agency. As an Agency we are also attempting to always is worth exploring. build our own internal management skills to make sure we get the absolute best value for all the public Chairman: Thank you very much indeed and thank money that has been vested. you and your two colleagues for the very lucid and helpful evidence that you have given, which will certainly assist us when we come to prepare our report. Thank you for the supplementary Ms Earl: The only thing I would add to that is, information you promised to send. It may well be exactly as Alan said, the other side are getting that we will wish to ask you some specific questions cleverer as we go along and we have to continue to in writing as well and you have given me a private be one step ahead. We also have to get better at assurance which I now put on the record that you ensuring that everybody knows just what we are would be as helpful as possible. We appreciate that doing and which of those points of law which really and wish you success in your endeavours, and may have now been properly dealt with to make it clear your resources not get smaller and may your receipts to our Respondents that fighting those points is only get larger! Thank you very much indeed. Could I going to involve them in more abortive legal costs, now declare the public session closed and ask and will not actually make a diVerence to the colleagues to remain, and those in the public gallery outcome in the end. to withdraw. Thank you very much. 3379331002 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Wednesday 8 March 2006

Members present:

Sir Patrick Cormack, in the Chair

Mr David Anderson Mr Stephen Hepburn Gordon Banks Lady Hermon Mr Gregory Campbell Meg Hillier Rosie Cooper Stephen Pound Mr Christopher Fraser Sammy Wilson Mr John Grogan

Written evidence from the Federation of the Retail Licensed Trade NI is on page Ev 127

Witness: Mrs Nicola Carruthers, Chief Executive, Federation of the Retail Licensed Trade Northern Ireland, gave evidence.

Q225 Chairman: Good afternoon. Are you on your rather deal with privately, then we will be very happy own? to give you 10 minutes or whatever at the end. We Mrs Carruthers: Yes. have other witnesses who are indeed going to give evidence in private this afternoon, and so I am quite Q226 Chairman: Mrs Carruthers, you are extremely anxious that we encompass our session with you by welcome. Thank you very much for agreeing to four o’clock, if you can; but obviously if there are come and give evidence to the inquiry this afternoon. points that we are still doing we will continue. Do As you know, we are looking into organised crime. you have any aYliate body in the Republic? Yours is the first organisation to field a single witness Mrs Carruthers: Not formal aYliation. We are so all the questions will obviously be directed to you. members of an organisation called the United Would you like to say a word about your Kingdom and Ireland Licensed Trade Association. organisation and put us in the picture and make any We are a member of that, as is the Federation of opening statement that you think would be helpful Licensed Victuallers in England, which represents to you or to the Committee? largely tenants and other operators, the Scottish Mrs Carruthers: Thank you very much, Chairman. Licensed Trade Association and the Vintners I am the Chief Executive of the Federation of the Federation of Ireland. There is no full-time member Retail Licensed Trade, Northern Ireland. We from Wales and their set-up is slightly diVerent to represent about 1100 members. The vast majority of our own, but we do have very close links with our our members would be pubs but we also represent colleagues in the Republic. oV-licences and a number of hotels and restaurants, but by far and away the biggest category would be Q229 Chairman: You do; and are those amicable pubs. links? Mrs Carruthers: Absolutely. Q227 Chairman: What percentage of the pubs would that be? Mrs Carruthers: About 70%. We are the only trade Q230 Chairman: What evidence do you have to association that represents the licensed trade in support your view that the illegal alcohol trade, to Northern Ireland, and we have been around in some quote your written evidence—for which many shape or form since 1873, so the organisation has thanks—continues to grow and flourish? been around for a length of time. We have members Mrs Carruthers: Chairman, it is really the evidence from all across Northern Ireland and we have no one from what my members tell me of what happens in area where we have a bigger spread of members or their local areas, and also the evidence from the where we are under represented; so the 70% is pretty police. We have very close working relationships much across the board. We are a small organisation, with the police across Northern Ireland in all areas. that said, with a very small staV. We do have a We had someone from the police attend a general dedicated training department, and much of our meeting of our Federation a couple of years ago time these days is spent in providing industry specifically on the issue of illegal sales of alcohol, and training courses and trying to raise standards across especially counterfeit alcohol and counterfeit the industry. We very much welcome this inquiry. I money. They were of the view that the problem was will try to be as helpful as possible, to the best of my a large one in Northern Ireland; that there were ability. That is all I would like to say. certain areas in Northern Ireland where the counterfeit alcohol is being produced on an Q228 Chairman: Thank you very much indeed. I alarming scale. There is the evidence from there and should say at the beginning that some of our also from our dealings with local drug and alcohol witnesses have chosen to give some of their evidence teams across Northern Ireland. They would tell us in private. If you feel, during the course of that illegal sales from sources such as markets, ice questioning, that there are matters which you would cream vans, sales door-to-door, sales from taxis, 3379331002 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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8 March 2006 Federation of the Retail Licensed Trade, Northern Ireland would be a significant problem, and that would be Q234 Chairman: Was that reluctance mainly from something that a lot of our members would tell us the Catholic community? as well. Mrs Carruthers: The pub trade in Northern Ireland is largely Catholic. It is a historical thing. We would estimate that about 80% of pubs in Northern Ireland Q231 Chairman: Do you share the view that has would be Catholic-owned and run. been advanced by others who have given evidence that organised crime has become and continues to be more sophisticated? Q235 Chairman: The vast majority of them would be Mrs Carruthers: It is a diYcult area for me to quite happy calling in the PSNI, and just a small comment on, to be perfectly honest. Organised crime group would not. and crime in general are not issues that my members Mrs Carruthers: Yes. discuss a lot. There is certainly a perception out there. Whether it is a perception that is based on hard evidence or hard fact, or it is a perception from Q236 Mr Anderson: I want to ask you particularly what one reads in the newspapers and the stories one about shebeens. You said in your submission to the hears, it is very diYcult to know. There would Committee that they were widespread. Can you give certainly be a perception in the society of Northern us some idea of the scale of them and the nature of Ireland amongst my members that crime and them? Are we talking about farms or houses? Do you organised crime is a problem, but it is exceptionally think there any link between these and diYcult to quantify because it is not something that paramilitaries? we can talk about. It is also diYcult to know where Mrs Carruthers: Shebeens in Northern Ireland were organised crime stops and crime per se starts. really started in the late 1960s and early 1970s, really as a result of the troubles and curfews that were imposed in certain areas. So drinking clubs sprang Q232 Chairman: As far as crime is concerned, do you up and they were very widespread. As time went on think that the ordinary—I hate to use this term—the more and more of those clubs became legitimate and ordinary, everyday drug that manifests itself they were brought within the proper registered club perhaps in public houses in the rest of the UK is not system. The registered clubs numbers grew from such a problem in Northern Ireland; it is rather the about 200 in the early 1970s to around 600 at the end organised, sophisticated crime? of the time. A lot of the registered clubs, the properly Y Mrs Carruthers: It would be very di cult for me to run registered clubs, that we have these days did start say that. The types of crime that the average pub oV as shebeens. These days, when members would V would face would be people running o without refer to shebeens, it is any form of illegal drinking paying, but mostly things like silly fights and den. Thinking about this, reports in the last year criminal damage. I imagine that is the problem have not been that great. They seem to come in V across the United Kingdom and Ireland. Our o - spates. It seemed a couple of years ago that I was V licence members would tell us that they would su er getting a lot of reports about various shebeens a significant amount of thefts and robberies whether around the country, whether they be in sheds, front through grab-and-runs from their premises or rooms, possibly linked to farms. As to whether or moneys being stolen from the Securicor vans doing not they are linked to paramilitaries, I could not say. deliveries. Again, when they are recording those they are just recorded as incidents; they do not know whether it is necessarily organised or not. Q237 Mr Anderson: Have you any idea of numbers, which is the question I asked earlier? Mrs Carruthers: I honestly would not know. I would Q233 Chairman: Are you happy with the levels of co- simply be guessing. operation you receive from PSNI, with the eYciency of PSNI, or are there problems on that front? Mrs Carruthers: Again, it is a diYcult one. As a Q238 Mr Anderson: Is it possible you can estimate federation we have good working relationships with the impact on your members on legitimate venues? the PSNI across Northern Ireland. We work on a lot Mrs Carruthers: You have got both the impact of local initiatives together. A lot of them are obviously on turnover, on customers; you have also partnerships and they provide training for us, for got the fact that some of the shebeens would be providing door supervisors, et cetera: but if you were getting their alcohol from illegal sources. They to ask me was that a view shared by all the members might even be making their own, for all anyone of the Federation, I would have to say not. We did knows. There would be an eVect both on the some research amongst the membership a couple of legitimate trade on registered clubs and on pubs years ago, basically to ask whether they would be because obviously if people are going to shebeens, comfortable in phoning the police and asking for that is a lot cheaper and they would not be going to assistance or reporting crimes. A good portion of proper licensed premises. Also, you do not know them were; 80% said there was no diYculty in where the alcohol in shebeens is coming from, where contacting the police for assistance; but 20% of them it is supplied from. We heard, for example, that one said they would not, and reasons for that ranged shebeen—I was told that was in existence—had from political sensibilities to, “there is no point— proper taps, proper kegs. Where are these coming slow response time; nothing will happen”. from? 3379331002 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q239 Mr Anderson: What is the address for that one! licences in Northern Ireland. For those members Mrs Carruthers: Obviously, at that time we spoke to who are unaware, there is a diVerent licensing system the police and also spoke to the brewers to see in Northern Ireland. In order to open a pub or an whether they were able to be of assistance; and as far oV-sales you have to purchase an existing licence. It as I know that one is no longer there. They can be means that there is a significant financial very inventive in the way they get access to alcohol, commitment that goes into entering the licensed and that inventiveness fuels the illegal drinks supply, trade. As you may be aware, the licensed trade is and it keeps going. very much a cash trade, and it has been identified by Her Majesty’s Revenue and Customs as a type of Q240 Mr Anderson: You mentioned to the business which has the potential for money to be Chairman about links with the PSNI. Is it possible laundered through. It would be the trade’s view that to see how successful they have been in closing these the proposed changes to the Northern Ireland places down? licensing legislation could legitimise some of the Mrs Carruthers: It is very diYcult actually because illegitimate sources out there, or simply just make it some district command units would be more helpful easier for others to enter the trade and to launder than others in regard to this particular subject. I fully money. understand the problems that the PSNI faces in certain areas in Northern Ireland, and I know that Q244 Sammy Wilson: In our recommendations, for example when I did report a shebeen once I was Nicola, if I could draw this out for you, how told that the police knew about it and had important is it that in seeking to stop organised knowledge of it and were trying to manage the crime getting a bigger hold on the industry, we and situation; but they were obviously trying to build government address the issues you have just talked links with the local community in that area, and so about? that type of set-up had to be handled in a very Mrs Carruthers: We believe it is absolutely vital. The diVerent way to how a diVerent type of shebeen might be handled. problem that the Committee has addressed of organised crime in Northern Ireland and the diYculty people have of getting a handle on it and Q241 Mr Anderson: You are not suggesting the getting to know its many tentacles and strands—we police turn a blind eye. need to cut oV as many avenues as we possibly can Mrs Carruthers: No. and not make things easier; so it is absolutely fundamental that the Government looks closely at Q242 Mr Anderson: It is just that sometimes— proposals on licensing. Indeed, in the Organised Mrs Carruthers: No, it is just that things have to be Crime Task Force annual report it identified that managed in diVerent ways. one of the areas it wanted to look at in the coming year was charities legislation, which I know the Q243 Sammy Wilson: On the question of illegal Committee has been discussing, but also the drinking in clubs, there was some disturbing regulatory framework for hotels, pubs and taxis. I comment on the change of regulations, either in only came across this when I was preparing for the regard to licensing and the lifting of the cap on Committee because we have not had any dealings licence, and the ease with which that will allow with Organised Crime Task Force, and I am not people to enter the industry—and also the aware that the task force or the Assets Recovery deregulation of pubs: do you see that as a big Agency was consulted when drawing up the current potential for swinging some of these illegal shebeens proposals for deregulation of licensing. into the legal end of the market? In doing so of course it is much easier to launder stolen fuel and money? Q245 Lady Hermon: Do you think the Minister is Mrs Carruthers: Absolutely; it is a huge issue. The listening to the views you have given about the whole licensing review is a huge issue for the licensed change to the licensing regulations? trade at the moment. The Registration of Clubs Mrs Carruthers: I very much hope that the Minister (Accounts) Regulations were put into place 10 years will be listening. The consultation period is now ago to try to stop money being laundered through closed. I know there have been about a thousand the clubs. The vast, vast majority of registered clubs responses to the proposals. Not all those responses are run perfectly well and properly, as they should are yet on the website but at the last count we noticed be. The Registration of Clubs (Accounts) that there were 622 responses against the proposals Regulations are a significant burden for some of and six in favour. It is also worth noting that there those clubs; but at the same time they were put into is complete cross-party support on this, which is force for a very legitimate reason—to try to stop an unusual in Northern Ireland! We very much hope avenue for money, fuel, alcohol or whatever to be that the Minister will listen and the consultation is a laundered. At the moment the proposal is that the genuine consultation. Registration of Clubs (Accounts) Regulations go. Chairman: We all hope that the consultations are They are also proposing that clubs are deregulated genuine, or at least this one is. We are listening very to a certain extent to make them more like pubs, in carefully to what you say and we shall be framing that they will have the same opening hours and the recommendations based on our evaluation of the same modus operandi as pubs. They are also evidence we have received. Up to now, yours is proposing removing the cap on the number of very good. 3379331002 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q246 Mr Campbell: In your correspondence with Mrs Carruthers: Certainly, police in certain areas the Committee you made reference to the taxis where it was becoming a significant problem did take selling alcohol. That issue has been around in it on board to make it their business to talk to other Northern Ireland for some time in anecdotal form. local taxi firms and to try to cut it oV. It has been What evidence is there from your members and what raised by the local drug and alcohol co-ordination knowledge and experience is there of that as an teams with whom we would work closely in relation issue? Is it a big issue; is it growing; what sort of to the Northern Ireland drug and alcohol strategy in impact is it having? the past. Taxis have been identified as a big source of Mrs Carruthers: It is a big issue. In the past, a lot of alcohol to the under-aged. The local drug and tax drivers would have maybe pleaded ignorance alcohol teams would say that certain taxis, certain about what they were doing. That is less likely to ice cream vans even, in particular areas would be a happen these days because the police have now good source of alcohol. A taxi would deliver to a become a lot more aware of the problem, and we door, and an under-18 would open the door and say, have certainly run joint seminars with the police to “this is for my mum; she is just upstairs; hand over highlight the issues around taxi deliveries of alcohol. the money”; and the alcohol would change hands. It Some of our members would say that in the past they was a very easy way for the under-18s to get access were aware of taxis coming in buying oV them, to alcohol. which is becoming less of a problem. The individual taxi driver delivering to customers’ houses is Q251 Chairman: Not alcoholic ice cream, surely! possibly becoming less of a problem because Mrs Carruthers: Fish and chip vans are another one. awareness is certainly growing and police awareness is certainly growing. One area that has long been a Q252 Mr Campbell: What about counterfeit problem would be the more organised taxi alcohol? deliveries. These spring up in various forms, and it Mrs Carruthers: That, again, is a big problem in is pretty easy to get the evidence for it because they Northern Ireland. I made reference earlier to the advertise quite widely; they are not shy about presentation we had from the police counterfeit putting leaflets through doors saying “Dial a drink team to our annual general meeting a couple of years 24 hours a day”. ago. Counterfeit SmirnoV is the main problem in Northern Ireland. The counterfeiters are extremely Q247 Chairman: Is it a black label, black taxi? adept at copying the bottle. Diageo actually changed V Mrs Carruthers: No, it would tend to be minicab the Smirno bottle about a year ago to try to keep a taxis. There are many cab firms that would advertise step ahead of the counterfeiters, but of course they “dial a drink” quite openly, 24 hours a day. We are have now caught up. also aware that there are taxis which just drive round with a stock of alcohol in their boot. Anecdotally I Q253 Chairman: They make this brew in Northern can tell you that a good friend of mine asked a taxi Ireland and put it in these kinds of bottles. driver to stop at an oV-licence for them when they Mrs Carruthers: Yes. It is a big problem. People were on the way to a friend’s house, and the taxi would have said in the past that counterfeit alcohol driver said, “there is no need” and opened the boot was being sold in pubs et cetera. I firmly believe that of the car, and there was a selection to choose from. that is not a problem at all. The checks on the Chairman: It is not very good for the claret, though, alcohol sold in pubs are so significant and stringent driving it around like that! these days; it is not just Trading Standards oYcers Sammy Wilson: I do not think it is claret they are that go round checking alcohol in pubs; it is the drinking, Chairman! Environmental Health oYcers under the Food Standards Agency—quite rightly too! Specific testing kits have been developed in conjunction with Q248 Mr Campbell: This is Northern Ireland, the drinks companies, so it is now very easy for a Chairman; I just remind you! Trading Standards or Environmental Health oYcer Mrs Carruthers: I think you tend to get a choice of to check the validity of a product that is being sold one vodka and two types of beer. That seems to be across the counter. It is our understanding that the all that is available. I also know that there are other biggest problem with the counterfeit stuV is markets, minicab firms that operate systems from residential door-to-door sales, and again the taxis. People think homes with alcohol being stored in garages. These that they are getting a bargain if they are buying a are obviously passed on to the police. bottle of SmirnoV for five pounds, but they are Chairman: This is a new world, is it not? certainly not buying a bottle of SmirnoV.

Q249 Mr Campbell: You are saying that some of it Q254 Mr Campbell: The anecdotal evidence that I is becoming less of a problem. have heard would appear to suggest that there is Mrs Carruthers: Yes. quite a sophisticated operation. Have your members indicated the variety of sources that might be involved in such a sophisticated operation? Q250 Mr Campbell: Is it becoming less of a problem Mrs Carruthers: No, it is not something which I because the police were contacted and took a very would have any specific information on. The level of robust approach to the pursuance of those who were sophistication was something that the police have carrying out this activity? told us about through factories, for want of a better 3379331002 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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8 March 2006 Federation of the Retail Licensed Trade, Northern Ireland word, that they have found in certain areas, which Q260 Meg Hillier: From that trend you could tell are manufacturing this counterfeit product. They that diVerence. Is there any way you could look at are sophisticated operations. My members would those figures—or maybe even supply them—if you tell me that they are not that often oVered stuV these can you tell by monitoring that whether there has days. In the past there might have been a knock on been an increase in illegal purchasing? the back door and someone was trying to sell them Mrs Carruthers: I think it would be diYcult to draw a dodgy product; but that is not a big problem these that conclusion from the figures. The only figures we days because they know they are not going to take it. have been able to get on the level of counterfeit It is diYcult to know exactly where it comes from but alcohol are figures that are UK-wide and they are the police would tell us it is very, very sophisticated, pretty elderly figures; they are three or four years which is why it is so diYcult for legitimate old now. companies to keep one step ahead of the counterfeiters. Q261 Chairman: Can I just ask a question that might Q255 Mr Campbell: If it is the case that most be helpful to Mr Campbell and Meg Hillier: would counterfeit alcohol is not going through legitimate it be feasible for you, following this session, to write channels and is reaching the general public through to your members just to see how many of them had shebeens and illegal drinking establishments, and if had what was called the knock on the back door for those who are responsible for the formulation and counterfeit alcohol in the last year and whether this distribution of counterfeit alcohol are extremely represented an increase or a decrease in those sophisticated—and I would assume they would need approaches. I am not asking for names or locations, to work in areas where they are less likely to be but it would be an answer to Mr Campbell’s detected—is there a possibility, probability, that question, and indeed Meg Hillier’s if you had some there is a paramilitary link at some point in that sort of indication from them. chain? Mrs Carruthers: Certainly5. Mrs Carruthers: I could not say. I could not say any more than anybody else in Northern Ireland could say, but the Committee would have to draw its own Q262 Gordon Banks: I want to take you back to the conclusions from the level of sophistication. point you made about bottling and that it all comes down to this level of sophistication. In my Q256 Chairman: Is it coming over the border? constituency I also have a major bottling plant, and bottle manufacturing in my constituency, so I can Mrs Carruthers: From what the police tell us, a lot of Y it is based in Northern Ireland, around border areas. understand the di culty. How do these people get these bottles? Are they stealing new bottles; are they stealing recycled bottles? They are surely not Q257 Mr Campbell: You said the Committee should manufacturing bottles because it is such a complex draw its own conclusions but what would be your operation! Is it organised that they are stealing best guess? bottles from Owens-Illinois? Mrs Carruthers: I honestly could not say. Mrs Carruthers: I honestly could not tell you. I Mr Campbell: What would your members’ best would not know at all. I know that they could be guess be? stealing them from people’s back yards. They could be being sold to them—I do not know. I know that the vast majority of bottles are not returnable bottles Q258 Chairman: She would have to ask them, would these days, so they just go straight into the bottle she not? bank and it is lifted by a glass manufacturer and Mrs Carruthers: There is obviously a lot of recycled. I couldn’t tell you where they get bottles sophistication involved but I couldn’t go any further from. than that. Lady Hermon: Nicola, you are very welcome here. It Mr Campbell: We can draw our own conclusions. is a very interesting session, if I may say so. I am tasked to ask you about floor supervisors. Before I Q259 Meg Hillier: Ms Carruthers, you talked about do so can I ask you about poteen: is it poteen not being able to be sure about the impact on your manufacture still prevalent in Northern Ireland, members. Do you have any figures showing the particularly around the border areas? Is it a constituent used in the manufacture of SmirnoV or percentage of legitimate sales of alcohol in pubs and V in your oV-licence members over the years that counterfeit Smirno ? would indicate whether it has gone up or down? Mrs Carruthers: OV the top of my head I could not tell you precise figures. What I could tell you is that Q263 Chairman: Can you tell the diVerence? the general trend is towards a general decline in on- Mrs Carruthers: I honestly wouldn’t know. One sales and a growth in oV-sales. There has certainly hears of Poteen but, to be honest—I think that been a growth in the oV-sales trade in Northern would probably do less harm than a lot of the Ireland and especially since the arrival of the counterfeit SmirnoV. supermarkets around 10 years ago, so this trend would be mirrored across everywhere. 5 See note page Ev 128. 3379331002 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q264 Lady Hermon: Less harm? way of doing it. We also wanted to do it in Mrs Carruthers: Yes. A lot of the counterfeit partnership with the local drugs teams and local SmirnoV—the big problem with a lot of counterfeit police, trying to make it as inclusive as possible. We alcohol is that you simply don’t know what is in it. started training in the west of Northern Ireland in We get warnings from Environmental Health Omagh, Eniskillen and up to Strabane, because oYcers from time to time that they have identified a often our members would tell us we were too Belfast certain consignment, for want of a better word, of an based, so we like to be as non-Belfast based as illegal alcohol that has got methane in or—really possible. We started oV training them. Very early on dangerous stuV in it. It is a dangerous product and we realised that there was going to be an issue in it should not be out there. I really could not tell you diVerence between training and registration, about Poteen I am afraid. because the two things are very separate. We went and talked to the councils about this. It was quite Q265 Lady Hermon: Moving on to door supervisors, clear that some councils just wanted their door could you tell me about the numbers? I know it is supervisors to be trained and they did not want to moving from the ridiculous to the sublime. How get into anything to do with registration at all. representative are the door supervisors of the community in Northern Ireland in terms of gender? Q267 Lady Hermon: V Why was that? I do know that women bring a di erent much calmer Mrs Carruthers: They knew there would be atmosphere to pubs, and I would be interested to diYculties with registration because registration know how many women are employed. would involve police checks, and they wanted at that Mrs Carruthers: There are apparently very few stage—they saw it as being more important that a employed, probably less than 5% at the moment. It critical mass were trained and able to deal with is something we are trying to change. The venues customers properly and able to carry out their duties that do employ a large number of door supervisors properly; so they were properly trained and then are aware that they need to change. We are certainly they would tackle registration later on, as it were. getting a growing number of females coming The majority of councils have never touched the through our training courses. It is very important registration. It would tend to be councils in and that venues do have female door supervisors on. As around North Down, Belfast, that tackled you say, they bring a calming influence. One of the registration, and, again, even then with those that do things we train them on is drugs awareness and how registration, they do it in diVerent ways. For to find drugs. If you are planning on searching a example, North Down have set up a local committee woman you have got to have a woman doing it. It is of licensees, the council and police, who vet the door very important, and the number of female door supervisors is growing. In the last couple of years, supervisors and get their reference checks; and that you are not talking about doubling every year—it body decides whether or not to grant somebody would be an awful lot more than that. Five years ago registration. On the other side of the coin, you have you could probably count the number of female the system in Belfast, which, I have to say, the door supervisors on one hand. There is now still not members in Belfast do not like because Belfast nearly enough there is definitely a growing number, require police checks to be taken of the door judging by the number of people we are now supervisors but that police check is then given back training. to the licensee and the licensee has to exercise their own judgment as to whether or not they want to employ that door supervisor. The reason we would Q266 Lady Hermon: That is very good news. like to see an SIA type body in Northern Ireland is Northern Ireland at present does not fall under the that it would remove that diYculty from the licensee. security industry agency. Would you like it to do so? There are times when licensees are encouraged to Has the Federation actively campaigned for it to do employ particular door supervisors. so, and what would be the advantages if the SIA were to extend its remit to Northern Ireland? Mrs Carruthers: We have not yet campaigned Q268 Lady Hermon: Can you elaborate upon the actively, apart from talking to local councils. We word “encourage”—by whom? have been waiting until the whole thing has been up Mrs Carruthers: There are a number of very good and running to see exactly how well it is working. It door supervisor firms, which are great, and an awful is about to extend its authority into Scotland, as far lot of licensees would employ people as employees as I know. Door supervisors, five years ago, were and then just use them individually. There has been entirely unregulated in Northern Ireland and they in the past a perception that organisations would were completely untrained, but four years ago we have door supervisors that they would like to get on worked with the British Inn-keeping Institute to to premises. develop a door supervisor course specifically for Northern Ireland, based very much on the GB version, but with diVerences for the diVerent Q269 Lady Hermon: Is it a reality though? Northern Ireland legislative structure. We started oV Mrs Carruthers: My members have never told me doing that in partnership with the local councils. one way or another whether they have been Given that the people who employed door persuaded or not, but what I can say is that a lot of supervisors also had entertainment licences, which members have said that they would like not to have were granted by local councils, it seemed a sensible to make their own judgment as to whether or not 3379331002 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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8 March 2006 Federation of the Retail Licensed Trade, Northern Ireland they employ someone; they would like to be able to Q273 Chairman: Mr Fraser wants to move on to point to a third party, saying, “I am sorry, I can’t extortion. Would you rather he asked these employ you because SIA says I cannot”. questions in private at the end, or are you happy to take them now? Mrs Carruthers: I can take them now because there Q270 Lady Hermon: In other words, compulsory is not really much I can say on it, so I am fine. training and compulsory registration would be very helpful to the Federation or to your members. Q274 Mr Fraser: Thank you very much for your Mrs Carruthers: Absolutely. evidence! Next question! I appreciate you have made it clear that everyone is aware of it, and very little is Q271 Lady Hermon: Before I leave this issue, can I talked about, but can you enlighten us as to the extent of the problem of extortion and how it aVects ask you to clarify something in the evidence that you your members in general terms? very kindly submitted to the Committee? Licensees Mrs Carruthers: It is even diYcult for me to talk in can come under pressure to employ particular general terms because in five years I have been at the individuals (with paramilitary and/or criminal links) Federation it is not something that has ever been and in the absence of something akin to the SIA it Y discussed ever; it has just never raised its head. I have would be di cult to refuse. Is that a localised Belfast never had a member coming to me, asking me advice issue; is it more to the west of the Province? Is it right about it and to ask me to involve the police on their across Northern Ireland? What could be done to behalf. Often we would act as a go-between between address that? members in certain areas and the police: if members Mrs Carruthers: We have heard about it in Belfast do not want to contact the police directly, we will do and in the west and north-west. We have not heard it for them. I have never had any contact from any about it, to be honest, in other areas. What could be member on the issue of extortion. done would be something like the SIA or, at the very least, local councils putting down more stringent Q275 Mr Fraser: I fully accept that. Sir Hugh Orde requirements in terms of who can or cannot be made it clear when he gave evidence to us that the registered—taking not necessarily full responsibility biggest challenge that the police face is tackling but assisting their licensees in turning down extortion. He then went on to say: “There are huge applications for door supervisors rather than opportunities for us in this field if we have the putting the full onus and burden back on the information up-front and we want to work in licensee. partnership with the victims to deliver.” Therefore, what steps could be taken to encourage the reporting Q272 Lady Hermon: Some local councils are but of extortion from these members you have that most are not; so you are really quite critical of local currently do not want to talk about it? What can councils not giving you suYcient back-up and happen in terms of a more open approach to the subject? support that your members would like. Mrs Carruthers: I think it would have to be Mrs Carruthers: It has been surprising how many something that was not seen to be driven by the local councils in Northern Ireland have not even police, perhaps some sort of impartial third party. I been interested in training door supervisors. That know that Crime Stoppers exists, but I genuinely has been a surprise to us. In some ways it has been think that a lot of people do not realise that Crime useful because being a small organisation at the Stoppers is an independent charity and does not moment we are training in those areas where we are have links with the police. I know it has recently wanted, and we have certainly got enough to do. started an advertising campaign and that is long Every single solitary door supervisor should be overdue. It is a very good thing. properly trained and registered; they absolutely should. A lot of the councils have been excellent. Q276 Mr Fraser: Are you talking to them Our preferred mode of training the door supervisors yourselves? is to work in partnership with the police, the Mrs Carruthers: No, we have not. Business crime is councils, the local drug and alcohol teams and the obviously an issue for the whole business local colleges. The door supervisors are getting to community. The Community Safety Unit at the know people on the ground—the local police, the Northern Ireland OYce is trying to set up a group to Y local council o cials who are doing checks. That has look specifically at business crime. We had an initial really helped to improve standards and improve meeting of that last week which was useful because relations on the ground, and that has been excellent, the police were able to supply figures on the level of especially in Eniskillen where it has worked very business crime across the board. It was a general well. There are other areas where we train door feeling that it was woefully under-reported, just on supervisors but we just use a single trainer who can the figures that we saw. It is not helpful to sit here do the whole lot, because we know that there are and say it is very hard and we are not sure what can naturally some people who would not attend be done, but one of the biggest problems is that there training courses if there was police involvement, so is a big perception that this is going on, and those we can accommodate everybody. Certainly our people who are suVering from it are fearful. That is preferred mode of training is to use the inclusive the basic bottom line. People would be scared to method. report it. It will be a very long time before that can 3379331002 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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8 March 2006 Federation of the Retail Licensed Trade, Northern Ireland be overcome. Perhaps as the Assets Recovery Q282 Chairman: You have very kindly said you Agency and the Organised Task Force become more would do this little survey, but how do you normally visible and more work is done, that will allay fears to consult your members? Do you have a series of some extent, but it is a hugely diYcult area. meetings in the course of a year? Mrs Carruthers: We are set up on a county structure. We have seven county associations, which is six Q277 Mr Fraser: Is that because of the repercussions counties plus Belfast. They send representatives to from the organisations that are undertaking such our board, and so we have the opportunity to speak activity, or is it because your members feel when they to them on a county level. At least once a year we report to police that either it is not taken seriously, would try to get the whole membership together, or they are dealing with it in a way that is less than but, like every membership organisation, we suVer Y e cient? from a great diYculty in getting people to come to Mrs Carruthers: I cannot comment specifically on things. the extortion and what our members believe to be the case on extortion, and why they do not report it. On business crime per se a lot of them would not Q283 Chairman: We know about that! report it because they feel it is a waste of time. Mrs Carruthers: We have done surveys to members in the past, which have been done either by phone or post or on the website. Q278 Chairman: Do you have anonymous surveys of your members, questionnaires, that they feel in without necessarily having to say who they are? Do Q284 Mr Hepburn: What changes do you think you assess feelings and views on that basis at all? should be made to the licensing law to deter Mrs Carruthers: We have done that in the past, yes6. criminal activity? Mrs Carruthers: None! As I mentioned previously, the proposed changes to Northern Ireland’s Q279 Chairman: Would you be able to do that in licensing legislation will increase criminal activity. this area? We certainly do not have a perfect system by any Mrs Carruthers: Yes. stretch of the imagination but we do not have a bad Chairman: That would be extremely helpful and we one. There is a genuine fear that the proposals that would be grateful to you; it would be something we are there will increase criminal activity, or there is would be very interested in. certainly the potential for criminal activity to be increased. Q280 Mr Fraser: Can I go on from that point and ask you a question more generally about confidence? Q285 Mr Hepburn: Surely an organisation like yours Is it your opinion that the increased sentencing for supports something like the closure of businesses if issues like extortion has brought a lot of confidence they have been found to be involved in criminal to your members in terms of thinking, “when people activity. are found out for doing things, something will Mrs Carruthers: Absolutely. We would not support happen to them”? Has that improved the confidence criminal activity in any shape or form. Indeed, we of your members? changed our constitution a number of years ago to Mrs Carruthers: I think when people see stories in make it easier for us to expel any members that were the news about various seizures that have been made found guilty of passing on or selling dodgy spirits or and what is happening, that generally raises whatever. We want to represent legitimate interests. confidence across the board. Whether it would make an individual be more likely to report a case of extortion, I do not know. I think we are still a long Q286 Chairman: Have you expelled anybody? way oV that. Mrs Carruthers: Since we changed the rules we have not had to; it has been excellent.

Q281 Mr Fraser: To keep it on the more general point, has the recent paramilitary organisation’s Q287 Chairman: Did you before have to expel decision to follow a peaceful means had a positive someone? eVect on members of your organisation in this Mrs Carruthers: We did not have the power to expel. respect? Mrs Carruthers: It certainly had positive Q288 Chairman: I see, so you did not have the power implications across the board because it has and when you had the power you— increased their business. The ghetto-isation that we Mrs Carruthers: No, since we have had the bar, there had during the troubles does not happen as much. have not been any convictions of our members. People are much happier to go into the town and city centres than they were before, and there is certainly a much better feeling across Northern Ireland since Q289 Chairman: Did some leave? that. That has had a very positive eVect on business. Mrs Carruthers: One did. We then changed the constitution, but since then there have not been any 6 See note page Ev 128. convictions, so we have not had to. 3379331002 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q290 Sammy Wilson: This might give me some idea going to get caught and it takes up their business of the extent within the trade: before you changed time in waiting for scenes of crime oYcers to come, your rules would you have had many of your and they are probably not going to claim on the members convicted during that period of passing on insurance and they do not need the crime number, so counterfeit or stolen— it just goes unreported. At the business crime Mrs Carruthers: It has never been a big issue meeting I attended last week, that was the pretty amongst the membership, to be honest. Since I have unanimous view around the table, and that the been there, in five years, there has been one case. figures we were given by police about levels of That was when we realised we had to change the business crime were woefully under-reported. constitution so that if this arose again in the future Chairman: Again, if you could do your own survey, we would be able to cope with it. It just has not been that would be jolly interesting7. an issue in five years that I have been there, and I am not aware it was a big issue before. There is a perception that it is an issue, but there really are an awful lot of checks that re done. I know that a Q293 Rosie Cooper: Would the Federation have any number of licensees do have a diYculty with the ideas of how that relationship could improve? Y manner in which checks are done by Trading Mrs Carruthers: It is slightly di cult. As a Standards and Environmental Health oYcers. They federation, we have good working relationships with tend to walk into premises that are busy at lunchtime police on a range of issues. Funnily enough, issues and say, “I am from the Trading Standards; I am about crime we never talk to the police about, which here to check your product”. That is absolutely fine, seems odd; but there is just this general feeling that but the word quickly gets round the town that there is not a lot of point. When we did the last somebody has been shopped, even though they are member survey 20% of people said they would not not. report or that they would not call for assistance— there was this view, “what’s the point?” There seems to be an acceptance that there is a level of crime, and Q291 Chairman: “I am from the Government; I have that it needs to be accepted. I would also say that come to help you”! certainly from work the Federation does with Mrs Carruthers: Exactly. People think they must various community groups, again the pubs and oV- have been doing something wrong if they have come licences would feel they are getting hammered a lot calling, rather than if being part of a series of calls. and blamed for under-age drinking, antisocial Anybody in the trade who is selling anything they behaviour, et cetera. Therefore the work we do with should not be is exceptionally silly because they are the police is focused on that. We would also do the going to be found out and they are only cheating the district police partnerships and police board, et customer at the end of the day. cetera, doing their surveys, and quite rightly asking the population what they feel the police resources Q292 Rosie Cooper: Some organisations have given should be focused on. Again, you are getting under- evidence to this Committee and have said that the age drinking, alcohol-related crime, social disorder, police have not engaged and made enough attempts because the perception is that this is a huge problem; to engage with the business community, and that but the business community is not as good as it when they do they do not have enough resources. Sir should be at sticking its head up and saying, “hold Hugh Orde said he thought the situation was on; business crime is also a big problem that you winnable, and that they could get there. You have should be focusing resources on”. I do think that the touched on it briefly, but do you believe that the level business community has to take its blame in this as of engagement in terms of resources and connections well, because it has not been as good as it should between the business community and the police is have been at sticking its hand up and saying “this is where it should be? a problem for us as well”. Mrs Carruthers: I do not think so. I am talking about when our members—for example, I spoke to one of our members who is a smallish chain of oV- licences and I spoke to them just to get a feeling from Q294 Sammy Wilson: But, Nicola, is it fair to them of the level of crime that they were facing on criticise the police if you are saying that of your a day-to-day basis, and also how they felt the police members are under-reporting? response was, because they are a pretty well-known Mrs Carruthers: No, absolutely; that is what I am operation, so you would think the level of support saying. The business community has to play its part would be pretty good. They told me that in the last in that, because it is not reporting things because it year in Belfast in about 15 stores they have had 50 thinks there is no point. I also have to say that the incidents of robberies and thefts. In one of those, the vast majority of our members would agree that from culprit was apprehended and that was because they their perspective the police are under-resourced. stole a whole Securicor van. The comment that was They know that they are not going to be top of the made to me was that the police were not interested. list in calling somebody out at two o’clock in the I said, “can I quote you on that?” They said, morning because there may only be two policemen “Absolutely”. Again, the levels of criminal on duty for a very large area. The police can only do damage—windows being put in during the night, so much. and doors being damaged—many people just would not bother to report it because the culprits are never 7 See note page Ev 128. 3379331002 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q295 Rosie Cooper: The Organised Crime Task Our colleagues in Scotland would tell us that they Force is an agency that depends on referrals. Do you have a very big problem of over-provision, and the know of any occasion—and I am not asking you to number of licences in Scotland is four times per head nail it—where licensees have reported something to of population what we have in Northern Ireland. the police, which has then been referred on? The Government, as part of its Northern Ireland Mrs Carruthers: No, absolutely not. I do not believe Statistics and Research Agency’s Omnibus Survey, that the Organised Crime Task Force has a very high asked the population whether or not they thought public view in Northern Ireland. We have never had that we had too many pubs and oV-licences. There any dealings with them until I was called to the was a lovely comment in the consultation paper Committee. I certainly had not even looked at their which said, “the majority of the population do not website and I was even unaware of the organisations believe we are over provided with pubs or oV- that made it up. The Asset Recovery Agency would licences”. Reading that, you would think we need have a pretty good— some more, but what the survey actually said was 50% thought it was exactly the right number; 46% Q296 Chairman: We have done you a great service think we have got too many and only 3% thought then! there were too few; so only 3% of the population Mrs Carruthers: But the Organised Crime Task want more. As I said, none of the political parties Force has a pretty low profile. want to get rid of this very tightly regulated system Mr Grogan: I must confess, Chairman, that I met Ms that we have, and what is being proposed is basically Carruthers at lunchtime, in my role as the Chair of complete deregulation, getting rid of the surrender the Beer Group, and amongst other things I secured requirement and moving responsibility for granting an invitation to the committee to have a tour of licences to local councils, as is the case in Scotland historic pubs in Belfast one summer’s evening! and in England. Chairman: You would certainly have a charming chaperone! Q299 Chairman: This should clearly be a matter left to the Northern Ireland Assembly, when it finally Q297 Mr Grogan: In relation to the proposed meets— licensing changes, it has been reflected in the Mrs Carruthers: Absolutely. There is overwhelming Committee that there is no political party that is opposition to this in Northern Ireland, so we are supporting these changes. Can you put on the very much hoping the Minister will listen to that as Committee’s record what is proposed and where he is bringing his response. these changes have come from? They are not designed to cut crime; they came from very diVerent Q300 Mr Fraser: On the point you made to Rosie motivations. The kernel of your argument is that Cooper about reluctance to report crime, is there they would have all sorts of unintended any evidence that the cost of crime is being passed on consequences on a whole range of issues. Is that to the consumer, i.e.—and this is the information right? point you made—are the unit costs for alcohol more Mrs Carruthers: Yes. The Liquor Licensing Review expensive in Northern Ireland as a consequence than was launched in Northern Ireland at the beginning they are in the rest of the United Kingdom, for of November and closed at the end of January, so it example? was held over the licensed trade’s busiest time, which Mrs Carruthers: Any costs from crime will be passed was diYcult, to say the least. on in some shape or form. I am not aware that the cost of alcohol in pubs in Northern Ireland is any Q298 Chairman: Governments are good at doing more expensive than in the rest of the UK. that! Obviously, costs vary depending on the pub. The Mrs Carruthers: Largely, the proposals would put costs will be passed on, just as rates costs are passed the English licensing system into Northern Ireland. on, and our much higher insurance costs that we Northern Ireland’s licensing system has always been have in Northern Ireland. It would probably have an very, very diVerent from that of Great Britain, and eVect at the margins. the proposals would bring Northern Ireland completely into line with the licensing agreement, Q301 Lady Hermon: Nicola, I would just like to ask with one exception, and that is the whole issue one question to know your view—and the around 24 hours; whereas Great Britain has 24 Federation view as well. You said on a couple of hours, or the potential for it, we are being given a occasions that a small group of pub owners would shift from one o’clock in the morning to two o’clock not be happy to involve the PSNI, and on another in the morning. It is our belief that it will just shift occasion you referred to the sensitivities of some one o’clock problems to two o’clock. The two main people in reporting crime; and you said, in response diYculties in the proposals for the licensed trade are to Christopher’s questions, that there is a reluctance the proposal to remove the surrender requirement, to complain to the police. Do you think, and would and that is the requirement whereby before opening the Federation be of the view, that it would be a pub or oV-licence you first have to purchase an changed if Sinn Fein were to join the policing board, existing licence. The surrender requirement has and urge other people from a Republican meant therefore that there is a cap on the number of background to join the police? Would that have a liquor licences in Northern Ireland. We do not suVer significant change in the attitude of Federation the same level of over provision as in other areas. members to reporting crime generally? 3379331002 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Mrs Carruthers: I am not sure about the change Mrs Carruthers: From time to time. from Federation members per se but from my own view I would have thought it would because if Sinn Q303 Chairman: Are you aYliated to any of them? Fein did join the policing board it would be my view Mrs Carruthers: Not formally, no, but we would that there would be an awful lot more confidence discuss and meet on matters of equal and joint across the whole of Northern Ireland in reporting concern. crime. Q304 Chairman: So you will be familiar with Mr Mitchell, one of our earlier witnesses, from the Q302 Chairman: You have, if I may say so, been an Federation? Yes. Are there any final questions from exemplary witness, and we congratulate you on colleagues, or is there a final point you would want fielding everything on your own. All the others have to make? had assistance and sidekicks, but you have faced it Mrs Carruthers: I do not think there is anything more I would like to say—just thank you very much all. We are very grateful to you for saying that you for your time. Hopefully, whatever I have said has will do a survey because that will be helpful to us. We been useful. are not asking you to divulge names or even Chairman: Extremely. Thank you very much indeed locations, but an indication would be helpful for coming. Thank you for what you are going to do. because we want to make a constructive report. We There may be some written questions we will send to talked several times about the business community, you; and equally there may be points when you go of which you are a part, collectively, and back and think, “I wish I had dealt with that”, so if individually your members; do you have a lot of that is the case, please feel free to write to the Clerk. participation in bodies like CBI, the Federation of We look forward to the beer tour with you later in Small Businesses and so on? the year! 3379331003 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Wednesday 22 March 2006

Members present:

Sir Patrick Cormack, in the Chair

Mr David Anderson Mr Stephen Hepburn Gordon Banks Lady Hermon Rosie Cooper Stephen Pound Mr Christopher Fraser Sammy Wilson Mr John Grogan

Written evidence from HM Revenue and Customs is on page Ev 130

Witnesses: Mr Paul Gerrard, Deputy Head of Enforcement and Compliance Operations and Mr Donald Toon, Deputy Director Criminal Investigations, HM Revenue & Customs, gave evidence.

Q305 Chairman: Good afternoon and welcome. how would you assess the state in comparison with Could I thank you very much indeed for coming. As the rest of the UK and how would you assess you know, we are engaged in a fairly intensive recent trends? investigation into organised crime in Northern Mr Toon: In terms of comparison with the rest of the Ireland. We have had evidence now from a number UK, I think it is fair to say that serious and organised of big bodies and organisations. We have seen the criminality in Northern Ireland is probably more Assets Recovery Agency and we are very grateful to significant and has a higher impact in terms of you for coming to give evidence on behalf of HM Northern Irish based criminals than it would Revenue and Customs. Would you like to introduce elsewhere in the UK. I think the key point in this is yourselves and tell us precisely what your respective also the level to which Northern Irish criminals have positions and responsibilities are, and then if you a significant impact across the rest of the UK and would like to make any sort of opening submission indeed into Europe. I think that is particularly we would be very glad to hear it. noticeable in terms of oils fraud and in terms of Mr Toon: I am Donald Toon. I am the Deputy tobacco fraud. In terms of the serious criminality, Director for Criminal Investigations with more than 50% of those involved would be Northern responsibility for northern England, Scotland and Irish or at least of Northern Irish extraction. Northern Ireland, and with a particular responsibility for the excise strategies across the UK. Mr Gerrard: My name is Paul Gerrard. I am the Q309 Chairman: As many as that? Deputy Head of Enforcement and Compliance Mr Toon: Yes. Operations and my responsibilities are to do with our strategies that are designed to tackle organised Q310 Chairman: How sophisticated is criminality in criminal attacks against the tax system such as Northern Ireland and is it becoming more cigarette smuggling, oils fraud et cetera. sophisticated? Mr Toon: I think the criminality is becoming steadily Q306 Chairman: I would be right in thinking that more sophisticated but that is in terms of a response both of you have pretty lengthy backgrounds on the from the criminality to the type of investigation customs side? activity and type of intervention activity that is Mr Toon: That is correct. carried out against them. This is always an Mr Gerrard: Yes. evolutionary business; you are always going to be in a position where the more impact we have, the types Q307 Chairman: Is there anything you would like to of techniques we use, as we become more say by way of opening submission? sophisticated and drive some people out of the Mr Toon: I do not think so. business into other areas of criminality—or indeed out of criminality entirely—then other people will Q308 Chairman: Thank you very much for the paper become better, use more complex mechanisms, use that you sent which is very helpful. Obviously we tighter knit groupings and move into slightly want a number of things on the record from you. We diVerent areas of the fraud. It is becoming more will conclude this particular session at four o’clock sophisticated but a lot of that is driven by the and then have half an hour with you to discuss one eVectiveness of the enforcement interventions in or two things privately. Some of the evidence that we particular, and I do not mean by that just what we have been receiving is of course of an extremely as an organisation are doing but very much what we sensitive nature. You are perhaps in as good a are doing in cooperation with the PSNI, in position as anybody because of your responsibilities cooperation with the Assets Recovery Agency, with extending beyond the Province, if you are assessing the authorities in the Republic and in particular I the scale of organised crime in Northern Ireland think with our Fiscal Liaison OYcer Network particularly with regard to fuel smuggling and overseas which is providing us with a particular set laundering, cigarette smuggling or alcohol fraud, of information which is useful and very eVective in 3379331003 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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22 March 2006 HM Revenue & Customs terms of detecting the criminality, particularly when legitimate filling station. Some of those individuals we are talking about tobacco smuggling where there owning those sites will know they are buying illegal has to be an original source. fuel because they are part of that criminal network. Some of them will have suspicions because they are Q311 Chairman: How far would you say that there buying fuel at a price that they cannot buy is a transfer of the techniques and the experience of legitimately. Oil has a floor price; you cannot buy it those who have, for generations, been involved in legitimately below that floor price but illegal fuel is paramilitary activity into what I might call more often below that floor price and it is attractive. They ordinary criminality and how far would you go may say they did not know, but they must have had along with those who say that there is real danger suspicions. Equally there are people who will be that the domination of the paramilitary will be buying fuel which is illegal but paying the full price, replaced by the domination of the mafia? therefore they are completely unknowing of the fact Y that they are selling illegal fuel, so I think there is a Mr Toon: I think it is very di cult for us to comment Y from our point of view as an organisation on range of behaviours involved. Our di culty is that paramilitaryism, on the operation of paramilitary or we engage in a good deal of enforcement activity paramilitary links to organisations. That is not the targeting retail sites but our frustration is that we business we are in. Whilst we do have a significant will seize fuel and where we can we will seek to exchange of information with PSNI and other prosecute people, but that site we cannot close authorities, our primary business is in focussing on down. the revenue frauds themselves. We have an awareness of the paramilitary links and we take Q313 Lady Hermon: When you say “we” could you those into account in operational activity et cetera, just tell me how big is the “we”? How many people but our targeting is driven by the revenue frauds. It are actually engaged in Northern Ireland—I mean is therefore very diYcult for us as an organisation to exclusively in Northern Ireland—and actually going make a realistic assessment of paramilitaryism as a round testing fuel and seizing fuel in Northern single issue within Northern Ireland. We would say, Ireland? How big is your operation? I think, that it is clear that paramilitary Mr Gerrard: In terms of testing the fuel which is organisations have had to be funded throughout done by our detection oYcers there is about 100 or their history. Most of that funding has been done, we 110 of those. In addition to that we have intelligence believe, through diVerent forms of criminality; a lot oYcers, we have criminal investigation specialists of that criminality will have been revenue fraud and we have non-complianceoYcers who will raise criminality. What we have no information on at all duty assessments. Over all we have just over 160 is how much of the criminality that currently exists oYcers in Northern Ireland exclusively dedicated to is going to fund paramilitary or paramilitary linked oils activity. organisations or how much goes into the individual pockets of individual people or how much of it is Q314 Lady Hermon: What would help you in your going in any other direction. The point was made in investigations in Northern Ireland in dealing evidence to the Committee by the PSNI that this is a Y specifically with the retail side? very di cult assessment to make and it is certainly Mr Gerrard: I think there are two parts to that. not an assessment that we would feel qualified to There must be more that we can do to improve our make. inter-agency cooperations with the other agencies in Chairman: Thank you for that; it is extremely Northern Ireland; I am absolutely certain of that. I helpful. I would like to bring in Lady Hermon who am aware of a recent operation where we received I know wants to follow up on a particular aspect fuel from a particular vehicle that was delivering fuel of this. to the retail sites. It was delivering that fuel from the back of a normal truck, it was a skip with a tank in Q312 Lady Hermon: May I just take you to it. I am sure we have all seen when fuel is legitimately paragraph 14 of your written paper? There is a delivered to retail sites it is cordoned oV and you comment which jumped oV the page as I was reading have the hazchem signs because it is a very through it and that is: “Finally, it is important to hazardous product. This is not what happens with note that while we believe the majority of illicit fuel illegal fuel delivery; this is done through a hosepipe is not sold through legitimate filling stations in Great down to the floor. So there is something we can do Britain, our latest assessment is that a very with health and safety; there is something we can do significant proportion of the illicit fuel sold in around the quality of the fuel with the Trading Northern Ireland is sold through retail filling Standards people; there are things we can do to stations.” How on earth has this come about? Do improve our co-operation. From my perspective, people do it knowingly or willingly? although it is not my responsibility, when I look at Mr Gerrard: I think there are a range of behaviours what we do in GB it is very diYcult for someone to involved. Certainly once there is a volume of illegal get illegal fuel into legitimate retail sites because fuel—be that smuggled fuel or be it laundered red those sites are licensed. I have friends who work for diesel, mixed kerosene or whatever it may be—there the oils majors downstream and certainly one of my is what you would term illicit sale through the use of friends has been interviewed under caution twice tanks by the side of the road but most people will not and it terrified her because of the potential health buy fuel to put into their vehicles through those sites; and safety issues at her retail sites in GB. That does most people will want to go to what looks like a not happen in Northern Ireland. I have been 3379331003 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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22 March 2006 HM Revenue & Customs involved for six years in Northern Ireland and there Mr Gerrard: Not that I am aware of. is an issue about how those sites are licensed and are those licences eVective for the 21st century; I would say that they are not. Q321 Chairman: What is the percentage of illegitimate fuel? Q315 Lady Hermon: We have heard evidence from Mr Gerrard: HM Revenue and Customs are one of another witness at another session of the Committee the few fiscal authorities in the world that will and that point was made, that the introduction of estimate the size of the revenue loss that we have so the licensing system in Northern Ireland would be I can tell you that in cigarettes it is currently 16% very helpful. Having tabled the question I then had a across the UK. In Northern Ireland I cannot tell you reply from the Minister, Angela Smith, which is very what the volume of illegal fuel is, be that smuggled disappointing but I will read it into the record: or laundered, but I can tell you what the volume of “Proposals to streamline a type of petrol licensing fraudulent fuel and legitimate cross-border shopped regime are currently being considered”; they are fuel is, that is people going to visit relatives in the only now currently being considered and you say south, filling up with fuel and coming back, is. We you have been working there for six years. estimate there is something like £245 million that is Mr Gerrard: Yes. lost in Northern Ireland as a result of fraud and shopping. That is currently about 30% of the market. That is down from over 40% of the market Q316 Lady Hermon: Is it your view that the Government has been very lapse and very slow four years ago but it is still a significant share. What responding to the needs that you have? element of that £245 million is fraud I am afraid I Mr Gerrard: Certainly we have spent a good deal of cannot tell you but I would suggest it is a significant time trying to get our own house in order to make proportion. sure that we are doing all we can. We are a very active member of the Organised Crime Task Force Q322 Lady Hermon: As a point of information I and it is an issue we have raised in the Organised would like to clarify some evidence that was given on Crime Task Force and I know that my colleagues in another occasion. The illicit fuel that is moved Northern Ireland are looking at those issues. around Northern Ireland, is it primarily moved in tankers marked with well known brands? Do these Q317 Lady Hermon: When would you have raised organised, sophisticated criminals have lorries that? Some time ago? disguised as a legitimate brand? Would you say that Mr Gerrard: I raised it in 2004–05 time; I could not there are more illegitimate branded lorries and give you the exact date. containers on the roads than legitimate ones? Mr Gerrard: I think it is a mixture. Certainly we are Q318 Chairman: Your aim in doing this is to help the well aware of illegal fuel being moved in legitimate legitimate retailer resist the pressures to sell the road tankers that are built just to move fuel. Equally illegitimate fuel. I am well aware of instances where fuel is moved in Mr Gerrard: Absolutely. My minister said when he vehicles that are not intended to move fuel. I think launched the UK oil strategy that one of the reasons it depends on what the organisation perceives as the for this was to protect legitimate trade. If you have risk. Certainly five years ago they were moving a business that is run by criminality then the tankers and they quickly worked out that we were pressures on the honest trader are very diYcult and stopping as many tankers as we could so they moved I think by putting in place regulatory control to put to concealment. So I think it is a mixture; it depends in the standard of behaviour that is acceptable then on what they think they can get away with. At that will help legitimate trade. present a large volume of fuel is moved in informal vehicles rather than legitimate road tankers. Q319 Lady Hermon: How many legitimate traders would you estimate have actually been driven out of business in Northern Ireland in the past five or six Q323 Sammy Wilson: We had evidence that—and years? we know this has been the case in Northern Mr Gerrard: I do not know the answer to that Ireland—this has been going on for years. The question because the trade itself, regardless of the retailers as far back as 1996 met with you and impact of fraud, is a fluid one anyway. What I can highlighted the eVect of this and I notice that in your say is that in the last six years the legitimate market submission to us it was not until 2000—despite all has got healthier. It needed to because it had dipped the evidence that was available to you—that you very sharply between 1996 and 2000. From 2000 increased the number of oYcers you had working on onwards the legitimate market has grown by about this from 25 to 160. Why did it take so long, given all 22%. That is good but it has some way to go. My of the evidence? The second question is that in own view would be that people have been driven out paragraph 17 you have given us what, on the face of but we are supporting those businesses much more it, appears to be an impressive commentary that because of the work that we do on oils in Northern between 2000 and 2004 you have dismantled 13 Ireland. criminal organisations, seized eight million litres of fuel and blown up 65 laundering plants. Given that Q320 Lady Hermon: Was any form of compensation the revenue loss that you have estimated as £245 paid to those traders who went out of business? million and even assuming that 60 pence per litre was 3379331003 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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22 March 2006 HM Revenue & Customs taxed, that means that there is 400 million litres of can do that for Northern Ireland for the illegal fuel per year and you are seizing two million. consumption of oils but we cannot then do that split It is hardly a success, is it? for fraud and shopping. For the UK for cigarettes Mr Gerrard: I will take the first question first. I have we have this gap. We can then split that between been working in this field for a long time. I started in fraudulent (because we have an estimate) shopping. April 2000 and on the evidence we had then we took We cannot estimate the cigarette consumption in action very quickly. I have to say that I am not clear Northern Ireland as we do not have data releases for what the evidence was earlier than that but certainly receipts as they relate to Northern Ireland. For those I think this Committee in an earlier form took two we do not have the base data specifically evidence on that in 1999 and part of that response collected in that way by the statisticians in order to was the action we took in 2000. In terms of our be able to make that assessment. success, the only point I would make is that the ultimate success measure that we must use must be Q326 Stephen Pound: Your colleagues in London how much fuel is legitimately sold in Northern frequently mount a very skilful operation now where Ireland. That has gone up by 22%. There is they visit football grounds and they pick up all the significantly more fuel legitimately sold in Northern empty cigarette packets at the end of a football Ireland than there was four years ago, 22% more. We match. The Glentoran Oval is a pretty large football did that through a range of interventions and I think ground and it is pretty well attended and well that as a fiscal authority of which we have a law supported, have you ever thought of doing that? It enforcement arm we have an awful lot of tools does give a body of empirical data and apparently available to us that are not necessarily criminal there is a fairly accurate read-across in terms of justice tools. So we can, for example, seize fuel, we penetration. Have you ever tried that or would you can impose assessments, we can control the supply prefer not to answer that in public? chains of things like red diesel and kerosene. There Mr Gerrard: The pack swap survey carried out by are a whole range of interventions that we make and the Tobacco Manufacturers Association does I think judging us just on the outputs on those kinds exactly that. They do a pack swap, approaching of figures does not really capture the whole picture. people giving them a voucher for a new packet if they The ultimate measure must be: is the legitimate give them their old packet. There is quite a decent market healthier than it was four years ago? The corollary between their estimates and our estimates. answer is yes. Can we do more to make it healthier I am not aware if this sample size is big enough in still? You are absolutely right, we can and we should Northern Ireland to allow that to do Northern and we are determined to do so. Ireland, but I would be happy to discuss with them.

Q324 Sammy Wilson: The fact that 99.5% of the Q327 Stephen Pound: Following on from Lady illegitimate fuel is not being seized by you hardly Hermon’s point about the actual point of sale, in my marks a success against the illegal fuel. experience in buying cigarettes in Northern Ireland Mr Gerrard: I take your point but as I say I think we I was asked if I was interested in “cheapies” and it need to be measured by the impact we have on the took me quite some time to work out exactly what market that we face, the illicit revenue loss, and that was being oVered me, but they were ordinary is going down. I am sure we can do it better and legitimate traders who had cheap cigarettes quicker, but I think the ultimate measure must be on underneath the counter. Is that a typical form of sale our impact. or are we more in the realm of the street corner Mr Toon: One additional point is that of that £245 trader? How are they actually sold and is there any million only a proportion of that is actually illicit evidence that the sellers to the ultimate consumer are fuel. The point that Paul made before is that also complicit in the process? included in that is legitimate, perfectly legal, cross- Mr Gerrard: It is certainly unusual in our experience border shopping. The 99.5% is probably a significant today. It is unusual for illegal cigarettes to be sold over statement of the position. through legitimate tobacconist retail sites. The vast majority of illegal sales of cigarettes throughout the Q325 Stephen Pound: Mr Gerrard, you referred to a UK are through informal networks, that would be 16% illicit market share UK-wide in cigarettes which family circles, social circles (pubs and clubs), car equates at about two billion. Can I ask the obvious boot sales, the work place, often on the shop floors and what may seem absurdly naı£ve question, why of big factories and also on street corners. Certainly can you not make a Northern Ireland estimate? in places in London and throughout the UK there Mr Gerrard: I will answer that in my layman’s way. are street sellers selling cigarettes. The Holloway I have economists and statisticians back in the oYce Road is the most infamous example here in London. who will be pulling their hair out at the thought of That is the typical experience, including in Northern my providing you with this answer. We estimate the Ireland. Certainly if a retailer is selling illegal size of the illicit market using a technique called gap cigarettes they run some pretty serious risks. The analysis and what we do is that we estimate the risk getting a criminal record because it is an overall theoretical consumption using survey data absolute oVence to sell non-fiscally marked from things like the General Household Survey and cigarettes and there is a risk of a £5,000 fine. With the Omnibus Survey. We then take away what we that they will lose the lottery terminal if they have it; collect—our receipts—and that gives you a gap. we can oppose certain licences necessary to sell other That gap is made up of both fraud and shopping. We products. They are running a significant risk. 3379331003 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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22 March 2006 HM Revenue & Customs

Q328 Stephen Pound: In terms of our inquiry, if Q332 Gordon Banks: The Committee recently heard there was street selling being done in Northern that pre-1993 protection money was clawed back as Ireland on the Holloway Road basis, there would be a legitimate tax deduction; since that time it has no criminal gang involvement, but the Holloway Road longer been the case. What eVect has this change cigarette selling is almost entirely dominated by since 1993 had and in particular what kind of impact Kosovo and Kurdish gangs who pay their local has this had? How much was being tax deducted in protectors. Are you saying there is very little street the first place? What eVect has it had on businesses selling or is there some street selling and, if so, is it and on the people who are carrying out the done by agreement with local organised crime? extortion? Have they changed the levels that they Mr Gerrard: There is undoubtedly some street would seek to extort from businesses because it was selling in Northern Ireland, as there is in the rest of a taxable expense and now it is not? the UK. Those street sellers may appear at a Mr Gerrard: I am afraid I am not an expert on tax relatively low level, but of course they are being deductible issues. I apologise for not being able to supplied and that supply chain will ultimately and answer those questions and I would be very happy to 8 undoubtedly lead back to organised criminality. It provide a note . will not be an amateur operation. Our experience in Chairman: We can pick that up at a later session and the UK is that those street sellers are supplied by we would very much appreciate your note. organised criminality. Mr Toon: The supply chain for cigarettes has Q333 Gordon Banks: We have heard about the 1.4 become stronger, more heavily organised over the million seizure in the middle of March and described last few years. During the first few years of the by Sean Woodward as being a priority. What would tobacco strategy I think we took out an awful lot of your view be on the harmonisation of fuel duty the smaller scale importers and distributors and we across the island of Ireland? Would this be of benefit now find ourselves tackling what are very large, and do you see it as a possible solution? complicated and very organised networks of Mr Gerrard: Those are matters for my minister criminals. That applies in the UK as a whole and it rather than for me. In terms of the island of Ireland, applies in Northern Ireland. because Northern Ireland in oils is unique in that there is an issue around cross-border smuggling that we do not have in terms of oils in the rest of the UK, Q329 Stephen Pound: In that evidence are you were you to harmonise duty rights in the island of diVerentiating between smuggled cigarettes and Ireland then that would stop cross-border counterfeit cigarettes? Is there a diVerence? smuggling. However, that would not, I would Mr Gerrard: In terms of the duty loss no there is not. suggest, stop oils fraud because then I think the criminality would simply look to replace that lost opportunity with a new opportunity. You would still Q330 Stephen Pound: I was thinking in terms of the have a diVerential between road fuel and rebated providers and those who oversee the operation. fuels and certainly speaking to my colleagues in the Mr Gerrard: When we first started this strategy back Republic of Ireland they have a significant problem in March 2000 the vast majority of illegal with rebated fuels fraud. I think harmonisation of cigarettes—about 16 billion in 2001—that came to duty rates would impact on a specific kind of fraud the UK were genuine UK manufactured cigarettes in Northern Ireland but it would not solve the oils that had been genuinely exported abroad, had been fraud problem. bought up overseas by smugglers and then smuggled back in. They were a genuine product; they looked, Q334 Gordon Banks: I appreciate that but it would tasted and were genuine products. Increasingly also undoubtedly free-up a lot of your available man now—I think it was 48% of our seizures last year— hours to follow up the then on-going fraud which is they are counterfeit cigarettes. When I talk about part of the fraud just now. illicit cigarettes I talk about both genuine smuggled Mr Gerrard: I think we would be facing the same and counterfeit smuggled, but of course counterfeit criminality. They would be looking to exploit the cigarettes carry significantly higher health risks. rebated fuel issue more in the absence of the ability Smoking is not good for you—it kills 120 thousand to exploit the cross-border smuggling issue. people a year—but counterfeit cigarettes are even worse for you. They contain more arsenic, more Q335 Gordon Banks: You would have the same level cadmium and more lead; they have more tar and of resources to combat one aspect of criminality and produce more carbon monoxide. you are saying they would grow to compensate, but in some ways it is much easier to address the counterfeit fuels than the smuggled fuels. Q331 Stephen Pound: Will people intentionally buy Mr Toon: I am not sure that I would necessarily counterfeit cigarettes? agree with that. I think that because you are dealing, Mr Gerrard: If they are sold on the street corner or particularly in diesel, with market product—green at the car boot sale, a packet of cigarettes for £2.50 diesel in the south—if that is smuggled without a or £3.00 they will think they are buying genuine laundering process you have a very easily detectable cigarettes because they look like genuine cigarettes. fraud. You still have a laundering process; you still It is only when they smoke them that they realise that they taste particularly unpleasant. 8 See note page Ev 164. 3379331003 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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22 March 2006 HM Revenue & Customs have the cleaning of the fuel to make it useable and beginning to see that it is feeding through in terms of invisible, which is precisely the same as you have the kind of figures that Paul was talking about. We with rebated red diesel in Northern Ireland and in are being able to put out of business in Northern the UK more generally. I am not sure it would Ireland and elsewhere some significant players who actually make a significant diVerence. It would make have been involved in oils fraud and oils laundering adiVerence in the cross-border shopping on the for quite an extended period of time. These are legitimate side and it would make some diVerence in people who are operating in the South Armagh terms of smuggling, but in terms of actually reducing cross-border area. We are working very regularly the level of fraud, given that we are still talking about again with PSNI. We are working regularly with the a laundering process, I would find it hard to see just Assets Recovery Agency and with CAB and the how much diVerence it would really make from an Revenue Commissioners in the South. We were operational point of view. involved obviously in the operation which got quite a lot of publicity 10 days or so ago in relation to Mr Thomas Murphy. There is a lot of that sort of work Q336 Mr Anderson: We have heard from a number being done. We are dealing with some very of people at the sharp end of this in terms of the sophisticated, very long term criminality and that people you represent and they have said that despite takes time and a lot of eVort. I do not think that the the increase in numbers in terms of oYcers and V V will or the e ort is lacking either in our agency or setting up the various bodies to deliver, the e ect of indeed any of the others to tackle that problem. all this put together has not been very positive. It has Could we do more with our resources? The simple been said that the increase in fuel paid for answer of course is yes because any organisation can legitimately could be explained by higher vehicle always do more if it has more, but we, as all usage but also they believe Revenue and Customs organisations, are limited to the amount of resource have only scraped the surface. There is a lot of crime available but also limited in relation to the going on. There is a lot of resource and the business information that is available to us to act on. As Paul of feeding through information to yourselves they says, there is a limited pool of information that is do not believe it is being acted on. Can you comment coming to us from the legitimate trade and from on that? elsewhere. Mr Gerrard: The revenue loss figure that I gave you, the £245 million, as a proportion of the shared market takes into account increased vehicle usage. Q337 Mr Anderson: Another suggestion was that the The overall amount of fuel used in Northern Ireland security forces are not working as well with you as that is not UK duty paid—shopped, smuggled and the retailers would like them to and perhaps you laundered—has dropped from over 40% to under could do with more oYcers on the ground. I think 30% so I would dispute that. In fact I have had letters you have probably answered the second part; what over the past few years from petrol retailers about the first part? complaining about something we have done but also Mr Toon: I would think that quite categorically our saying they have seen their products increase. That operational relationship with the PSNI is better now is the first point. I think the second point is that I than it has been in a very long time. The level of certainly do not think there is a lack of will on our cooperation is very high; we work very closely on behalf. We have devoted significant volumes of joint activity both in terms of targeted investigations resource for a significant period to do this and we are and in terms of a reaction to low level fraud. I find it very determined to continue to make that impact. In diYcult to see how much more cooperation we could terms of the information we have seen over the last receive from agencies like the PSNI. We also work three years the volume of information that comes closely with the Assets Recovery Agency; that is a into our Customs Confidential Hotline (which is, if growing relationship. Only a few days ago you saw I can give it a little plug, 0800 595000) increase in the Assets Recovery Agency take action in the High Northern Ireland in relation to oils, but it is still at Courts on Malachy Maloy where there was a £1.4 relatively small levels and I think one of the things million restraint. That was a referral from Revenue that we need to do with our joint forum with the and Customs. That is direct, eVective operational industry is to look at ways to get more information cooperation where we cannot take an enforcement from them. We have a very sophisticated intelligence action because of availability of evidence but the set up and we take a lot of information from that, Assets Recovery Agency is able to have an impact. but they are on the ground at the sharp end and they That is real co-operation. can get the information and I think sometimes that does not always get through to us. Mr Toon: In terms of the core criminality there are Q338 Mr Hepburn: I would just like to clarify some two aspects to this. One is the way in which we are of the things that have been mentioned in the last few actually working very closely with PSNI, that we are minutes. Do you routinely check fuel or is it always involved on a very regular basis—weekly, if not lead-based? multiple weekly basis—in dealing with detections Mr Gerrard: We try to work with as much which are made of illicit fuel as it is being intelligence as we have but as Donald says there is a transported, moving then to seizure and then taking limit to the amount of information available and we enforcement action. That is happening very, very do do roadside work as we call it, particularly with often. In terms of the more sophisticated criminality, colleagues in the Vehicle Licensing Agency. We are the more organised criminality, I think that we are stopping vehicles without very specific intelligence 3379331003 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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22 March 2006 HM Revenue & Customs and certainly over the last two years we have done Q344 Chairman: But you did say that there were significantly more challenges on the roadside than some people selling at the same price. If I, as a tourist we have ever done before. enjoying the beauties of Northern Ireland (of which there are many), pulled in on a forecourt, paid what Q339 Mr Hepburn: What about the testing of fuels appeared to me to be a perfectly normal price for my in the forecourts, speculatively? fuel, how would you then answer Mr Hepburn’s Mr Gerrard: We will do that, yes, but for that work question? we tend to rely on intelligence, intelligence in the Mr Gerrard: There is a risk there and it is not like broadest terms and not necessarily intelligence that cigarettes where cigarettes are invariably sold at a says: “The filling station run by Mr X is selling illegal cheaper price. fuel”; we use data that we have as oYcial authorities as to where there is potential risk and therefore we Q345 Chairman: Are there particular areas of will go and say, “There is a risk and we want to Northern Ireland that we should be wary of? There satisfy ourselves”. are the border areas, but are there any other areas? Mr Gerrard: We seize illegal fuel throughout Q340 Mr Hepburn: So I could be a retailer in Northern Ireland, from filling stations throughout Northern Ireland and it is possible that you would Northern Ireland. never check my forecourt. Mr Gerrard: I am sure there are some forecourts that have never been checked because they pose very Q346 Chairman: So even if I were enjoying a nice little risk. visit to the Giant’s Causeway and driving up the Antrim coast I could still have the misfortune of Q341 Mr Fraser: On the point of partnerships— getting fuel that would damage the engine of my car. which is very important in terms of the job you are Mr Gerrard: That is a possibility. doing—the Army has spent a great deal of time in Northern Ireland with highly sophisticated Q347 Sammy Wilson: Can I move on to the testing of mechanisms of finding out what is going on. Are you stations? According to the Petrol Retailers and even working with the Army? according to your own figures given the volumes of Mr Toon: We do work closely with the Army. We fuel sold illicitly one way or another, they say up to have an exchange of information and intelligence half of the filling stations in Northern Ireland either with all the law enforcement and security forces in contemporaneously or at some time use illicit fuel. Northern Ireland and we have a direct operational That is their evidence and certainly your own figures cooperation with the Army as well. What has been indicate that maybe the numbers are not as high as extremely helpful is where we have been involved that but it is certainly a high proportion. Given that, with operations on the border we have had surely that is the natural place and the natural focus significant military security and military logistical of your attention to try to identify who is selling fuel. support. That has been absolutely critical to us. We Let us say in an average year how many stations have military tankers, military plant equipment would your oYcers test? Or do you simply rely—as actually going in and working with us to make has been pointed out—on catching the motorist who seizures where the risk assessment would suggest may have inadvertently purchased the illicit fuel, but that it would be unwise for civilian contractors to be if stations are not being tested how do they know? I involved. was driving into Lady Hermon’s constituency— although I am not saying they are all criminals in Q342 Mr Fraser: The withdrawal of army personnel Lady Hermon’s constituency—and they were testing as a result of current decisions that have been taken, there and there were eight cars in a row, some of is that going to hamper that cooperation you talk them fairly high grade cars that had been pulled to about? the side and obviously had been dipped and found to Mr Toon: We have certainly seen nothing that would be using illegal fuels. Many of those people may well suggest any reduction in the capacity to cooperate in have bought it inadvertently and yet if stations are the areas that are critical to us; certainly not at this not being tested how does one know? stage. Mr Gerrard: I think there are two parts to that. In terms of the fuel that we will visit and test, those tests Q343 Mr Hepburn: We have heard a lot about the will identify rebated fuels, so they will identify damage that illicit fuels can cause to a car, but how laundered red diesel or they will identify kerosene would a motorist know whether he was buying this mixed fuel. From memory about 130 or 140 stations properly in terms of price? How would he know he were visited and tested last year and more than that was not going to put something in his car that was the year before. If somebody is selling smuggled fuel doing damage? Is there anything to say they are we can go in and test and we will find that it is duty registered or something like that? paid and what we do with those is that we will go in Mr Gerrard: The licensing regime in Northern using other techniques. Our assurance VAToYcers Ireland is one thing, but in terms of how can I tell begin to look through their books and records that I was not going to buy illegal fuel, I think my key because the books and records may not add up to indicator is going to be price. If I am buying fuel that what is going through the till. This number of visits is cheaper by any more than a couple of pence a litre does not include those visits that are done by than anywhere else, then I should be very suspicious. assurance oYcers. We do not test fuel because you 3379331003 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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22 March 2006 HM Revenue & Customs cannot find smuggled fuel through tests but you can get into this large scale smuggling you are dealing with find it looking at the books, the records and the something which is very much organised criminality. paperwork. The one operation which is worth mentioning links to that 15 million seizure that Paul mentioned which I Q348 Sammy Wilson: Can you give us an indication think was also mentioned by PSNI when they spoke to of the success rate of these visits? you because that was a joint operation. It was a joint Mr Gerrard: The success rate has dropped over the operation involving ourselves, involving the past few years. Where we used to get a very high hit Metropolitan Police, involving the guards, involving rate that has dropped successively over the last few the Revenue Commissioners and the security years, which suggests that the market is getting more intelligence agencies. There were three people arrested legitimate. in November 2005 in relation to that including one or two extremely well known names in Northern Ireland who have a very long history in Northern Ireland. On Q349 Mr Hepburn: Changing the theme to cigarette that operation well over 20 million cigarettes were smuggling and to give us an idea of the size of the seized, including the 15 million. There were a number problem in Northern Ireland, we are told that last of other seizures involved. Those seizures were all over year in the UK you broke up 68 gangs and seized £2 the UK. The revenue on that particular operation, billion worth of cigarettes. What are the figures for even with a very snapshot period of time, would have Northern Ireland? Why are the figures for Northern been about £3° million and we believe that that is a Ireland not published? small proportion of the activity that is actually going Mr Gerrard: Because it is a national strategy and we on. This is a very much controlled trade by organised publish them for the UK as a whole. We will publish, criminality linked into Europe and from Europe into when asked for, the figures for Northern Ireland. V the Far East because what we are talking about here is Starting o in 2002–03 we have seized 44 million a cigarette supply which involves British, Northern cigarettes, followed by 31 million cigarettes, Irish based criminals in mainland Europe who are followed by 19.7 million cigarettes. I can give these 9 brokering the cigarette supply from the Far East and in a note to the Committee . I cannot give you the then to organised criminals in Northern Ireland and numbers for 2005–06, the current financial year, then into middle level distributors and low level because the Department only publishes those in the distributors across the whole of the UK. You can annual report. What I can tell you is that we have publish figures for the UK, you can publish figures for seized more cigarettes already this year than we have Northern Ireland, but you have to look at this as a seized in either of the last two years. That is because large scale international fraud and simply looking at we have made a number of very large seizures. We the figures for the numbers of arrests or numbers of have made one seizure of 15 million cigarettes, seizures in one particular area does not give you a real another of nine million cigarettes, another of six picture of what is actually going on. million and another of three. Although I cannot tell Mr Gerrard: Of those four cigarette seizures that we you the total number of cigarettes seized this year, have made this year, two have come from China what I can say is that at the end of this year we will originally and one has come from Malaysia. This is have seen more cigarettes than we did in either of the international. Another point is that over the course of previous two years. the last five years we have seen 10 billion illegal Mr Toon: What is very clear to us is that a very high cigarettes destined for the UK markets. When I say proportion of cigarettes that were seized in Northern “we”, HM Revenue Customs in the UK have seized Ireland are not destined for the Northern Ireland five billion. Five billion have been seized overseas by market. Northern Ireland and Northern Irish our oYcers based overseas in conjunction with host criminals clearly play a very significant role in terms agencies. of cigarette supply to the UK as a whole both in terms of being in control of the movement of the cigarettes, in control of the financial position in Q351 Chairman: Those would almost all be terms of the assets then going back to Northern Irish counterfeit, would they not? criminals, but also in terms of the routing of Mr Gerrard: In more recent years increasingly they will cigarettes into the UK. We have quite a long history be counterfeit, but they would have been genuine as of significant consignments of cigarettes moving into well. Those are cigarettes en route to the UK which, by the Republic from mainland Europe going up from working with our host agencies overseas, we seized the Republic being either broken up, split up or those cigarettes. Some of those would have been simply having the method of transport slightly coming to Northern Ireland. changed, over the border then across into GB and then distributed into Scotland, to the north and Q352 Mr Grogan: You talked about the ways in which north-west of England as well as down into Essex you have improved in recent times, increased co- and the London area. operation with other agencies and the Serious Organised Crime Agency comes into being very Q350 Chairman: Are the port facilities adequate? shortly. How would you see your relationship with Mr Toon: One thing that is worth perhaps mentioning them? is that any movement between the port of Belfast and Mr Toon: I think the relationship will be a very close GB is that it is an internal UK movement. When you one; there is no doubt about that, not least because 757 of our oYcers are actually transferring to the Serious 9 See note page Ev 164. Organised Crime Agency as part of the remit. One 3379331003 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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22 March 2006 HM Revenue & Customs baseline point that is worth making, the primacy and Q354 Mr Fraser: Can you briefly tell us about the control of organised revenue fraud remains the actions you are taking against accountants, lawyers responsibility of HM Revenue and Customs even after and the professional services who may well, on the creation of the Serious Organised Crime Agency. occasions, be helping some of these criminals conceal We have retained all the powers which currently exist assets? and retain all the responsibilities in relation to UK Mr Toon: We do not specifically target professionals revenue fraud. We are already in the process of but we certainly take investigation and prosecution working up detailed arrangements for co-operation action against anyone whom it is clear is involved in V with the Serious Organised Crime Agency. Those further criminality. We will not be put o dealing with arrangements will be very comprehensive. They will professionals where we can obtain the evidence that the professional is actively involved and complicit in certainly focus initially very largely on intelligence and the criminality. We had a result recently with an intelligence assessment, the exchange of intelligence accountant who was involved in the laundering of the and information and on direct operational support proceeds of oils fraud, he was prosecuted, he got a from one agency to the other. We see this very much custodial sentence and that has certainly had a as an inter-twinned future. We will have to work significant impact on his business and on his colleagues closely with the Serious Organised Crime Agency in a in the accountancy profession. range of areas. For example there are links between VAT missing trader fraud which will be of primary Q355 Mr Fraser: You do not specifically target those responsibility for HM Revenue and Customs and individuals. Why not? organised Class A drug traYcking. Those links are Mr Toon: We would target them only as part of the primarily often arranged in the relationship of money. fraud itself. There has to be some evidence of their Class A drug traYckerstendtobecashrichintheUK. actual involvement in a fraud to actually target them. Antique fraudsters tend to be cash rich outside the This is particularly in relation to the indirect taxes. On V UK. There is a relationship between the two in terms the direct tax side, where there are direct tax o ences of where they need their money to actually be to to pay which involve a professional then that is more likely to oV the money who are involved in the fraud. There are attract a criminal investigation and the subsequent prosecution than similar oVences that do not involve a direct relationships between the two types of fraud. professional. There has to be a very direct and very close relationship between the agencies involved in investigating those Q356 Mr Fraser: I was more interested in why not? types of fraud to make sure that we actually have the Routine checks that a lot of organisations have, you greatest possible impact and the greatest possible count them in on that equally as you would any benefit for the UK exchequer as well as to the other visit? reduction of harm across the UK, even down towards Mr Toon: Yes. the local level. Q357 Mr Fraser: You mentioned sentencing. Do you think the current sentencing regime discourages this type of activity or should sentences for these types of crime be improved upon? Specifically in Northern Ireland. Q353 Mr Grogan: Can I ask you about Revenue Mr Toon: I think there is a particular issue in relation Commissioners and the Criminal Assets Bureau in the to sentencing in Northern Ireland, certainly across all Republic and links there, and also EUROPOL and the revenue frauds. We have a number of examples INTERPOL as well? where we have had oVences where we would have Mr Toon: The relationship with the Revenue expected custodial sentences—the sentencing Commissioners is a good one; it has been a good guidelines would suggest custodial sentences—where relationship for a long time. It is not just we have seen suspended sentences actually being given. straightforward cross-border co-operation between That is a point of concern certainly to us. It has a far the two agencies; we also have a fiscal liaison oYcer less impact on the individuals; it has a far less V based in Dublin who works with all of the authorities deterrent e ect. including the Criminal Assets Bureau in the Republic. Q358 Lady Hermon: It must be demoralising for We have a particular issue at the moment on the your staV. exchange of information between ourselves and the Mr Toon: It certainly does not build enthusiasm and Criminal Assets Bureau. There is a restriction on our encouragement, that is for sure. ability to exchange information which has been Chairman: I think that is a very good note on which to brought about by the detailed point with the move into private session. We can follow some of these Commissioner for Revenue and Customs Act 2005. points up. Thank you very much indeed publicly for Chairman: I think we will deal with that privately later. the evidence you have just given. Could I now ask Mr Fraser has one or two quick public questions and members of the public to withdraw and we will then we will move onto our private session. immediately resume in private. 3379331004 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

Ev 62 Northern Ireland Affairs Committee: Evidence

Wednesday 3 May 2006

Members present:

Sir Patrick Cormack, in the Chair

Mr David Anderson Mr Stephen Hepburn Gordon Banks Lady Hermon Mr Gregory Campbell Meg Hillier Rosie Cooper Dr Alasdair McDonnell Mr Christopher Fraser Stephen Pound Mr John Grogan

Written evidence from the Department for Social Development on Liquor Licensing and Review of Charities Legislation is on page Ev 134

Witnesses: Mr John McGrath, Head of Urban Regeneration, Mr Dave Wall, Head of the Voluntary and Community Division (Charities), Ms Linda MacHugh, Head of Urban Regeneration Strategy (Liquor Licensing), and Mr John Nevin, responsible for security fraud, including social security fraud, Department for Social Development (DSD), gave evidence.

Q359 Chairman: Could I welcome you, Mr request of our witnesses, in private and, although McGrath, and your colleagues. Would you like obviously, by definition, that will not be published, briefly to introduce yourselves and then we will we will be able to draw upon it in making our own begin the formal session? Thank you for coming in a recommendations and coming to our conclusions. moment or two early. There is not the likelihood but We hope to be in a position to publish a Report to the possibility of a division in the House, in which Parliament during the second half of June. There has case we would have to adjourn the proceedings for been a little bit of slippage because of heavy 15 minutes while people voted. I hope that will not Northern Ireland business on the floor of the House. happen but by starting early we hope to counteract We will be coming to Northern Ireland in that possibility anyhow. As we are starting at a connection with our inquiry again next week, and quarter past three, we will aim to finish by a quarter possibly a further visit in early June. That is the to five, but we may not finish before five o’clock, it background. You will also know that when we depends how things go. received evidence from the licensed trade there was Mr McGrath: Thank you, Chairman; we are very considerable concern expressed at the prepared for some interruptions. I am John suggestion that the “surrender” requirement might McGrath. I am the Deputy Secretary in the be abolished, because it might make it easier for Department for Social Development, responsible criminals, and especially those organised into the for urban regeneration, community development licensed liquor trade, which can be extremely and also social policy legislation, including the two lucrative. Perhaps you could tell us whether you are pieces that you are interested in. On my right, I have still taking this suggestion forward and, when you do with me Linda MacHugh, who is the Director in that, perhaps you could just tell us how you are charge of Urban Regeneration Strategy, who is conducting your consultation, or have conducted it, responsible specifically for liquor licensing and has and whether you started with very, very firm, fixed the detail on that. On my left is Dave Wall, who views and policies in mind, or whether you are heads up our Voluntary and Community Unit, genuinely open to persuasion as a result of the facts, which has responsibility for the oversight of figures, suggestions and indeed objections that are charities, and again is taking that piece of work put to you? forward. I think we have got some indication that Mr McGrath: I wanted to make just a couple of the Committee might also have some issues in terms opening remarks, Chairman, if that was possible, of social security fraud, information requests, and so which helpfully would be in connection with the on, and, while it is not strictly part of my remit, we points that you flagged from the trade’s evidence and have with us a colleague, John Nevin, who is then perhaps we could deal with questions. We Assistant Director in Social Security, who will be forwarded memoranda on both liquor licences and able to deal with those specific questions. charities to the Committee, and there are a couple of features I wanted to pick out which I think would be Q360 Chairman: Thank you very much. You are all of particular relevance to this Committee and this very welcome. We appreciate your coming. This is a inquiry. On liquor licensing, the current review was part of a continuing inquiry into organised crime in instigated in early 2004, following representations Northern Ireland. You will know that we have seen from the PSNI and the trade itself, including clubs. the Chief Constable and many other leading figures The consultation was launched on 1 November 2005 from Northern Ireland and figures from the world of and it finished at the end of January. We are commerce and industry and you may well have read currently analysing the responses to the consultation some of the published evidence that we have and the Minister, David Hanson, plans to make a received. Some evidence we have received, by statement fairly shortly on how he intends to 3379331004 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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3 May 2006 Department for Social Development proceed, in terms of new legislation. Therefore, in to surrender, what you need is money and it could be those terms, you will understand that what we can argued that is probably not in short supply for say today relates largely to the rationale behind the anybody in organised crime. current proposals. There are six objectives proposed to underpin licensing policy, but key among those is the prevention of crime and disorder. The Minister’s Q363 Chairman: Can I ask, to get this absolutely proposals developed from close working between straight on the record, what you are saying is that, my Department, PSNI, the Northern Ireland OYce, regardless of the cost of any premises that may be the Northern Ireland Court Service and the involved, the actual piece of paper itself has a value, Department of Health and Social Service and Public a tradeable value, of around £140,000 sterling? Safety, and involved extensive pre-consultation with Ms MacHugh: Yes. That is not set by Government; a wide range of interests, including the licensed it is set by the open market. That is not to say that trade, the retail trade, the tourism and hospitality all you need to operate premises is a licence, you sectors and registered clubs. The proposals will also have got then to take that to court to surrender it, have developed in the context of the Department’s but the licence surrender in itself is not a means to involvement in the Northern Ireland Civil Service control the trade. Interdepartmental Working Group on Organised Crime, which is part of the overall architecture of the Q364 Chairman: If you were selling a licence and I Organised Crime Task Force. The changes to the wanted to buy it, regardless of all the other system are aimed at strengthening enforcement considerations, I would not be likely to get it unless powers available to PSNI in dealing with problems I gave you £140,000 sterling for that piece of paper? in licensed premises of all types. They are designed Ms MacHugh: That is the going rate, as we believe, to create a more open and more rigorous licensing at the moment, although that obviously increases system and a critical element of that is the and decreases. As I said, the surrender does not itself introduction of a personal licence, which will be control the trade. What we are proposing now is a required by anyone wishing to run a licensed two-tier system of licensing, so there will be licences business. Anyone applying for a personal licence will for premises and also personal licences. In order to need to prove that they are a fit and proper person get a premises licence, you will have to apply to the to run a licensed business, including having local council; this is in 2009, after the Review of adequate skills and knowledge of the licensed trade Public Administration. To get that licence, you will and a clean background. Therefore, in a sense it is a have to produce an operating plan, which will response to the point you made about the trade demonstrate how you intend to run your business in evidence. It is Ministers’ belief that the package of the premises for which you are applying for a licence measures in the round could actually make it more and how you will meet the six licensing objectives diYcult for organised crime to enter the licensed that we have set down, one of which includes the trade, rather than easier. prevention of crime. It will also include how you mean to operate your business in terms of security, so the door staV and all of that. You will also be Q361 Chairman: Would you like to bring in your required to have a personal licence, and to get that colleague? Before you do though, you talked about you will have to prove that you have the skills and the Minister making a statement shortly. Are you knowledge to run a licensed business and also that expecting that during the course of the present you are a fit and proper person to run that business. month, or is it just a question of before the House That is a new thing; up until now there has not been rises in July: what is the time-frame? a personal licence system in Northern Ireland. Mr McGrath: We are currently actively working on this. I think that “shortly” would be before the House rises in July. That is the intent at the minute. Q365 Chairman: Are there factors that will automatically disqualify, such as criminal convictions? Q362 Chairman: Thank you very much indeed. That Ms MacHugh: These are still proposals, so as and is very helpful. when the Minister has made his final decision we will Ms MacHugh: We mentioned concerns about be working closely with PSNI to make sure that we “surrender”. In framing the proposals, our Minister have the best system, particularly on the personal was not given ever any evidence to suggest that licence side of things, to make sure that there removing surrender would increase the potential for is a robust system in place to check people’s people to enter the trade with an organised crime backgrounds. background, and that includes evidence from PSNI and indeed the trade, there simply was not any. Surrender in itself has been eVective in capping the Q366 Chairman: Will there be a charge made for overall number of licences in Northern Ireland, but that? it does nothing to control either where licences are Ms MacHugh: That is still something that we need used up in businesses or indeed who opens to work out. There will be a charge for the premises businesses. Because the number is capped, it has licence, and for the personal licence there may be a actually created a market for licences, and at the charge but that is some of the detail that we will work moment that stands at around £140,000 for a out as and when the Minister decides he is taking licence; so actually, at the moment, to buy a licence this forward. 3379331004 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q367 Chairman: Those publicans who currently Accounts Regulations now are not required. It is have a notional £140,000 in their back pockets will actually at the PSNI’s request that the Minister is find that disappears when this new system comes in? now considering relaxing these Regulations. Ms MacHugh: If it goes ahead, that is the case. Q371 Mr Campbell: What is the body of responses Q368 Chairman: There will be no value at all for the that you have got thus far on the surrender issue? publican who is retiring, who has become ill, for Ms MacHugh: The body of response on surrender, what reason who is getting out of the trade, there will there has been a lot of support for keeping surrender. be no value in the licence, in that piece of paper we I have to say, most of that support has come from talked about, if this new system comes in? the licensed trade itself. Ms MacHugh: No. Chairman: Thank you very much indeed. Q372 Chairman: Do you suspect that is because of this notional £140,000? Q369 Mr Campbell: Just on the surrender issue, if I Mr McGrath: I think, Chairman, it is not a notional could pursue that somewhat. The Committee, in figure, it is a value, and, as my colleague was saying, carrying out the investigation, received some it is an understandable position of the Federation evidence from the Drinks Industry Group and a that they have a vested interest in those, as such. number of other groups, including the Chief Executive of the Federation of the Retail Licensed Q373 Chairman: I was not going to suggest that Trade. She argued very strongly against the there is anything wrong in this. It is perfectly legal to abolition of surrender because—our sessions are in trade this at the moment, without breaking any laws the public domain—that then produced a very or regulations. Clearly, if there was a threat that robust response from the Federation of Licensed somebody who may have spent 30 or 40 years as a Clubs, which is very much in favour of the proposal licensee and believed that he, or she, had got to put to repeal. Do you see the situation as having evolved towards his, or her, retirement fund a piece of paper in recent years? It appears to be one section of the which he, or she, can sell for this sort of money—it licensed trade, whether it is a commercial club or any is quite a large sum of money—and thinks that is other, are very much in the camp of retention and under threat, of course they will take this line. Is another section are not. there any sort of compensation during that Ms MacHugh: I think the Federation of the Retail transitional period, or not? Licensed Trade are probably in quite an invidious Ms MacHugh: The Minister will be looking at all position because they do have to protect the possibilities before he makes a statement. commercial interests of their members. I suppose this is the worry about organised crime. The clubs obviously have an interest in seeing the very strict Q374 Chairman: He will be looking at compensation Accounts Regulations that are in place to monitor as one of those issues that have to be faced up to? the financial controls on clubs, they have a vested Mr McGrath: He will be taking into account the interest in seeing that is abolished. I can understand points made about that. I think the issue is about why you got very diVerent responses from both distinguishing between small licence-holders and camps. that as an asset perhaps on their books. Although perhaps when originally they required the licence they did not have to invest that sum of money, and Q370 Mr Campbell: Both of them obviously have licences held by larger conglomerates and how they commercial interests which they will seek to defend. are accounted for perhaps in their books, there is a How can we, as a Committee investigating organised range of options within that. crime, come to a definitive conclusion on the Ms MacHugh: I think the other point to bear in proposals about which way is more likely to impact mind is that we are not planning to introduce on the threat of organised crime in some clubs, and legislation immediately. Certainly the surrender a very small number of clubs? element of it would come in post-RPA, which would Ms MacHugh: Bear in mind, the surrender principle be at least 2009, possibly 2010, so there would be a does not apply to clubs. The clubs licensing system V period of grace in which any business could adjust is di erent, so you need to surrender your licence if financially to any negative impact. you are going to open up a pub or an oV-licence. With clubs, you may be referring to the Accounts Regulations, which we are proposing to relax. They Q375 Stephen Pound: It used to be that you could were instigated at the request of the RUC, back in not drive a taxi-cab in New York without what is 1996/1997, in direct response to a concern that they called a “gold medallion”, I think which were issued had about the financial controls on clubs and the round about 1890 and had a notional value of 10 potential for that to be used as a front for some dollars but sold for $20,000. They varied in price criminal activity. Since 2004, PSNI have given us constantly and now are used as a mechanism for evidence that they believe this is no longer required. regulating. How does that £140,000 vary; is that a Post-1996, PSNI have got a very rigorous system of historic high, is it a low, do you have any data on it? enforcement and control and it is PSNI’s view Ms MacHugh: It is a historic high. A number of that has resulted in a much more robust and years ago it would have been about £15,000 or comprehensive system in most clubs and that the £20,000. 3379331004 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q376 Stephen Pound: Roughly how many years ago? Ms MacHugh: Yes. Ms MacHugh: I think maybe 10 or 15 years ago. Stephen Pound: What? I wish I had bought one. Q385 Chairman: According to Ms Carruthers, we would also be talking of one community Q377 Chairman: I take it, you are not declaring an particularly, because she did make the point in interest? public evidence that most licensees were from the Ms MacHugh: It is interesting to note that since the Catholic community; is that right? Minister announced the consultation the cost has Ms MacHugh: That would be the pubs, yes. actually gone up. You have to make a judgment, I think, when you buy a licence, at this point, are you going to get a financial return on that licence over the Q386 Chairman: You would not dispute that? period in which surrender is still required, and it has Ms MacHugh: No. to be a commercial judgment. Chairman: This is really exciting the Committee. Q387 Lady Hermon: May I get one point absolutely Everybody wants to come in. on the record. The PSNI chose this rule about the Accounts Regulations. Can I just get it clear whether Q378 Stephen Pound: Is there a cap on the number in fact there is a conflict of view coming from the which can be issued? Can any new ones ever be PSNI in relation to the surrender value of these issued? particular licences; does the PSNI support the Ms MacHugh: Not under the current system. abolition of the surrender requirement? Ms MacHugh: Yes. The PSNI has been very Q379 Stephen Pound: So it is the scarcity value? supportive of the complete package of measures that Ms MacHugh: Yes; that is the way the market runs. our Minister is proposing. Chairman: Like Canalettos. They are not as pretty. Q388 Chairman: With or without compensation? Q380 Stephen Pound: Not exactly but I know what Ms MacHugh: With or without; I do not suppose you mean. Can I say, just to pick up another point, compensation would be, I am sure that PSNI and I am reluctant to weigh in behind any slogan of would be— “no surrender,” you mentioned, Ms MacHugh, earlier on, that after 1996 the PSNI and I cannot remember the exact words but you said they adopted Q389 Chairman: No; we want to get this on the a more robust role. Was that an operational record? decision, was that the result of statute, or was that Ms MacHugh: Deputy Chief Constable Paul some procedural change perhaps generated by your Leighton said that the package of measures was a own Department? What was the basis for that responsible balance in forward thinking and they change in direction? have been very supportive of the whole of the Ms MacHugh: The Regulations set down very strict proposals throughout. controls over how clubs dealt with money on the premises. They also had to send in annual accounts Q390 Chairman: We shall be pursuing the finance to the local police station every year. That was issue on Monday, when we are likely to discuss this followed up, on an annual basis, by an on-site with them. inspection by police, and potentially one or two Ms MacHugh: Bear in mind that the proposals also other, smaller inspections, and they could just walk give PSNI much greater enforcement powers than in and do that. they had before to deal with the premises that they are worried about, and there are some rogue traders. Q381 Stephen Pound: So this is a result of statutory changes? Ms MacHugh: Yes. Q391 Lady Hermon: Would you like to elaborate on the greater control that they will have? Q382 Stephen Pound: Which piece of legislation Ms MacHugh: At present, it is actually quite diYcult was that? to close down premises or to penalise premises which Ms MacHugh: It is the Clubs (Accounts) continue to break the law, in terms of, say, serving Regulations 1997, which followed on from the Clubs under-age drinkers, so we are planning to introduce Registration 1996. a penalty points system, temporary immediate closure powers for the police, if they have a concern Q383 Mr Anderson: Can you give us some idea of the about a situation developing in a particular size, of how many licensed premises there are? premises. Ms MacHugh: There are just under 1,900 pubs and oV-licences, and I think there are around 540 clubs Q392 Lady Hermon: Including powers if they and there are about 400 others, so that will be some suspect that there is paramilitary activity and hotels, guest-houses and other premises in which criminality, where they will have the powers you can buy alcohol. obviously to go against those other pubs or clubs? Ms MacHugh: Yes, and obviously they would need Q384 Mr Anderson: There is an element of evidence of criminal activity and there would be compensation we would be talking about here? greater powers to either suspend or revoke licences. 3379331004 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Q393 Mr Grogan: You said there was going to an having much more curtailed hours. Secondly, asI imminent statement from the Minister, or a understand the system in England, a licence is statement soon anyway; there is a hint in what you awarded unless there is objection. The system we are have said and indeed in the memorandum of what proposing in Northern Ireland will be much more might be in it. Just to check, as I understand it, on proactive. Councils will have to seek the views of key timing, that you have drawn a distinction between stakeholders from the area, including local residents, the proposals regarding opening hours enforcement, the PSNI, local traders and anybody else with a children and Registration of Clubs (Accounts), vested interest in looking at how licensed premises which in your memorandum you suggest might even are controlled in that area. It will be much, much come in this year. Then the other measures to do more proactive and it will not be based on some sort with bringing in councils, and so on, and their of negative equity but unless there is an objection it surrender principle, changing that, that would be will go forward. You will have to actually prove that 2009. I had a letter from the Minister, David (a) the premises are required and (b) that the person Hanson, dated 19 April, when he told me that the applying for that is fit and proper. Secretary of State and his ministerial colleagues in Northern Ireland look forward to a local Assembly being in a position to legislate on liquor licensing Q396 Rosie Cooper: Do churches qualify as vested matters. He said the introduction of proposed new interests; would they be consulted properly, legislation is still some way oV, and “I can assure you generally? that I will consider all the views received before Ms MacHugh: Yes, and it is likely that, for example, firming up proposals for the draft legislation.” Is the when local councils get community planning powers Department saying that this will be left on the table and they look at what is happening in their whole until hopefully by November the Assembly will be area, this could be one element of it, where is it up and running, or has the Minister powers to enact appropriate for licensed premises to be and what the proposals, which in your memorandum you say sorts of licensed premises should be in each of the will come in in 2007 without fresh legislation: how is areas. it going to work? Mr McGrath: I think Ministers general position is Q397 Gordon Banks: Just to take you back a little bit that they would hope the Assembly would determine to talk about the 2,500/3,000 licences roughly which a lot of these matters, that they would be dealt with exist and the £140,000, £145,000, is still what they on a local basis. I think that is recurrent in every turn over for now, how many sales are there a year issue we deal with at the moment. The stratagem of these licences? whereby there would be two sections to this Ms MacHugh: I do not have any specific figures here legislation, the second one because it is linked to but if you would like them I can get them for you. transferring licensing to local authorities, there Chairman: It would be interesting, yes. would be new local authorities coming into being as a result of new public administration, necessarily creates a diVerent time-line there. That could create Q398 Mr Campbell: Mr Chairman, I just wanted to the potential, indeed the hope of Ministers is that move on to the issue of 2009, under the present particular piece of legislation would be dealt with by proposals of the RPA we have seven super councils, the Assembly, if it returned. The Minister, as Linda I think they are called, and they are given the power said earlier, is looking at the whole package and the to enforce the new regime post-2009. Given that timing of legislation at the minute and his statement there will be new councils, with a completely new will indicate how exactly he wants to take those local government regime, completely transformed forward. since 1973, will there be any oversight of the councils enforcing the new regime? Q394 Mr Grogan: The first tranche of measures Ms MacHugh: Yes. In fact, each council will be which in your memorandum you say could come in required to produce a licensing policy statement, this year, would that require primary legislation, or which the Department will have oversight of and I has it got ministerial powers? think the Minister of that Department at the time. In Mr McGrath: Yes, it would. that, again, they will have to highlight as a council Ms MacHugh: This year, I think we are talking how they plan to meet the six licensing objectives about 2007 by the time the legislative process will which underpin all the licensing regulations. get through. Chairman: So it will be for the Queen’s Speech. Q399 Mr Campbell: What will happen? You will be aware, in a diVerent context, of similar concerns on Q395 Rosie Cooper: Notwithstanding the subject of the RPA, but let us say that there were one, or two, surrender, how similar is the proposed licensing or even three councils and their political control was system that you outline to the system which is being such that their approach to matters of law and order used currently in England, which is very, very and co-operating with the police was ambiguous, to regulated and has served us well over time; how say the least, if not outright oppositional, what similar is it to that? would happen in that circumstance? If there was Ms MacHugh: It is similar but I think it diVers in a some suggestion about misgivings about the number of very key areas. The first obviously is that allocations of licences, a council’s duty was to we are not moving to 24-hour drinking, we are enforce the law and there was a concern that the 3379331004 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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3 May 2006 Department for Social Development council was not being rigorous in pursuit of the law, Q405 Mr Campbell: If there was a problem with a in terms of the pursuit of certain licensed premises, council or councils, after having signed up to the what would happen in those circumstances? objectives, in the implementation of those Mr McGrath: Each council would have to show it objectives, it would then be the responsibility of was addressing the six overriding objectives. Clearly, whom to oversee that council and ensure that they Ministers want a system whereby each council can did what they were supposed to do? perhaps have some flexibility, otherwise you would Mr McGrath: It would be the responsibility of the have just a uniform system, but equally we would department, whatever department it would be, in not envisage that any council, in a sense, would anticipation of any further changes, and the minister jettison any one of the objectives, one of which was of the day, whether direct rule or devolved, to about preventing crime and disorder. exercise oversight and exercise such interventions that might be set out in detail in the legislation when Q400 Mr Campbell: Yes, but let us say that councils that was brought forward. sign up to the six principles, in theory, and they are quite happy and say that they support that, and Q406 Dr McDonnell: I want to take you back, I am the problem then becomes evident, post-signing very grateful for the information, I am absorbing it up to that, the practical outworking of councils all, but I must say that there is a very strong feeling monitoring the new regime? out there, coming from right across the community, Mr McGrath: What I meant, Mr Campbell, was that that “if it isn’t broke, you don’t fix it,” and the they would have to demonstrate, they are not perception is that “it isn’t broke.” What I wanted to actually principles or objectives, that they are come back to was the accounts and the regulations addressing those objectives in how they discharge which you touched on, because the required their licensing and monitoring function, not that regulations brought in in 1997 but then by 2004 it they would say simply, “We support these general appears that those regulations had worked so well six principles, but.” Therefore, if they were not that all the clubs were adhering to them and were addressing those in how they agreed licences, pristine clean. Is there any evidence from the PSNI monitored and evaluated them, whatever, they or otherwise, clear-cut evidence, other than hearsay, could be open to challenge, they could be open to that the accounting procedures were dramatically legal challenge because they were not doing their improved; have we any black and white evidence? duty under the law. It would not be enough that they Ms MacHugh: We have relied, and the Minister has would just be lax on that. relied, on evidence from PSNI and their evidence is that there has been an improvement and that the Q401 Chairman: This would be within the context, Accounts Regulations are now onerous, too you hope, of a wholly devolved responsibility, is onerous. What we are proposing is that we replace that right? statutory regulations and statutory guidance, so it is Mr McGrath: This would be in the context, not as if we are suggesting that clubs can do what Chairman, of seven, new, significantly enhanced they want with their finances, there will be statutory local authorities. guidance. The other thing to bear in mind is that they will also fall under the Revenue and Excise’s revenue Q402 Chairman: Yes, I appreciate that, but also you traders legislation, which applies to anyone handling are assuming it would be in the context of a goods against which there is an Excise duty, whether Northern Ireland where there was a functioning they are retailing it or wholesaling it, or whatever. Assembly and an Executive? That will be the minimum standard that we will start Mr McGrath: This would envisage they would be to work the statutory guidance should the Minister giving these reports and the oversight would be to a decide to go ahead with this. The other thing I devolved Minister for Social Development, or should say is that any new clubs coming along must whoever, of that day. serve a dry year before they are allowed to serve any form of alcohol, and that is to give PSNI an opportunity to monitor how the club is run. Q403 Chairman: The Secretary of State would not have a role and this Parliament would not have a role, this would be wholly devolved within Q407 Chairman: Have a dry year? Northern Ireland? Ms MacHugh: Yes. Mr McGrath: That is right; yes. Q408 Chairman: So only teetotallers are allowed to Q404 Mr Campbell: Just to be clear, in the go in the club for a year? eventuality of post-24 November there is not Ms MacHugh: Yes. devolution, and while we are working towards that, in any case, if that was not the case and in 2009 it was Q409 Chairman: There is going to be a whole change not the case, local councils, the nine super councils, of clientele then, is there not? would still have responsibility? Ms MacHugh: These are for new clubs that are Mr McGrath: If the legislation went forward they created. would still have that responsibility and would still have to report to the Department, and if that was Q410 Chairman: Yes, I know. I am thinking if a chap headed by a direct rule minister of the day he would wanted to start a new club for his bibulous friends be exercising oversight. and is not allowed to admit them for a whole year? 3379331004 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Ms MacHugh: That is the situation in Northern current regulations were introduced to respond to Ireland at the moment. the nature of the problem then. Clearly, there will Chairman: Those who castigate it as the devil’s always be some rogues in any sort of system and I buttermilk will have a field-day for a year. think it is the balance, it is proportionality between the tools we are bringing to tackle the problem and Q411 Lady Hermon: You are saying that is the in the end it is up to the PSNI to deal with that. The present position? opportunity cost of their policing very rigorous Ms MacHugh: That is the present position and we requirements for a lot of clubs perhaps where there are certainly not abolishing that. That will remain as is not a problem, you know, if it is not broken or another safeguard. closed you do not need someone to check that it is not broken, it is a balanced judgment, and in that Q412 Dr McDonnell: Can I probe a little further, case we are guided heavily by the PSNI’s view on because I have a couple of other bits I want to ask this. you. Were these improvements registered across every single club or were there some clubs which Q416 Dr McDonnell: We know that the Organised failed to meet the improvements on a foul night of Crime Task Force initially had a reservation about the credibility net? Could you give us again, at the the change. Would you care to tell us anything about back of last year, the police evidence? Beyond the how you modified that, or how you persuaded them, accounts, do you yourselves have any evidence, in terms of relaxing the regulations? beyond police evidence, that it is a good idea to Mr McGrath: The memorandum refers, there were repeal the regulations from 1997? some issues raised and we work very closely in the Mr McGrath: I think there is a general recognition, context of the Organised Crime Task Force, that on another day, the evidence you got from the they would rightly be raising the issues here. If these Federation itself quoted that the vast, vast majority were introduced to crack down on financial of registered clubs are run perfectly well and mismanagement and obviously the scope for rogue properly, as it should be. Therefore, I think we are elements to get into the trade, in a sense, they were talking of only a very small minority, and that is doing an element of crime-proofing, testing whether commonly agreed, where there will be diYculties. the proposal we were doing was going to let the The view of the police who were involved in the work flood-gates open. In discussion primarily with the leading up to the proposals and were closely PSNI and the representatives of the Task Force, they associated with the launch. The comment that we were satisfied that, in fact, the police view held sway have had back from the police on the documents and that this was not a relaxation which would cause themselves, if I can just quote from that, is: “The any significant diYculties at all. There are no Registration of Clubs (Accounts) Regulations (NI) concerns from the Organised Crime Task Force, in 1997 were introduced to help the Police Service its overall architecture, about this proposal. tackle financial mismanagement in clubs. Taking cognisance of the now existing improved accounting Q417 Dr McDonnell: Just on another point maybe to arrangements, we have since 2004 been promoting move slightly to the accounts, have you any less prescriptive and burdensome arrangements. We evidence, or could you share any evidence, that clubs therefore support the proposal to revoke the are used aside from a money-laundering concern for financial controls and accounts formats and retail outlets, for counterfeit goods; that is another introduce best practice guidance in their place.” I concern that we have? Have you much evidence of think, on that sort of issue there, we have to take a that? steer from the PSNI and their perception of where Ms MacHugh: Do you mean counterfeit alcoholic the balance of resources and scrutiny should fall. goods or any types?

Q413 Chairman: That represents the view of the Q418 Dr McDonnell: Both; everything. Alcohol, yes, OCTFas well? but other things, cigarettes, you can come in with all Ms MacHugh: Yes. We had a very clear steer from sorts of things, even DVDs, and things like that? Sir Hugh Orde’s oYce that they were in support of Ms MacHugh: Again, the regulations deal with the abolition of Accounts Regulations and a clubs that sell alcohol and it is the alcohol retail part relaxation. of the business that we are particularly interested in. In all our discussions with both PSNI and members Q414 Dr McDonnell: Is that the only evidence you of the Organised Crime Task Force, that has not have? Do you have any independent evidence been raised with us. coming through your own system to collaborate that? Q419 Chairman: Are you absolutely confident that if Ms MacHugh: No, we do not. the new regulations that are proposed come into force clubs throughout Northern Ireland will be Q415 Dr McDonnell: Can you tell us that these honestly and properly run, adequately supervised improvements included every single club, or are and unable to take part in the sort of nefarious there some clubs still out there in a twilight zone? activities that it would seem a small minority take Mr McGrath: I think the general perception is that part in at the moment? Therefore, that the new there are very few clubs in the twilight zone and the system would be more protective of the whole position is much diVerent than it was when the community than the current system? 3379331004 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Ms MacHugh: I think that under the new system storing10 counterfeit goods, it is not an area that we clubs will have to follow statutory guidance; so, as I were cognisant of and it is for the PSNI in general, said, it is not as if they have no regulation. Secondly, and other issues within the Organised Crime Task they will also come under the enforcement Force, to deal with, as a general issue about regulations that we are bringing in for all types of counterfeit goods. I am sure it is an issue which licensed premises, so there will be other checks and would be touched upon by PSNI in general terms. In balances in that part of the licensing legislation that a sense, we are unsighted on that issue. will also impact on clubs. Q425 Mr Campbell: Just on this issue, is it possible Q420 Chairman: So your answer is yes? or do you have any evidence from the police or Ms MacHugh: As sure as one can be in these within your Department to give us an indication situations. If you bring in any laws, it does not really of the scale of these types of problems, whether say there are not going to be people out there it is problems with Accounts Regulations on breaking them. irregularities, or this issue about counterfeit goods? Is there any concept of the scale of the problem; has it started, is it getting worse, is it confined to the 1% Q421 Chairman: No, but what has really changed or 2% of clubs, or is it much more widespread? We for the better, you are confident that the changes you are talking in a rather nebulous forum. We have are advocating will be for the better? heard discussions on the grapevine for years but I do Ms MacHugh: Certainly, PSNI feel that this is a not think anyone has ever said “This is the scale of system— the problem and it is getting worse,” or it is getting better, or it is largely negligible, and has not changed. Is there any way of establishing that? Q422 Chairman: We are not asking that at the Mr McGrath: I am sure we would have information moment. We are asking you if you are confident that about breaches of the Accounts Regulations and what is being proposed will be for the better conduct that could be provided. In a sense, we do not have of these establishments and therefore more any information about the sale of counterfeit goods conducive to a harmonious community than what in general; that would be an issue pursued by the exists at the moment? PSNI. I am sure there will be elements within the Mr McGrath: Chairman, as I said at the start, I think Organised Crime Task Force architecture interested in the round Ministers believe that these proposals in that. are addressing the six overall objectives, but specifically are not going to increase the scope for organised crime to gain access to the licensed trade, Q426 Chairman: Do you think you ought to be in the round; as Linda says, indeed there are rather better informed before you make these additional requirements for clubs as they come to proposed changes? the overall system and netting oV then the relaxation Mr McGrath: I think, Chairman, our view would be of their specific Accounts Regulations. whether or not somebody is selling counterfeit goods beneath the table or on a table in a pub or club, in a sense, is disconnected from the issues we are dealing Q423 Mr Fraser: With regard to the proposed with about licensing the clubs to sell alcohol. In the monitoring scheme, I am slightly confused about same way, a shop could be selling counterfeit goods. how you are going to check the people complying with the scheme and what happens and what the Q427 Chairman: If you are drafting laws, the object consequences will be if they do not actually comply of which is to make things better, ought you not to with the scheme? have a better grasp of how bad they are before you Mr McGrath: If local authorities do not; obviously, decide to make them better? that is an issue that we are looking at, in terms of the Mr McGrath: The laws we have a remit for are about roll-out. We will be placing a duty and a liquor licensing. What I am saying is that the other responsibility on local authorities, one of a number elements of the corpus of public legislation should which they will inherit under the Review of Public deal with the issue of counterfeit goods; it is just not Administration. This will not be the only area where within our remit to be dealing with that. That is the they will be taking on duties and responsibilities. In only issue I am trying to clarify. the detail of the legislative proposals, the Minister Chairman: We may wish to come back to this, but will want to strike a balance between showing proper thank you very much indeed. We have had a good oversight and not actually having a heavy hand of run around on the booze; let us get to the charities. Government coming second-guessing. Lady Hermon: A fascinating area of the unregulated business of charities. Q424 Mr Fraser: With regard to the repeal of the Chairman: Never has this Committee been so financial controls and regulation, will not that interested in booze. encourage more activity of the kind described just now by Dr McDonnell, in terms of the counterfeit Q428 Lady Hermon: Charities in Northern Ireland. smuggling of alcohol and cigarettes? I am not going to speak about booze. I am going to Mr McGrath: I think the diYculty is our interest in speak about charities. Let me just quote, and this is the Department is in liquor licensing and the control of alcohol. If the premises had been used for 10 Correction from witness: selling. 3379331004 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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3 May 2006 Department for Social Development to Mr Wall particularly, and I may say Dave instead, year for consultation. Again, those proposals were if you do not mind. You will be familiar, I am sure, developed with PSNI and the Revenue and Customs with the IMC Report, which highlighted, and let me and the Northern Ireland OYce, and the point of just quote from their Report, obviously this is the that was to establish a strong and visible regulatory IMC speaking: “We have been struck by the limited framework to increase public confidence in charities controls over charities in Northern Ireland. We have and to reduce opportunities for abuse by criminal heard frequent allegations that this has facilitated elements, for clearer control. Central to these the activities of paramilitary groups by making proposals is the establishment of a Charity possible the illicit use of money and the diversion of Commission with more comprehensive regulatory funds obtained from crime.” I am quoting from powers than the existing Commission for England paragraph 5.20 of the Report, published I believe in and Wales. The advantages Northern Ireland has November 2004. Why, in heaven’s name, has the are that not only can it see how things are operating Government been so desperately, desperately slow in terms of Great Britain but can tweak and perhaps to do anything to block this loophole? Why has it enhance some of the mechanism chosen or address been tolerated for such an awfully long time? We are some of the weaknesses there might be. Again, the now in May 2006. Would you like to brief us on the Minister’s intention is to publish shortly draft changes since the IMC Report? legislation to take forward putting in place a Mr Wall: You will be aware, I think, that there was stronger regulatory framework, which I think is a review of charities legislation in 1996. I was not generally accepted is needed and would be in involved at that stage but, from reading the response to the concerns of the IMC, among others. documentation, it was clear that the issues that we are all now very aware of were not issues for that review, and there was no established, clear way Q432 Chairman: Can you again define “shortly”? forward in 1996. There were no stakeholders who Mr McGrath: Hopefully, again, before July. were arguing for the very obvious changes that are now required. Q433 Chairman: Does “hopefully” make it stronger than “shortly”? Q429 Lady Hermon: Were other changes made after Mr McGrath: The intention is to publish a draft that review? proposal for legislation before July, Chairman. Mr Wall: No; certainly not in terms of the regulation of charities. You are quite right and the IMC Report is quite right that, even compared with the rest of the Q434 Lady Hermon: Does the Department make V V United Kingdom, the regulation of charities in any e ort, or has it made any e ort, in this review, Northern Ireland is extremely light and does need to quantify the problem in terms of the amount of V change, particularly in the light of the concerns money that could be siphoned o by charities, or the which IMC have raised and particularly in the light bogus charities, by paramilitary organisations, of the concerns of the Organised Crime Task Force. of whatever description, whether it is more prominently done by Loyalist paramilitaries or indeed by Republican paramilitaries? Is any eVort Q430 Lady Hermon: That is the sum total of what being made to capture that sort of evidence? you are going to tell the Committee? Mr Wall: As part of our review, we had detailed Mr McGrath: No. I think that is an answer to what discussions with both the PSNI and Inland Revenue is going on in Northern Ireland. and we asked the questions that you asked. The evidence that we got back was anecdotal. The police Q431 Lady Hermon: I am sure that you will know and the Inland Revenue were both of the view that that, in fact, the Committee did take recent evidence there was a clearer significant risk in terms of the from a member of the IMC, who indicated that this current legislation. PSNI do not keep records on was still a serious problem. Could you just explain to cases or on the value of fraud. us how it has been that, in fact, we have an Independent Monitoring Commission which made it quite clear that both the Irish Government and the Q435 Lady Hermon: Would it help if they did? British Government should have undertaken reform Mr Wall: Yes, it would, and we think that the new in this area? I am repeating myself here; that was a mechanisms that we will put in place will enable that recommendation made in November 2004, we are to happen. The Revenue did identify, again now sitting in May of 2006. What, in heaven’s name, anecdotally, some specific cases. They identified that has the British Government done since then? Why is they had some cases where charities had been set up it trying to skate over this issue? as vehicles for tax avoidance and that sham charities Mr McGrath: To be clear, we have monitored over had been established to avoid stamp duties, and that recent years the need to change legislation but also one charity had been set up to receive large gift actually to get some clarity about how to change it, shares, which attracted 40% tax relief. They estimate and taking account of developments in England and that has a cost of £14 million and that case is Wales. We have also had to take account of currently under investigation. There is currently no developments in terms of regulation of charities in formal record-keeping across agencies, in terms of the Republic to ensure that the border was not used the risk that is posed by the lack of regulation. We as a sort of mechanism to help some of the diYculties hope to correct that under the new requirements and we have talked about. 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Q436 Lady Hermon: Do you think the Department result of widespread consultation, we had more than has been rather negligent, when this problem has 100 responses to our consultation, and there was been highlighted years and years ago, that in fact it widespread support for that model. is only now that legislation is being passed actually to tackle this negligence? Q439 Rosie Cooper: I think Lady Hermon has Mr Wall: No. As Mr McGrath indicated, we began covered a lot of this area, but there are some to look at the review of legislation again in the year questions I would like to ask. How many 2000. You have to look at this in the context of organisations do you know of for taxable purposes changing regulation across the whole of the UK and have charitable status? it is important that the Northern Ireland regulatory Mr Wall: As you may be aware, the current system does tie in with the other parts of the UK, regulation for charities, eVectively, is through the particularly in terms of sharing information across V Inland Revenue, and the Revenue indicate that they di erent regulators, because that will be an element have 3,000 organisations on their database. In the in successful regulation and control of crime. That last year, we have established a funding database, in was a factor. It is only in the last three years that the Department, for organisations, voluntary and there has been strong evidence, the IMC Report is community organisations that are funded through one of them, about the need to implement changes Government. We have now 6,000 organisations on in terms of controlling organised crime and that database. We are operating on the assumption paramilitary involvement in charities. Mr McGrath that there are likely to be somewhere between 7,000 again outlined the timetable as regards that. I think and 9,000 organisations which will be registered as we have pursued that matter as robustly and quickly charities once we establish the Charity Commission, as we can, in the context of those competing because there is a range of other bodies at the present V demands, e ective co-ordination of regulation time which would not appear on the Inland Revenue across the UK and dealing with the specific issues in database and do not appear on the Government Northern Ireland. funders database. For example, churches would run a wide range of youth provision which would not Q437 Chairman: Six years is dealing with it urgently? receive Government funding, nor would they have Mr Wall: The issues as regards control of crime and charitable status, at the present time. We are organised crime have only emerged, certainly were operating on the assumption that we would need a only presented to the Department when we set up the register of 7,000 to 9,000. advisory group to look at the review of legislation, Rosie Cooper: I think most Members would agree which was two and a half years ago. that we were quite astounded to find that Northern Ireland did not have a Charity Commission. I have Chairman: Even so, during that time, an awful lot of had to do quite a bit of work with the Charity money could have been misappropriated by an Commission over time and even I would want them awful lot of charities, or bogus charities. to have stronger powers here in England. I have to say that I hope that whatever the Minister brings Q438 Lady Hermon: If I can just follow on from that forward is a lot stronger, because nothing that I have point, Mr Chairman. I am sure our witnesses will be heard today would make me feel there is any great aware of the Report of Professor Ronald Goldstock, hope that this will really be wrung out and sorted who was a Government appointment, came very out. I suppose my natural questions will be highly recommended and had a very high profile operational, in the sense of how do you propose to indeed, who did report in January of 2004, over set it up, how many people will there be, how much two years ago. He recommended the use of an money will be put into it, how strong will it be, what Independent Private Sector Inspector General will be the regulatory force behind it? How will we within both the construction industry and for the know that what you propose, the strategies that you regulation of charities. Why was no consideration have got, will deal with identifying money that is given, or has any consideration been given by the going through paramilitary activities in these Department? charities? If you have taken nine years, almost 10 Mr Wall: Yes, we are aware of that and we have years, and we have not got very far, how are you given consideration to those recommendations. The going to swing into action now with any force and examples cited all relate to private sector situations real relevance, and are you going to put enough where the victims are in fact in the private sector. In money and enough strength behind it, because I fear, the charities field there are a number of diVerences. unless you do that, then this is a waste of time? One is that the organisational victims, of course individual members of the public are victims in terms Q440 Chairman: There are a lot of good questions of the money they may donate to a charity which there. Give us good, comprehensive answers that is behaving criminally, but organisationally the will convert us all to be absolutely convinced that victims that we have identified would be the Inland you have all the right solutions and you are going to Revenue and tax collection. Also, the charity sector implement them with the vigour and urgency that in Northern Ireland is very fragmented and by its should characterise people charged with this duty? very nature is really not conducive to that private Mr Wall: I will do my best, Chairman. The quickest sector model. We think that the proposed Charity way to identify that is the ways in which we envisage Commission will provide the required regulation, it the powers of the Commission being diVerent from will have independence and it is a model which is the the powers of the Commission in England and 3379331004 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Wales. Currently, the Commission for England and Mr Wall: One should always give with care, I trust. Wales does not cover all charities, it covers, as I understand it, only about 60% of the sector. Some of Q444 Rosie Cooper: How will the Charity those, schools, for example, perhaps will not be Commission be alerted, other than via the accounts, considered to be high risk, but small charities would which no doubt can be handled if you are suYciently be probably one area where there could be the interested to make sure of that? In England and establishment of sham charities and the need for Wales they tend to wait for people to ‘phone in, and broader regulation, so we are proposing that all we have looked at various task forces where the charities will be subject to registration, regardless of police do not notify each other, they do not go out size. Secondly, there will be a public benefit test proactively themselves seeking evidence of fraud. in the Northern Ireland regulation which the How will they operate, what will be the thing that Commission will apply. The third and perhaps most starts an inquiry? important in terms of your concerns as regards Mr Wall: An inquiry by a member of the public will financial control, there will be much more rigorous be one route. We are establishing a regulatory accounting standards that will apply in terms of forum, which will include the regulators across the regulation of charities in Northern Ireland. UK but will also include the police and the Revenue. Currently in England and Wales charities which The legislation will also include gateways, in terms spend over £90,000 per annum have to declare their of sharing information between the Revenue and the full accounts and only where they have a turnover of Police Service and the Commission. over half a million pounds do they have to carry out a full professional audit. Under the proposals that Q445 Rosie Cooper: Will that be required, or will it we are putting forward, all charities will be required be they find out about an organisation which they to produce evidence of their accounts. For those think is possibly not a charity and being used for the spending less than £10,000 a year, they will have to wrong reasons; will they be required to pass on that produce an independent examination of their information to the Charity Commission and other accounts. For those between £10,000 and £100,000, organisations, or will it be just left in the air, they they will have to produce full accrual accounts plus may do, they may not? independent examination; and for those spending in Mr Wall: Are you talking about the police or the any one year more than £100,000 they will have to Revenue? carry out a full professional audit. There will be a regulatory framework which will be much tighter, Q446 Rosie Cooper: If the Revenue find out, will in terms of examining the financial probity of they be required to make sure the Charity registered charities, all registered charities. Commission know, will they be required to pass it on to the police and the Organised Crime Task Force, or whatever; will that be required? I think it is really Q441 Chairman: How soon can all that become important, because otherwise some people will say it operative? is perhaps not high on their agenda and it will just go Mr Wall: According to the timetable we have at by the by. the minute, we are hoping to commence the Mr Wall: I think it will be clearly in the interests of establishment of the Commission next year. I would the objectives of both the Police Service and the hope that we would have the Commission operating Inland Revenue, where crime is suspected, to share fully as quickly as possible, and we will certainly be that information with the Commission, in terms of mindful as regards the concerns in terms of the ensuring improved regulation and control of crime. control of crime. There is an issue, however, in that it will take a certain amount of time actually to get Q447 Rosie Cooper: Is there a diVerence between “in people on to the register. the interests of” and “required”; that is the point I am trying to get to? Q442 Chairman: Good people will be watching and Mr Wall: I would need to check the actual wording listening with interest to your evidence, and all these of the legislation, to give you an answer. I will vague descriptions of time are a little bit tantalising, provide that for you at a later date. so can you put some figures on as quickly as possible? We have got “shortly” down, so we are Q448 Chairman: Perhaps it would be sensible to making some progress, but when do you think the have a requirement for co-operation with the people of Northern Ireland can feel that if they give Organised Crime Task Force, and perhaps you money to a charity they are indeed giving money for could take that one on board? a charitable purpose? Mr Wall: I will take that on board. Mr Wall: It is intended that the Commission will be established in March 2007. I would hope that within Q449 Stephen Pound: Did you say seven to nine 12 months we would have clear evidence of a Charity thousand, or 79,000? Commission operating which the Northern Ireland Mr Wall: Seven to nine. public can depend upon. Q450 Stephen Pound: I was just working out in my head whether that was one charity for every 31,000 Q443 Chairman: So give with great care until 2008 people; it seems to me a pretty extraordinary figure. and then you can give with abandon? There are a number of charities that I am personally 3379331004 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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3 May 2006 Department for Social Development involved in, like the RNLI and the Soldiers’, Sailors’ Q456 Stephen Pound: For street collection and on and Airmen’s Families Association, which are UK private premises? charities, so even though they operate in Northern Mr Wall: No, not on private premises; for public Ireland they are based in the UK. How many of collections. those charities that you are talking about are ones which already come within the aegis of the Charity Q457 Chairman: I think it is very important that you Commission because they happen to have their do take on board the concerns of the Committee that Y o ce of record in GB? the involvement, or potential involvement, of V Mr Wall: I have not got numbers. There are di erent criminal elements, be they paramilitary-based or kinds of charities in terms of the relationship with otherwise, must be dealt with by close liaison with GB; some Northern Ireland branches, if you like, the Organised Crime Task Force and other means. I have more autonomy than others, as a kind of am sure you do take all that on board, and I am sure franchise. My guess is that we are talking in the that you also have some idea of the amount of funds hundreds, not above a thousand, a smaller number. that have been diverted to illicit use, so you know presumably the extent of the problem that you are Q451 Stephen Pound: I may say, I am just trying to going to be facing? reduce your workload here. Mr Wall: We are certainly convinced of the extent of Mr Wall: If a charity operates in Northern Ireland the problem. I think the relationships that have under the new regulatory system, they will have already been established between the various to register separately in Northern Ireland, but authorities will enable us to build well upon that. I there will be administrative mechanisms to ensure also think we have mechanisms to be able to measure that information is shared between the diVerent the problem in future. Commissions to ensure that there is not too onerous an administrative burden placed upon charities. Q458 Gordon Banks: Very briefly, because Lady Hermon somewhat stole my thunder on some issues Q452 Stephen Pound: An organisation like Guide I was going to raise. Going back to the Goldstock Dogs for the Blind, for example, or even Report, which basically you said was not a pattern Greenpeace, or whatever, if they are registered here, that you wanted, that you were looking for, do you would still have to register locally? see that there are any other sectors which could Mr Wall: They would still be required to register in benefit from regulation in a way that Professor Northern Ireland. Goldstock did actually suggest; sectors such as taxi firms? Q453 Stephen Pound: Have you considered a case of Mr McGrath: I am not sure we have a view on that, 15 years ago? There was an organisation called the to be honest. West Belfast Family and Children Support Services Group, which was in fact a front for the IRA, and a Q459 Gordon Banks: You do not think there is any number of people in the part of west London that I other sector in Northern Ireland that could benefit live in gave money to this, thinking it was for the from IPSIGs, if you like, that you would have an suVering children, and it ended up causing suVering interest in? to children. The people who gave that money were Mr McGrath: Our primary interest in terms of the actually charged under the then anti-terrorism Department, in terms of the sector, is the voluntary legislation, including someone rather close to me. and community sector, which is actually a very Has that consideration come in, because it seems to vibrant and active sector in Northern Ireland. As a me, if you have got even a partially unregulated Department, there is not another sector that we have system at the present time, it is not only the fact that sponsorship or oversight of, apart from the licensing the money is going to undesirable places but actually trade we have just spoken about and other elements you are creating criminals here? in social policy. Mr Wall: The new system will not be partially unregulated, it will be more regulated than anywhere Q460 Chairman: This Committee has received else in the United Kingdom. evidence which would seem to indicate that a degree of regulation and licensing, for instance, taxis and Q454 Stephen Pound: That message to the potential road haulage, beyond what might exist at the donors would go out? moment would possibly be beneficial. Do you have Mr Wall: That is right and we are also introducing a view on that? stringent controls in terms of public collections of Mr McGrath: It is not within the remit of the monies, which will apply to all charities. Department for Social Development to comment on; again, we have no responsibility for it and I have Q455 Stephen Pound: Who will license the public formed no view on it. collections? Mr Wall: The Commission will issue an Q461 Chairman: Right; but that does not mean that authorisation for any organisation that wants to there are not people who have strong views on that, collect money publicly. The council then will have to absolutely? issue a specific permit in terms of the specific Mr McGrath: No; and that is a point maybe to pick collection that is intended. up somewhere in the future discussions. 3379331004 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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Chairman: Yes. Thank you very much indeed. which is not reducing crime but ensuring that the overall strategic direction, in a sense, has an element of crime-proofing within them. Q462 Mr Grogan: On the subject of joint working, which perhaps naturally follows, in your memorandum you refer to the Interdepartmental Q464 Mr Hepburn: On the issue of social security Working Group on Organised Crime. How does this fraud, can you tell us exactly what sort of fraud is work; how often does it meet, what are the sorts of going on; is it ID fraud or is it personal fraud and current issues that are being looked at and who is claiming benefit fraud, and so on? represented on it? Mr Nevin: The main one involves the person who is Mr McGrath: There is an overall framework. The claiming the benefit or their spouse working; your Interdepartmental Group on Organised Crime is age, overstatement of disability or incapacity and one of the strands within the overall architecture of probably living together with someone, as a partner, the Organised Crime Task Force, which is at when you claim not to be. Those are probably the ministerial level, and is headed up by Shaun three main areas of fraud that we are aware of and Woodward. The Interdepartmental Working Group have evidence of. I think it is fair to say probably on Organised Crime is within the Northern Ireland there has been a bit of a change in recent years Civil Service, it is chaired by the Head of the Civil because we have increased our steps to verify Service, Nigel Hamilton. To date, it was set up in identity, and obviously the gateway to the benefit March of 2005, it has met on four occasions since system is through the National Insurance then and it is how you fit in the other issues with the application and getting a National Insurance civil departments, departments such as ours, whose number. The process of running that has become primary focus is public services, how that feeds in to more rigorous in recent years and we think that has probably helped to reduce identity fraud. I think some of the issues that the Organised Crime Task also another factor that has contributed to it has Force is dealing with. We are dealing with liquor been the cessation of payment by order book, licensing and regulation of charities, we are also because one of the things that people did was try to dealing with social security, all issues like that will be hijack various identities and then get order books. dealt with and fed into the more clear organised Then they had payments for 26, 27 weeks, or crime focus further up the architecture, for the NIO, whatever, and obviously benefit could be paid of PSNI, Assets Recovery Units, they all would well over £100 a week, so if you had managed to feature. It is one of the wider strands of that overall obtain these there would be quite a lucrative income architecture which has been put in place between the from it. I think, in actual fact, if you had been Task Force itself, the ministerial chaired one, the speaking to me five years ago I would have said that stakeholder group and then this element to make identity fraud was a much greater problem then than sure that the civil departments play a role, and the it is now. sort of issue that civil legislation is, in a sense, crime- proofed or looked at is fitted in as well in that. That is the overall architecture. Q465 Mr Hepburn: How widespread is the problem? You have suggested that it is more or less individuals involved, in personal fraud. What level of Q463 Mr Grogan: For example, when drawing up organisation, surely there must be some level of the proposals on charities or on liquor licensing, parliamentary organisation involved in security how much contact, and at what level, does fraud? the Department have with the Organised Crime Mr Nevin: We have no recent evidence that there is Task Force, or was this discussed in the any great level of paramilitary involvement. There is Interdepartmental Working Group? some little evidence, we have had contact, for Mr McGrath: There are two levels, specifically on example, with the PSNI, who have to tackle all the liquor and charities. There were specific working fraud going on, and incidental to that it is involved mechanisms set up, and liquor involved PSNI and in social security crime. In actual fact, in the couple the Court Service specifically to do the details, the of cases which have been brought to my attention, nitty-gritty of the proposal worked up in close the level of social security crime, I can say this is relationship. In a sense, the wider package was taken purely relative, if relatively small, a person, or through that sort of higher strategic mechanism to maybe his spouse, claiming benefits, I think ensure that it fitted. Similarly on charities, in a sense, probably as a front, to provide an income, so they as Lady Hermon said, there is a general view that had a front and an explanation for having some better regulation should be in force. There was a income, and they were there, taking the time that debate about whether the precise mechanisms were they had to do other crime. Whereas, in the past, again worked up in close consideration with PSNI when there was more identity fraud going on, it was and the Revenue and Customs, and again would be actually being used to fund other crimes, or getting into drugs, some paramilitary involvement, things seen at the strategic level in the Organised Crime like that. Task Force as an important response, particularly to the points that have been made, and Lady Hermon has referred to them, in IMC reports. There is the Q466 Chairman: Is there any evidence of one meshing of the individual departments working on it community being responsible for the application of and fitting it within what their primary purpose is, a greater degree of fraud than the other? 3379331004 Page Type [O] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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3 May 2006 Department for Social Development

Mr Nevin: No, there is no evidence of that; it seems appropriate. Again, do you have any colleagues of to be very evenly spread. yours who would attend these meetings and sit within this working group? Q467 Mr Hepburn: How does the problem compare Mr McGrath: I think we are dealing with it on the with other parts of the UK; would you say you have social security side. a worse problem, or a similar one? Mr Nevin: In actual fact, I was not aware of that Mr Nevin: We have not, I think, gone into the particular agreement. identity fraud end of it. All I can say to you is that we and our colleagues in DWP carry out exercises to Q474 Lady Hermon: I will let you have my copy estimate the levels of fraud and ours is very afterwards. comparable with the level in DWP. They have Mr Nevin: Social security has actually had a reported recently that under 1% of expenditure on memorandum of understanding, as part of the UK social security benefits is down to claiming Government, with the Republic of Ireland, on social fraudulently. The latest estimate for the last couple security, in fact, since 2000, and there has been of years is that we are around 1% of expenditure. very close co-operation. There is a Management Across the whole fraud aspect, I think we are very Committee, which meets three to four times a year. comparable with our colleagues in GB. There is regular liaison between ourselves and colleagues in the Republic of Ireland at the operational level, to try to detect and minimise Q468 Mr Hepburn: The solution to this and how you cross-border fraud. On the memorandum of tackle it would be similar to other parts of the UK? understanding, the committee which deals with that, Mr Nevin: We are very similar. there was a recent conference, which we hosted, in Armagh, which looked at cross-border identity Q469 Mr Hepburn: There are no special measures fraud and the movement of people across borders, so because it is Northern Ireland to deal with this there is actually work going on in the social security particular type of fraud? field between ourselves in Northern Ireland, DWP in Mr Nevin: No, and we keep in close touch with our Great Britain and the Republic of Ireland. In fact, colleagues in DWP in Great Britain. this year, or last year I think, The Netherlands also drew up a memorandum of understanding and they Q470 Dr McDonnell: Do you include housing fraud were present at the conference in Armagh as guests in that 1%? because they were involved in this and to bring a Mr Nevin: In fact, our investigators act for continental aspect to it. the Northern Ireland Housing Executive in investigating housing fraud. They do not have their Q475 Lady Hermon: I wonder if that co-operation own investigators for that. They identify cases and has been successful and beneficial? refer them to us and we work closely with them on it. Mr Nevin: It has; it has obviously improved over the years as we have become more comfortable and more familiar with the laws. The laws are not the Q471 Mr Hepburn: So you include that in the 1%? same in both countries. Mr Nevin: That is included in the 1%. Q476 Lady Hermon: Do you think that could be Q472 Lady Hermon: Are you ever invited to give mirrored by the charities changes as well, since the evidence by or to the Independent Monitoring IMC specifically looked at the jurisdiction? Commission, at any level, your Department, have Mr Wall: We have been having regular meetings you been consulted at all, particularly by the with oYcials in the Republic; they are going through charities? a similar process of review of their legislation. In Mr Wall: We get evidence as part of the bigger fact, their legislation is older than our own. Our charities legislation . charities legislation, in fact, goes back to 1964, I think theirs goes back to pre-partition, so they have Q473 Lady Hermon: Thank you. Mr Nevin, you similar problems to ourselves. The regulatory forum made reference to co-operation, working closely that I spoke about will include oYcials from the with your counterparts in Great Britain. Can I just Republic as well as oYcials from the UK, so we are say to you that, of course, we are looking at, our working proactively and ensuring that there is good specific inquiry is Organised Crime in Northern communication and we are looking at mechanisms Ireland, we are very, very aware that, in fact, the for transferring information between the regulatory border between the Republic and Northern Ireland authority in the Republic and in the North. makes no diVerence to those who intend to carry out Lady Hermon: That is fascinating. organised crime. I am sure you are aware that last year there was an agreement signed oV between both Q477 Mr Fraser: Going back to the licence situation, the British Government and the Irish Government. just to clarify something, one of you said that the I am just reading the title here, on “Co-operation on £140,000 licence is an asset on the books of a Criminal Justice Matters” and there is a working business. That is correct, is it not? group established, as I say, as of last year, to identify Mr McGrath: I said, to be clear, there is probably a areas of co-operation on criminal justice matters variety of accounting treatments of this, depending where they could be enhanced or initiated as on whether it is a small, single-handed pub or 3379331004 Page Type [E] 29-06-06 23:50:42 Pag Table: COENEW PPSysB Unit: PAG1

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3 May 2006 Department for Social Development the licence-holder is actually one of the big illicit. Therefore, where the impact is going to be conglomerates and it may well have been written oV. great upon, or potentially great upon, an individual That is the point; there is a mixed approach to that who had every reason to expect that this would be a and therefore the impact of the proposals would not realisable asset then it is important that any change necessarily be as draconian to some people, in asset recognises that, which is wholly diVerent from the terms, in any terms, as to others. impact upon a company owning a chain of things, so I guess that you need to take that one on board. Did Q478 Chairman: To the single person operating one you want to say anything to us, finally? pub, it could represent a very significant sum? Mr McGrath: No, I do not think so, Mr Chairman. We have covered most of the points we wanted to Mr McGrath: It could represent an asset, as I said, make and I hope we have given you as fulsome Chairman; it may well be not the sum that they paid answers as possible. for the licence in the first place. It is presented, in Chairman: Thank you very much indeed; you have some cases, as the sort of pension fund. been extremely helpful and we are very grateful to you. It may well be that our Clerk will correspond Q479 Chairman: What we have to recognise here, with you about certain bits of information, if we and I am sure you will recognise this, is that this is want a little bit more follow-up, but we are grateful something which, whether it should be there or not, to you for coming. We wish you a pleasant and safe in your opinion, in fact is wholly legitimate, people journey, and I declare the session closed. Thank you are not trading in anything that is remotely illegal or very much. 3392501043 Page Type [SO] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

Northern Ireland Affairs Committee: Evidence Ev 77

Wednesday 7 June 2006

Members present:

Sir Patrick Cormack, in the Chair

Mr David Anderson Mr John Grogan Gordon Banks Lady Hermon Mr Gregory Campbell Dr Alasdair McDonnell Rosie Cooper Sammy Wilson

Written evidence from the Northern Ireland OYce and the Northern Ireland Departments is on page Ev 139

Witnesses: Paul Goggins, a Member of the House, Parliamentary Under Secretary of State for Policing and Security at the Northern Ireland OYce, Chairman of the Organised Crime Task Force (OCTF), Mr Nigel Hamilton, Head of the Northern Ireland Civil Service, a member of the OCTFand Mr Nick Perry, Director General of Policing and Security at the Northern Ireland OYce, Chairman of an OCTFstrategy group, gave evidence.

Chairman: Can I welcome you, Minister. First of all, If I might say, I think there are three early issues can I, on behalf of the Committee, congratulate you which seem to me clearly to need further work in the on your recent appointment. It is one that gave a lot months ahead. One is to get eVective understanding of pleasure to your friends on both sides of the of the criminal markets that operate and we can House and you have a pivotal and important work closely with GB colleagues in developing that. assignment that we wish you well in discharging. It Secondly, I think to focus on the gangs rather more is also a great pleasure to see again Mr Nick Perry than the commodities. I think in the past we have and Mr Nigel Hamilton who are with you. You are been good at looking at the commodities but in fact all most welcome. Thank you for allowing us to start the criminal gangs will move between commodities a little earlier than we said but we are advised there and it is they we need to focus on. Thirdly, and is going to be a division at four o’clock. We would, finally, and I think this is a very important task for as I mentioned to you a couple of weeks ago, like to me personally, to raise the profile of this whole have a brief session with you privately after the business with the public and with the business public session because much of the evidence we have community so that we have a real sense of shared received, of necessity, we had to receive in private responsibility. This is not something just for law and we will talk to you a little about that. I think enforcement, it is something that everybody needs to even before I say anything else because there may be play their part in. some people who will tune into this, I must thank Mr Sammy Wilson for representing the Committee on Q481 Chairman: I think we welcome that statement, the mile run day and surviving it. Minister, and we hope that when our report is Mr Campbell: Just! published it will underline the extent of the problem and perhaps point the way to some solutions and Q480 Chairman: He is slightly redder than normal obviously we will want to discuss that report with but he seems to be more or less intact. Stephen you. The Government, of course, will be responding Hepburn is still running and we hope he will turn up to it formally but we will want to discuss that with later! Minister, have you anything that you would you and the Secretary of State and we hope it will like to say at the beginning before we move into the make a positive contribution towards bringing what questions? you and I would call normality in the Province. By Paul Goggins: Perhaps just briefly. Clearly you are way of beginning, the Home OYce has conducted an familiar already with my colleagues to the left and inquiry into, and you have just come from there so right of me and they will make a contribution in obviously you are familiar with these things, the answer to some of the questions this afternoon. economic and social harm caused by organised Simply to say at the outset, at the core of what the crime. I am not sure that report has yet been Government aims to do in Northern Ireland is of completed but the investigation has been underway course to bring peace, prosperity and stability, and for some time. What plans do you have to work in tackling organised crime is fundamentally tandem with your former department on this? important to that. There are of course many things Paul Goggins: I think there is a need for close in common between organised crime in Northern collaboration to understand better the levels of Ireland and in other parts of the UK but there are organised crime. People ask the question how much also diVerences, the connection with paramilitaries organised crime is there and it is very diYcult to give clearly being one of them, the border between the an answer, much of it is unseen and hard to quantity, north and south clearly being another. My belief for but we need to get better at the analysis, we need to the few weeks that I have been in position is that I work closely on that. I am particularly interested to believe we have the structures in place to deal with work closely with Home OYce colleagues on the that, particularly the task force but also the issue of harm reduction because I am sure the partnerships between the law enforcement agencies. Committee have noticed that perhaps the traditional 3392501043 Page Type [E] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry way of focusing on success in relation to organised Organised Crime Steering Group that the Home crime has been to count how many tonnes of Class OYce runs and the Home OYce oYcial who is now A drugs we have been able to seize and how much leading a lot of this policy work started oV in the cash we have been able to seize. Of course that is NIO. There is a lot of transfer of information. On the important, but actually the really important thing is strategy group, which I chair, which is an how much harm has been prevented by the actions operational group, what we are seeking to do is to of the law enforcement agencies and we have a long integrate three areas of work. First is the issue of way to go to be able to quantify what we mean by prioritising gangs, which the Minister referred to, that harm reduction. I might say the work that has using a methodology that all law enforcement gone on in the Home OYce is clearly very important agencies signed up to. Secondly, linking that to a but very early on, in fact the second day of my time problem solving approach. We spend a lot of our in Northern Ireland, I paid a visit to the PSNI time discussing issues that have arisen in the course analysis centre and I was very impressed by the of operations and trying to solve those problems and quality of the work going on there. They seem to be making sure a whole range of Government eVort is pioneering—it is still in the early stages—some very focused on key groups and issues. Thirdly, tasking important work at the analysis centre, making that and using the expert groups to create the tools that link between the operational work and the reduction the agencies need to combat organised crime and of harm on the ground, the diVerence it makes to that is our focus at the moment. individuals, to communities and to the economy. I Chairman: Thank you very much indeed. think that we will work closely with GB colleagues, we will I am sure learn from the Home OYce but I V Q484 Mr Campbell: Could you inform us, Minister, think we also have something to o er from as to what the Organised Crime Task Force is doing Northern Ireland. on an ongoing basis regarding the paramilitary involvement in organised crime at various levels? Q482 Chairman: Clearly, you are bringing yourself You have outlined some of the issues about the into the job and working yourself into it very dangers to individuals who might come within their quickly, I congratulate you. Have you had much to remit, what are the Task Force doing on an ongoing do yet with the Organised Crime Task Force which basis to target those paramilitary groups which I gather is about to publish its 2006 annual report? appear to still be involved in violence and Paul Goggins: That is right. On 19 June, a week on racketeering? Monday, I will launch the annual report and the Paul Goggins: The clear focus of the Organised threat assessment and we will be gathering together Crime Task Force is organised crime and whoever is a whole range of people from law enforcement but involved in that organised crime will be our target. also more widely from the business community. I I think recent evidence is that law enforcement will will be sending out a very strong message from that deliver the sharp end of that. If you take, for meeting and from the launch of that report about the example, Jonesborough Market which, as Members fight against organised crime and the role of the of the Committee will know, was a disreputable ordinary citizen within that. I want to make it very centre for the sale of counterfeit goods, law plain to people that when you buy counterfeit enforcement moved in there in a very impressive way cigarettes, you do not only do the harm you would and dealt with that. A certain notorious family in normally do by smoking the cigarette but there is South Armagh had a visit from a very well organised 160% more tar in that counterfeit cigarette and 80% number of police oYcers and other representatives more nicotine. If you choose to use perfume that is of law enforcement. I think the message is whoever made up of urine then you need to know that. If you you are, whatever organisation you are involved buy a DVD that is a pirate DVD, you may be with, whether it is paramilitary or not, then law contributing to paramilitary violence. We need to enforcement will be bearing down on you. Of course get that message across and I shall be choosing to do we take into account in all this the IMC reports. The that very clearly. latest report, the tenth—I will not lecture the Committee because you will all be well aware of the Q483 Chairman: I am very glad to hear that, I am contents of that—does report continued sure all the committee will be glad to hear that involvement of paramilitary with organised crime. It although I do not want to put words in the mouths of notes some significant steps forward in terms of my colleagues. Although we are very impressed that PIRA, although it acknowledges that individual there is an Organised Crime Task Force, I think we members of PIRA may still be involved. We have have all felt from time to time that perhaps the some way to go but my assurance to the Committee profile is not as high as it should be. Your assertion is that whoever you are, whether or not you are in eVect you are going to do what you can to raise its paramilitary, if you are engaged in organised profile is very welcome. Thank you for that. criminality then the focus will be on you. Paul Goggins: It might be appropriate to ask Nick to say something more about the strategy group, I chair Q485 Mr Campbell: You mentioned the IMC report, the stakeholder group so I am involved in a wider the most recent report of the IMC indicated that in range also. relation to both the Provisional IRA and the UVF, Mr Perry: If I can add to the point about the Home in the IRA some senior members remain involved in OYce. Of course, the Home OYce are members of fuel laundering, money laundering, extortion and the OCTFand in turn we are members of the tax evasion and that the UVFdid not see any 3392501043 Page Type [O] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry significant impact on the behaviour of the UVFas a Northern Ireland itself. It is a very worrying whole in relation to racketeering. Now it is dimension that the Committee had not heard of any obviously some months since that evidence was evidence prior to that. provided by the IMC, in terms of your brief has Paul Goggins: I am very happy to respond to that. anything substantially altered? One of my previous responsibilities in the Home Paul Goggins: It is probably diYcult for me four OYce was for organised crime and that included weeks in to draw any specific judgment about the human traYcking. I was very keen that we advanced very short timeframe. The distinction I do draw, this work and saw greater partnership between law based on the IMC report, is that whilst they enforcement and voluntary organisations. Next year acknowledge that individual members of PIRA may is the 200th anniversary since the abolition of still be involved in criminal activity, they make it slavery— clear that the organisation itself and its leadership is not engaged in that, and actually anybody who is engaged is doing so out of step with the organisation. Q488 Chairman: The slave trade. They also note that loyalist paramilitary are not Paul Goggins:—the slave trade, I stand to be desisting either from paramilitary violence or from corrected, Chairman. An important landmark organised crime. I find it deeply regrettable that nonetheless and yet we have this new form of slavery UVFhave made it clear that they will not say which now faces us. Clearly I have made some anything further on decommissioning until after 24 inquiries in view of the evidence from Women’s Aid November. It is clear to me that there are diVerences and what comes through to me is that the issue of Y there. Of course we await now the next report due in immigration, crime, human tra cking is certainly October of the IMC when we all hope that there will not at the level that it is elsewhere in the United be further signs of progress. Kingdom but it is certainly a more pressing issue than it was. It is encouraging, therefore, that the immigration service is putting in a permanent team, Q486 Mr Campbell: Is there any evidence, Minister, an enforcement team, in Belfast. of paramilitary groups disparate from the loyalist groups and more cohesive than the republican groups, on either side, mutating or moving away Q489 Lady Hermon: How large is the permanent from their previous type of activities and becoming team? Paul Goggins: I am led to believe from memory it is more of a criminal empire whether as senior Y individuals or as groups organised within initially half a dozen enforcement o cers but that is themselves? a permanent presence there, whereas at the moment, Paul Goggins: I am watching that very clearly of course, the enforcement is done from Liverpool. because I see that as a huge challenge for all of us. Let me say a little more. What has also come back to If we are successful and paramilitary organisations me is that there has been an increase in the number move towards peace and desist from violence we of female foreign nationals working in prostitution would all applaud that. If then, as you said, it and there are now a greater number of brothels transmutes into organised criminal gangs because operating in Belfast. One of the things that has been the infrastructure is there, the discipline and said to me from the work the police have done is that organisation, then of course we would face a fresh none of the women who has been found have said challenge. I think it is very important that we keep that they have been forced into that position. They this pressure up throughout so that we do not allow have claimed that they have done it, and are doing it, that to happen, we do not allow those old on a voluntary basis. Can I say my response to that is to be at least cautious, if not sceptical, because many infrastructures to become a new threat to the people Y of Northern Ireland. of the women who are tra cked for the reason of sexual exploitation are bullied, threatened and intimidated by the people who bring them here and Q487 Lady Hermon: I am delighted with your therefore many of them are not ready to say straight appointment, Minister, to the Northern Ireland away that they are the subject of human traYcking. OYce team and it is very good of you to come here so I will watch this very carefully. I certainly would be soon after appointment as a witness to give evidence. happy to see any specific evidence that Women’s Aid May I ask you about three separate topics. I was or any other organisation has about this issue. I also extremely concerned by evidence that was given to await the full results of Operation Pentameter which the Joint Committee on Human Rights in this House has been a UK-wide police led operation to target on 22 May by the Women’s Aid Federation of the whole issue of women being traYcked for sexual Northern Ireland. Although it was anecdotal exploitation. That has operated in Northern Ireland evidence they brought to the attention of the and we will get the results of that. In short, this is not Committee their concerns that paramilitaries were a problem on the scale as it is, perhaps, elsewhere in involved in the traYcking of human beings, women, the UK but it is a potential problem at the very least. for all sorts of horrible reasons. Could you enlighten I will be looking for any signs of any clear evidence us a little bit about what your oYce intends to do and I will bring the full force of law enforcement to and the extent of paramilitary involvement in bear in Northern Ireland on this issue and make sure human traYcking in Northern Ireland, either into that if there are victims of human traYcking they get the rest of the United Kingdom or staying in the support they need. 3392501043 Page Type [E] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

Ev 80 Northern Ireland Affairs Committee: Evidence

7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry

Q490 Lady Hermon: At this stage, Minister, do you Paul Goggins: I think you are quite right, of course, have evidence of paramilitary involvement either by that there is this overlap, the question is where is the loyalist paramilitaries or republicans in human appropriate home for national security intelligence. traYcking? Patten was clear and the Government is clear that as Paul Goggins: I have no evidence in front of me of we move to a normal society then that responsibility paramilitary involvement in human traYcking but is a UK-wide responsibility and it should move. Of then, as I say, the evidence I have is that it is on a course there are a number of important steps to take lower level and I will be watching very carefully. before that happens. I will need to be content as the Minister responsible, of course; the chief constable will want to be content; the Secretary of State will Q491 Lady Hermon: If I could just move you back want to be content and we will continue to look at slightly, a few moments ago in fact, you did mention that closely. The chief constable is closely engaged in the UVF—the Ulster Volunteer Force—and you are those discussions. It would be an anomaly if national quite right in saying that they had issued a public security intelligence remained with the chief statement in April indicating that there was not constable in Northern Ireland when, of course, it going to be any decommissioning by that does not rest with any other chief constable organisation until at least after 24 November to see anywhere else. If I might say in relation to the whether in fact an executive is set up. You will be oversight commissioner, I had a very useful familiar with the tenth report of the IMC which was discussion with him in my first meeting with him the very critical that there has been little tangible other evening and in his report, which does bear evidence of progress from the UVF. In the interim, if some close reading on this issue, he does not actually they have not moved on decommissioning, have they say that we have made the wrong decision or we are transmuted into anything else? Has the level of going in the wrong direction, he merely notes that criminality by the UVFdecreased? Is there any there has been some controversy about this, and indication you can give of their current activities? If indeed there has. For me normalisation means they are not going to decommission what else are returning this to UK-wide responsibility. The chief they involved in at the present time? constable, of course, will have to be satisfied that he Paul Goggins: The most compelling evidence is is able to access the information and intelligence that contained there within the report which you have in he needs and he will not be prepared to sign oV on front of you which is the statement from the IMC this until he has got that assurance, and I will be that the UVFare still involved in criminal activity. closely engaged in that. It will be the job of law enforcement in Northern Ireland to deal with that as best they are able. What Q494 Sammy Wilson: At present, Minister, all of the we need, of course, is for the UVFand for all work which is required to ensure that flow of paramilitary organisations to decommission their information has not been completed, is that what weapons and to draw away from violence and you are saying? towards peace. Paul Goggins: Nick may want to comment on this. The work is ongoing and there are detailed Q492 Lady Hermon: Does the Northern Ireland discussions involving the chief constable and others OYce have a strategy to bring that about? in working out the detail of that but that work Paul Goggins: Indeed there is a strategy there, that continues. is a wider political strategy which we try to engage Mr Perry: Simply to confirm what the Minister said, politicians of all parties in. That engagement is based a great deal of detailed work is going on and it is on a very strong principle and that is the rule of law. making good progress. It will be completed long All politicians in Northern Ireland, of course, should before the transfer takes place. support the rule of law and that is a fundamental building block. Q495 Gordon Banks: I would like to move on to an Chairman: We would all say Amen to that. area which I will classify as the involvement of professionals in organised crime. We have heard in evidence from PSNI and others about the Q493 Sammy Wilson: On the issue of paramilitaries, involvement of what we might call professionals this week the oversight commissioner has indicated such as accountants, lawyers and financial advisers that with the gathering of intelligence now being assisting those who are perpetrating organised transferred to the security services and taken from crime. What steps can you tell us the Organised the police that there is a danger and since there is an Crime Task Force have taken to counteract the overlap between criminal gangs and terrorist gangs, involvement of such professionals aiding and very often they are one and the same, they sometimes abetting the carrying out of organised crime? carry out criminal actions to finance their terrorism. Paul Goggins: Of course wherever that happens it is Are you satisfied that the police and the security completely to be condemned by Government but services have got protocols in place which will ensure also by the professional organisations of those the flow of intelligence gathered by the security professional people. I am aware the PSNI are services to the police to enable them to carry out involved in undertaking training with professional investigations against those paramilitaries who bodies concerned, and the Law Society, and I think might be involved in terrorism and in organised that is to be welcomed. One particular initiative crime? which I am taking, and I think this is an important 3392501043 Page Type [O] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry step, is that some very important work is being livelihood, it is somebody else’s job put at risk or undertaken by Sir Stephen Lander, who is the Chair somebody else’s pension put at risk. We have to of SOCA, in relation to the suspicious activity make this point: there is no such thing as a victimless reports. These are reports which the financial crime, there is always a victim and all of us stand to services sector must make if they believe there is a lose as a society unless we grip this kind of conduct, suspicious activity in relation to financial dealings. and I am determined that we will. I say I am Sir Stephen reviewed that because although it was determined, I have come in and inherited a structure working it was not working as well as it might do and and framework in which this is already happening. I intend to launch that report in the near future in Northern Ireland and engage the financial services, the accountants and also the legal advisers so that we Q498 Dr McDonnell: It is good to see you here, assert a very strong message which of course is that Minister. I hope the four weeks have been those organisations should be on the side of law and worthwhile. order and the police and other enforcement agencies Paul Goggins: They have been full and very will be mindful in supporting and rooting out any interesting. rotten apples in the barrel. Chairman: You have obviously been on a very steep learning curve and you seem to be doing rather well. Q496 Gordon Banks: You mentioned the PSNI working with organisations like the Law Society and Q499 Dr McDonnell: We have talked many times in you mentioned SOCA there as well. Are you aware the Committee about the Organised Crime Task of other organisations within the professional world Force, the stakeholder group and the various that are having relationships in discussing the potential of this growth with organisations such as components going into it. Do you see any benefits in the Organised Crime Task Force, and what else are extending that stakeholder group to include an even you as a Minister particularly doing? I know you wider network? I am thinking in terms of people mentioned some things that your predecessor has involved in the petrol retail trade or people in the done because it is an issue which obviously is not licensed trade or people in the building trade. hugely on the Richter scale at this point in time as Secondly, that stakeholder group would only much as PSNI have had limited success in locating normally meet twice a year but, given the fairly fluid people, but as organised crime becomes more nature of organised crime, would it not be useful if sophisticated so does the need to try and hide the that group were to meet and collaborate more than organised crime. The ancillary question to that is do twice a year? you see that it is a potential field for growth as this Paul Goggins: I respect the work of those who have organised crime develops? gone before me in terms of the review that has been Paul Goggins: As I say, I think the full weight of law carried out, because it has been a thorough review enforcement needs to be brought to bear against any with clear conclusions and makes absolutely clear rotten apples in the barrel and those professionals the diVerence between the stakeholder group, the who engage in this kind of conduct should be strategy group and the expert groups in particular prosecuted, should be dealt with, and that should areas. I see the stakeholder group as a real serve as a warning to others that this should not opportunity to do the kind of thing we have been happen. There is a sense, I hope I am not speaking discussing which is to build that consensus and out of turn as somebody new to Northern Ireland, engage people from a variety of diVerent that perhaps in the past there were too many nods backgrounds. I know the membership of that group and winks about things like this and I think what we has been extended to include more people from the are moving to now is a better co-ordinated system business community which I think is very welcome, where the consensus loudly spoken is that all of us representatives of the police board, which is very are on the side of law and order and we will not welcome, and I will be making my own assessment, tolerate any activity of this kind. I think we need to because I have not chaired any of these meetings yet, make sure in every way we can, through the task as to whether that grouping is wide enough or force and through the individual professional whether it needs to be widened still further and I will association to bear down. make a judgment about that.

Q497 Chairman: Is it not fundamental to the success of that, Minister, getting rid of this absurd concept Q500 Chairman: You take on board the point about of victimless crime because there is no such thing as regularity of meetings? a victimless crime? We have had this trotted out to Paul Goggins: Twice a year on the face of it does not us from time to time. Would you agree with me that sound very often but my experience is that it is what some of these people nodded and winked because happens between the meetings that really matters, so they connived at the concept of victimless crime and I will be looking to make some kind of judgment this must be dealt with. about that. It seems to me that there is at least an Paul Goggins: Absolutely, I agree with you very, argument that it should be more frequent but, as I very strongly. I mentioned before the examples of say, I need to respect the work that has gone before the impact on health, people who smoke counterfeit and make my own judgments not too hastily. I cigarettes. Every pound that is stolen is a pound that certainly would not be against a more regular is taken away from somebody else’s savings or meeting if that was appropriate. 3392501043 Page Type [E] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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Q501 Dr McDonnell: Would you intend, just beyond Ireland, and I think that is a very welcome that on the task force itself, to widen it to include investment from the Asset Recovery Agency and academics, advisers and economists, as was you will know of some of the assets that have been suggested by Professor Goldstock? frozen as a result of their activities. I think there is Paul Goggins: I am certainly prepared to consider good co-operation with the Criminal Assets Bureau whether or not the group is as wide as it should be, and that is helpful. Clearly the Criminal Assets respecting as I say the judgments that have been Bureau operates in a diVerent framework from the made thus far and I will not be making any hasty Asset Recovery Agency. Are there things that we can judgment. The only note of caution I would put in is learn? I am sure that there are and, as you probably if you make the group so wide and so all- know, Government is looking very closely at asset encompassing, then you need to hire a big hall and recovery in general and the Asset Recovery Agency you do not make much progress. I want it to be the to see if there are ways in which we can make some right size to get the right level of serious engagement further improvements. but I do not start from the position of wanting to exclude people, I want all the right people to be there Q504 Dr McDonnell: You are telling us that in fact and I want senior people to be there so that what we you will learn from the CAB and bring changes? work at together resonates down the organisation as Paul Goggins: It operates in a diVerent context but I a whole. am sure there are things we can learn. We do not start from a position of being too far down the field. Q502 Dr McDonnell: From previous evidence we I think we can be very pleased with the start that the have gathered that the Organised Crime Task Force Asset Recovery Agency has made and the seizures is in the process of developing assets recovery and that it has made so far. strategy which will join up a lot of the work which has gone on. Can you give us some suggestions as to Q505 Chairman: You clearly want to build up what why you think you are doing that? Is there a gap has been done in the way of co-operation across the there to be filled, in other words, and what will the border, do you not? main provisions of that strategy be? How is that Paul Goggins: Absolutely, that north-south co- strategy coming about and what will it add to the operation at every level is— equation? Paul Goggins: The asset recovery work, which the Q506 Chairman: Crucial. task force will bring together, is very important and Paul Goggins: The other thing I want, as we all do, it is important because financial investigation should is to turn some of these frozen assets into cash which be at the heart of every criminal investigation that can then be recycled back and under the takes place. If somebody has made some money and incentivisation scheme can be put back on the front they have made it legally and they have put that line. It is still very early days but we need to stay money in the bank or into property then the message patient and strong in that task and make sure that we now is we are going to have that back and of course win those battles. through the proceeds of Crime Act, the creation of Chairman: I am sure you will. the Asset Recovery Agency, we now have the powers and systems and methods to enable us to do that in Q507 Lady Hermon: Can I focus a little bit on the a way, frankly, that we have never been able to do Asset Recovery Agency. It has done sterling work before. The benefit of the task force having a but it does strike me, and this is a personal view, that particular group that is working on this is it brings a huge amount of the budget of the Asset Recovery all the agencies together with that common theme Agency is eaten up in the administration of the and it should almost be rule of thumb from now on person’s estate and what they are administering. that any agency that comes across any form of How could that be reduced? How could the Asset criminal activity or potential ill-gotten gains there Recovery Agency be made much more eVective? I should be a referral to the Asset Recovery Agency, am disappointed by what you have just touched. there should be financial investigation from the There is an expectation in the community that there police and we should be pursuing the assets as well V will be a profit at the end of this. We have patiently as dealing with any criminal o ences that may have waited for a profit to come out of the Assets been committed. Recovery Agency and not a single penny has yet been invested to my understanding in Northern Q503 Dr McDonnell: Some of us have admired the Ireland by the Asset Recovery Agency, not through very dramatic seizures of the Criminal Assets its fault but there is something wrong with the Bureau in the south and the results they were able to mechanism and the cost of administering estates, is achieve there. Do you think that we can get to a that correct? point where the Asset Recovery Agency will be every Paul Goggins: I think there are a couple of problems. bit as successful? Because we are still in the relatively early days of the Paul Goggins: I think we can and I think the results Asset Recovery Agency, some of the action that they of the Asset Recovery Agency itself so far in have taken to freeze assets has yet to result in those Northern Ireland are very impressive. A quarter of assets being turned into cash and obviously people the resource and the staV power of the Asset are fighting legal battles, they do not want to lose Recovery Agency is focused on Northern Ireland, their ill-gotten gains and they are prepared to fight that is the whole UK but it is focused on Northern for them. What we have got to show is the resolve to 3392501043 Page Type [O] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry stay in there and win through on some of those cases Q512 Gordon Banks: If I could take the Minister and turn those assets into cash which then recycles back, this links back into the earlier question I was back into the organisation in the way that you have asking about professionals. We have heard some said. I think we have got to be confidant in the comments through our evidence process that organisation and what it is doing and be slightly potential criminals are using their assets to employ patient. At the same time, we have got to do extensive and expensive legal and financial advisers whatever we can to speed up the process. There are to counteract the claims on their potential ill-gotten things that stand in the way and the Asset Recovery gains. Have you any evidence of that? Have you got Agency have made a number of recommendations, an opinion on how that can be curtailed? some of them quite technical, for ways in which the Paul Goggins: This is a real problem and those who process can be speeded up and clearly Government frame the proceeds of crime legislation anticipated will need to look very closely at that so we do not that it would be, which was why initially the allow obstacles to stand in the way of us not just legislation did not allow the assets that had been seizing those assets but turning them into real seized to be used to fund the defence of that money. particular individual, that was to be left to other forms of financial support, legal aid and so on. The problem came in the working out of that that either Q508 Lady Hermon: It is an issue of an area that we people were above the threshold for legal aid, and might look to make more eVective and eYcient. therefore could not access it, or for some other Paul Goggins: Indeed. reason. There was a review of that and the decision made to allow some access to those seized assets, albeit a limited amount. There has to be a specific Q509 Lady Hermon: So that is a commitment? element of the seized assets which is excluded for this Paul Goggins: It is a commitment to make asset purpose which eVectively gives a budget for the recovery and proceeds of crime legislation work and individual to defend themselves. There is the V work more e ectively. This is so important. It is oversight of the court and the disbursements need to important because it is the right thing to do, it is also be reasonable. Of course we have an obligation to vital in terms of public confidence, people want make sure that they have a fair trial, so that is an those assets to back into money that is put into obligation on us. Although none of us like the idea services. of these assets being used in that way in the ideal world it probably is the best in terms of balancing Q510 Sammy Wilson: Minister, already the police in out everything. Chairman: Of course, even in Northern Ireland the Northern Ireland, because they can seize assets accused is innocent until proven guilty! where there has been a criminal prosecution, have had money recycled into the police service. If it can done through the mechanism where police seize Q513 Lady Hermon: How large is the budget that is assets and then who would get a certain percent of it, set aside for legal services? why has that not been possible in the Asset Paul Goggins: It will be diVerent in diVerent cases. It Recovery Agency? will depend on the case. A case will need to be made Paul Goggins: While some of the assets the police by the defence for the kind of expenditure that will seize are cash assets which are more easily recyclable, be allowed. The court will make a decision on that. the kinds of assets which the Asset Recovery Agency In fact, the Asset Recovery Agency has the power to are freezing are often properties and there is legal challenge that and, if successful, can reduce the contention around it. Because they are new powers amount of disbursement down to 65% of what was there is a number of battles taking place about it, but being requested. It is a tricky area. Of course this has the police have been able to do that. One of the only been in since 1 January this year so we will need reasons is because the police in Northern Ireland to keep it under review, and no doubt colleagues in Y have invested in financial investigation very heavily. the Home O ce will do that to see how it works out They currently have 26 financial investigators in in practice. It seemed to be necessary given the Northern Ireland. I can tell you that is not the level practical pressures we were under. in the police forces around the UK, it is a big Chairman: We shall also want to keep it under investment and I think it will pay oV and they will get review. back 50% of the assets recovered which can then go into further development capacity and financial Q514 Rosie Cooper: Could I ask you about investigation. telephone intercepts currently not being allowed, and the outcome of the Home OYce review on the electronic surveillance which is fairly long overdue, Q511 Chairman: Perhaps you should do the same I think. Also in the same sentence can I ask you to with the Asset Recovery Agency. tell us whether you are going to review the Proceeds Mr Perry: This year is the first year that the Home of Crime Act to allow the Assets Recovery Agency OYce incentivisation scheme is available to help, so to become an integral part of those investigative I hope this year and next year we will see some teams? benefits. Paul Goggins: On the intercept, I cannot add Chairman: When you come next year we will want a anything in terms of where the Home OYce is up to large pool of money on the table. in terms of the review, although I know the Prime 3392501043 Page Type [E] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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Minister has made it absolutely clear, as has the Q517 Chairman: Bit of deft passing! Home Secretary, the previous Home Secretary and Mr Perry: I think the issue there was partly about Ministers. In principle there is no objection to using the fact that bank notes of a certain type are intercept evidence, the problem is how do you find a repatriated to their parent banks to increase the practical model to enable you to do so in a way numbers of cash movements and therefore increase which makes a diVerence but which does not the level of vulnerability. I think the police are compromise the sources from which the information happier now that they have a good practical system comes. There is always the danger, of course, if you with the banks and the security companies, introduce a model that then the criminal element will including a joint control room, a risk analysis use other means of communication once they know framework and a feeling of more sensible planning that kind of evidence could be used against them. of cash movements so that repatriation of bank This is not one-way street intercept evidence, it is notes per se is not the issue. There is obviously still a more complex than it first appears to be, and that is big issue about security of vehicles moving around what the Home OYce is thinking about. In principle the place but repatriation is not one of the main it has been made very clear that there are no drivers of that. objections to the principle, it is the practicality of Paul Goggins: If I could just add to that. My early working out a model that will work. On the second, introduction to the complexity of banking and bank notes in Northern Ireland was quite an eye-opener clearly there is this review going on in terms of asset with five diVerent banks all operating diVerent bank recovery at the current time. The Asset Recovery notes. I think the key thing is the concern about cash Agency have made a number of recommendations. in transit robberies which clearly there have been. I My view of it is that the important thing is that the looked at the figures and for 2003 there were 105 Asset Recovery Agency is part of the team and is so cash in transit robberies, in 2005 that had gone down well connected to the other law enforcement to 64 and that was largely because of the close agencies that there are referrals made and that collaboration between the police and the private people work together on this. All the evidence I have security people including joint working in the seen so far in Northern Ireland is that is what is control room. Now the key thing is to make sure that happening in practice, the Asset Recovery Agency we continue to make improvements in that and in are getting the referrals. There is this wider review my view that will require further co-operation of going on. I am sure the question you have raised will that kind. be one that is considered within that context. Q518 Chairman: It is not just the numbers it is the amounts as well, is it not? Q515 Rosie Cooper: I think in the evidence that we Mr Perry: Indeed. have received some people have suggested that there is a mismatch between that which is happening and Q519 Chairman: We all know about one quite big that which is referred, and that process is not one. necessarily flawless. Mr Perry: Indeed. Paul Goggins: I am very happy if Nick wants to Paul Goggins: Fair point. comment further on that. The point has been made here in earlier sessions that you have had this is a Q520 Rosie Cooper: Can I just ask a final question view that people have. No doubt those views will be about the private sector inspector generally and the considered within the review that is going on and a view they should not be used in the charity sector. I conclusion will be reached. From my point of view think most Members of the Committee were the important thing is that the Agency is activity shocked/surprised that there was no charity engaged as a partner, and that seems to be working commissioner in Northern Ireland and it seems that very well in Northern Ireland. this is a field which those people who exploit this Mr Perry: My understanding is that the Agency was area have plenty of room in which to do that. It was happy that it was suYciently integrated and they did rather disappointing to see that this is not an area not want to follow up Professor Goldstock’s that you are going to move into. suggestion originally that they be part of the Paul Goggins: Let me make a comment about the investigative team but it is something which is kept independent private security inspectors general issue under review. in general. Nigel might want to comment on the issue of the Charity Commission because obviously there are plans to move forward on that in Northern Ireland. I am quite interested to see this model, and Q516 Rosie Cooper: I will be interested to see how I know there have been a number of pilots, I think that pans out. Talking about Professor Goldstock, there are six pilots operating, particularly in relation there is also a recommendation about bank notes to the construction industry to try and bring more being repatriated and I wonder what the current transparency and scrutiny into that whole business situation is and what the police service’s view of that of the contract and so on before any work takes is currently? place so that there is a more secure environment for Paul Goggins: You were looking at Nick when you that contract to be worked out so we bear down started that question. against extortion and other illegal activities. I think Rosie Cooper: Yes. the plan is to roll that model further forward a bit, 3392501043 Page Type [O] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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Nigel, you might want to comment in relation to the Mr Hamilton: That would be our intention. We have charity sector. Just as a general point, it seems to me just finalised this in terms of the model that we will in these early days still that there is an emerging need eventually settle on. to do something quite radical and bold about the private security industry in general in Northern Ireland. In a sense one of the vacuums that there is Q523 Lady Hermon: A very quick question. It is a in Northern Ireland is the lack of a credible, well- point which I think needs some clarification and, Mr regulated, properly licensed private security Hamilton, you are ideally suited and qualified, I am industry, and that is something that I am already sure, to clarify this. When the Committee received taking a very close interest in so that you get that evidence on 3 May this year in relation to this very level of scrutiny and oversight without these issue about the loophole in the charities legislation backdoor deals or extortion rackets taking place that was being exploited by paramilitaries, the within what otherwise would be legitimate economic witness—who was very helpful indeed—was Mr activity. It is an area of particular interest. Wall—and I am quoting here—said that the Revenue had identified some cases where “ . . . charities had been set up as vehicles for tax Q521 Rosie Cooper: I think you are doing a great job avoidance and that sham charities had been but it is a fact that they are not really moving into the established to avoid stamp duties, and that one charity sector. charity had been set up to receive large gift shares, Mr Hamilton: Chairman, maybe I should say by way which attracted 40% tax relief. They estimate that of introduction that across the devolved areas—and has a cost of £14 million and that case is currently I know this is an area of interest to this Committee— under investigation”. I am concerned at the wider we are currently working on seven pieces of public—since it was a public session—who give very legislation, five of which will be introduced. That is generously, we are all aware of this in Northern four pieces of primary legislation and one piece of Ireland, who may be very concerned that the charity supporting legislation, and hopefully enacted by this of their choice which is entirely bona fides may be the House by next March across charities, waste, road one under investigation. Could I ask you to identify freight, liquor licensing, petroleum, et cetera. In that charity to avoid that sort of concern that the respect of the charities sector, the Minister will wider public do now have? intend immediately following final consideration of Mr Hamilton: Chairman, I could not because that the Charities Bill, which is going through the House action has been taken by Customs and Revenue at the moment, to publish in July a draft Order in colleagues in relation to taxation issues rather than Council which hopefully will complete its passage by my side of the House. I will happily go and find out February next year so we will then have a full blown and advise the Committee privately. Charities Commission in operation. That will have Chairman: I think perhaps we will leave that for a about 16 staV, including financial staV to investigate moment and talk about that privately because I can a range of issues there. We would learn all the lessons see I have a nervous clerk on my side who is always obviously from the Charities Commission which motivated by those two words sub judice. Perhaps we currently exists in England and Wales. We can talk could return to that privately later. It is not further about that should the Committee be something that I am shutting oV. interested. In relation to IPSIG, as the Minister said Lady Hermon: It is a genuine concern. we have run six fairly small pilot projects exclusively Chairman: It is a very genuine concern. I am sure the in the housing and education sectors. These have Minister has taken it on board and we will explore it proved, Chairman, very positive so far in the sense a little later. that interestingly in those particular pilot schemes Sammy Wilson: Minister, I welcome the point which there were no approaches from paramilitary you made earlier on that something needs to be done organisations in respect of extortion et cetera. That about the private security industry and also the has been reviewed and we have decided we want to assurance which Nigel Hamilton has given us that run further into other sectors, particularly roads, legislation has been prepared which will include a transport and health, again just to quickly learn number of pieces of legislation but there were about some lessons, and out of that we will have a model four diVerent areas that people drew to our that we will want to apply across all the public sector attention. The first one was by the Petrol Retail construction projects that we have. That we would Group. When they came along, these were their also hope to roll out in due course, to those capital words, “A robust licensing system would make projects, particularly, we would think being petrol retailers better able to resist the pressure of the undertaken by the voluntary sector in which criminal gangs”, and they have been asking for this Government grant was involved. If we were involved for years now. in construction projects in each of the sectors that I Chairman: Our predecessor committee also asked, I mentioned or were grant aiding major construction might say. projects in the voluntary sector we would require the Sammy Wilson: It was one of the sessions where a final IPSIG model. I think, Chairman, you would great deal of frustration came through that prefer to call it a contract model rather than IPSIG, something which they believed should have been which sounds awful. within the grasp of Government, could have been done many years ago, was not done and now we Q522 Chairman: That would be preferable. We are welcome the announcement which Nigel has made in favour of the speaking of plain English. that there should be something coming through in 3392501043 Page Type [E] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry the Autumn session. Could you outline for us what it that the legislation will not be able to bring in the changes you do envisage when making the new kind of sanctions as well that new regulatory body legislation, and I assume that we will have silent can focus on? hearings in this Committee before hand. The one Paul Goggins: Can I say, Chairman, I do not have thing that would be devastating for those who have ministerial responsibility for the issue you are raising been campaigning is to find that a weak piece of in terms of the licensing but I think the message is legislation comes through which does not address fairly clear from Members of the Committee that the problems which they have identified. they see the two issues as being fundamentally joined together and I think there will be a need for some Q524 Chairman: Can I say, before you reply to that, prior oversight to this Committee. the Secretary of State has also admitted that it would Sammy Wilson: Minister, I think the message that be appropriate for this Committee to look at certain must come from the Committee is that there will be pieces of legislation draft, particularly before grave disappointment from those who have seen devolution. We do think this is an important role their businesses destroyed and the industry in that this Committee can play and so I very much Northern Ireland practically taken over in certain hope that the pieces of legislation to which Mr areas by paramilitaries if, after having waited for all Hamilton referred will be referred to us so that we of these years, all we have is an umbrella regulatory can quickly and diligently look at it and see if there body but the teeth for that body will not be supplied are any problems that we can spot. for maybe another two or three years as well. There Paul Goggins: Given that the Secretary of State said will be grave disappointment and I do not think it he believes that is the right thing to do, I have no will help in the fight against organised crime. Can I hesitation in saying we should do it and we will make just take one other one and that is the transport sure the arrangements are in place, particularly for a industry where the transport operating licensing longstanding issue. Nigel may want to comment on system in the GB has not been applied in Northern the detail of this, but my understanding is that the Ireland and, therefore, where there have been key measure that we will introduce is that where at sanctions here, where there is a record of criminal the moment the Health and Safety Executive are activities licences can be withdrawn, the ability to responsible for the licensing system for all the petrol operate can be withdrawn, that has not happened in tankers who move the fuel, in future their Health Northern Ireland. I take it that part of this and Safety Executive will also be responsible for legislation we are talking about will include a body licensing all petrol stations so that you will have one similar to this and will that legislation not just be properly integrated system with one accountable setting up a body but introducing the sanctions that body who will run the whole system and it should body can impose? work much better. Mr Hamilton: That is exactly what was proposed. It Q526 Chairman: And will specifically address the is intended to publish a consultative document in problem of the road taxis, of which we gather there fact, I think the previous minister, Angela Smith, are quite a considerable number doing things other made a written statement a few weeks ago to this than taxis normally do. intent. What we would then have is the Health and Paul Goggins: Do you mind if I ask Nigel to Safety Executive responsible for tankers on the road, answer this. for oil terminals and for the licensing of petroleum Mr Hamilton: I said, Chairman, that we were stations which at the moment is the responsibility of working on seven pieces of legislation and the two the district councils. We have a consistency across we did not address, obviously, were the question of Northern Ireland. That is putting it together into a how we are going to further develop the petrol single authority. I think there is a second stage which licensing system and the second one to introduce we clearly need to get to which is to see how much into Northern Ireland a road freight regime exactly more robust that regulatory authority needs to be. the same as happens in the rest of the United So the first stage would be to pull these functions Kingdom. The intention will be to bring forward together into the Health and Safety Executive. The proposals next year in that context. In the meantime next stage, which we also want to get to, which will there is an immediate issue around the repute of not be this year, is to see how much more robust drivers because at this point in time the legislation those arrangements should be. does not allow the issue of repute in respect of financial standing et cetera of drivers to be Q525 Sammy Wilson: That is one of the problems considered as part of the licensing system. We hope because the sanctions appear, even where there is that in another piece of legislation earlier this year regulation of the tankers at present, to be we will actively be able to plug that particular gap meaningless or certainly not in any way dissuading immediately. Clearly the intention is that we will go those who are engaged in those kinds of activities. for a road freight licensing system which replicates We had evidence given to us here where tankers can exactly that which is happening in the rest of the be seized one day and the operators are back on the United Kingdom. road again the next day. I am a bit disappointed to hear that you are saying whilst the legislation may Q527 Chairman: And the taxis? set up one regulatory body for the whole of the Mr Hamilton: Chairman, next month we will be industry we are going to have to wait for the publishing another one of the other pieces of robustness of their activities. For how long? Why is legislation. 3392501043 Page Type [O] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry

Paul Goggins: We had a prior agreement that if taxis system could remove at a stroke that asset from came up Nigel would answer. many perfect, good law abiding individuals who had Mr Hamilton: Chairman, the taxi legislation been relying on it. Can you give us some assurance consultation will start later this month and the that there will be some thought given to intention is that it will be fully in operation and have compensation, not for chains but for individuals? reached Privy Council by March next year. The Paul Goggins: I can certainly give you the assurance licensing system will be in terms of drivers, vehicles I will give it more thought because this is the first and services and to prevent drivers and operators time that I have actually heard this issue, therefore I operating without proper licence. That will be will need to give it further thought. Nigel may know hopefully published later this month. more about it. Mr Hamilton: Chairman, I do not pretend to be an Q528 Sammy Wilson: Can I ask on the transport expert in liquor licensing. It is the intention that the legislation, one of the things which some of the Minister responsible will want to make a statement transport companies said to us was that there were again in terms of the way ahead. This will be a two those who were quite happy to use illegal diesel stage process. The first stage would be the issues which of course meant that they were under-cutting around the changing arrangements for liquor those who were not prepared to do this. In this new licensing as the Minister has outlined. I think the legislation you are talking about you have Committee had the benefit of a further submission mentioned the record of drivers but will there also be from DSD on that. There were still contentious the ability, as there is in the rest of the United issues around surrendering licences, around opening Kingdom, where a company has been found to be hours and children. I think Minister Hanson is using illegal fuel that the traYc commissioner can currently considering those. That is the first of the revoke its licence or are we going to have to wait for two stage process. The second stage would be that that as well? this responsibility would transfer to the new Mr Hamilton: It will be the intention that that which councils, not to the existing district councils but to is missing in the legislation will be introduced in the the new councils following the review of public legislation so that sort of oVence would very much administration. In that context, quite clearly it is be considered in the granting or non granting of a very important that the Department has a very licence. strong oversight of what is going on in terms of how the councils will exercise those responsibilities. The department will issue statutory guidance as to how Q529 Chairman: Can we move on, I want to bring those councils should operate. some more colleagues in, to liquor licensing. We have had a fair amount of evidence and we would Chairman: I am sure you will but I do hope the point like to know what checks you are going to make to that I have made will be taken on board when you ensure that the new district councils will vigorously are framing the licence. and responsibly enforce the new regime? Paul Goggins: As we move forward with the RPA process and the new seven district councils are brought into operation what we want to do is make sure that the new licensing process is open much Q531 Mr Campbell: On the statutory guidance that more to democratic accountability and public Nigel has just mentioned, obviously under the RPA scrutiny. The problem is when the decision making it could well be the case that you may have one or process about licensing is so far removed from the more of the super councils upon which a single communities that are aVected by the impact of those political party has a considerable influence, whose licensing decisions then you have a problem. We attitude to law and order may be at best described as want to make sure that distance is reduced and there ambiguous. If that were the case, that political party is some real scrutiny and proper democratic had either control of the council or 40%, say, accountability there. There will be more flexibility in membership of the council and were somewhat the system but hopefully also more democracy and reluctant to enforce against, for example, some form then the key thing is to make sure that the law of misdemeanours or repeated misdemeanours, how enforcement agencies do strictly apply the law and would the guidance work in that circumstance? where people contravene the licence they have then Mr Hamilton: Chairman, I think it is very diYcult they should be dealt with and, if necessary, they for me to speculate as to how it would work because should have that licence revoked. It is more we have not drawn it up yet. The guidance would accountability but stronger enforcement of the very much be based on the guidance which exists at legislation. the moment in England and Wales with the checks and balances that are there. I think, to be honest, Q530 Chairman: Have you taken on board the those are the sorts of issues we would need to give ancillary point that was brought quite forcefully to further consideration to, to make sure that there is our attention. There is at the moment a real financial consistency on application. I would not want to value in a licence and people legitimately expect mislead the Committee by suggesting that we had when they are planning retirement and all the rest of thought our way through all those at this point in it to be able to realise that. That is absolutely legal, time. it is above board, it is the way the thing works at the Paul Goggins: Although I think, and I am straying moment. It was brought to our notice that the new beyond my ministerial territory here— 3392501043 Page Type [E] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry

Q532 Chairman: We will protect you. rest of the UK. Tom Wilson from the Freight Paul Goggins:—it is important, of course, that the Transport Association said that the penalties do not decision is one that is made by the district council fit the crime. Val Smith from the Road Haulage but the licence then, of course, is something which Association said that these are derisory sentences. comes under wider scrutiny. If people are flouting We know that the Department has set up a the licence that is a matter for the law enforcement sentencing review, can you give us an idea of where agencies, the police, and it will be for the police to be you are with that? able to take action about that and to take action to Paul Goggins: Yes. The issue about whether people have the licence varied or revoked. Although the get a stiV enough sentence is, of course, an issue that decision rests with the district council, the whole is not just confined to Northern Ireland, there is a thing does not rest with them in terms of pursuit of wider debate throughout, but there is the framework making sure that people follow what is written into review that you mentioned which is ongoing. My that. colleague, David Hanson, I expect will make some Chairman: I can see something that you cannot see announcement about that in the fairly near future which is that in the House we are on to the final but of course within that there will be consideration wind-up speech, therefore a division is fairly of some of the new sentences that were part of the imminent. I would like to bring in fairly quickly Dr 2003 Act on extended sentences and also the McDonnell. indeterminate sentence for public protection. These Dr McDonnell: Two very quick points I want to re- are actively being considered and if they are emphasise, we have already touched on one. The introduced they will then open up the possibility for councils at present—and I am referring to Belfast longer sentences. I had a quick and early look at this which is roughly the same size, give or take, as any issue of comparability between them. There are one of the seven councils—at the moment have always dangers, of course, in making these responsibility for entertainment licensing and comparisons but actually broadly sentencing is on a various inputs into the licensing of bars and places par as between Northern Ireland and England and of public entertainment. They have not much Wales. There may be diVerences in diVerent areas influence at the end of the day and there is a serious but overall I would say there is a broad comparison concern out there that that situation prevails. There is a serious worry that in fact we would end up—to although clearly the chief constable has a view about use a colloquialism—groping in the dark in terms of this and I will need to look ever more closely at any the new licensing laws. I would emphasise that evidence he brings. I have just looked at some of the again, I do not think we can step over it. There is a recent sentences, for example, just to give mention to serious fear that we move from the frying pan into two or three: a five year custodial sentence for the fire or maybe worse. The concern is that the blackmail and 12 year custodial sentence for situation should not deteriorate. The second point somebody possessing drugs with intent to supply, a is—and I think we need to deal with it because, 15 year sentence for a scheduled robbery. These are again, it is causing serious public concern— stiV sentences for very serious oVences and clearly currently I hear this is worth £150,000 in Northern that is what the public would expect. Of course at the Ireland and for many people who are single pub same time there is eVective community punishment operators, single bar operators rather than chains, and so on for people who commit less serious that is their pension. That is the same point the oVences. Chairman made and, Minister, I know this is probably on the margins of your territory but I think these two issues are important and we have had Q535 Mr Anderson: Will that comparability be part strong representations, that is why I have come back of the review or will it be reported in the review? Do on them. you think that if you can show clearly that there is not a diVerence, then that has got to go some way towards helping people? The other thing is whether Q533 Chairman: Could I just ask you to take those or not it has been considered that a crime which is on board because I do want to bring in David committed and is directly connected with organised Anderson. crime, are you looking to making that an additional Paul Goggins: Just one sentence, for the record, we factor in advising judges on how to hand out will certainly take that issue that you have both sentences? made very powerfully and give it further Paul Goggins: As I say, David Hanson will be consideration. coming forward with proposals based on the review Chairman: I am very grateful to you and I am sure in the near future. I do not think he will be aiming to that many people will be glad to have that on the record. make the sentences necessarily just the same because what he will be bringing forward is what is appropriate for Northern Ireland. What I can say is, Q534 Mr Anderson: Minister, one of the things looking at the evidence, currently they are broadly which has frustrated this Committee as much as this similar. concept of victimless crime is the constant reference from witnesses we have heard to the sentencing regime in Northern Ireland. The chief constable said Q536 Chairman: I think Mr Anderson’s point about that the level of deterrent in Northern Ireland is comparisons with organised crime being an often perceived as not comparable with that in the aggregating factor is very important. 3392501043 Page Type [O] 29-06-06 23:57:16 Pag Table: COENEW PPSysB Unit: PAG3

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7 June 2006 Paul Goggins, Mr Nigel Hamilton and Mr Nick Perry

Paul Goggins: Perhaps if I could come on to that. It Paul Goggins: I am not sure it has been used at all as is the case at the moment that the court can take into a result of the Criminal Justice Act 2003, let alone in account the fact that somebody who has been Northern Ireland. involved in organised crime can take that into account as an aggregating factor, that can already Q539 Lady Hermon: May I suggest, Minister, since happen. Whether there should be something you were responsible at that time that some initiative stronger in the legislation that it must be taken into is made to make use of what would be very valuable consideration or expressed in some other way again, for witnesses who wish to come forward but who are this is something that has been and will be really in peril of their lives and feel in peril of their considered as part of the review and my colleague lives to do so when we have very sophisticated will be bringing forward proposals on that in the organised crime in Northern Ireland. It does strike near future. me that it is one of those provisions, it is already Chairman: We are very close to a division, are there there, would you as a Minister make sure that some any other questions that any colleague wishes to ask activity is put into the system to avail of what is in this public session? there? Paul Goggins: In response to Lady Hermon, I share Q537 Lady Hermon: One particular issue which has her view that there are circumstances in which it is been raised by a number of witnesses is the diYculty important that there is the provision for a non-jury in dealing with paramilitary involvement in any trial, that provision has been made within the criminal activity is the fear the witnesses very Criminal Justice Act and there is already the genuinely have about coming forward and giving provision in Northern Ireland that you mentioned. evidence. Minister, you will know, because I think Obviously consideration of these things is ongoing you were the responsible minister at the time, that but there are sometimes circumstances in which that the Criminal Justice Act 2003, which you just is necessary for the reasons that you say, that people alluded to, did make provisions for non-jury trials are sometimes frightened for their lives and although and did apply to Northern Ireland where there is a it is necessary, of course,tooVer witness protection real and present danger of intimidation to witnesses and other support in an attempt to get a jury trial, during trials. That is in force, it is on the statute because that is the best form of trial in a democratic book, why in heaven’s name has the Northern society, nonetheless there would be circumstances Ireland OYce not made any statement or given any when jury-less trials are necessary. encouragement to prosecute, to use and avail of an already existing system which would help witnesses Q540 Chairman: As we draw this formal session to a and encourage them to come forward and give close, could I thank you very much indeed. I do not evidence in tackling serious organised crime in want to sound patronising, Minister, but you have Northern Ireland? not been there long and it seems to me that you have Paul Goggins: You are quite right to mention the really mastered your brief fairly substantially. We fact that there is that provision within the Criminal are grateful for your frank answers, and particularly Justice Act 2003. I am not sure I would need to check grateful to you for saying that you will take on board as to whether it has ever been used consequent to some of the important points that have been brought that coming into force. to our notice and we have now passed on to you. We Lady Hermon: It has never been used in Northern hope that when we publish our report you will find Ireland. it helpful in furthering the work that you do. Thank Chairman: You are talking to a law lecturer,you you and your oYcials. Would you be prepared to know. move now into a brief private session, which we can adjourn if necessary? Q538 Lady Hermon: Not for the past 20 years Paul Goggins: Yes. anyway. Chairman: Thank you very much indeed. 3392504001 Page Type [SE] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

Ev 90 Northern Ireland Affairs Committee: Evidence Written evidence

1. Written evidence from the CBI Northern Ireland 1. CBI Northern Ireland welcomes the opportunity to respond to the Northern Ireland AVairs Committee Inquiry into organised crime in the Province. This is an issue which has been of concern to our members for a number of years, and we have met senior representatives of the PSNI at regular intervals since 2002 to discuss the impact which organised crime is having on the economy and indeed society in general and the eVectiveness of the measures taken by the police and other agencies to counter organised crime. 2. We are not in a position to comment in detail on many aspects of organised crime—there is clearly much sensitivity in dealing with these matters in public discussion although we are confident that our members do have eVective linkages with the PSNI. 3. From CBI Northern Ireland members’ perspective the key aspects of organised crime encompass: — fuel smuggling—an issue upon which CBI Northern has carried out some detailed research in the past; — fraud, theft, violent robberies (particularly in relation to cigarettes and cash deliveries) etc; — money laundering activities; — extortion and racketeering, especially in the construction industry; — counterfeiting of brand name goods, particularly videos and DVDs, alcohol, etc; — illegal drugs transactions; — immigration crime. The perception in the business community is that there have been major increases in the incidence and numbers of crimes in all of the above areas since the mid 1990s, and particularly over the last four years since police numbers were cut as a result of the Patten reforms. Much of this is considered to be related to organised crime, though clearly there will be a certain amount of activity involving other groups/individuals. Our members have also expressed major concern that we appear to be living in an increasingly lawless society with rising numbers of domestic burglaries, many with violent aspects, and increasing levels of anti-social behaviour. For example, a major telecoms company would have had an average of about one attack per month on their vans pre-1997—now these are an increasingly common occurrence. Similarly, cash delivery vans are now much more likely to be attacked than seven or eight years ago. 4. Worryingly, organised crime has moved out of areas of Belfast and other towns where paramilitary influences are strong into the mainstream of society. In relation to fuel smuggling and laundering, for example, it has been estimated that as much as 70% of fuel sold in NI has been adulterated to a greater or lesser extent.

Impact on the Northern Ireland Economy 5. The impact of organised crime is pernicious, and the agencies tasked with combatting it (PSNI, Her Majesty’s Revenue and Customs—HMRC—and the Assets Recovery Agency) have a major task on their hands convincing the public that buying a counter-feited DVD, for example, is not a “victimless crime”. Indeed there have been reported instances where the police have been attacked at markets such as those held at Nutts Corner when they move in to confiscate counterfeit goods. 6. Organised crime has the following impacts: — It increases the influence, and more significantly, the income of the paramilitaries/ex- paramilitaries; — It makes it much more diYcult, if not impossible, for legitimate traders, particularly in areas such as retailing, to abide by the law and still stay in business—this can impact on the “corner shop” where illegal cigarettes and alcohol are sold in local neighbourhoods to petrol retailers who are undermined by illegal operators; — It can have damaging environmental consequences where such illegal operators ignore regulations designed to protect the environment; — It has very damaging consequences on employees who are the victims of armed robberies and other violent crime—this can lead to increased absenteeism, stress and other physiological problems; — It can add to business costs which have had to take additional precautions and measures to reduce the risk from organised crime as well as increasing welfare costs of looking after staV aVected by such crime; — It reduces respect for law and order and creates a culture of lawlessness and disrespect—including in our young people who get oVered cheap counterfeit goods. This in turn creates a culture where “ordinary decent crime” is regarded as acceptable behaviour. 3392504001 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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7. There are also substantial revenue losses to the government as a result of organised crime, particularly in relation to fuel smuggling, which three years ago was estimated to be costing the Treasury in the region of £300 million per year—a recent report by the Independent Monitoring Commission refers to a £1 billion loss over the last three years. CBI welcomes the recent successes of the Assets Recovery Agency and wishes to see it becoming as eVective and successful as the Criminal Assets Bureau in the Republic of Ireland. 8. CBI welcomed the setting up of the Organised Crime Task Force in 2002 and we have recently been invited to have representation on it. It is crucial that the multi-agency partnership between central and NI government departments, law enforcement agencies and most importantly, the community at large, is seen to be eVective in tackling the serious problems associated with organised crime and in combatting the perceived atmosphere of lawlessness which seems to prevail throughout much of our society. 9. There is also a particular issue in relation to the resources of the PSNI and how these are deployed. There is a perception among CBI members that due to big cuts in police numbers over the last four years that a hierarchy of oVences exists and those which the PSNI consider to be less serious only receive attention after some delay, which in certain cases can be considerable. We have put these points to senior PSNI representatives, who concede that they have much less manpower then previously. However, there is an expectation that as the numbers entering the Service work their way through the system, are trained and gain experience, that they will be eVective in the fight against organised crime and that the situation on the ground will improve. Meanwhile, however, it is more than ever essential that limited resources are used most eVectively. 10. CBI welcomes the strategic approach adopted by the Organised Crime Task Force and the work currently ongoing at a national level within the Home OYce to measure the harmful impacts of organised crime and develop a performance regime to assess how such impacts are being reduced through the activities of the law enforcement agencies in the UK. It is important to ensure that suYcient resources are allocated to those involved in fighting organised crime to ensure that the scale of the problem is significantly reduced. 11. We also welcome the co-operation between the PSNI and Garda Siochana which resulted in the Cross Border Organised Crime Assessment report produced last year, and focused specifically on serious and organised crime conducted on both sides of the border on a long-term basis by criminals in pursuit of significant financial profit, and the ongoing work which is continuing to date. 12. CBI Northern Ireland also awaits with interest the results of the research commissioned by the OCTF to explore consumer attitudes towards, and motivations for, the consumption of counterfeit goods, in the light of the point about public attitudes to so-called “victimless crime” made in paragraph 5 above. According to the 2005 Annual Report of the OCTFthese results will inform go vernment policy on tackling intellectual property crime and facilitate industry sources on the creation of anti-piracy messages. This is essential if this invidious type of crime is to be tackled. CBI Northern Ireland 12 December 2005

2. Written evidence from the Federation of Small Businesses The Federation of Small Businesses (FSB) welcomes the opportunity to respond to the Northern Ireland AVairs Committee on Organised Crime in Northern Ireland. The Federation of Small Businesses is Northern Ireland’s largest business organisation with over 5,000 members. The FSB is a non-party political lobbying group for Small and Medium Sized (SME) businesses existing to promote and protect the interests of all who own and/or manage their own businesses. Organised crime against business is an increasing concern to us and our members in the FSB. Crime in general is one of our key priorities as FSB “Lifting the Barriers to growth” research indicated that 59% of businesses are a victim of crime in a year. Most crime against businesses are not reported as (36%) of businesses believes they will not achieve anything by reporting incidents and there is a lack of confidence in the ability of the police to find the criminals (26%). FSB research indicates that Northern Ireland is fourth highest region in the UK experiencing business crime. In addition, to regular business crime we are conscious of the additional burden of extortion and racketeering through paramilitary activity. This is an additional hidden cost of doing business in Northern Ireland were costs are higher in general. In particular we have a growing concern on the level of extortion and racketeering by paramilitaries in local communities. Businesses that are easily visible, that depends on local consumers, such as the retail and service are regularly targeted. The construction industry is also a target for “protection” money but only if carrying out works in areas where this activity remains endemic. Politicians and government are aware of the geographic areas where this activity is ongoing but choose not to tackle this issue. The FSB recognises that the exact scale and scope of extortion and racketeering is hard to assess, but the issue must become one of the main priorities for the Organised Crime Task Force in Northern Ireland. 3392504001 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Businesses choose not to locate to particular areas due to the demand for “protection” money. In many areas this has impacted on limited shopping facilities for those most vulnerable in society. The FSB believes that it is unrealistic to rely solely on businesses to report this crime—as the cost to the victims in terms of personal security is too high. Therefore it is up to Government and politicians to take a lead on this issue. SME’s make a vital social and economic contribution to N Ireland, making up 99% of all businesses, 79% of employment and 75% of turnover. It is crucial therefore, that: — The Organised Crime Force makes racketeering and extortion against the SME community a core priority. — Research into the cost and impact of racketeering and extortion against the SME community is commissioned. — Politicians have to accept their role and take a lead to deal with this issue at all levels especially at a local level. The FSB has carried out a small survey with members on the impact of donations in general and below are some of the comments we received regarding illegal donations. “We are a small town business, donations are excessive but ...Ifeel I could do more harm by not donating”. Retail, two employees. “Having groups of men in uniform coming in to the practice is quite intimidating especially as they insist on person behind desk signing form and writing how much they are giving”. Opticians, four employees. “If the small amount to be paid is ‘seen to be paid’ there is no problem. My windows and personal safety are worth a lot more than £100 a year”. Barbers, two employees. “Money is one thing—risk to staV, intimidation and ongoing worry—no value”. Retail, 17 employees. “I have had to refuse requests for ‘protection money’. I have had to donate money to ‘prisoner charities’”. Services, four employees. The FSB believes it has a duty to business to highlight the ‘tip of the iceberg’ regarding the pressures faced on this issue. Wilfred Mitchell Policy Chairman 12 December 2005

3. Written evidence from the Freight Transport Association The main area of organised crime (directly or indirectly) aVecting the transport industry is that of fuel smuggling and the illegal laundering of marked fuel. It is estimated that over 95% of all diesel road fuel used by NI registered commercial vehicles is not purchased through the recognised supply outlets which attract the UK levels of revenue duty. Smuggled fuel (good quality) and laundered fuel supplies are apparently readily available from a number of illegal suppliers who make bulk deliveries direct into storage tanks in the North. It is believed that considerable quantities are shipped to Great Britain where there is a ready market. Taken along with the legitimate purchasing of fuel in the south of Ireland by transport companies and motorists driving there, it is estimated the impact through annual loss of revenue to the Exchequer is £350 million. The additional impacts resulting from fuel purchases in the south are lost revenue due to “general shopping” across the border and the adverse impact to the environment (fuel emissions) caused by additional unnecessary mileage incurred to obtain the cheaper fuel. There is also additional damage caused to our road network from this extra mileage. The attraction of evading UK fuel duty levels has been so high over the last number of years that legitimate fuel oil suppliers in the North are not selling much diesel road fuel. The measures taken by Government to counter this aspect of organised crime have been largely ineVective. They claim to have applied increased levels of manpower but are hampered by the length of time it takes to bring the culprits to justice. When cases are eventually heard, the courts are apparently reluctant to proceed unless a criminal act can be proved. The courts have apparently been known to reject cases, telling HM Revenue & Customs to recover the unpaid duty which means the guilty party being allowed to carry on business in order to pay back the estimated amount of duty evasion. 3392504001 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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The best method of stopping this type of organised crime is to remove the opportunity through harmonisation of fuel duty on the island of Ireland. Tom Wilson Manager FTA 1 December 2005

4. Written evidence from the Road Haulage Association Ltd (RHA)

Introduction The Road Haulage Association (RHA) was formed in 1945 to look after the interests of haulage contractors operating throughout the United Kingdom, in eVect, amalgamating local organisations that had already been established. The Association has subsequently developed into the primary trade association representing the hire-or-reward sector of the UK road transport industry. There are now some 10,000 companies in membership varying from major companies with over 5,000 vehicles down to single vehicle owner-drivers.

Fuel Fraud The RHA gave both oral and written evidence to the Northern Ireland AVairs Committee’s inquiries into the related subject of the impact in Northern Ireland of Cross Border Fuel Duty DiVerentials. Essentially our views remain as set out in that previous evidence. In our previous evidence the RHA stated that fuel smuggling between Northern Ireland and the Republic was caused primarily by the huge diVerential between rates of excise duty applied to fuel in the UK and in Ireland. This remains the case. Excise duty on diesel in the UK is now 47.10 pence per litre (ppl) resulting in an average retail price across Northern Ireland of 92.9 per litre (including VAT). In contrast, on the Continent the price for diesel is now typically the equivalent of around 20 to 25 pence per litre cheaper than it is in the UK, resulting in a saving against UK purchased fuel of £200.00/ƒ291.00 diVerence per 1,000 litre tank of fuel. Since fuel represents approximately one-third of a haulier’s total business costs, there is a huge incentive to obtain fuel at the cheapest rate. There are two main options for achieving this: firstly by making legitimate purchases of fuel in another EU Member State—either by crossing the border to the Republic or whilst travelling on the Continent; secondly by purchasing smuggled or illegally laundered fuel. Although the first option is completely legal (subject of course to some limits on carrying capacity etc) both options result in loss of revenue to the Exchequer.

Scale of the Problem The diYculty of putting a precise figure on the scale of the problem remains. However, the RHA is convinced that smuggling is now extremely widespread. Indeed, anecdotal evidence suggests that smuggled fuel is now finding its way into mainland UK (particular in the North) as well as Northern Ireland, extending the problem to hauliers based in that part of the country. The most recently published figures contained in HM Revenue & Customs report “Measuring and tackling indirect tax losses 2004” show that the revenue being lost to the Exchequer through fraud on diesel amounted to £1,000 million in the year 2000 plus a further £300 million as a result of legitimate cross-border purchases of diesel. The amount being lost reduced slightly in 2001 and 2002, but HMRC expects an increase in the figure for 2003. The RHA believes that this situation will not improve whilst the cross-border price remains substantially lower than that for fuel purchased within the United Kingdom.

Removing the Incentive Whilst we are aware that extra resources have been made available to HM Revenue & Customs for enforcement in this area since the Northern Ireland Committee’s last inquiry, the RHA remains of the view that the only way that this problem can be eradicated altogether is to remove the diVerential that exists between fuel duties within the EU. The European Commission itself has recommended that in order to remove distortions of competition within the road freight industry, duties on fuel used for commercial purposes should be “harmonised” across the EU. The RHA has been campaigning on this issue for some time but until action is taken to bring fuel prices in the North and South more into line, problems of smuggling and cross-border shopping for fuel are likely to continue. January 2006 3392504002 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

Ev 94 Northern Ireland Affairs Committee: Evidence

5. Written evidence from the Police Service of Northern Ireland

Overview Organised crime ranges from close-knit structures, often based on family or paramilitary aYliation, to loose networks of individuals who come together to commit crime and who will work with a wide, range of other criminals in pursuit of profit. The nature of organised crime in Northern Ireland is becoming increasingly sophisticated and criminal associations by their nature seek to operate covertly; this in turn requires a high-level law enforcement response which is continually adapting to respond to new challenges. This is evidenced by the range and scale of criminality undertaken by some of the activities which have been detected and disrupted by successful law enforcement activity.

Paramilitary Involvement in Organised Crime The extent, sophistication and impact of organised crime are significantly influenced by the involvement of paramilitary organisations; the disciplined structures which were already in place in the paramilitary organisations have allowed them to evolve from eVective terrorist organisations into lucrative criminal enterprises, combining the two objectives when required. It is clear that all of the paramilitary groups in Northern Ireland are heavily involved in organised crime both as a means of raising finance for their organisations and for personal gain. They also use their paramilitary associations to exert control over communities in the belief that they can pursue their criminal activities with impunity. Paramilitary backed gangs have been responsible for some of the largest and most lucrative organised crime activity undertaken in Northern Ireland which continues to present a threat to the long-term stability of both the economy and the community in Northern Ireland. It is diYcult to assess what percentage of the criminal proceeds are for the organisations themselves and how much it is for personal gain, but it is clear that senior figures in all of the paramilitary organisations are directly involved in organised crime. Loyalist groups remain involved in drugs supply, intellectual property crime, importation and distribution of contraband goods, extortion, money lending and armed robbery. They are also known to use legitimate businesses, notably pubs, clubs and taxi firms as cover for its illegal operations. Ongoing feuding between the various loyalist factions has also led to a series of violent assaults and murders, attempts to intimidate individuals and businesses and civil disorder all of which increase fear and distrust within the community. The Provisional IRA (PIRA) has long been involved in a range of criminal enterprises, including organised crime. Their criminal activities have included large-scale robberies and hijacking, which have provided substantial funding for the organisation, although no such incidents have been carried out by PIRA since their statement of 28 July 2005 announcing a cessation of all illegal activities, however, they are also involved in smuggling contraband goods, intellectual property crime and money laundering while continuing to pursue more ‘traditional’ forms of fundraising such as ballots and voluntary donations. The so-called dissident republican groups (Continuity IRA (CIRA) and Real IRA (RIRA)) are also involved in robberies, smuggling contraband goods and intellectual property crime. Proceeds from their organised crime activities have been used to fund attacks against members of the Security Forces, Prison Service, Policing Board, District Policing Partnerships and locally elected representatives of the community.

Investigating Organised Crime in Northern Ireland As part of the programme of change, in 2003 PSNI created Crime Operations Department to integrate all elements of tackling serious and organised crime including intelligence gathering, investigation, surveillance and technical support and analytical and forensic support. The Organised Crime Branch (C1) within Crime Operations, headed by a Detective Chief Superintendent, has responsibility for tackling high- level organised crime gangs operating in Northern Ireland: the Branch consists of the Organised Crime Squad, the Drugs Squad and the Economic Crime Bureau, each headed by a Detective Superintendent. Crime Operations Department also comprises C2 Serious Crime Branch, C3 Intelligence Branch, C4 Special Operations Branch, C5 Analysis Centre and C6 Scientific Support all of which have a significant role to play in the collective work against organised crime. Operations against lower level organised crime are also undertaken at Regional and District Command Unit level. Considerable work has been undertaken to establish a National Intelligence Model compliant framework to manage work against organised crime gangs to ensure that resources are focussed against the gangs which have the potential to cause the most significant harm to the community. This framework uses the nationally accredited SARA (Scanning, Analysis, Response, Assessment) problem-solving model to examine the attributes of organised crime gangs and uses these to prioritise investigations and operations. 3392504002 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Cross-Border Co-operation It is apparent that many criminals believe that the border may aVord them some degree of protection but continuing close cooperation between law enforcement agencies in both jurisdictions has led to numerous successful operations resulting in arrests, disruptions and seizures on both sides of the border. In some areas of criminality such as cross border smuggling and money laundering, the border clearly oVers criminal opportunities, but it is apparent that in others such as drugs and intellectual property crime, it has little or no impact. Criminal networks are usually based on trust, existing contacts and the need for certain skills or commodities rather than on any geographic basis; a criminal based in Newry or Dundalk is as likely to make use of contacts in Dublin as in Belfast.

International Links Many of the gangs under investigation are very sophisticated in their methodology and have established links outside Northern Ireland. Criminal networks are developing overseas links in order to source criminal commodities cheaply, avoid detection and increase profits. For example, criminal gangs involved in Intellectual Property Crime in Northern Ireland have been proved to have links as far afield as Turkey and Thailand; drugs have been imported from Europe, notably Spain and the Netherlands; the number of West African letter frauds reported here has increased significantly; illegal and counterfeit cigarettes have been smuggled in massive quantities from China and the Far East; counterfeit currency manufactured in Northern Ireland has been recovered throughout Europe. The majority of organised crime in Northern Ireland is locally controlled and managed but there is emerging evidence of the involvement of foreign nationals.

Armed Robbery Organised crime has been responsible for a number of high-profile robberies which have netted millions of pounds in cash and high-value goods. Cash-in-transit robberies have been a significant feature of organised crime since the late 1990s. There was a sharp increase in the number of incidents in 2001 and the problem was adopted as a priority by the OCTF. Working in close partnership with partners in the security and banking sectors, strategies were developed and implemented to tackle the problem. Although the levels of violence used in such attacks in Northern Ireland tends to be lower than in the rest of the United Kingdom, there are indications that levels of violence may be increasing. It is clear from the nature of the attacks that there are two main types of criminal carrying out these attacks. In previous years they have largely been carried out by experienced criminal gangs who carry out well-organised attacks on targets across Northern Ireland. More recently we have also seen the emergence of more opportunistic local robbers who have on occasion run oV with an empty box, or have panicked and run oV empty handed. Nationally1, the number of CIT attacks has been rising over the last three years, with London, Manchester, Merseyside and the West Midlands being the four hardest-hit areas; Northern Ireland currently ranks fifth in national terms accounting for some 8% of all CIT attacks in 2005.

Response Considerable work has been undertaken under the auspices of the OCTFExper t Group to develop strategies, in partnership with banks and cash-in-transit companies, to tackle these problems. Specific examples of partnership work undertaken include: — Development of a risk matrix to identify high risk cash delivery locations where extra police cover may be deployed. — The use by the cash-in-transit companies of an overt surveillance vehicle—CCTV footage captured by this vehicle can be seized by PSNI and used evidentially. — The establishment of a joint control room staVed by PSNI and the CIT companies to coordinate deliveries and provide additional police cover where available. This is also used to advise crews to redirect their deliveries where intelligence may indicate an attack could occur. — A review of the vetting arrangements for staV in the banks and CIT companies who have access to large sums of cash—in some previous incidents, employees have willingly provided information on security procedures to organised crime gangs in return for a share of the profits. — Crime prevention advice given by Crime Operations Department to banks and CIT companies on the storage and transportation of large cash sums.

1 Data supplied by the British Security Industry Association. 3392504002 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Drugs The drugs market in Northern Ireland does not reflect national trends in either the United Kingdom or the Republic of Ireland, but there are indicators and emerging trends which suggest that this could change. There is clear evidence of increasing demand for and availability of cocaine and the number of multi-kilo seizures made by PSNI in the last three years reflects this (eg nine kilos seized in West Belfast in May 2004, six kilos seized in Lisburn in July 2004, six kilos in Dungannon in July 2005, four kilos in Magherafelt in December 2005). There are clear indicators that major traYckers are shifting their focus towards cocaine; this is largely market driven as demand is increasing and the profit margins involved in cocaine are higher than for cannabis or ecstasy. Relatively small quantities of high purity cocaine can be imported and processed locally. This is a good example of how organised crime can adapt to meet market demand while maintaining profitability. Cannabis and ecstasy remain the most commonly abused drugs and account for the majority of seizures in Northern Ireland. Heroin use in Northern Ireland has been associated with a small community in Ballymena for some time. Intelligence also indicates growing “pockets” of abuse across Northern Ireland in areas such as South Belfast, North Down. The comparatively small size of heroin seizures in Northern Ireland indicate that the drug is more commonly brought into the country by users in small quantities for personal use. Amphetamine appears to be gaining popularity in Northern Ireland. The largest ever seizure of amphetamine in Northern Ireland was made in December 2004 when 50 kilos were recovered in the Ballymena area.

Response The PSNI Drugs Squad has a strategic focus on Level 2 and 3 organised crime gangs, in particular those traYcking Class A drugs such as cocaine and heroin. By focusing resources proactively against the top level gangs involved in drug traYcking, the Drugs Squad has had some considerable successes and has disrupted some major importation routes and arrested some of the most significant drug traYckers. In the first three quarters (April to December) of FY 2005–06, PSNI Drugs Squad seized illegal drugs with a “street” value of £6.5 million. Intelligence from the PSNI Drugs Squad has also led to some significant arrests and seizures outside the jurisdiction but which do not get recorded as Northern Ireland successes.

Intellectual Property Theft Intellectual property theft is a major local problem. Counterfeit goods are widely distributed via local markets and are a multi-million pound business in Northern Ireland. It is a crime that is seen as victimless by many but it is in fact a destructive and potentially deadly criminal activity. The harm caused by the counterfeiting of clothing, electronic media and other goods is both to legitimate manufacturers and traders and to the customer who may be buying something of shoddy quality or which may actually be dangerous— the potential hazards of counterfeit goods are evident in some of the items recovered in Northern Ireland in recent years including power tools, batteries, children’s toys, washing powder, tea bags, condoms and veterinary drugs. Counterfeit cigarettes, 16 million of which have been seized since April 2005, have been found to contain 160% more tar, 80% more nicotine, 133% more carbon monoxide and five times the level of cadmium (a carcinogen linked to lung, kidney and digestive tract damage) than their genuine counterparts. There is a growth in the use of the Internet to sell and distribute counterfeit goods. Some of these are clearly identified as counterfeit and there is no intention to deceive the public, merely to capitalise on the popularity of a trademark or copyrighted item. Other sites sell the counterfeit version with every assurance that the item for sale is genuine. Individuals based in Northern Ireland have been using the Internet to reach a wider audience for their merchandise. In contrast to the legitimate market, organised crime has two types of potential customer: the knowing and the unwitting. This provides additional criminal opportunities depending on outlet, commodity and price. For example, some people are prepared to buy fake goods, knowing they may be of inferior quality, as they are cheaper than the genuine article; most do not consider that they are breaking the law due to the perceived victimless nature of the crime. These customers are usually looking for the latest “must-have” items and will only expect the goods to last until the next fad. Other better quality products selling at just below actual retail prices may appeal to the unwitting customer who genuinely believe they have bought a legitimate item at a good price. However, no customer will accept a £20 note, knowing it to be counterfeit.

Response During 2005, PSNI working closely with HMRC and representatives from the trademark holders and brand owners seized over £8 million worth of counterfeit goods and production equipment such as computers and CD burners. The OCTFIPT Expert Group comprises representatives from PSNI, HMRC, NCIS , ARA, the Northern Ireland OYce, The Federation Against Copyright Theft (FACT), the British Phonographic Industry (BPI), the Entertainment and Leisure Software Publishers Association (ELSPA), the United Kingdom Patent 3392504002 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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OYce, and Diageo. The group also has links to other national anti-piracy bodies such as the Anti- Counterfeiting Group and the Alliance Against Counterfeiting and Piracy. The Expert Group enables a coordinated approach to the problem and provides a forum for exchanging ideas and good practice as well as identifying potential risks and barriers to investigation. Specific projects covered have included: — An academic study into what motivates people to purchase counterfeit products. — The production of a quarterly Counterfeit Products Bulletin to inform front-line PSNI oYcers of what counterfeit products are currently most prevalent and identifying any new trends or emerging issues. — The production of a pocket-sized ready reckoner for front-line PSNI oYcers informing them of the laws covering IPT and what powers they have to seize goods they suspect to be counterfeit. — A programme of education to various bodies to emphasise that IPT is not a “victimless” crime and demonstrate the harm that it can cause to the community and to the economy. This has had particular focus towards the courts system to encourage harsher penalties for those involved. Taking the work of this group as an example of good practice, the Patent OYce has established a national. working party on IP Crime and has developed a national strategy to tackle it.

Counterfeit Currency There are over 50 bank notes in common circulation in Northern Ireland, including Euros, which makes it diYcult to be suYciently familiar with their appearance and security features to identify counterfeits. The majority of counterfeit notes are identified by sorting machines rather than recovered in circulation by shops. The face value of counterfeit currency recovered in Northern Ireland increased significantly (by 137%) in 2005. The counterfeit currency market has shifted considerably in Northern Ireland over the past seven years, from fake currency importation to local production and dissemination. The quality of recovered counterfeit notes in Northern Ireland continues to improve, with more security features being replicated, due to the increased access and ability to use, high quality computer and reprographic technology.

Response — In 2005, 33 persons were charged or summoned relating to counterfeit currency oVences and 11 persons received oYcial Police cautions. Statements of authenticity are being prepared in relation to at least 80 further prosecution cases. — Counterfeit currency familiarisation training courses have been arranged for PSNI by Bank of England and De La Rue and PSNI counterfeit currency presentations are made to the business community and local bank staV. — The Northern Ireland banks are reprinting the “Know Your Notes” leaflets for circulation throughout their branches and a training video similar to that produced by the Bank of England and European Central Bank, is being produced by the Banks, for training their own staV, PSNI and for sale to businesses.

Economic Crime and Fraud The true scale of economic crime and fraud in Northern Ireland is not fully understood but the breadth and sophistication of economic crime and fraud continues to expand, largely due to the increasing use of technology such as the Internet to commit all types of organised crime. Financial gain is the main purpose of all types of organised crime activity and criminals will constantly seek to net larger sums of money and find innovative ways to conceal and launder their profits. Money laundering is a key supporting activity for all aspects of organised crime. As criminals become more aware of the powers available to law enforcement under the Proceeds of Crime Act (2002) (POCA) and the widely publicised successes of the Assets Recovery Agency (ARA) in restraining and confiscating criminal assets they will seek to employ more sophisticated means of concealing and laundering their profits. Significant numbers of criminals use the border with the Republic of Ireland to conceal and launder their assets. They seek to cover the money trail by transferring funds between accounts on either side of the border, purchasing assets, notably property, in the Republic of Ireland and using parallel company structures passing money between businesses to make cash flows appear legitimate. In general, criminals will also be involved in multiple scams in addition to their main criminal activity such as false declarations for the purpose of obtaining mortgages, false income statements to obtain benefits and tax and VAT evasion. In a small number of cases under investigation, “professional” advisers such as accountants, solicitors and independent financial advisers have assisted and advised criminals to conceal assets and avoid attention. Under POCA these individuals are also subject to prosecution and can face severe penalties for failing to disclose their clients’ financial activities. 3392504002 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Serious and organised criminals involved in traYcking goods or armed robbery have used white collar frauds both to make money and as a way of laundering money made from these other crimes, which they have continued to commit. While it is hard to say just how much money is generated by organised crime, it is fair to assume that millions of pounds of criminal profits not only fund the lifestyles of those involved but are also reinvested to commit further crimes. How criminals use the money they generate can vary greatly: some clearly use it to fund a lavish day-to- day lifestyle; others choose to “invest” for the future; and others use it to finance paramilitary organisations. Much is made in the local media of the criminal lifestyles enjoyed by high profile “career” criminals in Northern Ireland. Such individuals are usually involved in “quick win” activities such as armed robberies or extortion which can instantly net them significant sums of money to spend on luxury items and lifestyle. More sophisticated organised crime enterprises have sought to invest their profits in an attempt to disguise their criminal origins and to “legitimise” their business. This type of activity can vary from involvement in cash-rich businesses such as pubs, clubs and taxi firms where a high cash turnover is to be expected and less likely to attract the attention of the police or financial authorities to more complex investment portfolios involving property or other valuable assets.

Response PSNI works closely with ARA and is responsible for more referrals to the Agency than any other Police service in the United Kingdom. Since the introduction of the Proceeds of Crime Act (2002), PSNI has made the following referrals; figures for the Metropolitan Police, Greater Manchester Police, the West Midlands Police and the National Crime Squad are included by way of comparison:

FY PSNI MPS GMP WMS NCS 2003–04 24 14 1 4 15 2004–05 30 8 0 1 9 2005–06 (to 30.11.05) 17 7 2 3 11 Total 71 29 3 8 25

ARA has a gateway into PSNI through the Financial Investigation Unit. The Assessment Unit within FIU seeks suitable referrals from within PSNI, DCUs and Specialist Squads. The material is collated by the Single Point of Contact and is suitably cleared if required before release to the agency. A revised Memorandum of Understanding between the two organisations is currently in draft form.

Excise Fraud and Smuggling The smuggling of counterfeit and contraband goods is probably the most lucrative area of organised crime. The illegal trade in fuel, cigarettes and alcohol can generate millions of pounds for organised crime networks. The land border between Northern Ireland and the Republic of Ireland means there is an abundance of suitable cross border routes for the smuggling of fuel into and out of Northern Ireland. Many of these routes are small rural roads but which are capable of taking heavy goods vehicle (HGV) traYc. Criminal organisations smuggle fuel using a variety of vehicles that are adapted to conceal their illicit loads. These vehicles are unsuitable for the transportation of fuel and present a serious danger to the general public. The vast majority of fuel smuggled into Northern Ireland from the Republic of Ireland is duty-paid fuel from the Republic of Ireland. Once smuggled into Northern Ireland the fuel is stored in improvised storage sites and then distributed to retail sites on a supply and demand basis. Criminal gangs involved in fuel smuggling operate on both sides of the border, frequently using the cover of legitimate businesses to facilitate their criminality. There is also a long history of oil laundering in Northern Ireland and in the Republic of Ireland, especially in the border region and consequently a high level of expertise exists in this area of criminality. The two favoured methods of fuel laundering involve the use of either acid or a filtration agent such as cat litter or activated charcoal. The raw materials required for both methods are freely available on the open market. The by-products of the laundering process can be hazardous and are usually dumped illegally causing potential harm to the wildlife and the environment. The level of criminality involved in tobacco smuggling ranges from the opportunist cross-border smuggler through to sophisticated criminal organisations that have direct access to overseas suppliers. These organisations look to hide their illicit activity within recognised trade routes and rely on the sheer scale of global container traYc to avoid detection. They have access to transportation that is prepared to deliver to the ready market for smuggled cigarettes and tobacco and distribute them through recognised outlets such as pubs and clubs. These criminal organisations adapt, changing their smuggling routes and methods of concealment in line with law enforcement techniques and successes. They are quick to change their tried and tested methods and to move to diVerent or new suppliers if their existing scheme or supply sources are exposed. 3392504002 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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The majority of smuggled cigarettes continue to arrive into the United Kingdom through the busy southern and eastern ports of England. They are detected in multi-million consignments originating from just about anywhere in the world ie China, Malaysia or closer to home from within the European Union. Alcohol fraud, and spirits fraud in particular, continues to be a serious problem. Alcohol diversion fraud, particularly spirits, is attractive to criminals as the illicit product has not been subject to duty in any jurisdiction and is sold at or near legitimate duty paid prices. It is consequently diYcult to diVerentiate illicit product from legitimate product at the retail stage. This makes this type of fraud both highly profitable and relatively uncomplicated. Alcohol frauds are undertaken by large organised crime syndicates and small-scale operators alike. As with tobacco fraud, criminal organisations have access to a ready market and transportation that is complicit with this fraud. The deception can be perpetrated at any time whilst the alcohol is moving in duty suspension and can easily be sold at any number of traditional outlets such as pubs and clubs.

Response

HMRC have lead responsibility for investigating excise fraud, but usually operate with PSNI support when conducting operations. PSNI also undertake some cases which do not meet HMRC’s nationally set threshold, but which nevertheless have a significant local impact. Working jointly, PSNI and HMRC have had some major successes and have successfully disrupted fuel-laundering facilities with the capacity to process significant quantities of fuel. Examples of recent successes include: — In June 2005 two fuel-laundering plants were detected in the Coalisland area; searches at both facilities and at a nearby filling station recovered 31,000 litres of illegal fuel, storage equipment and two vehicles. — In May 2005 two fuel laundering plants were detected in South Armagh; these had the capacity to produce three million litres of fuel annually, a potential loss to the Exchequer of £1.5 million. Over three thousand litres of toxic acid waste also had to be removed from the site. — In December 2004 a forty-foot sea container arrived at Belfast by sea from the Far East; the container was manifested as household goods, namely glass beer mugs and consigned for delivery to a Belfast address. Upon examination HMRC OYcers detected 6.2 million mixed brands of cigarettes concealed behind the cover load of beer glasses. The revenue involved was in excess of £1.1 million.

Extortion

As well as being a means of raising finance for terrorist operations, extortion has also been used eVectively since the early 1970s to exercise paramilitary control over the community. Extortion probably generates millions of pounds per annum for paramilitary organisations. Although the problem is assessed to be carried out predominantly by loyalist groups, Dissident Republicans and members of PIRA have been convicted of such oVences. Detailed analysis suggests that the true extent of Northern Ireland’s extortion problem is not reflected in the number of cases successfully prosecuted; it is likely that less than 10% of extortion is reported to police although the number of businesses coming forward to ask for PSNI assistance is increasing slowly. Demands are usually made in person, mostly in the form of a visit from two or three individuals to collect payment. This is most often done as an “invitation” to purchase security services from the organisation which they represent—it is rarely explicitly stated which organisation it is they represent, but the victim will be left under no illusions. For new businesses, a one-oV payment will often be demanded with subsequent monthly or weekly sums to be paid in addition once the business has started trading. For existing businesses, demands for regular monthly or weekly payment will be made. The size of the demand will usually be tailored to reflect the size and probable turnover of the business— ie what the business or individual can “realistically aVord”. It is in the extortionists’ interest to make it easier for the victim to pay the demand, as this will reduce the chances of the crime being reported to the police. The building trade is worst aVected though fast food outlets, restaurants and licensed premises, car dealerships and other retail outlets have also been aVected. Extortion threatens inward investment and increases the cost of doing business. This may be reflected in higher prices for the consumer and additional costs to the taxpayer. Extortion destroys families and relationships and businesses—particularly in witness intimidation cases. Extortionists drive people out of business and out of their homes and police are forced to devote scarce resources to the protection of vulnerable individuals. In a United Kingdom context, extortion as described here is almost unique to Northern Ireland. 3392504002 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Response The PSNI Extortion Unit mounts proactive and reactive operations to tackle extortion. It is a diYcult crime to investigate due to the victim’s fear of reprisal and the threatening nature of the crime itself and often involves the use of undercover oYcers in order to obtain the necessary evidence while protecting the victim. In approximately 85% of cases reported, the victim declines to work with PSNI to conduct an investigation. Where PSNI is able to conduct an investigation, all cases have resulted in the extortionists being convicted. In 2005, the Unit arrested and charged 24 people with extortion oVences. Under the auspices of the Organised Crime Task Force a pilot project has been established to independently inspect public sector contracts given to local firms. The Inspectors have no executive powers, but contracts may be awarded or withdrawn based on their findings and recommendations.

Illegal Dumping of Waste Illegal dumping has been a growing problem in recent years and not only has the potential to generate significant sums of money for the criminals but also poses a serious hazard to the environment and public health. Organised criminals are involved in removing lorry loads of household and commercial waste and dumping it illegally rather than in approved landfill sites. Much of this involves the illegal cross-border transfer of waste, including the removal of waste from the Republic of Ireland through Northern Ireland to be dumped in Scotland. One illegal load detected in Belfast en route to Scotland contained waste from the Republic of Ireland which had been “top dressed” with local waste, including copies of the Belfast Telegraph, in an attempt to disguise it origins. Illegal dumping sites detected in Northern Ireland are usually in rural areas and are usually operated for short periods of time. Once detected they are abandoned and alternatives sites are found. Landowners are usually reluctant to provide details of those who have been using their land, usually due to fear of reprisals as many of those involved have paramilitary connections.

Response In the last two years, the Environment and Heritage Service has detected. approximately 40 illegal landfill sites in Northern Ireland containing some 250,000 tonnes of waste from the Republic of Ireland. This alone could have generated criminal profits of £25 million. In addition to the criminal profit the environmental and health implications are considerable; untreated or hazardous waste, including industrial and clinical waste, can seep into the water table causing pollution to rivers and lakes, presenting a danger to wildlife and humans. Some waste will also produce explosive gases which contribute to global warming. There are also the costs associated with removing the waste which, by law, must be repatriated if it originated in the Republic of Ireland, and the remediation of the land aVected, which can cost as much as £1 million per site. As it is very diYcult to identify those responsible for having dumped the waste, these costs must be borne by the public purse. Ongoing multi-agency, cross-border operations have resulted in the seizure of assets worth in excess of £2 million causing significant disruption to those involved in this illegal and dangerous trade. However, the legislation does not currently permit the seizure of vehicles in connection with this crime and trucks filled with illegal waste which have been seized have had to be returned to the owners once the waste has been properly disposed of.

Immigration Crime While there is no evidence to suggest large-scale people smuggling operations in Northern Ireland though there is undoubtedly facilitation of illegal immigration. Work carried out by the UK Immigration Service, supported by PSNI and the Garda National Immigration Bureau (GNIB) has shown that Northern Ireland is used as a “back door” by those wishing to enter both Great Britain and the Republic of Ireland undetected. This exploitation of the Common Travel Area is believed to be increasing as controls are tightened at the main ports of entry. Many are failed asylum seekers planning to re-apply in adiVerent jurisdiction or leave and re-enter the original jurisdiction but under a diVerent identity and apply for asylum a second time. Increasing employment opportunities attract foreign labour; the majority here legitimately but there are cases of illegal immigrants finding employment. Many will pose as a diVerent nationality to their own, usually as a citizen of a European Union state so that they are able to obtain employment, eg Brazilians will claim to be Portuguese and obtain work in meat processing factories in mid-Ulster where there is a strong Portuguese presence. This necessitates the use of forged documentation and or the adoption of a stolen identity. The facilitation of illegal immigration, whether transiting or remaining in Northern Ireland, may be undertaken by individuals living elsewhere. Globally organised crime is heavily involved in people smuggling and human traYcking. 3392504002 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Response In Northern Ireland as elsewhere in the United Kingdom, the Immigration Service (UKIS) is the lead agency for immigration matters and at the present time it is expanding its presence in Northern Ireland to deal with the increase in the numbers of illegal immigrants. Until this occurs Immigration OYcers from Liverpool have been visiting Northern Ireland once a month for a few days. Their time has been divided between the airports or seaports and carrying out enforcement work throughout the country. This work has identified a number of immigration oVenders, including failed asylum seekers, and these cases are being dealt with by UKIS. 10 February 2006

Recommendations — A government-sponsored education programme should be developed for all professional bodies (legal profession, financial advisers, estate agents etc) to raise awareness in respect of money laundering in order to help professional advisers better understand their legal responsibilities. — The issue of having two judges (disclosure and trial) in the Northern Ireland court system needs to be reviewed, particularly in light of the increasing use of covert evidence gathering methodologies. The lack of adequate protection provided by the present disclosure system discourages the use of covert evidentiary opportunities used elsewhere in the United Kingdom. — Money laundering should be made a scheduled oVence. This will assist in preventing some of those involved in financing serious and organised crime and terrorist oVences from being granted bail. — Proposed legislation to allow vehicles connected with organised crime oVences, particularly the illegal dumping of waste to be seized, should be expedited. — A comparative review of the issue of sentencing for organised crime oVences in Northern Ireland and compare sentences given in Northern Ireland with Great Britain should be undertaken. — The appropriateness of current legislation available to prosecute for organised crime oVences should be reviewed. — Consideration should be given to the introduction of an oVence of “directing organised crime” to allow law enforcement to prosecute the high level organised criminals who are not directly involved in illegal activities but manage criminal enterprises and generate significant personal criminal wealth.

Supplementary written evidence from the Police Service of Northern Ireland

COPY OFA LETTER SENT TO ALL NORTHERN IRELAND BANKS BY THE ASSISTANT CHIEFCONSTABLE SAM KINKAID OBE LLB, CRIME OPERATIONS Despite the fact that Northern Ireland has seen a 10% reduction in reported crime over the last year the level of robberies against financial institutions, including cash in transit and ATMs, remains unacceptably high. The approach of the PSNI, in partnership with financial institutions, has been to try and prevent such crimes and to have systems in place that assist us to prosecute oVenders. We have for example charged persons from two robbery gangs that targeted financial institutions in the last few months. I am aware of the recent contacts between PSNI Crime Prevention OYcers and Security StaV attached to the major financial institutions in Northern Ireland. At such contacts PSNI oYcers have been oVering advice based on lessons learnt from our investigations into current robberies. The PSNI has itself been a victim of a major crime that was made easier by security lapses. Prior to the attack we believed our security systems were adequate. However our systems for auditing and inspecting security were, on reflection, shown to be clearly inadequate. I would therefore encourage you to re-examine all aspects of your security systems to ensure that the Board of Directors of your company can be satisfied that the corporate risks associated with a major robbery are being properly managed by your staV. A review of our investigations this year has highlighted a number of recurring defects in security systems within financial institutions. A number of questions, which we would like you to consider, are:

StaV 1. What sort of selection and vetting of staV in key positions takes place? It is fundamentally important to check on the integrity of those who have detailed knowledge of your security systems or access to large amounts of cash or commodities. Do you minimise the use of agency staV when processing high value goods? 3392504002 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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2. Does your system minimise the number of staV who have access to secure storage areas to a strictly “need to” basis and only allows staV to access areas of the premises which are necessary for them to perform their role? 3. Have you identified potentially vulnerable staV and ensured that their personal and home security is adequate? 4. Are your security procedures changed regularly so that, for example, ex-employees, agency staV or staV on long-term sick leave are not still familiar with procedures and routines? Pin numbers of security systems should regularly be changed. 5. Are your staV aware of procedures to raise the alarm discreetly should they find themselves or their families in a hostile situation. Have managers been trained on how to handle such situations? Do you run exercises to test such systems? Is there confidence in your systems? 6. In a number of recent cases the Police have been surprised by the selection and training of persons given key security roles, particularly those checking on the movement of high value deliveries in and out of premises. Has your Human Resource Manager recently reviewed the job descriptions and competences for such posts? 7. Are the addresses of your key staV widely distributed within your organisation or restricted to a strict “need to know” basis?

Systems 8. Have you reviewed your systems to ensure that amounts of cash or commodities held in one place are kept to a minimum, particularly in more vulnerable (eg remote or rural) locations? 9. Have time-lapse and time-lock facilities been placed on safes and relevant access points? 10. Does your security system have an ability to individually grant and record access to key areas by the use of personally issued electronic cards? Is there CCTV coverage of such access points? Is access to vulnerable areas based on need rather than routine or status within the organisation? 11. Does your security system provide additional security barriers within secure storage areas so that one or two keys do not permit access to all items? 12. We have discovered that some facilities had a lack of adequate entry and exit controls for vehicles and people. Visitors were often given access by means of intercom so there is no human contact, no signing in, no vehicle details recorded etc. We have been surprised by the number of occasions where security staV do not check on the legitimacy and size of high value loads leaving premises. Other checks that would be relevant in this regard relate to the ID of the driver and the prior validation of the VRM of vehicles. Have you taken steps to ensure that such vulnerabilities have been removed? 13. Is there a practice whereby the number of authorised staV present is increased when exceptionally high value loads are leaving the premises? 14. Are there adequate systems in place to identify the exact value and where possible the serial numbers of notes or commodities held in storage. A major diYculty facing the police can be the delay in trying to determine what exactly has been taken by the robbers.

CCTV 15. Is your CCTV system fit for purpose? Have you completed a recent operational requirement for the system? We have found defects in nearly every system we have examined following a major robbery. Does your system adequately cover access to secure areas? Is there full coverage to external areas particularly delivery yards and loading bays? 16. Who internally monitors the CCTV, and checks that staV are adequately briefed and trained? Who physically checks that the system is actually recording ie the video heads and the lens are clean? The latter is a regular defect discovered in our investigations.

Management 17. Are all your staV encouraged to question or report unusual behaviour. Is there a security-conscious culture where employees identify and challenge potentially suspicious activity. In several incidents this year, clearly unusual behaviour was not reported by other staV. If such had been reported and acted upon, we believe that the robbery could have been significantly disrupted. 18. Have you a manager who is responsible for carrying out routine checks of the security system that the security manager and his staV are unaware of ie do you have the equivalent of a mystery shopper for your security system? 3392504002 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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19. Does a senior operational manager independent of the security manager and their staV carry out a systems review after a major robbery or attempted robbery of the premises? Are lessons learnt discussed at a senior level at the company? 20. In a number of cases this year, the storage or transport of high value commodities has been sub- contracted to third party organisations. Does your commercial negotiations with such third parties specifically lay out the standard of security required of them? Do you check on such? Not all these defects were found in every investigation but in most cases a variety were present. I would be grateful if you could urgently consider the issues I have raised and contact me. The PSNI are keen to give your staV any assistance and advice you feel necessary, although we are aware that there are commercial companies in existence who could also assist you in this regard. We have recently carried out a review of how we respond to and investigate what are often called “tiger kidnap” robberies. The PSNI will be changing its approach on the basis of its findings. One of the matters we would like to discuss with you is how we could introduce an early warning system to cover cases where we may have some general indication that a major robbery against a financial institution could be about to happen but we do not have suYcient information to allow us to run the type of operation that recently caught members of a robbery team in Belfast. Such systems have been introduced for other crimes eg Petrol retailers. I am copying this letter to the Security Minister Mr Ian Pearson and Chairman of the Policing Board Sir Desmond Rea, in light of their interest in ensuring that there is eVective strategies to deal with organised crime in Northern Ireland.

Supplementary written evidence from the Police Service of Northern Ireland Whilst giving evidence to the Committee on Organised Crime on 15 February 2006 we agreed to provide additional information on a question posted by Sammy Wilson concerning the number of groups we are dealing with (Q152). In response we would say that when the matrix (annex a) was first developed, it was used to identify the 25 gangs that were considered at that time to have the potential to cause the most harm to the community. Police action has been carried out against all 25 of the gangs and significant arrests, seizures and disruptions have resulted. The results and impact of this activity are recorded in the annual OCTFreport. Organised crime gangs are fluid in nature and criminal allegiances change, especially as gang members are disrupted by police activity such as seizures and arrest, so the nature and make up of the gangs can change on a frequent basis. On the 25 originally highlighted, few exist in their original form due to successful police activity and shifting criminal or paramilitary allegiance. These and other gangs have continued to evolve so the matrix is used on an ongoing basis to monitor the activities of organised crime gangs, identify new and emerging individuals and alliances and ensure that police resources are targeted against the criminal elements which present the greatest threat. Other gangs identified by the matrix will be subject to intelligence development to identify and address information gaps and identify potential opportunities for disruption so that operational resources can be deployed as appropriate. Sir Hugh Orde OBE Chief Constable 24 February 2006 3392504002 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

Ev 104 Northern Ireland Affairs Committee: Evidence

Annex A

Assistant Chief Constable

Central Authorisation Branch

C1 C2 C3 C4 C5 C6 C7 Organised Serious Intelligence Specialist Analysis Scientific Serious Crime Crime Crime Operations Centre Support Review

Drug Squad Major Head of Specialist Strategic Forensic 28 – Day Crime Intelligence Operations Analysis Strategy Progress Organised Teams: Review Crime Belfast Gough I.M.G.:- Technical Serious Mapping Squads: Maydown Desks Support Crime Deferred Belfast Gough Vetting Analysis Photography Case Maydown Child Portal Air Reviews Protection CHIS Support Intelligence Fingerprints Economic & Serious Secretariat Analysis Archive Crime Sexual Intercept SOCO (CSE) Murder Offences WERC DCU/ Investigation Organised ACPO SB Regional/ Sumissions Crime Task MASRAM HQ Unit Historic Force Regions:- Analysis Cases Liaison Computer Source Units Crime RCGs Analyst Intelligence Development Family Cells Programme Liaison District Coordinator Offices

HOLMES

Crime Scence Managers

Specialist Project Teams

Supplementary written evidence from the Police Service of Northern Ireland I refer to your letter of 7 March 2006. I apologise for the delay in responding to this matter, but I can confirm that in respect of the questions you asked:

Q1 “What will PSNI’s operational links be with the Serious and Organised Crime Agency (SOCA)? What role will SOCA have in Northern Ireland and what use does PSNI expect to make of it? The PSNI expects to work closely with SOCA to tackle crime perpetrated by those criminals that are resident in Northern Ireland or use it as a base/staging point to commit crime in the UK and internationally. Crime Operations Department will provide a single point of contact to ensure that there is an eYcient flow of information and resources. The PSNI believes that the majority of business between the agencies will centre on the movement of drugs and people, a priority will be to covertly build a picture of the organised crime gangs by use of intelligence and new legal gateways. SOCA will be a valuable partner in the fight against organised crime; there is no doubt that a multi agency approach to deal with a specific crime problem can be more eVective, rather than by agencies working in isolation. The key to success will be to use the most appropriate agency to arrest oVenders, disrupt their activities and strip them of their assets.

Q2 What are PSNI’s operational links with Europol and Interpol? How often does PSNI seek assistance from or use resource of thee organisations? When an Organised Crime Branch operation takes place involving a Foreign Law Enforcement Agency a Commission Rogatoire (Letter of Request) is Created by that Sub Branch, which details the full requests being made to that Law Enforcement Agency. This document is then sent to the Northern Ireland Public Prosecution OYce who agrees the request and they then forward it to the foreign Governments Legal OYce for approval. Interpol contacts: 2004—135 requests; 2005—183 requests; 2008—50 requests to date. 3392504002 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Q3 Do you have any suggestions for improving the eVectiveness of the Organised Crime Task Force or for improving the eVectiveness of information sharing between agencies of the Task Force? Does PSNI have a Revenue and Customs Liaison OYcer in the Crime Operation Department? Are P8W oYcers seconded to work in a similar capacity in HNRC? A review of the OCTFwas finalised in 2005 and the recommendations suggested in that review are now being implemented. These changes are designed to improve eVectiveness of the OCTF. The diVerent strands in the OCTFallow for the strategic and tactical levels to be dealt with e Vectively by partner agencies. At present there is informal liaison arrangements between the HMRC and PSNI to assist with the flow of information between the partners and the NIO and other agencies. This works well as long as that Single Point Of Contact is used to ensure the information passed is consistent and the correct lines of communication are used. Although there is no formal Revenue and Customs Liaison OYcer, the OCTFLiaison O Ycer does liaise with HMRC on OCTFbusiness and other business as required. PSNI o Ycers are not seconded to work in HMRC—this does preclude the two agencies working closely together on investigations.

Q4 What steps does PSNI take to crack down on increasing use of technology by organised criminal gangs, a particular reference to use of the internet? At present the PSNI Computer Crime Unit is limited solely to the fundamental forensic recovery of digital evidence principally from seized computers and media covering the full range of criminal investigations, which would include that machines historical internet activity only. The Computer Crime Unit has no ACPO recognised role of “Network Investigator’ and as such carries out no live time or proactive internet investigations into criminal activity of any sort within Northern Ireland. A report addressing this issue is under consideration within Serious Crime Branch.

Q5 What assessment have you made of the extent of illegal dumping? What arrangements are in place for Joint working with the Environment end Heritage Service to combat this problem? Organised Crime Squad have been involved in a number of operations regarding the illegal smuggling of Republic of Ireland (ROI) waste into Northern Ireland and subsequent dumping of it in both NI and Scotland. During our investigations it was established that one haulier smuggled 28,000 tons of waste during an 18-month period. He received payments exceeding ƒ2.5 million (Euros) I have discussed the recent trends in this criminality with our partners in Environment and Heritage Service (EHS) and recent intelligence indicates the following. (1) Waste is now being macerated prior to it being illegally, transported into NI. This makes the identification of the origin of the waste more diYcult to establish. Indications of this practice were detected as recently as 6 April 2006 in Co. Tyrone. (2) Another suspected trend is the importation of Green Waste from ROI into NI to recycle. When this waste crosses the border legitimately it is then illegally dumped into landfill sites. This is eVectively laundering the waste. The volume of this activity is diYcult to assess. The Environment and Protection Agency (EPA) in ROI claim to have significantly reduced this illegal activity however intelligence gathered in NI would indicate that it still continues as described above. Organised Crime Squad and Environmental Heath Service (EHS) have worked eVectively in close cooperation in targeting a number of individuals involved in this criminality. Organised Crime Squad have utilised money-laundering legislation to tackle this problem, as the powers of enforcement provided by the Proceeds of Crime Act 2002 are more robust. This has led to a number of joint operations leading to the successful stopping of lorries illegally transporting waste and a major investigation, which resulted in the charging of three suspects with money laundering and waste oVences. A recent development has been the introduction of formal arrangements for the passage of intelligence from EHS to the PSNI and vice versa.

Q6 What stage have your proposals to allow seizure of vehicles Connected with organised crime oVences reached? The current status of the draft Waste (Amendment) Order (NI) 200618 that the Environmental Protection Division of the Department of Environment NI who are taking the legislation forward are seeking formal advice from the Departmental Solicitors oYce. It is disappointing that this legislation has not been implemented yet 3392504002 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

Ev 106 Northern Ireland Affairs Committee: Evidence

This has allowed the criminals the upper hand to proceed. The legislation as it stands limits enforcement agencies ability to tackle this problem. The most fundamental diYculty is the stopping and detaining of suspect vehicles transporting waste.

Q7 What work has PSNI done with the UK Immigration service in combating illegal immigration (and acting against gangs involved in this area)? The permanent United Kingdom Immigration Service (UKIS) presence in Northern Ireland is based at Belfast International Airport (BIA). That oYce is part of the “Borders and Control Directorate”. Since October 2004 a team from the Enforcement and Removals Directorate (separate department of UKIS) based at Liverpool have operated in Northern Ireland on a regular, albeit limited basis, both at the ports and conducting community visits. The UKIS hope to have an operational and dedicated Northern Ireland based enforcement and removals team in the near future. They will also provide assistance to police on a call-out basis. To date there have been no joint PSNI/Immigration Service operations mounted against organised illegal immigration specific to Northern Ireland.

Q8 What are the reasons for the low levels of reporting of extortion and racketeering that you have identified? Are these rates of reporting comparable to rates of reporting of other crimes associated with organised crime? It has been identified that the main reason for not reporting is the fear and cost factor around paramilitary reprisals. There is evidence to suggest that extortion is seen as an acceptable tax within parts of Northern Ireland, builders and contractor subsequently factor this into the cost of a project increasing the cost to the customer. From 2004 to 2005 Organised Crime Branch have experienced almost a threefold increase in successful operations against extortion. It is diYcult to be definitive in comparing reporting rates in relation to crimes associated with organised crime, as the true levels of the crimes can only be estimates.

Q9 What steps are PSNI taking to improve the confidence of the public and businesses in their operations against organised crime and to encourage reporting? What arrangements are made to facilitate third party reporting? Crime Operations have appointed a dedicated press oYcer to ensure that the positive results from operations against organised criminals receive appropriate media coverage and subsequently encourage reporting. Any report in relation to organised crime activities will be investigated, this may take an overt or covert form. Throughout 2006–07 it is hoped that a series of consultations will take place with various professional bodies to make them fully aware of their individual responsibilities in relation to reporting suspected criminal oVences.

Q10 What response would you make to the suggestion that increasing confidence in the police is a matter of increasing visible police presence in communities? What response would you make to the suggestion that has been made to the Committee that implementation of the Patern recommendations has led to a reduction in police presence on the streets, reducing public confidence in police eVorts to combat organised crime? Every interaction the police have with the public aVects public confidence. Our Reassurance Strategy aims to raise public confidence by improving communications, managing public expectations and assuring local communities that crime is being addressed. By being visible, accessible and familiar we can reduce the fear of crime and whilst a reduction in the number of oYcers has an impact on this, it is not the only factor. We will continue to consult with communities and to identify and prioritize improvements to the physical and social environment, working in partnership and using community-focused policing to target crime and disorder to make neighbourhoods more secure. There is no doubt the public like to see police oYcers on the streets of Northern Ireland, with time the bonds of confidence between the police and general public will increase and so should the flow of information gleaned from everyday contacts. With the introduction of the National Intelligence Model process the PSNI are now even more focused on targeting the organised criminals who have high media profiles and those who aVect the local community. We take into consideration a number of factors while developing a fluid matrix that highlights where the resources of the PSNI are most eVectively focused, to provide the greatest return to the public. 3392504002 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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It has been established that by the arrest of a key individual, a large number of other criminals are disrupted. In the longer term with the reduction of opportunities for gangs to commit crime and increased detection rates then the public should feel more confident.

Q11 What response would you make to the Federation of Small Businesses proposal that the police should provide a free helpline for businesses faced with extortion demands? A dedicated phone line has been installed in the Organised Crime Branch extortion oYce so that members of the public can make contact easily. The telephone number will be 02890922267. The PSNI are also currently considering adding a facility to the PSNI internet site to encourage reporting. A free help line can also be considered, but the PSNI believe that the minimal cost reporting the oVence is not a factor that prevents reporting. Sir Hugh Order OBE Chief Constable 24 February 2006

6. Written evidence from the Assets Recovery Agency

Introduction 1. The Proceeds of Crime Act 2002 (the Act) established the Assets Recovery Agency (the Agency) to be headed by a new oYce holder, the Director, who is appointed by the Home Secretary. The Act provides that the Director must exercise her powers in a way which she considers is best calculated to contribute to the reduction of crime. In considering this matter, the Act states that she is to have regard to any guidance provided by the Secretary of State and that the reduction of crime is in general best secured by criminal investigations and prosecutions. 2. The Agency is a small non-ministerial department and has been in operation since the 24 February 2003. It is based in London with a branch oYce in Belfast. It currently employs around 200 people and has a budget of £15.5 million of which the Belfast oYce accounts for 47 people and £3.59 million respectively. Of these, operationally speaking, the Belfast branch has seven financial investigators and eight assistant financial investigators, supported by a legal team of seven lawyers and six legal caseworkers. 3. The Agency’s key functions are: — To initiate and pursue confiscation proceedings in England and Wales and Northern Ireland. — To investigate and bring civil recovery proceedings in England and Wales and Northern Ireland. — To exercise revenue functions throughout the United Kingdom where there is a reasonable suspicion of criminal conduct. 4. The statutory assumption which underlies work in the proceeds of crime field is that recovery through confiscation following criminal conviction will be the norm and that it will be cases which are not generally amenable to the criminal process which will be dealt with by way of civil recovery or tax. In relation to confiscation proceedings, the Public Prosecution Service for Northern Ireland as Northern Ireland’s prosecuting authority assumes responsibility for all restraint and confiscation proceedings. In Northern Ireland, the Agency has provided investigative expertise and support to enable other government departments, such as the Benefits Investigation Service and the Environment & Heritage Service, to conduct confiscation investigations in relation to criminal investigations and proceedings they have initiated. 5. The Agency’s core role in the reduction of crime is through civil recovery proceedings. Civil recovery is an entirely new civil right of action which enables the state to sue for the recovery of property which has been obtained in the past 12 years through conduct which is contrary to the criminal law. The focus of the proceedings is on the property and the defendant will be the person holding the property at the time when the proceedings are initiated and not necessarily the perpetrator of the unlawful conduct by which the property was obtained. It is not necessary to tie the acquisition of the property to a specific unlawful act. If it can be established on a balance of probabilities that the property was obtained through a variety of unlawful conduct, this will suYce. The Director may apply to the High Court to have the assets frozen pending the completion of the civil recovery investigation and the resolution of the civil recovery proceedings. 6. Where there are reasonable grounds to suspect that an individual has an income or a gain upon which tax ought to have been paid and that income or gain has come from unlawful conduct, whether his own or another’s, in part or in full, the Director may notify the Commissioners of her suspicion and assume the functions of the Revenue. Agency tax specialists will then conduct an assessment under the normal rules for taxation. In addition to the normal taxation rules, the Director has one other power in that she can raise 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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an assessment against income or gain whose source is unknown. The assessment can take into account the individual’s tax liability over the previous 20 years. The individual has 30 days in which to appeal the assessment to the Special Commissioners but they must still pay the amount due while awaiting the outcome. Penalties of up to 100% of the assessment can be imposed for failing to pay the tax in the first place thus enabling the Agency to recover substantially more revenue than the assessed amount.

Types of Cases Brought by the Agency 7. While the priority remains the criminal investigation and prosecution of those engaged in criminal activity, whether organised or not, there will be individual cases where the reduction of crime will be best secured by the bringing of either civil recovery proceedings or the taxation of income which is suspected of being derived from criminal activity. 8. Where an individual dies they are, obviously, beyond criminal prosecution. However this does not mean that the proceeds of crime are beyond recovery. The Agency has instituted civil recovery action in a number of Northern Ireland cases where the property holder has met a violent death.

Assets Recovery Agency v Johnston 9. Jim Johnston was shot dead outside his Crawfordsburn home in May 2003 during a loyalist feud. The case was referred to the Agency by the Police Service of Northern Ireland in the suspicion that Johnston’s assets had been gained through unlawful activity. After initial investigations, the Agency searched a number of properties including Johnston’s Crawfordsburn address where they discovered a partially assembled bomb and some ammunition. In September 2003 the High Court was satisfied that the evidence was suYcient to freeze Johnston’s assets, appointing an Interim Receiver who took possession of his assets and was tasked to carry out an independent investigation on behalf of the Court. The receiver’s subsequent report found that all of the property in Johnston’s estate was the proceeds of unlawful conduct and was therefore “recoverable” under the Act. In September 2004, following discussions between the Agency and the representatives of Johnston’s estate, the Court granted a recovery order by consent under which assets valued at approximately £1.25 million were forfeited. This included Johnston’s former home in Crawfordsburn, together with a further seven houses in Northern Ireland, a holiday home in Ireland and a set of commercial premises in Belfast. A significant investment portfolio was also forfeited. In November 2004, Johnston’s home was sold by public auction for £410,000. In February 2005, four properties were sold by public auction; with a further two houses being sold by private treaty for a total of £390,000. In addition the trustee for civil recovery raised a further £100,000 from various cash and other investments, and £86,000 from the sale of two apartments. 10. A second category of circumstance in which civil recovery proceedings have been commenced is in relation to the property of those who have been acquitted in criminal proceedings and where confiscation proceedings have therefore not been possible.

Assets Recovery Agency v Gault 11. Paul Gault was murdered in his home in 2000. His widow, Lesley Gault, and her lover, Gordon Graham, were subsequently prosecuted for his murder. Although Graham was convicted, the jury could not reach a verdict in respect of Gault. She was therefore tried a second time and was convicted. However on appeal her conviction was quashed by the Court of Appeal for Northern Ireland. At her retrial, she was acquitted and police then referred the case to the Agency. Police alleged to the Agency that Gault benefited from her husband’s murder by receipt of his life insurance and by inheriting his share of their joint marital home. The Agency identified that the proceeds of these assets amounted to the equivalent of approximately 75% of the value of another property subsequently purchased by Gault, which was estimated to be worth approximately £130,000. Gault fully co- operated with the Agency throughout its investigation, and, whilst not admitting to any culpability in the murder, she agreed to settle the civil recovery proceedings. The OYcial Solicitor for Northern Ireland subsequently confirmed that her oYce had been involved in the action on behalf of Gault’s children for whom the money at issue in the proceedings had been placed in trust.

Assets Recovery Agency v Cecil Walsh 12. On 13 June 2003, Cecil Walsh was found not guilty of three charges of obtaining services by deception and one charge of obtaining property by deception. In related criminal proceedings Gavin McCartan, a solicitor, was convicted of failure to disclose suspicions of money laundering. The PSNI referred the case to the Agency as they believed that Walsh was in possession of c. £85,000 of property which they believed was the proceeds of his criminal conduct. Walsh had an extensive criminal record for oVences of an acquisitive nature and, at the time the Agency initiated proceedings, was serving a six year sentence for his part in a cash in transit robbery. The Agency obtained a Mareva injunction to prevent Walsh dealing with his property while the civil recovery proceedings are litigated. Walsh is currently once again in custody following his arrest in a vehicle in suspicious circumstances. This case has not concluded. 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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13. A third category of circumstances in which civil recovery proceedings have been brought is where an appropriate confiscation order has not been possible. It may be that a conviction was obtained but confiscation did not follow or followed only to an inadequate extent. This might have been because of prosecution error, a particular plea bargain, or because the circumstances led to a limited confiscation order which did not cover all of the recoverable property. 14. A fourth type of circumstance where civil recovery has been eVective is where the defendant is alive but is not within the territorial jurisdiction of the court.

Assets Recovery Agency v Patrick David Belton 15. Patrick David Belton was investigated by Her Majesty’s Customs & Excise in relation to his involvement in the evasion of duty payable on smuggled hydrocarbon oils. However before the investigation was complete and before the Department of the Director of Public Prosecutions for Northern Ireland was able to consider the investigation material, Belton removed himself from the jurisdiction and is currently resident in County Monaghan. Extradition was considered inappropriate and Belton’s absence meant that a prosecution could not be taken. The case was referred to the Agency as Belton was identified as owning property in this jurisdiction. Following an investigation a Mareva injunction was obtained from the High Court preventing Belton from disposing of any of his assets pending resolution of the recovery proceedings. This case has not concluded. 16. A final category of circumstance where the Agency has taken civil recovery proceedings is where there is deemed to be insuYcient evidence to institute criminal proceedings.

Assets Recovery Agency v Colin Robert Armstrong 17. Since the early 1990s the PSNI had linked Armstrong to drug traYcking from Belgium to NI and supplying drugs within NI generally. It was further believed that Armstrong had links to the UVF and then the LVF following the split between these organisations. He was known to associate with known criminals yet had nothing in the way of criminal convictions himself. Despite extensive enquiries into his drugs importation, the PSNI could not obtain suYcient evidence to warrant the prosecution of Armstrong. The case was referred to the Agency who investigated the assets of Armstrong in light of the substantial information the PSNI were able to provide in relation to Armstrong’s criminality. The investigation identified 31 properties and other assets valued at £3.75 million and successfully applied for an Interim Receiving Order to freeze Armstrong’s assets pending the outcome of civil recovery proceedings. The receiver has identified a further 29 properties and is following up enquiries into possible properties in France. This case has not concluded.

Assets Recovery Agency v Frances McCluskey 18. Frances McCluskey managed to acquire 42 properties worth c. £3 million during a period in her life when she was in receipt of a number of diVerent means tested benefits, some of which were in diVerent names, including that of her sister in the USA. She had clearly failed to disclose her property portfolio and the rental income she had received from tenants. McCluskey had made a number of false declarations about her assets and sources of income in numerous mortgage applications. The case was referred to the Agency by the Benefits Investigation Service of the SSA who, notwithstanding having identified McCluskey as a suspected fraudster, had been unable to secure her attendance for interview thus preventing them from submitting an investigation file to the DPP for prosecution. The Agency spent 12 months unravelling a web of financial transactions including an analysis of the history of over 60 properties and the transactions on over 60 bank and building society accounts stretching back over the previous 12 years. On 9 March 2005, the Agency successfully obtained and Interim Receiving Order to freeze McCluskey’s property and bank accounts. This case has not concluded.

Referral and Casework Information 19. The Agency does not initiate its own cases. Rather it acts on case referrals submitted to it by law enforcement. The following graphs represent the sources of case referrals, the organised crime links, the primary unlawful conduct, the current status of civil recovery cases being investigated and litigated in Northern Ireland and the cases rejected upon referral and returned to the referring organisation. 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Sources of Cases 03/04 - 05/06

35 30 25 20 15 10 5 0 03/04

Total Number of Cases of TotalNumber 04/05 BIS PSNI EHS CAB CSA DSD MPS HMRC 05/06

Trading Standards Referring LEA

Organisational Crime Links 03/04 - 05/06

35 31 29 30

25

20 16 14 15

10 5 5

0 Criminal Loyalist Organised Republican Not Crime specified Group

Nos of Referrals 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Explanatory Note Primary Unlawful conduct Drugs include supply of drugs, 30 28 25 drug dealing and 25 drug trafficking. 19 Smuggling includes 20 fuel, cigarette and general smuggling. 15 Acquisitive Crime 10 7 includes robbery 5544 and theft. 5 2 11 Revenue includes 0 benefit fraud, tax and duty evasion and deception. Fraud Drugs Murder Others Others include Revenue Smuggling Counterfeit Blackmail illegal waste

Fuel Laundering disposal and Acquisitive Crime Money Laundering prostitution.

Nos of Referrals

Current status of N.I civil cases in action

17 18 16 14 11 12 10 7 8 6 3 3 4 1 2 2 0 Tax Settlement Freezing Order Investigation to Litigate Order/Mareva Adopted/Under Recovery Order Interim Receiving Adopted/Authority

Nos of civil cases in action 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Cases rejected / returned to LEA

12 11 10 9 8 6 4 4 4 3 3 4 2 2 1 0 2003-2004 2004-2005 2005-2006

Insuffucient criminality Insufficient assets Called back - Fresh Crime

Cross Border Co-operation 20. The Agency enjoys close working relations with the Criminal Assets Bureau (CAB) in Dublin. Not only was CAB of assistance in advising on the setting up of the Agency but, since the establishment of the Agency, a number of Belfast-based staV have benefited from short secondments to CAB to gain experience of working practices used there. In the past nine months the Agency has been able to obtain evidence from the Republic of Ireland directly from CAB under the provision for co-operation which was inserted into section 5(d) of the Criminal Assets Bureau Act 1996 by the Proceeds of Crime (Amendment) Act 2005. The Chief Bureau OYcer has made arrangements with his staV that, upon receipt of the precise details of what evidence is sought, any request from the Agency will be expedited as a matter of urgency. The Agency has received assistance with the following types of casework:

Alcohol Smuggling 21. The subject of a civil recovery investigation by the Agency was for a time licensed in both the Republic of Ireland and Northern Ireland to operate as an alcohol trader. Evidence was obtained from CAB in relation to the levels of alcohol traded by the various trading entities operated by the subject. Similarly, details of the evidence held by the Agency were copied to CAB to assist in their own investigation. Details of company formation were also provided.

Drug TraYcking 22. Evidence of vehicle importations into the Republic of Ireland were obtained from CAB in relation to the subject of a civil recovery investigation by the Agency. This evidence was required to support the Agency’s case that large volumes of cash and high levels of spending on lifestyle could not be sustained by the defendant from his declared turnover of his car sales in Northern Ireland and were in fact the proceeds of his drug traYcking. Details of property ownership and company formations by the Defendant in the Republic of Ireland were also provided by CAB.

Fuel Smuggling 23. Evidence of trading and property ownership was provided by CAB in connection with the fuel smuggling activities in three separate civil recovery investigations by the Agency. Of critical importance was evidence relating to Garda search and seizure operations at two commercial premises where the smuggled oils originated. This material had been obtained by the Director of Public Prosecutions for Northern Ireland in connection with criminal proceedings by way of international mutual legal assistance. Its use, however, was limited to the criminal proceedings and the Agency was unable, as a matter of law, to be given the evidence by either Her Majesty’s Customs & Excise or the Director of Public Prosecutions for Northern Ireland. As CAB was simultaneously investigating other persons involved in the same fuel smuggling activities, they provided the evidence under the aforesaid provisions for co-operation in their proceeds of crime legislation. 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Money Laundering 24. CAB has positively responded to three separate requests from the Agency for information in relation to a civil recovery investigation into property in Manchester. Regular meetings have been held with CAB and the Police Service of Northern Ireland to ensure that evidential co-operation is maximised. 25. Beyond formal requests for information a number of meetings have taken place for the exchange of information, the sharing of ideas and to update each other on the progress of our investigations.

Delays affecting the Agency 26. The Agency has experienced a variety of delays in its civil recovery litigation, both at the investigative stage and once court proceedings have been initiated.

Investigation Stage 27. The Agency has experienced delays in the receipt of information from referring organisations and financial institutions. Such delays impact on the progress of any investigation. As civil recovery investigations will usually involve a detailed examination of property and financial transactions over a period of up to 12 years, the complexity of the work has resulted in protracted investigations. This is especially the case where a substantial number of individuals or companies are involved. Notwithstanding the Agency’s extensive use of information technology, the investigative process remains paper-intensive and the Agency will have to liaise with four or five points of contact to obtain what is often related information. However, it is important to emphasise that the Agency has experienced an extremely high degree of willingness to assist its investigations. 28. Delays have also been experienced in relation to the receipt of reports from the Interim Receiver. The Agency requires the Receiver’s report before taking a decision on whether to initiate civil recovery proceedings in the High Court. The Agency has been advised that the delay in submitting a report has been the result of factors such as the lack of co-operation provided to the Receiver by the defendants or individuals involved and the complexity of the case and the forensic accountancy exercise which may be required. 29. The Agency has experienced diYculties in relation to the receipt and permitted use of intelligence information held by referring organisations. The Agency’s intelligence cell continues to foster close professional relationships with their counterparts in the referring organisations and it is anticipated that the eVective use of intelligence by the Agency will continue to develop. 30. Delay has also been occasioned by the necessity of obtaining and examining trial transcripts in relation to civil recovery referrals which arise from failed prosecutions. Where a criminal trial has been aborted as a result of some procedural irregularity or impropriety, it may impact on the Agency’s ability to rely on the same criminality in the civil recovery proceedings. 31. Finally, delays in the investigation of cases have sometimes resulted from the lack of an open gateway between the Agency and the referring organisation, for example Trading Standards, for the making of referrals and the exchange of information. Steps have been taken to creat such gateways where they are needed.

Court Proceedings Stage 32. Civil litigants often experience delays in pursuing their litigation to a conclusion. This may be for any one of a number of reasons. For example a defendant may decide to change his solicitor or counsel or a defendant’s chosen counsel may be unavailable due to other trial commitments. The issues surrounding the provision of legal aid to defendants have also been responsible for considerable delays in progressing the litigation of civil recovery proceedings in Northern Ireland. Following a recent amendment to the Act, defendants can now, in addition to applying for legal aid if they meet the criteria, apply to the High Court for the release of frozen assets which can be used to fund legal expenses reasonably incurred in connection with their defence of the proceedings. 33. Where a defendant decides to defend the civil recovery proceedings, delays associated with High Court procedure and practice will inevitably occur. Given that the Act is a relatively new piece of legislation, further delays have been experienced as the Agency has been forced to defend numerous challenges to the legality of both the civil recovery investigation and proceedings. Such challenges have included: — Adjourning the proceedings as an application for legal aid has been rejected and seven persons wished to appeal this decision and ultimately to judicially review the decision made by the Legal Services Commission. — Bringing challenges on points of law, for example the compatibility of the Act with the ECHR. — Bringing challenges on points of procedure, for example the Agency’s right to serve interrogatories on the defendant. 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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— Delaying the progress of the proceedings by requesting extensive disclosure/discovery leading to protracted argument over Public Interest Immunity issues. The Agency has been successful in meeting all the challenges raised to date. 34. Further delays have been experienced in relation to the settlement of cases where property has to be sold to provide the funds. This is particularly the case where the property is perceived to be situated in an unpopular location.

Legislative Changes to the Act 35. Since the enactment of the Proceeds of Crime Act 2002, there have been three main changes to the way civil recovery works:

A New Property Freezing Order 36. Where the Director can demonstrate to the High Court that there is a good arguable case that the property under investigation is derived from crime and that there is a risk that the property may be at risk of being dissipated, the court may make an order to freeze the property pending the resolution of the civil recovery proceedings. The Serious Organised Crime and Police Act 2005 amended the Act to introduce a new type of order called a Property Freezing Order and essentially replaced the Agency’s use of Mareva injunctions in Northern Ireland. A Mareva injunction could only be sought where the Agency was in a position to commence civil recovery proceedings and eVectively brought the Agency’s investigative functions to an end. The advantage the new Property Freezing Order has is that it can be obtained before the Agency is ready to commence proceedings, thus “holding the ring” while the investigation is completed.

Legal Aid 37. A further significant amendment to the Act contained in The Serious Organised Crime and Police Act 2005 concerns the payment of legal fees. The Act originally contained a provision which meant that someone defending civil recovery proceedings was not allowed to use the frozen assets to pay legal fees. The rationale behind this prohibition was the concern that a criminal facing the loss of property he had acquired through his criminal activities may consider that he had nothing to lose by funding a “Rolls Royce” defence, thus eVectively dissipating the assets. Although legal aid was available to defendants in Northern Ireland, in many cases defendants were unable to get public funding from the Legal Services Commission because they failed the means test in light of the amounts of living expenses which were being allowed under assets freezing orders. The danger was then that the proceedings would breach the fair trial provisions of Article 6 of the ECHR if defendants could not get legal aid and couldn’t fund their defence out of frozen assets. 38. The amendments provided that where public legal funding was available, this had to be the first option. Where it was not, the court may allow the defendant to spend frozen assets on legal expenses provided that they are reasonably incurred and within the rates laid down by the Legal Expenses regulations made by the Lord Chancellor under the Act.

A Hierarchy of Preference 39. The Act provides that the Director must exercise her powers in a way which she considers is best calculated to contribute to the reduction of crime. The Act then says that in considering the way which is best calculated to contribute to the reduction of crime, the Director must have regard to any guidance provided by the Secretary of State and that the guidance must indicate that the reduction of crime is in general best secured by means of criminal investigations and criminal proceedings. 40. The words “in general” are crucial as they allow the Director an element of discretion. Clearly the Act anticipated that in certain circumstances, the reduction in crime would be best secured in an individual case by the bringing of either civil recovery proceedings or the taxation of income which is suspected of being derived from criminal activity. 41. The original guidance provided in 2003 was amended in 2005 in an attempt to increase the Agency’s eVectiveness in reducing crime and removing the proceeds of criminality. The current guidance allows the Agency to pursue civil recovery or taxation investigations in parallel with criminal investigations and proceedings. This will ensure that, where necessary, civil recovery or taxation proceedings can commence immediately after a criminal matter has concluded. 42. The guidance sets out four principles: — A criminal investigation can take place at the same time as a civil recovery or taxation investigation. — Civil recovery or taxation proceedings can be initiated where a criminal investigation is ongoing into unrelated criminality. 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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— Civil recovery or taxation proceedings can be initiated where criminal proceedings are ongoing into unrelated criminality. — In no circumstances can criminal and civil proceedings be carried on at the same time in relation to the same criminality.

Effectiveness of the Agency 43. The Agency has in its first three years made an important and significant start to the recovery of the proceeds of crime by mechanisms outside the criminal confiscation regime. Operational and legal staV are in post and have been trained. Relationships have been built with stakeholder organisations and procedures put in place with them. Some high profile cases have been brought to a successful conclusion. A number of important legal precedents have been achieved before the High Court, the Court of Appeal for Northern Ireland and the Special Commissioners. A considerable number of cases are now in litigation and are working their way through the court system. 44. The Director of the Agency is committed to exercising her statutory functions under the Proceeds of Crime Act 2002 in a robust but fair and proportionate manner with a view to the reduction of crime. As with any new legislation, however, a number of issues have been identified where there could be changes which would make the recovery of criminal proceeds more eVective. These include: (a) The creation of international mutual legal assistance arrangements in respect of civil recovery investigations and proceedings. Mutual legal assistance treaties and laws apply for the most part only to criminal investigations, prosecutions, and related confiscation proceedings. Thus, some jurisdictions by law cannot provide assistance unless the request emanates in respect of criminal proceedings. Such assistance can be critical in cases where assets have been moved through a number of jurisdictions in an attempt to make the money trail more diYcult for investigators to follow. As civil recovery systems become more prevalent, jurisdictions need to begin to consider solutions to this issue. Among the possibilities are: — provisions in domestic legal assistance legislation that permit such assistance; — agreements to requests for subsequent use in civil proceedings of materials previously gathered through mutual legal assistance channels, and — multilateral or bilateral conventions that provide a legal basis for such assistance. (b) A number of small amendments to Part 5 of the Proceeds of Crime Act 2002. The inclusion of the words “in connection with” in section 242(1) of the Act. This would allow property which had been “retained” by criminal conduct but arguably not “obtained” thereby, to be recoverable would increase the eVectiveness of the Act. Similarly, a change to the limitation period, currently 12 years, would allow the recovery of properties purchased with drug traYcking proceeds in the early 1990’s which are currently beyond the reach of civil recovery proceedings. (c) A revision of Part 6 of the Proceeds of Crime Act 2002 to provide a legislative scheme more close to that operated in Ireland by the Criminal Assets Bureau. A number of technical changes are possible which, if Parliament were minded to implement, would make the taxation of monies suspected to be derived from criminal conduct much more eVective. (d) A relaxation of the guidance issued to the Director by the Home Secretary. This could be done in such a way as still to maintain that the bringing of criminal prosecutions is preferable when normal evidential and public interest tests have been satisfied. (e) The consideration of any measures which have the eVect of reducing the capacity of respondents to cause delay to civil recovery proceedings which have been instituted against them. For example, in South Africa, under the Prevention of Organised Crime Act 1998, a respondent who wishes to defend such proceedings must submit to the court, within a specific timescale, an aYdavit specifying the nature of his interest in the property and the basis of his defence to the proceedings. 16 February 2006

Supplementary written evidence from the Assets Recovery Agency Thank you for allowing us the opportunity to write to you and your Committee setting out what suggested legislative amendments the Agency would find useful in making sure that crime does not pay. Our “wish lists” are attached behind at Annexes A and B. In Annex A, the first part covers powers related to civil recovery, whilst the second seeks to clarify the powers of the Interim Receiver. Changes proposed to Part 6, the taxation provisions, come next. Finally at Annex B we enclose details of some additional suggestions made previously to the Home OYce in August 2005. Your committee also requested a percentage breakdown on those cases with the Agency which are classified as having terrorist connections. As of 3 March 2006 the case load in our Northern Ireland oYce is: — Percentage of cases adopted for investigation which are Loyalist—43.1% 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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— Percentage of cases adopted for investigation which are Republican—15.7% — Percentage of cases taken into Litigation/taxation which are Loyalist—46.9% — Percentage of cases taken into Litigation/taxation which are Republican—15.6% — Value of cases taken into Litigation/taxation which are Loyalist—£5,528,825.29 — Value of cases taken into Litigation/taxation which are Republican—£955,332.42 Attached at Annex C is a chart that reflects the rejections/withdrawals. Jane Earl Director Assets Recovery Agency March 2006

Annex A Civil Recovery

Suggested Amendment Part 5—Civil Recovery — Part 5 to be amended to allow for a time limits within which respondents must lodge their defence to civil recovery proceedings.

Reason The South African civil forfeiture legislation, in its Prevention of Organised Crime Act 1998, provides that a respondent who wishes to defend such proceedings must submit to the court, within a specific timescale, an aYdavit specifying the nature of his interest in the property and the basis of his defence to the proceedings. Similar provision might be considered but in such a way as to ensure that the court had the power to require further and better particulars if the respondent failed to properly engage with the court on this issue.

Suggested Amendment Part 5—Civil Recovery — Section 247(2)(b) to be amended to remove the words “in relation to the “same unlawful conduct”

Reason This inhibiting subsection detracts from the purpose of identifying proceeds of unlawful conduct irrespective of where the conduct took place. It provides a technicality through which property can escape on the basis, for example, that the initial investigation centred on theft whilst the receiver believes that a Ferrari has been purchased with drugs proceeds. Whilst ultimately the car might be recovered, doing so could necessitate a whole new set of proceedings.

Suggested Amendments Part 5—Civil Recovery — Amend section 305 to extend the tracing provisions to include property which represents, in whole or in part and directly or indirectly, the original property. Alternatively, to accomplish a similar objective by the amendment of section 242.

Reason ARA has encountered a situation where a person was using proceeds of crime to pay for incidental expenses and child benefit to pay a mortgage. The child benefit would obviously have been required to meet these incidental expenses, but for the use of money which was the proceeds of crime. The tracing provisions are not currently wide enough to guarantee that the payments toward the mortgage are recoverable. An alternative approach, which could be more eVective, might be to add a provision in section 242 to the eVect that where a person uses limited clean income on purchasing property, while using criminal proceeds to fund general lifestyle expenses (which could not have been otherwise aVorded) the property which has been obtained by the unlawful conduct.

Suggested Amendment Part 5—Civil Recovery — Amendment of Part 5 to allow for the civil recovery of instrumentalities of crime.

Reason Civil forfeiture worldwide is divided into two categories. Some jurisdictions have laws for civil forfeiture of the proceeds of crime (as the UK does under POCA Part 5), some have laws allowing civil forfeiture of 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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instrumentalities of crime, and some jurisdictions have both. An instrumentality is something which is used to commit a crime. It might be for example a plane used to fly drugs into the country or a house where the garden or the attic has been used as a growing place for cannabis plants. The UK deals with instrumentalities of crime in two ways. Firstly, upon conviction, an instrumentality can be made the subject of a deprivation order. So if a person is convicted in the Crown Court for importing drugs by boat, the Court can order the forfeiture of his boat. The second possibility is in terms of cash forfeitures under Part 5 of POCA which allow the Magistrates Court to order the forfeiture of not only the proceeds of criminal conduct but also cash which is intended to be used in crime. So clean cash (say borrowed from a relative) which a person intends to use to buy drugs with can be forfeited as an instrumentality. Arguably the UK is falling behind the international benchmarks. The Commonwealth Model legislation which the Justice Ministers recently agreed and published on the Commonwealth website has civil forfeiture of instrumentalities of crime. The UK does not yet allow for this. Thus in cases of human traYcking, drugs traYcking, intellectual property crime, civil forfeiture of the instrumentalities of crime could be eVective to strip out of the hands of organised crime all their business tools even where law enforcement cannot get their proceeds. They could then be auctioned. This would make it more diYcult for organised crime to function without the tools of their trade. The objections sometimes raised in this area are stories from the USA where action has been taken which is perceived as unproportional to the original action. The UK would have a major safeguard in this area, namely the need for proportionality under ECHR. Thus the courts could not make a forfeiture order where it would be out of proportion to the underlying conduct.

Suggested Amendment—Part 5 Civil Recovery — Amend Part 5 to allow for the giving in evidence of previous convictions which would otherwise be inadmissible due to the eVect of the Rehabilitation of OVenders legislation.

Reason A significant number of civil recovery cases have been hampered by the courts’ refusal to admit evidence of spent convictions during civil proceedings as well as refusing applications for investigative orders where they are being sought for the purpose of civil recovery investigations. The Rehabilitation of OVenders Act allows for a certain amount of judicial discretion to be employedin deciding whether or not to admit evidence of spent convictions. However the bar for this is set very high. Evidence of spent convictions can only be admitted if justice cannot be done except by admitting the spent conviction. Nonetheless experience is demonstrating that this is no longer adequate. In one recent case the court gave a clear indication that it was only likely to accede to such an application in extremis. It also indicated that it seemed illogical that, while in a particular case evidence of the facts underlying the conviction could not be admitted because the conviction was spent, the evidence could have been admitted if the defendant had been acquitted. POCA exists because many criminals reach a point where they are able to insulate themselves from arrest. Over time, their convictions gradually become spent and it is therefore increasingly diYcult to prove that financial empires were built on a base of criminal activity.

Suggested Amendment Part 1—Assets Recovery Agency — Section 2(3) to be amended so as clarify that the Director may engage in fair reporting of actions taken by her in pursuance of her statutory functions under the 2002 Act.

Reason The Director has adopted the view that fair reporting of action taken by her under the Act is likely to have an impact in terms of reduction of crime. The amendment would provide a more secure and unambiguous legal basis for her doing so.

Suggested Amendment Part 5—Civil Recovery — Section 242(2) to be amended so that a case for civil recovery may be sustained in circumstances where a respondent has no identifiable lawful income to warrant his lifestyle and purchases. 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Reason In Assets Recovery Agency v Green Mr Justice Sullivan held that, to be successful in civil recovery proceedings, while the Director need not allege the commission of any specific criminal oVence, she must set out matters that are alleged to constitute the particular kind or kinds of unlawful conduct by or in return for which the property was obtained. However, the court concluded that if the Director satisfied the court that property represents the proceeds of unspecified unlawful conduct, but was unable to show any particular kind of unlawful conduct in relation to that property, the court would not make a recovery order. Mr Justice Sullivan commented that if Parliament had wished the Director to be able to recover property by simply alleging, and thereafter persuading the court, that, on the balance of probabilities, it had been obtained by or in return for some unspecified unlawful conduct, it could have said so, but it did not.

Suggested Amendment Part 5—Civil Recovery — Amend section 266 to require a court making a recovery order against property held by a limited company or held by a director of a limited company to consider whether the director or directors ought to be disqualified as company directors.

Reason Corporate vehicles are frequently used to hide property obtained by unlawful conduct. Courts which conclude that corporate structures have been abused should be able to take preventative action to ensure that such abuse does not occur.

Suggested Amendment Part 8—Investigations — Section 376 to be amended to allow the Director to issue Letters of Request in respect of civil recovery investigations.

Reason Certain countries may be willing to respond to Letters of Request on a bilateral basis in respect of non- conviction based investigations into criminal proceeds as long as there is a statutory power for the issuing of the Letter of Request.

Suggested Amendment Part 10—Information There are a number of additions to the “permitted persons” category in Part 10 which are necessary. The facility to update Section 438 is available through the Home OYce and is currently underway. This is a lengthy process and is dependent upon the Parliamentary Timetable, but is important to the eYcient operation of the regime.

Suggested Amendment—Contempt of Court Orders Amend POCA so as to provide that the maximum penalty for contempt of a court order made by any court under POCA should be five years imprisonment and/or an unlimited fine.

Reason Those who are defending restraint proceedings, confiscation proceedings, or civil recovery proceedings will frequently be subject to court orders requiring them to perform certain actions. These may include court orders to repatriate funds to the jurisdiction, and orders to swear a disclosure aYdavit, orders to bring documents within the jurisdiction. Experience has shown that defendants and respondents will often show unwillingness to comply with such orders. Where a confiscation order has been made against a defendant in criminal proceedings and he fails to comply, the default sentence can be as much as ten years imprisonment. Where, however, the non-compliance is in terms of non-repatriation of £1 million of funds to the jurisdiction, the maximum penalty for contempt is two years imprisonment. This seems inconsistent. A greater degree of compliance with court orders could be engendered by increasing the maximum penalty for contempt. 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Receivers.

There are a number of items which would clarify the powers of the Interim Receiver.

Suggested Amendment Part 5—Civil Recovery — Section 247 to be amended so as to allow an interim receiving order to require police to assist the receiver by being present on premises.

Reason Currently, police may not attend with a receiver on property unless there is an imminent or actual breach of the peace. Accordingly receivers are forced to hire private security at costly rates.

Suggested Amendment Part 5—Civil Recovery — Sections 251 and 260 to be amended to allow a discretionary power expressly provided in the Act for the interim receiver to apply ex parte and on an urgent basis for directions where necessary.

Reason POCA requires that any application for directions/variation etc by, inter alia, the interim receiver, must be on notice. This is too cumbersome. There may be occasions where the receiver considers that he needs to ask the court whether he should extend the order to property not currently within its ambit or to seek directions on a matter where the property owner should not have prior notice of the application in case he uses that notice period to dissipate property or conceal evidence or otherwise act to the detriment of a potential recovery order.

Suggested Amendment Part 5—Civil Recovery — Section 251 to be amended to allow an IRO to be varied by the Court of its own motion following receipt of information from a receiver during an application for directions.

Reason Currently what occurs is that from time to time receivers require to seek the directions of the court. To support an application for directions, the interim receiver will furnish the court with information as to his findings so far. The issue then can be whether the Order should be amended in the light of what the receiver has told the court. The Agency has no information other than what is in the possession of the court and the respondent. To eliminate confusion, it should be clear that the court has the power of its own motion to amend the order and include additional property in the IRO following receipt of information from the receiver.

Suggested Amendment Part 5—Civil Recovery — Section 247(3) to be amended to extend the Receiver’s protection.

Reason Section 247(3) deals with loss or damage caused by the interim receiver and limits liability to those instances where such is caused by the interim receiver’s negligence. It seems that there is considerable scope for attacks to be launched against the interim receiver regarding the contents of her reports, claims of injury to reputation etc. Such claims might be used to delay civil recovery proceedings. It could therefore assist to aVord the interim receiver some form of immunity in respect of such claims.

Suggested Amendment Part 5—Civil Recovery — Part 5 to be amended to allow an interim receiver to issue Letters of Request in respect of civil recovery investigations.

Reason Certain countries may be willing to respond to Letters of Request from a receiver in respect of investigations into criminal proceeds as long as there is a statutory power for the issuing of the Letter of Request. 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Suggested Amendment Part 7—Money Laundering — Section 330 to be amended so as to relieve an interim receiver of the obligation of making a disclosure to NCIS in respect of material covered by his investigation for the High Court.

Reason Section 330 of POCA makes it an oVence for a member of the regulated sector to fail to disclose. This is an impossible burden upon the interim receiver. Where the information comes to the receiver and/or her staV via her appointment or proposed appointment in such roles she should be exempt from regulation.

Suggested Amendment Part 11—Co-operation — Amend section 443(2) to include references to Part 5.

Reason Currently, an interim receiver appointed in England and Wales under Part 5 has no powers in Northern Ireland or Scotland. Thus, if a receiver knows that property exists in one of the other UK jurisdictions, he has no powers to deal with it. In such circumstances, the Agency must go to the expense of obtaining an order in the other jurisdiction, duplicating costs. It is preferable to have the matter dealt with before one court rather than have two considering the same underlying unlawful conduct.

Suggested Amendment Schedule 6 — The following should powers should be added to Schedule 6: (i) A power to eVect a forced entry to any premises which are either themselves recoverable property, or are premises where she reasonably believes recoverable property, or evidence which will assist her in locating recoverable property, may be found. (ii) A power to extend the order to property not expressly detailed therein where the interim receiver believes upon reasonable grounds that it may be or represent the proceeds of unlawful conduct (iii) A power to require a respondent to swear a power of attorney. (iv) A power for the interim receiver to delegate his functions and powers to his staV to allow for simultaneous operations at multiple premises.

Reason Schedule 6 represents a non-exhaustive list by way of example of powers which may be granted to the interim receiver. It is desirable that some of the more frequently granted powers which do not currently appear in Schedule 6 were incorporated in order to reassure recipients of orders and their legal representatives of the legality of the order.

Annex B

Section 1—Confiscation and Civil Recovery

1. Suggested Amendment Part 5—Civil Recovery Amend section 242 to clarify the interpretation of assets obtained by unlawful conduct. Possibly an amendment of section 242(1) to include the words “or in connection with” after the word “by”.

Reason ARA has been advised that if it were faced with an argument that tax (of all types) may have been “retained” by unlawful conduct but was not “obtained” by unlawful conduct for the purpose of Part 5, it is not certain it would win. 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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2. Suggested Amendment Part 2—Confiscation Provide management receivers the power to manage or otherwise deal with property held under section 49(2)(b) following an ex parte application, with the exception of selling.

Reason Where there is an ex-parte application for management receivership powers, the court has the power to allow the receiver to take possession of the property under section 49 (2)(a) but not to manage or otherwise deal under subsection (2)(b). Manage or otherwise deal includes the power to sell (subsection (10)(a)). which is accepted should not be done before representations are made. However, inability to carry on the business has led to practical problems for the receiver and the course of the investigation.

3. Suggested Amendment Part 2—Confiscation Strengthened provisions for the enforcement of confiscation orders. Suggestions, which can be stand alone or mixed together, include: — a new scheme by which the court at the confiscation hearing after hearing evidence including that of any party who has an interest in the property, the judge must make a binding order to the amount of the defendant’s interest in the property. There will be no separate enforcement stage. — Amend section 67(4)(a) so money can be transferred from a bank account to satisfy a confiscation order without a restraint order—modelled on the existing “Third Party Debt Orders”. — Where the property is physically held by law enforcement, an order permitting the police (or which ever agency holds the property) to take title of the property. They will then sell it paying the proceeds to satisfy the confiscation order.

Reason Re-litigation at the enforcement stage leads to frustrating and lengthy delays. If enforcement was more robust and immediate, confiscation would gain more credence, be more eVective and be publicly acknowledged.

4. Suggested Amendment Part 5—Civil Recovery Amend section 282(2) to allow for civil recovery action against cash.

Reason Ability to take civil recovery action against cash alone would be desirable in certain cases. In one current case ARA is testing the proposition that this provision (s.282(2) POCA) is simply a jurisdictional one to direct whether a case goes to the Magistrates Court or the High Court in a case where both options are available. Our argument therefore is that where the Magistrates’ Court option is not available (either because the money was pre-POCA and did not fall under the Drug TraYcking Act 1994 or where it could have fallen under one or other of those provisions but was for whatever reason not seized under those provisions) the proceedings against cash alone can be taken to the High Court. There is a further possible line of argument, on which HMRC are presently taking Counsel’s advice that, while this argument might be made in relation to cases where the original seizure was made pursuant to section 42 of the Drug TraYcking Act or section 294 of POCA, this surely applies to cash seized under PACE or any other power in the course of a criminal investigation. Legislative clarification would remove the need to litigate this point and allow ARA to pursue assets currently out of its reach and readily enforceable against.

5. Suggested Amendment Part 8—Investigations Section 363 to add “safety deposit box’.

Reason Section 363 has no express reference to “safety deposit box” as previously in schedule 2 to the Proceeds of Crime (Northern Ireland) Order 1996. The customer information order provisions in POCA are largely based on the precedent in the Terrorism Act 2000. ARA would like this amended so the legislation gives them the power to search a safety deposit box. Northern Ireland is achieving this by their own legislation. 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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6. Suggested Amendment Part 10—Information Section 438 to be clarified to allow a gateway between the Agency and interim receivers without the resort by the Interim Receiver to use of Schedule 6 powers.

Reason The issue has arisen in a recent case. An IRO was granted by the High Court in respect of property owned by an individual. The Interim Receiver served on the Agency a letter using Schedule 6 powers to require ARA to hand over the documentation held in this case. ARA wrote to the Interim Receiver saying it would hand over everything but one document received from NCIS. This document showed that intelligence material had been received from a foreign jurisdiction that assets may have been hidden in another name in that jurisdiction. The Interim Receiver initiated proceedings asking the court to give ARA a direction to hand over the document. The Interim Receiver considered the issue which had never been ruled on by the courts before needed some kind of resolution. NCIS were brought in as a third party. They lodged an aYdavit explaining that if the information was handed over the UK’s participation in the EGMONT system would be at risk. NCIS’s solicitor wanted to vary the IRO so as to rule the Interim Receiver out of getting the material ARA had received from NCIS. Then both the Interim Receiver and his solicitor realised that, if the proceedings continued, the subject would have to be served with all the papers. After discussion with the Interim Receiver and the other parties it was agreed that it would be appropriate for the Interim Receiver to withdraw the proceedings in this particular case if the Agency undertook to write to the Home OYce and ask for a review of the provisions in POCA regarding interim receivers.

7. Suggested Amendment Part 12—Miscellaneous and General Section 449 to be extended to encompass interim receivers and their staV.

Reason Security considerations following inadvertent disclosure that Interim Receiver is operating under non- statutory pseudonym in NI. Consideration should also be given to the Irish approach (originally laid before the House in the Bill) of it being an oVence to identify a member of ARA (and with it being extended to receivers.)

8. Suggested Amendment Part 2—Confiscation Section 75 (4) requires to be amended to tidy up the criminal lifestyle test. The Whitehall Prosecutors Group initially identified this problem.

Reason There has been some confusion over the interpretation of section 75(4) and whether the threshold for the “one plus three” oVences lifestyle test required £5,000 benefit from each oVences (ie £20,000 in total) or an aggregate of £5,000 from all 4 oVences we would not take this forward. The diYculty is well illustrated by the case of Broadbent which had great success but which would not have been possible had it been a POCA case and not a Criminal Justice Act case. This involved a man caught evading payment for petrol which he had put in his car at a garage forecourt. There were 4 oVences of this totalling about £250 in benefit. The financial investigation indicated a very substantial and unexplained series of assets. The lifestyle provisions were triggered on the “one plus three” basis, and a confiscation order of £1.2m made. Because the benefit from the known oVences was £250 the lifestyle assumptions would not have been triggered. This is something which could have an impact on the work of the Agency in terms of Trading Standards, vetinary fraud, or prescription fraud cases. The Environment Agency, DWP and DEFRA have all been unable to take confiscation proceedings as they would like as a result of these provisions.

9. Suggested Amendments Part 5—Civil Recovery Allow civilians working under PoCA to have greater investigative and other enforcement powers. This mirrors the position of civilians operating under the Police Reform Act 2002. Possible amendments include: — Interim receivers under Part 5 having the powers of reasonable force in their investigative function. [Ideally this would also be extended to ARA investigators under their search powers] — Civilians (perhaps only accredited financial investigators, those investigating as the Director and/ or designated police civilian staV) having the powers to search for and seize cash under Chapter 3 of Part 5. 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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— Civilian experts being able to accompany the execution of a search, eg computer experts, forensic accountants etc. (Section 356(6) to allow non-ARA staV to accompany a warrant. This section provides that the Director of the Agency may give written authorisation for members of her staV to accompany the person to whom a search warrant has been granted. It does not include an ability to authorise persons who are not members of the Agency staV, such as specialists (eg police, computer experts, and forensic accountants).

Reason This mirrors the position of civilians operating under the Police Reform Act 2002.

10. Suggested Amendment Part 5—Civil Recovery Clarification of section 248—registration of interests in land/property

Reason This has been the root of much debate as to who is entitled to make such application in England and Wales. Subsection (3) states that no notice may be entered in the register of title under the Land Registration Act 2002 in respect of an interim receiving order—the basis for this is we assume the act that Hansard (May 13 2002 column 105) stated that the purpose of this was to ensure that the orders are simply registered as pending land actions—this has caused confusion at the land Registries at the enforcement authorities and at the interim receivers—this needs statutory clarification on what is to be registered and by whom.

11. Suggested Amendment Part 5—Civil Recovery Include a “legislative steer” in relation to civil recovery proceedings in the same way as the Act provides a “legislative steer” in relation to confiscation proceedings.

Reason The leading textbook on confiscation states that the steer sets out in statutory form “the clear purpose of the legislation”. The absence of a legislative steer in respect of civil recovery arguably places this regime in a weaker position than the confiscation regime in that it leaves the public policy to be inferred. In a case where a court may be inclined to exercise its discretion in a way which would have the eVect of releasing the property frozen by means of an IRO or a PFO, a legislative steer might well have the eVect of tipping the court’s discretion towards a diVerent decision.

12. Suggested Amendment Part 12—Miscellaneous and General Section 449 to be extended to allow the Law Society to register ARA lawyers under their pseudonym.

Reason Current arrangements with government departments allows ARA lawyers to register their place of business as their previous government employer. However, the recent recruitment to the legal team has seen an increase of recruitment of lawyers from outside the civil service to whom this current practice as it stands would not be able to extend. The Law Society considers it has no power to register lawyers in pseudonyms granted by the Director. The amendment is necessary to ensure security for Agency staV.

13. Suggested Amendment Part 5—Civil Recovery Amend section 288 to extend or abolish the 12 year limitation period.

Reason The Agency frequently discovers property which has been obtained by unlawful conduct where the obtaining and the conduct took place outside the 12 year limitation period. A drug dealer who bought a house with drug traYcking proceeds fifteen years ago is therefore unrecoverable under the civil recovery provisions. 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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14. Suggested Amendment Part 8—Investigations Amend section 380 to clarify the ability to impose an account monitoring order on a solicitor’s client account.

Reason If an investigator wishes to obtain an AMO on a solicitor’s client account, then the wording of the Act causes diYculties. By way of example, a solicitor may disclose that he expects a lodgement of what may be criminal proceeds to be lodged to his client account by a client within the next week. The investigator will wish to obtain an AMO to monitor when this occurs. Section 370(4) requires the account to be one held by the person specified (ie the person under investigation). But of course the account is not held by the person under investigation but by an innocent third party, the solicitor. The wording therefore needs to be amended. There is a related and wider issue in relation to the use of Part 8 orders where a third party’s account may be being used and how a financial investigator gets access to those accounts (for example belonging to a relative) without risking breaching their Article 8 right. It is clear that criminals frequently make use of the bank accounts of relatives and close associates for money laundering purposes. Persons involved in criminal activity seek thereby to reduce the amount of money and other property held in their own names so as to minimise their exposure to the risk of confiscation.

Section 2—Revenue Functions

1. Clarification of section 317(1)—add profit and benefit to “income and gain” in 317 (1) (a) and (b) and throughout where necessary.

Reason Widening the definition of what is income and gain in terms of tax law. For example, in a benefit fraud case ARA would want to tax the money but it is not income as it does not derive from a trade, profession or vocation. ARA has had a number of referrals in relation to fraud where the money comes from stealing. To date we have had to connect the money to a business of some sort to make it chargeable so that it becomes part of the taxpayer’s trade but a lot of cases do not have a trade etc attached to it. Without widening the definition the Director will have no option to reject many cases as she has done.

1a. Charging of new tax category to tax under Part 6: either (a) Create a new section containing a new charging provision under Part 6 of POCA to cover “income, benefit, gain or profit derived from unlawful activity”; or (b) Use existing legislation to charge the above to tax: by creating an amend in POCA stating: “All profits, benefits, income and gains whatsoever whether capital in nature or not in respect of which the Director has reasonable grounds to suspect derive in any way whatsoever from criminal conduct are chargeable to tax under section 5, chapter 2 of the Trading and Other Income Tax Act 2005 schedule D cases 1 and 2 under section 18 of ICTA 1988 if the assessment is in relation tax years preceding 2005–06 irrespective of anything which says otherwise elsewhere including the Taxes Act 1988 and shall be described in the Assessment as miscellaneous income or” “income, benefit, gain or profit derived from unlawful activity”.

Reason To ensure that the new wider tax category is actually chargeable to tax otherwise there is no point having no 1 above.

1b. Add to the interpretations and definitions in section 326 to include “source”, “income”, “benefit or profit” and “gain” For example: — Source refers to the precise activity that generates the profit, income, benefit or gain derives from; — Income is any amount which accrues to any individual or company and is not derived by way of gif; — Benefit or profit shall take their ordinary meaning and are anything other than income, profit or gain; — Gain is any gain that a person makes under the Capital gains tax legislation or in the ordinary meaning of the word. 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Reason Need to define the new terms that have been introduced to the tax regime. To make clear that the definitions that are already being used are defined in as wide an application as possible otherwise no point having above suggested amends.

2. Add to Part 6 a provision that allows that no deductible expenses, losses, allowances, capital or otherwise, shall be allowed

Reason A criminal should not benefit from their crime. This would bring the tax provisions in-line with those for criminal confiscation, that there can be no legitimate expenses incurred in criminal oVences. This would prevent taxpayers involved in criminal trades from using the above to minimise their tax liability.

3. Amend to/repeal of section 325 and declaration in schedule 8 with regards to the Director’s ability to publicise cases with regards to her function in section 2 (1)—where the Agency has reasonable grounds that income has been gained unlawfully then the duty of taxpayer confidentiality is forfeit. Also a new section would have to be added to ensure that any case-law was overridden.

Reason Ireland has the ability to release details and there is a quarterly list of Revenue defaulters that is published. If someone is guilty of a tax crime, or has admitted evasion and settled administratively, it is arguable that they should be deemed to have forfeited their right to taxpayer confidentiality. This would allow the ARA to publicise in much more detail its tax actions, which would in turn have a positive impact on our statutory requirements to contribute to the reduction of crime.

4. Replace section 319 (1) and (2) to put into eVect the removal of the need to identify what activity the income is related to. For example: The assessment shall not be discharged by reason only of the fact that the income, gain, profit or benefit derives from criminal activity either in whole or in part, directly or indirectly or that it could have been charged under any other provision of tax law or because the assessment fails to identify the precise source of the profit, income, benefit or gain or because that source is unknown as long as the Director has reasonable grounds of suspicion in relation to each of the elements of the qualifying condition.

Reason There is a need to clarify that challenges based upon those grounds: part or indirect derivation from criminal conduct, the Director being unable to identify the precise source or any source will not be made successfully or at all. It is unclear as section 319 currently stands that legitimate income can be taxed by ARA ie where some income has been identified as unlawful within a tax year then all income from that tax year is taxable by ARA. This needs to be made explicit in the legislation. It is not clear from the above amendment whether section 319(3) and (4) would still be required. This provision will eliminate the taxpayer’s ability to challenge the tax assessment and thereby the amount due.

5. Further clarification of section 319 with regards to taxable income within a tax year (in addition to amend IV above—would be inserted after section 319 (3)) For example: If it is shown that the income, gain, profit or benefit arising or accruing in a particular tax year has a purely legitimate source then the assessment is only discharged if it is shown that it is not chargeable to tax under the normal taxing provisions.

Reason This section would provide ARA with the ability to tax purely legitimate income in a situation where the Director had reasonable grounds of suspicion but the taxpayer had shown that all his income etc was legitimate. If the Director can tax legitimate income this would increase her recoverable amounts. 3392504003 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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6. Include clearer definition/interpretation of “standard of proof’ in section 326 For example: The standard of proof shall be the balance of probabilities. The burden of proof is on the taxpayer to demonstrate that the tax assessed under the assessment is not due.

Reason The clarification is needed because it currently only exists through historic case law. This provision would enhances all the other amendments and thereby would allow the Agency to take on more cases since the burden is on the taxpayer to do more of the work. Placing it on a statutory basis reduces the scope for argument in relation to where the burden lies.

7. Add to Part 6 a provision that allows for title possession property—ie that it is irrelevant for these purposes of Part 6 that the individual or company to be taxed may not have good title, possession or property to the income, benefit, profit or gain.

Reason Under ordinary tax law an individual cannot be taxed on income or gain that is not their’s. In all criminal enterprises there is a legitimate question as to who is the lawful owner. Such an interpretation, if brought against ARA, would be a serious threat to its power to tax. This amendment would remove the threat of challenge by making the point explicit.

8. Amend section 323 (3) to make Revenue investigative functions (c, d, e & f) available to ARA

Reason Would make available to ARA the same powers of investigation in tax cases as those held by HMRC. Given ARA is dealing with criminality these powers would be appropriate and invaluable, and would speed up the cases and enhance performance delivery.

9. Repeal section 324

Reason ARA deals with an entirely diVerent type of taxpayer to HMRC therefore the practices/concessions published by the Revenue are not appropriate to those who deliberately flout the tax laws. For example as the Revenue and Customs website indicates that theft etc is not chargeable to tax then we have to reject a lot of cases of theft, burglary and benefit fraud. In terms of practice the negotiated route advocated by Revenue and Customs practice would prevent us from issuing assessments immediately and listing appeals as quickly as possible. This slows down the whole process of recovering money.

10. Add to Part 6 a provision that takes away the burden from ARA to show fraudulent or negligent conduct where the law requires it in any circumstances where ARA has raised an assessment (or penalty).

Reason In some circumstances eg where a tax return has been delivered under section 8 or s8A of the Taxes Management Act 1970, the current legal requirement is that the taxing authority needs to demonstrate that fraudulent or negligent conduct (ie the taxpayer knew or ought to have known that the tax return should have been correct). It is inconsistent for example that a taxpayer should beinadiVerent position with regards to the proceeds of unlawful activity if they have filed a tax return compared to if they have not filed one at all. Alternatively, a similar requirement exists if the taxing authority wishes to go back in time further than 5 years. It is extremely diYcult to show fraudulent or negligent conduct and having that burden means that the whole burden (to show the tax due) is eVectively on the Agency. 3392504003 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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11. Clarify and amend section 320 to make the jurisdiction of the Special Commissioners explicit and remove any suggestion that they have increased powers of review over the Director than they have over the Revenue

Reason This would include within the definition inheritance tax because, as it is currently worded, it is not included. Current drafting could be interpreted to expand the powers of review of the Special Commissioners over the Director as beyond that for HMRC. Would apply consistency of jurisdiction of the Special Commissioners with regards to Appeals for ARA and the Revenue. All other appeals would follow the usual routes.

Annex C

Total number Total number Value of InsuYcient InsuYcient Ongoing LEA of referrals of withdrawals withdrawals criminality1 assets2 investigation3 Loyalist 33 8 £1.27m 1 4 3 Republican 16 7 £1.57m 0 2 4 (! 1probable)

7. Written evidence from the Federation of the Retail Licensed Trade NI The Federation of the Retail Licensed Trade (the Federation) is the only trade association which represents the members of the licensed trade in Northern Ireland. It represents well over 1,000 licensees, over 70% in total. The licensed trade in Northern Ireland employs around 34,000 workers (approximately 5% of the workforce), accounts for wages of around £300 million/year, and the value of the alcohol market in Northern Ireland is around £950 million/year. It thus provides a significant level of employment and subsequently income tax to the UK Treasury, and a considerable level of tax through alcohol sales. In addition, the sector contributes around £2 million/year to the arts, sports and charities.4 The Federation would make the following points— Organised crime, in the form of protection money or “donations” and racketeering, is something which everyone in the trade is aware goes on, but which is never spoken about, other than occasional anecdotal stories. Direct areas where the licensed trade is aVected are as follows— — Shebeens (illegal drinking venues)—our members tell us that these are widespread throughout Northern Ireland — Taxis selling alcohol—there are a number of organised taxi delivery/sale operations which operate on a large scale, either selling directly out of the boots of cars, or delivering to homes through the night; deliveries to the underage are a particular problem — Robberies (of oV-sales and of drinks delivery consignments) — Counterfeit alcohol—there is a specific problem with counterfeit SmirnoV; counterfeit product is sold widely from markets, door-to-door, from ice-cream vans etc. It can be poisonous and sales to the underage are common. Bottles and security features are changed from time to time, but the counterfeit product can be exceptionally good. — Door supervisors—Northern Ireland does not fall under the Security Industry Agency, so it is left to the 26 local councils to regulate door supervisors (or not) via the Entertainments Licence. The Federation provides training but councils have varying requirements surrounding vetting, police record checks etc. Some councils are active, most are not. Licensees can come under pressure to employ particular individuals (with paramilitary and/or criminal links) and, in the absence of something akin to the SIA, it can be diYcult to refuse. The trade fears that the current Department of Social Development consultation Liquor Licensing: The Way Forward has not taken account of the potential for the proposed changes to increase avenues for organised crime, both “political” and “conventional”, to flourish further or to launder money:

1 This means that the Agency was unable to verify suYcient history of acquisitive crime to convince a court to grant orders under POCA. 2 This means that ARA was unable to locate suYcient assets to meet the POCA threshold. There can be many reasons for this. Often the referring Law Enforcement Agency (LEA) will identify that there appear to be assets but further enquiry by the Agency identifies that these lie outside the 12 year POCA time horizon for civil recovery or are heavily mortgaged. 3 This means that the LEA withdrew the case from ARA, normally because evidence of criminality had been identified and the LEA then wished to pursue a full criminal investigation, possibly leading to criminal confiscation. 4 Sources: NI Statistics & Research Agency, Cenus of Employment 2003; DHSSPSNI “Reducing alcohol related harm in Northern Ireland”; MINTEL 2004. 3392504004 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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For example, the proposal to remove the cap on the number of liquor licences will make it easier for anyone to enter the trade and set up new premises and thus enter a largely cash business, and the deregulation of registered clubs, including the repeal of the Registered Clubs Accounts Regulations which were set up 10 years ago to ensure that money couldn’t be laundered through clubs. A question on the issue was tabled in the House of Lords by the Lord Maginnis of Drumglass. It reads “To ask Her Majesty’s Government whether the Assets Recovery Agency in Northern Ireland has been consulted about the proposed abolition of the surrender provision for liquor licences in Northern Ireland; and whether they have made any assessment of the impact of the abolition on the level of criminal activity. [NIO] (HL3273)” The Federation feels that the response from the Secretary of State for Northern Ireland was less than satisfactory. Given the specific expertise of the Assets Recovery Agency or, indeed, the Organised Crime Task Force, in this area we are concerned that it was not directly consulted in the drafting of the strategy. The licensed trade in Northern Ireland currently faces immense pressure—with a smoking ban a year away, a licensing review proposing wholesale changes to the fundamental nature of and investment in the industry, increasing margin and business pressures from competition from supermarkets. All of this has lead to a real uncertainty and lack of confidence in the industry. Licensees are understandably concerned that they face these business pressures, whilst the illegal trade apparently continues to grow and flourish. Nicola Carruthers Chief Executive 2 March 2006

Supplementary written evidence from Federation of the Retail Licensed Trade NI I promised to ask our membership for details of the incidence of illegal alcohol and unreported crime, to try to assist the Committee in its Inquiry into Organised Crime in Northern Ireland. Despite our best eVorts, we had only a small response to our questionnaire (40 respondents). The vast majority were in eVect “nil” returns which, unfortunately, is often the case with a self-reported and self- selected survey. However, for the sake of completeness and interest, the findings were as follows: — The 40 responses were evenly divided from throughout Northern Ireland. — 11 had been oVered alcohol for sale from other than a reputable source; on average, once a year. The most common time was around Christmas. — None of the 11 cases reported it to the PSN1. — To the best of their knowledge, only 3 of the 40 had ever been oVered counterfeit alcohol for sale— and less than once a year in all cases. — None of the 3 cases reported it to the PSNI. We asked whether, to the best of their knowledge, whether illegal alcohol distribution (via shebeens, taxis, markets etc) was common in their area. Responses were: Extremely common 4 respondents Very common 6 Common 8 Quite uncommon 5 Extremely uncommon 8 Thus, from the limited sample, it was more common than not. Interestingly, those that stated it was extremely or very common were all based in Belfast, Down or Armagh. Only two stated that they had ever been victims of extortion—one was asked for £2,000 to cover 12 months, and the other for £100/week. Both were from Belfast. One case was reported to the PSNI—“No action was taken”. In the other case, the comment was “What would be the use—absolutely no protection available from the police.” When asked if other crime would be reported to the PSNI, 35 respondents stated that they would. Those that replied “no” gave reasons as “slow response times, no point” and “political reasons”. I am sorry that we did not get a better response. The sample is so small as to be worthless; however, I did want to let you have the results in any case. Nicola Carruthers Chief Executive 14 April 2006 3392504004 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Supplementary written evidence from the Federation of the Retail Licensed Trade Northern Ireland I read with great interest the evidence given by Mr McGrath and Ms MacHugh on 3 May 2006. Loath as I am to add further to the Committee’s reading or workload, there were a number of statements (six in total) made during the session which could not be let pass without comment. I have, therefore, enclosed a brief paper containing a number of comments on various statements made on the subject of the liquor licensing review in Northern Ireland, together with a set of rather hefty Appendices (not printed) for the sake of completeness. Nicola Carruthers Chief Executive 27 May 2006

Comment from the Federation of the Retail Licensed Trade NI (FRLT NI) to certain evidence given by Mr John McGrath, Mr Dave Wall, Ms Linda MacHugh and Mr John Nevin to the Northern Ireland AVairs Select Committee inquiry into Organised Crime. Taken from the uncorrected transcript to be published as HC 886-vi. 1. DSD Evidence (Q360): Mr McGrath presenting as an improvement the fact that anyone applying for a personal licence will need to prove that they are a “fit and proper person”. FRLT NI Response: This is already a legislative requirement in Northern Ireland. An applicant for a licence must prove this to the courts, and there is a body of case law to back it up. In future, this requirement will have to be proved to the local council. This cannot be as stringent as the courts. 2. DSD Evidence (Q362 and Q395): Statement by Ms MacHugh that the surrender requirement has done nothing to control where licences are used up in business, and that the system that is being proposed is more proactive than that in GB, in that an applicant will “have to actually prove that (a) the premises are required and (b) that the person applying for that is fit and proper”. In Northern Ireland at the moment, in order to open a new pub or oV-sales you must— — surrender a subsisting licence to the court, AND — prove that the number of licensed premises is inadequate, AND — prove that you are a fit and proper person. In addition, you must also advertise your intention to apply for a licence, and any person or business in the vicinity, together with the local council and local police (both of which must be given individual notice), can register an objection. If no objections are made, this does not mean that the licence will be granted—the court can find and has found that there is no inadequacy or that the applicant is not fit and proper. Prospective licensees who purchase a licence for surrender to open a new premises try wherever possible to buy licences close to where they wish to open, as this will help to satisfy the “inadequacy” requirement (ie by showing that there will be no increase in the number of licences in the area, but simply a substitution). Please see attached extract from our response to the consultation on how a local authority administered system, despite best intentions, cannot be as rigorous as a court-based system (Appendix 1); together with a copy of a letter sent by the Scottish Licensed Trade Association to the Minister (Appendix 2). 3. DSD Evidence (Q371): Ms MacHugh’s statement that “there has been a lot of support for keeping surrender. I have to say, most of that support has come from the licensed trade itself”. FRLT NI Response: This is an entirely incorrect statement. ALL responses received to the consultation are posted on the DSD website in the archived consultations section. A breakdown of responses received is as follows— — 961 responses received in total. — Of those, 881 expressed an opinion on the surrender issue. — 18 agreed that surrender should be abolished (although two of those, whilst agreeing it was “anti- competitive”, stated that a limit on licences should remain). — 863 stated that surrender should remain. Of those 863, only 37 were from licensees (including ourselves). In short, of those who expressed an opinion on surrender, 98% stated that it should remain (90% of all responses). Only 1.9% of responses agreed that surrender should be abolished. It is not true, therefore, to say that most of the support for the retention of surrender has come from the licensed trade. A full breakdown of who responded on the issue is attached (Appendix 3). 4. DSD Evidence (Q377): Ms MacHugh’s statement that since the consultation was launched, the cost of a licence has gone up. FRLT NI Response: This is not surprising, given the uncertainty and instability that is now in the market. There are significantly fewer licensed premises and licences that have come on the market. 3392504004 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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5. DSD Evidence (Q387 and Q389): The impression is given that the implications of the abolition of the surrender requirement were fully discussed by the Inter-departmental Working Group and PSNI. FRLT NI Response: That may have been the case, but we have been unable to confirm this. We made a Freedom of Information request for copies of agendas and minutes of the inter-departmental group, but our request was turned down on the “public immunity” ground. Given the extremely brief and simplistic discussion of the surrender issues within the consultation paper itself (attached—Appendix 4, together with the extract from our response on that surrender section—Appendix 5), we do not believe that this proposal was discussed in any great or proper detail prior to the publication of the consultation paper. Indeed, in its pre-submission document, the PSNI stated that views were sought on the “impact of longer opening hours, enforcement powers, shared responsibility for the management of the night-time economy, and sanctions”. There was no mention of the removal of the surrender requirement or, indeed, transfer of responsibility for licensing from the courts to local councils.1 The implication was also given that the proposals were discussed with the Organised Crime Task Force/ Assets Recovery Agency. See below for an answer by Lord Rooker to a question tabled by a Northern Ireland Peer, Lord Maginnis of Drumglass from 25 January 2006: Lord Maginnis of Drumglass asked Her Majesty’s Government— “Whether the Assets Recovery Agency in Northern Ireland has been consulted about the proposed abolition of the surrender provision for liquor licences in Northern Ireland; and whether they have made any assessment of the impact of the abolition on the level of criminal activity. [HL 3273] Lord Rooker: The Assets Recovery Agency in Northern Ireland was not directly consulted about the proposed abolition of the surrender provision for liquor licences in Northern Ireland. The Government, in conjunction with the Police Service of Northern Ireland, considered the implications of the abolition of surrender as part of the package of proposals for the reform of liquor licensing contained in the consultation document Liquor Licensing—The Way Forward published on 1 November 2005. It is free to make any comment during the consultation.” 6. DSD Evidence (Q477): Clarification of the treatment of the value of the licence on the books of the business. FRLT NI Response: Please see the attached response from the Northern Ireland Bankers’ Association (Appendix 6) In addition, as included in our response (Appendix 5), if licensees are not compensated for the loss of their licences but are instead given until 2009 to write oV the value of their licence, this displays a fundamental misunderstanding of what would be simply practical. A publican paying tax at 22% would need to get a tax allowance of £636,000 to equate to £140,000 (value of the licence). Many pubs are small and pay tax on their small profits, for example— Pay tax on £15k 42 years to clear Pay tax on £20k 32 years to clear Pay tax on £30k 21 years to clear PricewaterhouseCoopers has prepared a report on the Economic Impact for Northern Ireland of the proposals within the consultation, and this will be finalised within the next week or so. A copy will be forwarded to the Committee for information.

8. Written evidence from HM Revenue and Customs 1. The Government is committed to tackling tax fraud in order to protect the revenue required for investment in public services, to protect legitimate business from being undermined by dishonest competition and to protect society from organised crime. 2. This memorandum provides information on the role and responsibilities of HM Revenue and Customs (paragraphs 3–5), the threat posed by organised crime to those responsibilities in Northern Ireland (paragraphs 6–9), more detail on HM Revenue and Customs priorities in Northern Ireland—oils fraud (paragraphs 11–18) and tobacco smuggling (paragraphs 19–30)—and HM Revenue and Customs” role in the Organised Crime Task Force (paragraphs 31–33).

1 Report for the Northern Ireland Liquor Review Team summarising the Results of the Survey of District Commanders, Regional Headquarters and Criminal Justice Department’s Community Safety Branch. 3392504005 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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HM Revenue and Customs 3. HM Revenue and Customs was established on 18 April 2005 through the merger of HM Customs and Excise and the Inland Revenue. 4. The new department is responsible for collecting the bulk of tax revenue as well as paying tax credits and child benefit, and strengthening the UK’s frontiers. As a result, HM Revenue and Customs manage: — Income, Corporation, Capital Gains, Inheritance, Insurance Premium, Stamp, Land and Petroleum Revenue Taxes; — Environmental taxes: climate change and aggregates levy and landfill tax; — VAT; — Customs Duties and frontier protection; — Excise Duties; — National Insurance; — Tax Credits; — Child Benefit and the Child Trust Fund; — Enforcement of the National Minimum Wage; and — Recovery of Student Loan repayments. 5. The aim of HM Revenue and Customs is to administer the tax and customs control systems fairly and eYciently and make it as easy as possible for individuals and businesses to understand and comply with their obligations and receive their tax credit and other entitlements. Our mission is to provide an increasingly eYcient and high quality service that: — helps people and businesses understand and meet their tax obligations and understand and receive their entitlements; — strengthens frontier protection; and — tackles those who do not comply.

Threats to the UK Tax System from Organised Crime in Northern Ireland 6. From a United Kingdom perspective, it is clear from our everyday work that a number of the regimes, which we are responsible for are subject to concerted attack by organised criminality; in particular: — the principal excise regimes—tobacco, alcohol and road fuels; and — value added tax (VAT) through Missing Trader fraud (MTIC). 7. We also believe that many serious and organised criminals do not comply with their direct tax obligations and, as a consequence, do not pay the right amount of direct tax. HM Revenue and Customs is continuing to work with others in law enforcement to tackle serious oVences, including direct tax evasion. For example, this has already resulted in several cases of criminal prosecution for tax evasion in Northern Ireland, in which the former Inland Revenue worked with the Police Service of Northern Ireland and others, in cases in which tax evasion was suspected of being linked to other serious oVences. 8. In Northern Ireland specifically, the most serious attacks on the tax regimes involve cigarette smuggling and road fuels fraud; set out below are further details of the nature and size of these threats, HM Revenue and Customs’ approach to tackling these threats and the impact to date on them. It is clear, however, from our operational activity and intelligence that Northern Ireland-based criminality are important players in the illegal oils and cigarettes market throughout the United Kingdom. Their activity and influence extend beyond supplying illegal markets in Northern Ireland and encompasses involvement in such criminal activity throughout the United Kingdom. 9. It is important to note that since 2000, HM Revenue and Customs (then HM Customs and Excise) have taken a new strategic approach to tackling indirect tax fraud. This strategic approach has five components: — analysis: understanding of the nature of any revenue loss problem is an important first step in measuring its size, analysing the trends in its development, and ensuring the eVective deployment of strategies to tackle them; — estimates: it is also important to establish a robust baseline of the size of a problem against which targets can be set and monitored. Estimates of the revenue loss problems facing the indirect tax regimes are now published on a routine basis wherever possible. The latest estimates of indirect tax losses, and the methodologies behind them, were published as part of the Pre-Budget report in December 2005 in the “Measuring Indirect Tax Losses” document; — targets: the new approach has seen a switch from a focus on outputs to a balanced combination of activities designed to hit outcome targets. Each strategy needs to be geared towards a clear outcome in terms of its impact on the scale of the problem, so that the appropriate operational responses can be drawn up to meet those targets, and so the eVectiveness of the strategy can be routinely measured; 3392504005 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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— responses: each strategy must feature a range of measures which apply proportionate and well- targeted pressure at all levels of the problem. In some cases, where losses occur because of fundamental weaknesses in the way the tax is controlled, the first step must be to establish a sustainable control regime; and — monitoring: performance in meeting the key outcome-based targets is measured and reported on a regular basis, accompanied where relevant by operational data which shows progress in individual areas. The development of the problem must also be carefully monitored so that operational responses can be adapted accordingly, and new measures brought forward. 10. Finally, the creation of HM Revenue and Customs provides an opportunity in tackling organised criminality, as in other areas, to work in a co-ordinated way across direct and indirect taxes, pooling the information, expertise and resources available across HM Revenue and Customs to gain the maximum impact against those who engage in serious criminal activity.

Oils Fraud 11. The nature of oils fraud in Northern Ireland centres around two specific kinds of fraud—rebated fuels fraud and road fuel smuggling—but both are driven principally by organised criminality. 12. Rebated fuels—red diesel and kerosene—along with oils used of industrial processes known as “tied oils” can be used in road fuel frauds in three ways: — laundering—the treatment of rebated and duty-free fuels with chemicals to remove their markers and dyes and make identification of use as a road fuel harder; — mixing—combining rebated and duty-free oils to make an illegal road fuel or to dilute road diesel; and — misuse—illegally using unadulterated rebated and duty-free fuels in road vehicles. 13. In Great Britain, rebated fuels fraud is the single, biggest threat in terms of oils fraud. Unlike the rest of Great Britain, in Northern Ireland road fuel smuggling is also present in significant volumes; that is the smuggling of road fuel duty paid in another member state, in this case the Republic of Ireland, into Northern Ireland. 14. Finally, it is important to note that while we believe the majority of illicit fuel is not sold through legitimate filling stations in Great Britain, our latest assessment is that a very significant proportion of the illicit fuel sold in Northern Ireland is sold through retail filling stations. 15. At present, we cannot identify the amount of revenue lost from oils fraud in Northern Ireland. However, we can successfully estimate the amount of revenue lost from all forms of oils fraud and cross- border shopping. Our latest estimates are set out in the table below:

2000 2001 2002 2003 2004 Diesel Revenue £230m £215m £210m £220m £180m Diesel Market Share 62% 58% 55% 52% 42% Petrol Revenue £90m £75m £75m £85m £65m Petrol Market Share 23% 20% 20% 23% 18%

16. Customs have had in place since 2000 a developing strategy to tackle oils fraud. This strategy is based on three initiatives: — beginning in 2000, increasing the number of oYcers engaged in tackling oils fraud from 25 to over 160; this level of resource has been maintained since 2001; — implementing in Northern Ireland, as elsewhere, the UK Oils strategy which is principally focused on tackling rebated fuels fraud which includes the introduction of a regulatory regime to control the sale of rebated fuels, the creation of a new central intelligence unit to direct all operational activity, additional funding for new investigation, control, testing and intelligence oYcers to tackle oils fraud and a hard-hitting publicity campaign to highlight the risks of illegal fuel use; and — leading multi-agency working in the road fuels sector, working with other agencies under the umbrella of the Organised Crime Task Force to maximise the impact of Government intervention in the whole road fuel sector. 17. This strategy has led us to some specific operational tactics to tackle oils fraud, In particular, we have targeted the organised crime groups behind oils fraud and between April 2000 and March 2004 we have dismantled 13 criminal organisations in Northern Ireland engaged in oils fraud, broken up 65 laundering and mixing plants in Northern Ireland and seized over 8 million litres of illegal fuel. HM Revenue and Customs’ latest operational results will be published shortly as part of the 2004/2005 Annual Report. 18. The strategy HM Revenue and Customs have developed and put into place since 2000 has resulted in a reducing share of the Northern Ireland market which is not UK-duty paid; a reduction of 22% and 32% for petrol and diesel respectively. It is also worth noting that between 1996 and 2000 the volume of legitimate 3392504005 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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road fuel declined steeply year on year by around 36% in total. However, following the introduction of HM Revenue and Customs’ strategy in 2000 we have seen this downward trend reversed year on year with volumes now up 28% in 2004 compared to 2000.

Cigarette Smuggling 19. The majority by volume of tobacco fraud detected by Customs involves large-scale organised smuggling of large quantities (typically between one to 8 million sticks at a time) in freight. These cigarettes are generally sourced from outside the EU and will carry little or no tax. Seizures of large-scale freight- smuggled cigarettes very rarely involve stock that has had duty paid anywhere within the EU. A typical smuggling operation will involve a number of independent groups working as links in a chain to get illicit product from source to the UK smoker. Each organisation involved in moving product along the illicit distribution chain will expect to profit from its part of the process. Typically there will be at least four links in the supply chain. Genuine products sourced in global wholesale markets may be obtained for as little as 70p per pack (significantly less still for counterfeit). The typical UK illicit street price is around £2.50 per pack. 20. At the lower end of the smuggled market more product is sourced EU duty paid and brought into the UK by large gangs of air passengers working as “runners” for organised groups. 21. When HM Revenue and Customs’ strategy to tackle this problem began in 2000 the majority of product seized was of UK manufactured origin. Since then the preponderance of UK manufactured product has fallen steadily and an increasing proportion is counterfeit. In 2003–04 54% of seized cigarettes were counterfeit compared to 15% in 2001–02. 22. The table below sets out HM Revenue and Customs’ latest estimates of the size of the illicit cigarette market in the United Kingdom as a whole, including Northern Ireland. It is not possible to identify the size of the illicit market in Northern Ireland, or any particular region of the United Kingdom, separately.

2000–01 2001–02 2002–03 2003–04 Revenue Loss £2.7bn £2.5bn £2.0bn £2.2bn Illicit Market Share 21% 20% 15% 16%

23. The Government launched its Tackling Tobacco Smuggling strategy in March 2000 against a background of increasing growth in tobacco smuggling which, it is estimated, would have seen the illicit market grow to some 34% by 2002–03 if no action had been taken. 24. The strategy is based on attacking the economic profitability and risk/reward ratio of smuggling through an end-to-end strategy of disruption. It involves the suppression of supply of UK manufactured product, legislative change, the use of new technology, and increased resources both at the ports, overseas and inland. Taken together this has reduced the profits available to smugglers by driving up their costs and has increased the chance of their getting caught. 25. The strategy launched in March 2000 included an increase in the number ofoYcers deployed to tackle cigarette smuggling by almost 1000 in the UK and overseas, the introduction of a national network of x- ray scanners, working closely with tobacco manufacturers to suppress the availability of UK manufactured cigarettes to smugglers abroad and the new legislative measures which introduced “UK Duty Paid” fiscal marks on tobacco products to help prevent, detect and deter the handling, distribution, sale and purchase of smuggled tobacco. 26. The strategy has been developed and refreshed since its launch in March 2000 both in anticipation of and in response to changing patterns of behaviour as the fraudsters react to our eVorts. Most recently the Government has announced in the Pre-Budget Report a number of initiatives to enhance the strategy to tackle tobacco smuggling including: — agreeing improved Memoranda of Understanding with UK tobacco manufacturers to restrict the availability of cigarettes to smugglers, and to tackle the problem of counterfeit material, including consultation on options for introducing covert markings for the UK tobacco retail market; — consulting with the industry on complementary legislation to be introduced in Finance Bill 2006, aimed at preventing organised criminal gangs from exploiting weaknesses in supply chains for tobacco products; — deploying 200 staV specifically to tackle the smuggling of hand-rolling tobacco; and — reviewing operational activities to deliver maximum impact against the growing threat from counterfeit tobacco products smuggling. 27. To measure delivery of the strategy, key targets were set for the percentage of the market accounted for by smuggled cigarettes for each year up to 2005–06. Since the introduction of the Tackling Tobacco Smuggling strategy we have managed to slow, stabilise and reverse the growth in tobacco smuggling, reducing the illicit cigarette market share to 16% in 2003–04, against a target of 20%; see the table below. 3392504005 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 Smuggled Share Target (%) 21 22 21 20 18 17 Smuggled Share Actual (%) 21 20 15 16 n/a n/a

28. The illicit cigarette market in Northern Ireland has the same characteristics as in the rest of the United Kingdom. Moreover, it is important to note that, in common with Great Britain, seizures made in Northern Ireland are not necessarily destined for the Northern Ireland market. 29. Our activity in Northern Ireland, as in the rest of the United Kingdom, has been focused on strategic aims and operational tactics. The examples below illustrate some of the particular operations we have run in Northern Ireland highlighting the nature and seriousness of the criminality involved: — in November 2005, HM Revenue and Customs oYcers detected 2.94 million Superkings cigarettes on board a refrigerated trailer within the confines of Belfast Port attempting to board a ferry to Stranraer. The driver claimed he was taking the consignment of “vegetables” to Manchester. This particular consignment had originated in Belgium and upon entry to the Port of Rosslare transited through the Republic of Ireland before being detected in Belfast. The driver was arrested and charged by HM Revenue and Customs and is awaiting trial. — in November 2005 the Police Service of Northern Ireland and HM Revenue and Customs detected some 15.4 million mixed brand cigarettes in one site in North Armagh. Evidence seized at the site indicates the source of the cigarettes is Spain. Three men were arrested at the scene, all three were charged. One of these individuals was granted bail with substantial sureties required and the other two are presently remanded in custody. 30. As these illustrations demonstrate, serious and organised criminality are behind cigarette smuggling and our response must utilise all the tools available to HM Revenue and Customs.

The Organised Crime Task Force 31. All of our work in Northern Ireland to tackle organised criminality attacking the tax regimes we are responsible for, especially those attacks on our priority areas of cigarette smuggling and oils fraud, is done as part of the multi-agency approach championed by the Organised Crime Task Force. 32. HM Revenue and Customs is a central element of the Organised Crime Task Force and is fully committed to ensuring that law enforcement agencies work together. HM Revenue and Customs have seen how through a multi-agency approach of sharing information, supporting activity of others and working together in joint operations, we can make a greater impact on the problems that we face. 33. In particular, our multi-agency work on oils fraud, where we work very closely with a range of Government agencies, gives us clear evidence of the additional success such an approach brings. HM Revenue and Customs December 2005

9. Written evidence from the Department for Social Development

Review of Liquor Licensing The Minister for Social Development, David Hanson MP, launched the consultation paper “Liquor Licensing—The Way Forward” on 1 November 2005. It set out proposals for reforming and modernising the law on the sale and supply of alcohol in licensed premises and registered clubs in Northern Ireland. The consultation period ended on 31 January 2006. Responses are being considered and the Minister will make a statement in early summer 2006. The last review of the law governing liquor licensing and registered clubs took place ten years ago. Since then the social and economic climate in Northern Ireland has changed and improved immensely. The peace dividend has altered the shape of the tourism and hospitality sectors and of town and city centres. More growth lies ahead. Liquor licensing law must keep pace with these developments and with modern expectations and new challenges.

Proposals The main proposals in the consultation paper are as follows: — Six new objectives, to underpin licensing policy, legislation and regulation: Promotion of public health; Promotion of public safety; Prevention of crime and disorder; Prevention of public nuisance; Protection of children from harm; Fair treatment of all stakeholders. 3392504006 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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— Moving responsibility for granting and renewing licences from courts to district councils, leading to a more accountable, transparent system. — Removing the current twelve categories of licence in favour of a dual system of personal and premises licences, which will require personal licence holders to have accredited qualifications and clean backgrounds. — New, more eVective enforcement measures, including immediate temporary closure powers for the police, a penalty points system for licensees who break the law and new council liquor licensing oYcers. — A proof-of-age scheme and more flexibility to allow under-18s on certified licensed premises when accompanied by responsible adults. — A modest extension of current opening hours, creating scope for opening up to 2.00am Monday to Saturday and midnight on Sunday. — Abolishing the provision which requires an existing licence for a pub or oV-licence to be “surrendered” to a court before a new one may be granted. — Revoking the financial controls and accounts formats for registered clubs, prescribed in the Registration of Clubs (Accounts) Regulations (Northern Ireland) 1997, in favour of best practice guidance.

Aims The proposals aim to: — Give people greater choice about when and where they may drink. — Encourage investment, variety and high standards of service in the hospitality, tourism and entertainment sectors. — Remove bureaucratic burdens on service providers, for example, pubs, registered clubs, hotels, restaurants and oV-licenses. — Promote a safe, welcoming environment in town and city centres where the evening and night-time economy can flourish. — Give police the powers they need to crack down on irresponsible drinkers and rogue traders. — Make the licensing system more transparent and accountable, giving communities more information and a louder voice in decision-making.

Timescale The proposals will come into eVect in two stages. Proposals relating to opening hours, enforcement, children and registered clubs’ accounts will come into eVect as soon as new legislation can be enacted, which should happen in 2007. The Review of Public Administration is due for completion by 2009 which will be the provisional target date for making legislation to transfer responsibility for licensing from courts to district councils and do away with children’s certificates, existing categories of licence and surrender.

Alcohol and Organised Crime The PSNI continues to support the Minister’s balanced package of proposals. They were members of the Liquor Review Team, and supported the Minister at the launch in November 2005.

Organised Crime Task Force (OCTF) During the pre-consultation phase of the licensing review the OCTFquerie d the proposal to relax the registered clubs’ accounts regulations. They suggested that the clubs’ accounting requirements should be retained and extended to all licensees, to take account of concerns about premises being used as a front for organised crime. The Interdepartmental Group on Organised Crime explored the issues further with the Department for Social Development, Northern Ireland OYce, OYce of the First Minister and Deputy First Minister and PSNI. Clarification of the overall PSNI position was sought on behalf of the Group. The Chief Constable’s OYce advised that PSNI corporately supported the proposal to relax registered clubs’ current accounting requirements and confirmed that these do not need to be extended to licensed premises. “Liquor Licensing—The Way Forward” reflected the PSNI corporate position.

Key Issues Key points in response to the concerns that have been expressed about the proposals are as follows: — The package of measures proposed will strengthen the PSNI ability to monitor activity and enforce the law on the supply and sale of alcohol. 3392504006 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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— Giving district councils responsibility for granting liquor licences and club certificates will create a more accountable system where pubs, oV-licences, registered clubs and other licensees will have to explain in detail how their businesses will support the six licensing objectives. — There will be other safeguards. Before reaching a decision, district councils will have to seek the views of responsible authorities and interested parties such as the PSNI, local residents and local businesses. All applications for a licence will be open to objection and a licence may be reviewed, revoked or suspended at any time if there is cause for concern. — Replacing the current twelve categories of licence with a dual system of personal and premises licences will simplify processes. Personal licence holders will have to have accredited qualifications and demonstrate clean backgrounds. This will help guard against infiltration by criminal elements — Regarding concerns about registered clubs illegally selling genuine or counterfeit alcohol, or money laundering, a private members’ club must serve a “dry year” ie it cannot supply alcohol, between applying to a court for a certificate of registration and the court hearing on the application. This process aims to ensure a club is capable of obeying the rules governing registered clubs before its registration is granted and it is allowed to supply alcohol to members and their guests.

Review of Charities Legislation 1. There are three distinct charity law regimes in the UK, each with its own legislation. At present only England and Wales has a Charity Commission and a full Register of Charities. Scotland has recently established its regulator (OYce of the Scottish Charity Regulator, OSCR) and will be launching its register shortly. The Republic of Ireland has just published its Heads of Bill to establish a charity regulator. Tax relief for charities is an excepted matter, dealt with by HM Revenue & Customs on a UK-wide basis. 2. In Northern Ireland, the Department for Social Development (DSD) has the following powers in connection with charities under the Charities Act (NI) 1964 — Section 2 of the Charities Act (NI) 1964—Where it appears that legal proceedings should be considered in relation to a charity DSD may send a certificate to that eVect, with explanatory particulars, to the Attorney-General. The Attorney general may institute such legal proceedings as he considers proper. — Section 3 of the Charities Act (NI) 1964—Where DSD has reasonable grounds to believe that any charity property may have been concealed, misapplied or withheld it may, with the consent of the Attorney-General, by order require copies or originals of any books, records, deeds or papers relating to the charity. — Section 29 of the Charities Act (NI) 1964—Where there is alleged to be a breach of a charitable trust or the advice of the Court is required in connection with a charity DSD (having given notice of its intention to the Attorney-General) (or the trustees or any interested party) may apply to the Court for such relief as may be necessary.

3. Use of DSD’s Statutory Powers — DSD has no power to go on a “fishing expedition” in the hopes of finding evidence of wrongdoing where no prima facie evidence appears. — Before acting, DSD must have suYcient evidence to satisfy the Attorney-General that its proposed actions are reasonable in the circumstances. — DSD has no power to act against organisations which are not charities.

4. Collections — Public collections (whether conducted on the street or house-to-house) are primarily a matter for the Police Service of Northern Ireland (PSNI). DSD has a limited role in connection with authorising very large scale house-to-house collections for a few major charities, but nearly all collections are authorised by PSNI, and PSNI have general responsibility for ensuring that collections are conducted properly. —ItisanoVence to conduct a public collection (even a perfectly genuine and honest one) without obtaining the appropriate authorisation from PSNI, and it is an oVence to collect money for one purpose under the false pretence that it is for another purpose. 5. It is proposed to introduce new charities legislation in Northern Ireland bringing it broadly into line with England and Wales, with a Charity Commission for Northern Ireland (CCNI) and a Northern Ireland Register of Charities (NIROC) to improve controls over charities. — This will provide a strong visible regulatory framework for all charities, and ensure consistency with the other devolved regions and Ireland which have a charities regulator or are about to establish one. 3392504006 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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— Information on what charities do with the money they raise will be made available to the public, increasing public confidence. — The opportunity for abuse by criminal elements will be restricted through greater scrutiny and controls. — Structures will be put in place providing for greater exchange of information between other regulators across UK and Ireland and with the PSNI and HM Revenue & Customs regarding charities. 6. In March 2004 the Department established a Northern Ireland Charities Advisory Panel to consider options for change to charity legislation. The Panel recommended that a system similar to that in England and Wales should be adopted, but all charities in Northern Ireland should be registered (as opposed to about 60% in England and Wales). Key features would be: — A new definition of charities for Northern Ireland, based on that proposed for England and Wales, with the addition of the promotion of peace, and the promotion of good community relations. All charities should demonstrate public benefit. — There should be a Northern Ireland Register of Charities and all Northern Ireland charities should be registered. — There should be a Northern Ireland Charity Commission. — All Northern Ireland registered charities should be regulated to seek to ensure that they are well- run and deserving of public support. — Charities should be required to produce accounts in specified forms, supply them to the Commission and make them available to the public on request. — The present systems for licensing street and house-to-house collections should be replaced with a new system covering all public charitable collections. 7. DSD carried out a public consultation exercise on the proposals from 11 February to 3 June 2005. 106 responses were received from a wide range of bodies and individuals, with the majority being broadly favourable. There was a degree of diVering opinion about a few specific issues which led to relatively minor changes in the proposals, mostly intended to avoid duplication of regulatory requirements on national charities and organisations which have multiple regulators (eg housing associations). 8. In terms of the need for a Charity Commission for Northern Ireland and a Northern Ireland Register of Charities, checks by HM Revenue & Customs on organisations seeking charitable tax exemption status are based on tax, not charity law requirements. Organisations claiming to be Northern Ireland charities can operate elsewhere in the UK, Europe and throughout the world, and enforcement agencies in those jurisdictions have no reference point for information on purposes, annual reports and accounts. Concerns about the regulation of charities have been expressed in International Monitoring Committee and Organised Crime Taskforce Reports, and there is evidence of charities being established in Northern Ireland precisely to avoid the regulatory framework that exists elsewhere.

9. The Scale of the Problem — PSNI does not keep information that would allow the number of cases of fraud involving charities to be quantified, nor the value of money diverted to criminal purposes. Enquiries, however, indicate that there are several such cases each year. — HM Revenue & Customs has encountered a small number of Northern Ireland charities that appear to have been set up as vehicles for sophisticated tax avoidance. Sums involved can be substantial. — Some sham charities established in Northern Ireland were used to avoid Stamp Duty before new legislation was enacted, with an estimated tax loss of approximately £2 million. — One Northern Ireland charity appears to have been set up to receive large gifts of shares thereby attracting tax relief at 40% for the donor. Tax at risk in this case is estimated at £14 million.

10. Paramilitary Involvement — Certain organisations associated publicly with current and former paramilitary groups have charitable purposes that would be recognised under current Northern Ireland legislative provisions and all of them deliver against these purposes, to a greater or lesser degree. — Anecdotal evidence, however, suggests that some of the resources are used to fund expenditure not wholly compliant with charitable purposes and the proceeds of informal collections do not, in fact, reach the named recipient. — PSNI investigations have highlighted cases where bank accounts in the names of charitable organisations associated with current and former paramilitary groups have been used to encash monies collected from extortion and other criminal activities. In these cases, persons with strong paramilitary connections undertook the criminal activities. 3392504006 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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11. New Northern Ireland charities legislation is being drafted. The anticipated timetable is: — Anticipated completion of drafting April 2006. — Public Consultation on proposal for draft Order May 2006 to August 2006. — Order laid before Parliament October 2006. — Order made at Privy Council December 2006. — Subordinate legislation containing detailed provisions March 2007. 21 April 2006

Supplementary written evidence from the Department for Social Development On liquor licensing the current review was instigated in early 2004 following representations by the PSNI, the licensed trade and clubs. David Hanson, Minister for Social Development launched the consultation on 1 November 2005 and it finished at the end of January. We are currently analysing the responses to the legislation, and Minister will be making a statement in early summer on how he intends to proceed with new legislation. You will understand that in advance of this we can only focus today on the rationale behind the proposals. There are six objectives proposed to underpin licensing policy. Key among these are prevention of crime and disorder. The Minister’s proposals developed from close working between DSO and PSNI, NIO and the NI Court Service and DHSSPS and involved extensive pre-consultation with a wide range of Organised Crime Task Force (OCTF) interests including the licensed trade, the retail trade, the tourism and hospitality sector and registered clubs. They were developed also in the context of the Department’s involvement in the NICS Inter-Departmental Working Group on Organised Crime which is an element of the OCTF. The proposed changes to the liquor licensing system are aimed at strengthening the endorsement powers available to PSNI in dealing with problems in licensed premises of all types. They are designed to create a more open and rigorous licensing system. A critical element is the introduction of a personal licence which will be required by anyone wishing to run a licensed business. Anyone applying for a personal licence will need to prove that they are a fit and proper person to run a licensed business, including having adequate skills and knowledge of the licensed trade and a clean background. Ministers believe therefore that the package of measures will make it more diYcult for organised crime to enter the licensing trade.

Supplementary written evidence from the Department for Social Development On 3 May oYcials from the Department for Social Development gave evidence to the Committee on the review of liquor licensing law and charities legislation in Northern Ireland. In the course of the session oYcials undertook to provide further written information on a number of points.

Q425 Mr Campbell asked for information on the scale of the problem of accounting irregularities by registered clubs The Registration of Clubs (Accounts) Regulations (NI) 1997 (the Regulations) were introduced at the behest of the Royal Ulster Constabulary to help tackle the problem at the time of financial mismanagement and racketeering in registered clubs. In the course of the annual checks provided for in the Regulations, accounting irregularities have frequently been identified. However, over the course of the past 10 years, the police have adopted a policy of proportionate response, encouraging clubs to avoid prosecution by improving their accounting arrangements. This has been so successful that PSNI have reported no prosecutions in the last five years. In 2004 PSNI acknowledged the clubs’ eVorts in this area by recommending that the Department review the Regulations with an eye to relaxing them through simplifying the auditing requirements and replacing other mandatory requirements with a system of guidance and best practice.

Q397 Mr Banks asked how many sales of liquor licences took place each year Under Northern Ireland liquor licensing law the grant of a new public house or oV-sales licence is conditional on the surrender to the County Court of an existing licence. The requirement does not apply if the applicant intends to continue the same business on the same premises—but does apply where the new licence will be used to open a pub or oV-licence elsewhere in Northern Ireland. This has generated a lucrative private sector trade in licences. The surrender provision is unique to the licensed trade and exists nowhere else in the UK. In 2003 the County Courts disposed of 245 (Judicial Statistics 2003) new licensing applications. This figure includes all categories of licensed premises, not just those, ie pubs and oV-licences, governed by the surrender provision. Information on individual disposals is not held centrally by the NI Courts Service nor in a readily accessible form by each County Court. However it is known that pubs and oV-licences make up some 75% 3392504006 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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of the licensed trade and it is reasonable to assume that this proportion is reflected in the numbers of applications disposed of annually. On this basis, therefore, it is likely that some 180 licences for pubs and oV-sales change hands each year. The value of licences which have been acquired for surrender purposes has increased substantially in the past two years. In the early 1980s liquor licences were virtually worthless. During the Troubles, hundreds of licensed premises were destroyed by explosions and were not re-built; licences were not in demand, many expired and the total number of licences in circulation declined. In the early 1990s, as greater social stability began to return, the value of a licence gradually rose to around £40k. Later that decade, a licence could fetch some £65k. In 2004 they were fetching over £70k and by early 2005 had reached £90k. Over the last 12 months the value of a licence has rocketed to an all time high of £140k. Belfast-based company Whelan Chartered Surveyors and Property Consultants who have long experience handling licensed premises noted (February 2006) that in certain circumstances much higher prices have been paid in “vicinity” situations where potential objections would otherwise be substantial. The company also reported a trend in the market towards the closure and redevelopment of rural and semi-rural pubs, where it is now often the case that the value of the site and liquor licence as two separate entities is higher than the value of the business as a going concern.

Q447 Ms Cooper asked whether Her Majesty’s Revenue and Customs (HMRC) would require the Charity Commission to pass on information to the police and the Organised Crime Task Force, should it suspect that an organisation is using charity status as a front for organised crime It is proposed in England and Wales that HMRC “may” disclose information to the Charity Commission for England and Wales, and provisions for disclosure to the Charity Commission for Northern Ireland will be similar. “May” is usually used in this type of disclosure clause since a compulsory requirement with no discretion or element of judgement: — might compromise ongoing investigations; and — could involve the transfer of large amounts of irrelevant information. Mr John McGrath Deputy Secretary 7 June 2006

10. Written evidence from the Northern Ireland OYce and Northern Ireland Departments

Introduction 1. The Government is committed, as part of its objective of building a peaceful, prosperous and politically stable society in Northern Ireland underpinned by fully functioning devolution, to confronting organised crime from whatever source. Over the years, organised crime has created thousands of victims across the spectrum of Northern Irish society: ranging from individuals robbed at gunpoint, to those whose families are destroyed by drugs, to others whose safety and livelihoods are jeopardised by counterfeit goods. Its insidious nature has the capacity to corrupt and corrode the fabric of society. 2. Organised crime groups in Northern Ireland range from close-knit structures, often based on family or paramilitary aYliation, to loose networks of individuals who come together to commit crime and who work with a wide range of other criminals in pursuit of profit. 3. This memorandum provides information on: structures (paragraphs 4–14), co-operation (paragraphs 15–19), priority setting and measuring performance (paragraphs 20–25), future developments (paragraph 26) and conclusion (paragraph 27), as well as three annexes covering structures, successes and future development.

Structures 4. The Organised Crime Task Force (OCTF) was set up in September 2000. Its mission is to tackle organised crime through a multi-agency partnership between central government, law enforcement agencies (LEAs) and the community at large (while fully recognising the operational independence of the respective LEAs). 5. Following a review of the Task Force in 2005 it now operates at three levels: (i) A Ministerially-chaired Stakeholder Group [the public face of the OCTF]; (ii) A smaller NIO-chaired Strategy Group of senior representatives from the LEAs; and (iii) Eight work streams, progressed by the sub & expert groups. 3392501024 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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6. These are described in more detail below (paragraphs 7–11) and at Annex A. The new structure is intended, building on the significant progress made by its predecessor, to clarify reporting lines, improve operational cooperation, and strengthen the analytical focus on which the Task Force’s work is based. The Strategy Group, for example, enables LEAs to meet regularly to discuss NI organised criminality in a strategic context and facilitate operational co-operation between partner agencies.

Stakeholder Group 7. The Stakeholder Group meets twice yearly to advise on and monitor progress in achieving cross cutting objectives to combat NI organised crime. It supports the LEAs in carrying out their statutory duties by creating a climate, practically and presentationally, which enhances their eVectiveness. The membership includes the Police Service of NI (PSNI), Her Majesty’s Revenue & Customs (HMRC), the Assets Recovery Agency (ARA), the Serious Organised Crime Agency (SOCA), the Home OYce (HO), the Head of the NI Civil Service, the Northern Ireland OYce and, to reflect the views of the wider NI community and business interests; the NI Policing Board; the NI Chamber of Commerce & Industry, the Federation for Small Businesses; and the Confederation of British Industry.

Strategy Group 8. The Strategy Group meets bi-monthly. Its aim is to develop an improved, shared understanding of the nature of organised crime in NI; and identify the barriers to tackling organised crime and develop strategies to overcome them. Its work informs the strategic priorities set for the Task Force and facilitates cooperation and information-sharing across partner agencies. It also directs and monitors progress of the Task Force work streams.

Work Streams 9. There are eight work streams, divided into two categories—Enabling & Co-ordination and Criminal Enterprises. The Enabling & Co-ordination work streams focuses particularly on the public sector, looks to identify and implement necessary changes required to legislation, policy and procedures, improve public awareness and confidence and facilitate international co-operation. This work stream includes analysis & measurement, joined up government, communications and cross border co-operation. 10. Criminal Enterprises relates to specific organised crime threats, such as revenue oVences (includes VAT, oils; tobacco and alcohol smuggling, intellectual property crime and tax fraud in the construction industry), drugs, armed robbery and criminal finance (including extortion, non-revenue fraud and money laundering). 11. These work streams are supported by further sub and expert groups examining particular aspects of the organised crime problem; both private and public sector partners are involved in this work. 12. Supporting the Enabling & Co-ordination work stream, the Head of the Northern Ireland Civil Service (NICS) chairs a NICS interdepartmental group, whose aim is to promote awareness in the NI Departments and the wider public sector of the threat of organised crime and to maintain the momentum behind current initiatives to tackle it, including considering how best existing laws and regulations can be exploited to tackle organised criminality and how they might be enhanced.

Communications 13. A key role of the Task Force is to raise awareness of the dangers of organised crime and the importance of ensuring that public confidence is sustained by clearly demonstrating the vital work that is being done to tackle it and how those eVorts are putting criminals out of business. This is actioned through a number of initiatives: including the publication of the annual OCTFRepo rt and placing of supplements in leading local newspapers, press statements & briefings, publication of the OCTFquarterly magazine which is distributed to a network of stakeholders and opinion formers and the OCTFwebsite (www.octf.gov.uk). 14. The Chair of the OCTFalso publicly endorses operational successes, wh en appropriate, thus raising the profile and promoting the collective eVorts of the Task Force. A new Communications strategy is being developed for the OCTF, to take into account its new structures and membership. The OCTFendeavours to gauge the level of public awareness and to measure the success of its publicity initiatives by placing questions in the Northern Ireland Omnibus Survey. The latest survey, conducted in July, demonstrates that half of those surveyed had heard of the OCTF(two thirds of whom thought it wa s very eVective/eVective in raising awareness about organised crime) and reflects a continuing upward trend in awareness. 3392501024 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Co-operation

North South 15. NI is in a unique position with the existence of the land border which undoubtedly creates criminal opportunities: in committing the crime itself, for protection from LEAs and in concealing assets. There is regular liaison between the two jurisdictions at Ministerial and oYcial level to discuss policy and legislative issues relating to organised crime, as well as close co-operation between LEAs. 16. This is augmented by the annual cross border co-operation seminar on organised crime, which is organised jointly by the NIO and the Department of Justice, Equality and Law Reform. This event involves both public sector and LEAs from north and south of the border and its purpose is to enhance the existing shared understanding of cross border organised crime and to review and evaluate the progress being made in tackling it. 17. The first joint Cross Border Organised Crime Assessment was published at the 2004 seminar by the An Garda Siochana and the PSNI. The assessment focused specifically on serious and organised crime conducted on both sides of the border on a long-term basis and has explored eight key areas—money laundering and fraud, oils, tobacco and alcohol fraud, intellectual property crime, drugs and immigration crime. It is used to target the eVorts of LEAs on both sides of the border—in 2005 successful joint operations have been carried out in relation to oils fraud, drugs, counterfeit goods and illegal dumping.

East West 18. The NIO also works closely with the Home OYce on organised crime issues through participation in a range of fora including the Organised Crime Steering Group. This Group takes a strategic view of the most serious organised crime threats facing the UK and supports the Ministerial Organised Crime Working Group. The NIO is also involved in the Serious Organised Crime Agency Steering Group, thereby directly contributing to the Agency’s development and its relationship with NI and the Task Force partner agencies. 19. These linkages ensure that both NIO and Task Force partners’ interests in UK wide serious and organised crime policy and legislative developments are fully represented and provide a mechanism by which Task Force partners can be consulted on key policy developments. They also ensure both formal and informal communication and consultation networks are maintained. The NIO is also linked, via the Home OYce, into policy and legislative developments relating to organised crime at an international level.

Priority Setting and Measuring Performance 20. The 2005 OCTFAnnual Report assesses the principal threats from organi sed criminality to be (in no order of priority): Extortion (including blackmail and intimidation), Drugs, Excise & tax frauds, Money laundering, Intellectual Property Crime, Armed Robbery (including Cash-in-Transit attacks) and Illegal Dumping. Illegal immigration is considered an emerging threat in NI at present, and is being monitored closely by the Task Force. 21. The introduction of the UK National Intelligence Model (NIM) has provided a framework to assist LEAs to identify and direct their eVorts against those organised crime groups who have been classified as top-level with international links. The PSNI are developing a Northern Ireland model (using NIM methodologies) tailored to address the specific attributes of organised criminals in NI. The OCTFis considering how this can be adopted by all LEAs. 22. In GB the Home Secretary has agreed that SOCA’s future strategic priorities should be class A drugs and organised immigration crime, in that order. There is not an automatic read across of these priorities to Northern Ireland due to the diVerent nature of organised criminality here: the involvement of paramilitaries and the land border shared with the Republic of Ireland. 23. The latest OCTFReport confirmed that, as at June 2005, all of the NI param ilitary groups were heavily involved in all facets of organised crime, including cross border criminality. However, following the Provisional Irish Republican Army (PIRA) statement of 28 July 2005, the latest report of the Independent Monitoring Commission3 (IMC) provided an assessment of the current activities of paramilitary groups, up to the end of August. This report recognises the PIRA July statement as “very significant’ and that “initial signs...are encouraging”. Future IMC reports will confirm whether or not the PIRA have met their commitments to end all activity. 24. Since its inception the Task Force partner agencies have made a significant impact on organised crime in Northern Ireland—a summary of the key successes is given in Annex B. To date the Task Force has assessed its performance based on outputs activity measures—numbers of operations, arrests, amount of seizures etc. As the Home OYce White Paper: “A 21st Century Strategy to Defeat Organised Crime” (2004) has made clear, there is no single metric which can measure the diverse range of organised criminality. Work is currently ongoing within the Home OYce to measure the harms caused by organised crime and develop a performance regime, based on outcomes rather than just outputs, to assess how such harms are being

3 The Seventh Report of the IMC was published on 19 October 2005. 3392501024 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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reduced through the activities of the UK LEAs. In parallel the Home OYce has commissioned innovative research into quantifying the level of UK organised crime. Both pieces of work are due to be published next spring. 25. The OCTFwill review the finished products in detail when they are fully d eveloped and the analysis completed. The Task Force will use this review to determine what added value these new measures bring; how to adapt them to the specifics of the NI criminal justice landscape; and will implement those measures which are relevant and beneficial to our circumstances. In the meantime separate work is being put in hand by the OCTFStrategy Group to see what additional measures might be availab le to assess the Task Force’s eVectiveness.

Future Developments 26. There are a number of future developments which are being actioned to tackle organised crime. These are summarised below and described in more detail in Annex C: initiatives being progressed by the NI Departments, developments in Assets Recovery, the NI Private Security Industry and immigration facilities in NI.

Conclusion 27. Tackling organised crime at a number of diVerent levels and by all available means—through eVective law enforcement, appropriate regulation, political pressure and public awareness—is a key priority for the Government, for our OCTFpartners and for our colleagues in Great Britain, Ireland and overseas. The threat we face continues to evolve: organised criminals are sophisticated and cunning as well as ruthless. Since its inception the OCTFhas worked to develop a joined up, collaborati ve approach to confronting organised criminality in NI. Today’s challenge is to ensure that the wealth of knowledge, expertise and commitment that exists is built on and deployed eVectively to establish the kind of normal society that the people of NI deserve. Northern Ireland OYce 9 December 2005

Annex A

OCTF Structures OCTF Structures

Stakeholder Group

Strategy Group

Work Streams

Enabling / Co-ordination Criminal Enterprises

Analysis & Measurement Revenue Offences

Joined up Government Drugs

Com Armed Robbery

Cross Border Criminal Finance

The work streams are progressed by sub & expert groups. 3392501025 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Annex B

OCTFSUCCESSES

Recent

Drugs: Oct 2005—one individual arrested and cannabis valued at several hundred thousand pounds seized by PSNI on Co. Armagh.

Counterfeit Goods Oct 2005—in a number of separate operations PSNI seized counterfeit goods valued at £120,000. Dec 2005—PSNI conduct searches in the vicinity of Jonesborough market in Co Armagh and seize a significant quantity of illicit goods.

Oils Fraud July 2005—an illegal fuel laundering plant was uncovered and dismantled by Customs oYcers, supported by PSNI in Camlough, Co Armagh. Estimates indicate that the plant had the capacity to launder 40,000 litres per week with a potential revenue loss of £1 million per year.

Tobacco Nov 2005—Police working with Customs seized a massive quantity of contraband tobacco in Armagh and arrested three individuals.

Criminal Assets Sep 2005—ARA was granted an Interim Receiving Order over assets valued in the region of £750,000 which the Agency believes were derived from fuel smuggling. Nov 2005—ARA was granted an Interim Receiving Order over assets from the estate of a murdered drug dealer, currently estimated to be worth £387,000.

Extortion Nov 2005—senior Loyalist paramilitaries arrested and charged with oVences relating to blackmail, intimidation and money laundering.

Historical Drugs seizures and arrests 2002–03—2004–05

2002–03 2003–04 2004–05 Total No of Seizure Incidents 1,781 2,347 2,402 “Street Value” of Drugs Seized £11.1m £15.1m £9.5m Persons Arrested 1,295 1,754 1,356 Persons Charged 798 1,088 1,077

Source: PSNI Statistical Report 2004–05 Street Value of Counterfeit Goods Seized by PSNI 2002–03—2004–05

2002–03 2003–04 2004–05

Value (£million) £6.7 £7.6 £7

Source: OCTFAnnual Report 2004–05 3392501025 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Oils Fraud—Customs Activity 2001–02—2003–04

2002–03 2003–04 2004–05 Laundering plants disrupted 8 21 13 Seizures of illicit oils (m litres) 1.75 1.59 1.52 Gangs disrupted 7 1 2 Convictions 15 3 4 Average Sentence (months) 16 8 7 Confiscation Orders Nil £250K Nil Vehicles Seized 684 1,576 901 Source: OCTFAnnual Report 2004–05 Tobacco—UK Market Shares (%)

2002–03 2003–04 2004–05 Illicit market share: % 20 15 15 Source: OCTFAnnual Report 2004–05 Armed Robberies 2002–03—2004–05

2002–03 2003–04 2004–05 No. of armed robberies in NI attributed to organised criminals 113 70 64 Source: OCTFAnnual Report 2004–05 Criminal Assets—Number of Confiscation and Restraint Orders obtained by Police and Customs 2002–03—2004–05

2002–03 2003–04 2004–05 Confiscation Orders 3 7 12 Restraint Orders 15 26 32 Source: OCTFAnnual Report 2004–05 Criminal Assets—Amounts of Criminal Assets Restrained or Confiscated by Police and Customs 2002–03—2004–05

2002–03 2003–04 2004–05 Restrained (million) Not available £10.2 £6.4 Confiscated (million) Not available £1.03 £1.4 Source: OCTFAnnual Report 2004–05 Criminal Assets—Amounts of Criminal Assets Restrained or Confiscated by ARA 2004–05

Number Value (million) Referred 44 £14 Under Assessment 23 £7 Adopted 16 £7 Mareva/IRO/Tax 12 £4 Assessments Source: OCTFAnnual Report 2004–05 Alcohol—UK Market Shares (%)

2002–03 2003–04 2004–05 Illicit market share: % 9 6 7 Source: HMRC Measuring Indirect Tax Loss 2004–05 3392501026 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Annex C

Future Developments

1. Initiatives by the NI Departments (a) Charities—legislation is planned for the summer of next year to introduce a full statutory regime, including a NI Charities Register regulated by a newly appointed Charities Commission. (b) Illegal dumping—a public consultation document was recently issued4 which proposes changes to waste enforcement powers to enable suspect vehicles to be stopped, searched, and if necessary, seized and retained pending the outcome of an investigation. Legislation will be brought forward next year. (c) Licensing regimes—the Task Force is examining the regulatory framework around legitimate businesses such as taxis, pubs and hotels, to determine how they may be further enhanced. Revised taxi licensing legislation should be in eVect in 2007; to provide for operator licensing and enhanced enforcement powers. A Consultation paper on liquor licensing5 recently issued, proposes the introduction of personal & premises licenses and strengthened enforcement measures. (d) Oils Fraud—proposals to streamline and tighten the petrol licensing regime are currently being considered. The Task Force will be reviewing the current petrol licensing regime in other jurisdictions, such as GB and ROI, to identify best practice and learn lessons. (e) Extortion—Professor Ron Goldstock, in his 2004 report6, recommended the use of Independent Private Sector Inspector Generals to monitor compliance with relevant law and regulations. A pilot project, involving six public sector construction contracts is currently underway with the evaluation and final report due in 2006.

2. Assets Recovery (a) From the next financial year the Home OYce will operate a new Assets Recovery Incentivisation scheme which rebates half of the monies actually received back to the LEAs concerned, the balance being retained by the Home OYce. This, together with ARA’s recent announcement to significantly expand its NI operations both in terms of financial investigators/lawyers and case numbers, will further increase our overall capacity to seize criminal assets in NI;

3. NI Private Security Industry (a) In NI regulation of the private security industry (door supervisors and security guards) currently exists within the temporary provisions of Part 7 of the Terrorism Act. The NIO is currently reviewing the existing provisions with a view to introducing specific legislation to regulate the NI Private Security Industry within the next two years;

4. Immigration (a) Following the latest cross border co-operation seminar it has been agreed to establish a new, multi- agency, immigration enforcement oYce in Belfast, by late 2006. The UK Immigration Service is leading on this project and is working up the staYng requirements and the options available for a dedicated immigration detention facility in NI with Task Force partner agencies. Until recently there have been insuYcient detainees, at any one time, to make such a facility cost eVective. The oYce will have the capacity to both remove oVenders and prosecute, where appropriate. It will liaise directly with PSNI and the Garda National Immigration Bureau in the Republic of Ireland.

11. Written evidence from the Public Prosecution Service I understand that the Northern Ireland AVairs Committee wishes to conduct an inquiry into organised crime in Northern Ireland. In particular, it wishes to look into the following: The nature of organised crime in Northern Ireland, the impact of organised crime on society and the economy in Northern Ireland, and the eVectiveness of measures taken by the Government and relevant agencies to counter organised crime.

4 Dept of Environment: “Proposed Amendments to The Waste and Contaminated Land (Northern Ireland) Order 1997” issued Aug 2005. 5 Dept of Social Development “Liquor Licensing—the Way Forward” issued Nov 2005. 6 “Organised Crime in NI: A report for the Secretary of State”. The report, and the Government’s response, was published by the NIO in July 2004. 3392501027 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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The role of the Director of Public Prosecutions in relation to the prosecution of oVences, including those arising from organised crime, is now set out in the Justice (Northern Ireland) Act 2002. By virtue of section 31(1) of the Act the Director must take over the conduct of all criminal proceedings which are instituted in Northern Ireland on behalf of the Police Service of Northern Ireland. By virtue of Section 31(2) of the Act the Director may institute, and have conduct of, criminal proceedings in any other case where it appears appropriate for him to do so. In so doing, the Director is independent of Government whilst subject to the superintendence and direction of the Attorney General for Northern Ireland acting as a Law OYcer. Section 31(5) of the Act requires the Director to give to police forces including the Police Service of Northern Ireland such advice as appears to him appropriate on matters relating to the prosecution of oVences. This often occurs in serious or complex cases. The Director applies the TEST FOR PROSECUTION in deciding whether facts and information reported to him which might be said to arise from organised crime give rise toanoVence which should be prosecuted contrary to the law of Northern Ireland. The TEST FOR PROSECUTION is met if the evidence which can be adduced in court is suYcient to provide a reasonable prospect of conviction and prosecution is required in the public interest. Each aspect of the test must be separately considered and passed before a decision to prosecute can be taken. The Evidential Test must be passed before the Public Interest Test is considered. Broadly the presumption is that the public interest requires prosecution where there has been a contravention of the criminal law. This presumption provides the starting point for consideration of each individual case. In some instances, such as organised crime, the serious nature of the case will make the presumption a very strong one. The Director also makes prosecution decisions and conducts prosecutions arising from files submitted by various Government Departments. Of particular relevance in the area of organised crime are files submitted by Her Majesty’s Revenue and Customs, Trading Standards Department and the Department of Environment. He also has duties in relation to the confiscation and forfeiture of criminal assets. It is diYcult to categorise all the oVences which can be prosecuted arising out of an investigation into organised crime but at present the principal oVences relate to fraud, the importation and supply of drugs, fuel smuggling, counterfeit goods, money laundering, extortion and the illegal dumping of waste. J Scholes Senior Assistant Director 9 November 2005

12. Written evidence from the National Criminal Intelligence Service Thank you for your letter of 2 November inviting the National Criminal Intelligence Service to submit evidence to the committee’s inquiry into the nature and impact of organised crime in Northern Ireland and the eVectiveness of the measures taken to counter it. It might be helpful if I give a brief explanation of the NCIS role in Northern Ireland. The oYce is based at the PSNI Headquarters and was established in 1997 with the secondment of a detective sergeant from the RUC. The oYce has grown since then and we now have a staV of eight made up of direct employees (two of whom are former PSNI oYcers) and secondees from the United Kingdom Immigration Service and HM Revenue and Customs. That presence will be maintained as NCIS becomes subsumed into the Serious Organised Crime Agency on 1 April and I understand that colleagues from the new agency have already been in discussion with stakeholders in Northern Ireland about how that level of support will be arranged. NCIS is mandated by; the Police Act to gather, store and analyse information in order to provide criminal intelligence to police forces in Great Britain, the Police Service of Northern Ireland, the Scottish Drug Enforcement Agency, the National Crime Squad, Her Majesty’s Revenue and Customs and other law enforcement agencies and to act in support of such law enforcement partners as they carry out their criminal intelligence activities. The PSNI leads in the fight against serious organised crime in Northern Ireland and so it is not surprising that the bulk of NCIS services delivered there are in support of the force’s activities. NCIS has completed both problem and target profiles on behalf of the PSNI, but from across the law enforcement and government sections. Among other things, that has created an environment which has led to a greater shared understanding across the law enforcement community in Northern Ireland. An Assistant Director has recently been replaced as the NCIS representative of the OCTFby a Deputy Di rector (designate) of the Serious Organised Crime Agency and a Senior Manager and Principal Intelligence OYcer contribute to the expert sub-groups on Drugs, Organised Immigration Crime and Intellectual Property Crime. In the absence of a formal multi-agency tasking and co-ordination process, NCIS has responded to individual taskings from partners in Northern Ireland. Recent examples have included a problem profile on cash in transit for the PSNI and a baseline assessment of Gangmaster activity for the Northern Ireland 3392501028 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Gangmaster forum. We have also given intelligence support to PSNI operations in the areas of Class A drugs, money laundering, organised illegal immigration, the sale of firearms and bank robbery. We also helped to support and co-ordinate a joint operation by the PSNI and HMRC into a criminal group who were committing a range of oVences including revenue fraud. In addition to services of specific interest to partners in Northern Ireland, NCI produces a range of products that seek to asses the nature and impact of individual facets of organised criminality as it impacts on the UK. The OCTFcommissions the Northern Ireland Threat Assessment whi ch informs the United Kingdom Threat Assessment. The OCTFAssessment is the authoritative docu ment that defines and analyses the threat posed by serious Norganised crime to Northern Ireland. I think, given the unique nature of organised crime in Northern Ireland, that approach is a sensible one and NCIS would not contradict the OCTFreport’s findings. As you will appreciate, given the role of NCIS that I have outlined, I think it would be inappropriate for me to comment on the eVectiveness of the measures taken against organised crime in Northern Ireland. Peter Hampson Director General 2 December 2005

13. Written evidence from the Metropolitan Police Special Branch

STRATEGY FOR TACKLING NORTHERN IRELAND LINKED ORGANISED CRIME IN GREAT BRITAIN

Introduction Organised crime is seen as a serious threat to the society and economy in Northern Ireland (NI). Although not a new phenomena, the gradual decline of terrorist activity since the signing of the Belfast Agreement in 1998, has meant that serious criminality has become more visible for what it is—crime. Much organised crime committed throughout the period referred to as “the troubles” was labelled, at least by those performing it, as political and not criminal activity. Whereas previously headlines were made by bombings and shootings, the changing political climate in Northern Ireland has allowed for criminality such as armed robberies and extortion to take the limelight. Historically, crime within NI has been “territorial” with particular paramilitary groups controlling extortion and racketeering in their own areas, and benefiting from the proceeds of crime committed by them or on behalf of “the cause”. Crime is now more of a free enterprise with many groups (often retaining some paramilitary links through current or ex-members) competing against each other and benefiting personal gain from the proceeds of crime. The situation regarding organised crime in NI does not however, aVect the “province” alone. Four of the six counties that form Northern Ireland share a land border with the Republic of Ireland. Although not exclusive, the main air and sea links into NI are from Great Britain. With such strong communication and demographic links between NI and the rest of the British Isles, it is clear that the aVairs of one region, whether they are legal, political or social, will have an impact on other regions. This is particularly the case with crime.

How NI Based Crime Impacts on Great Britain With organised crime in Northern Ireland so prevalent there are many factors that will have a knock-on eVect in Great Britain. One such factor is market trends; this has been evidenced through fuel laundering and smuggling. At one time fuel was smuggled from north to south when prices were more expensive in the Republic. This was subsequently reversed by economic factors. To increase profitability, criminals began laundering fuel to remove markers from rebated oils. This process allowed criminal groups to sell their illicit product cheaper than major oil companies sold legitimate fuel. The prolific sale of laundered fuel in NI has impacted on the ability of legitimate filling stations to operate. With the local market saturated with laundered fuel, there is evidence that the criminal networks have turned to the larger and more lucrative market in areas of Great Britain. Another factor that will influence the impact of NI based criminality on the UK in general is law enforcement action. Co-operation, particularly in tackling cross border organised crime on the island of Ireland, exists between the Northern Ireland Organised Crime Task Force and law enforcement agencies in the Republic of Ireland. This enables criminals operating in both jurisdictions to be targeted and networks to be disrupted. However, success in this area is likely to displace the criminals and Great Britain is an obvious area for the criminals to re-locate to. 3392501029 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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The eVective targeting of organised criminal groups alone will not necessarily impact on the level of criminality within NI Even where convictions are secured, the number of organised crime gangs operating in NI means that another group is likely to fill the gap with the level of criminality largely unchanged. The huge amount of resources required to gather suYcient evidence to gain a conviction against an individual, let alone the entire criminal network, often means that many criminal groups can consolidate their position within the underworld, while police target their rivals. Where police activity is eVective, criminal groups can simply move their operations to a neighbouring jurisdiction. This displacement does little to reduce the level or eVects of organised crime and in many cases strengthens the criminality through associations with like- minded criminals, based in Britain or further afield, with access to diverse distribution networks.

How can Police in Great Britain Tackle NI Based Criminality? It is clear that the eVective combating of organised crime within NI must involve targeting those involved and the available markets beyond the boundaries of the Province. Broadly speaking, the eVects of organised crime on the economy and wider community could be seen as an insurgency against the rule of law. If viewed in this way, the same principles can be employed to tackle it: — Winning hearts and minds. — Defence in depth. — Denial of ground. How the above principles can be employed by law enforcement agencies to combat criminality is described thus:

Winning hearts and minds—community based intelligence The most eVective way of tackling any form of criminality is with support from the local community. Where organised crime is concerned, this refers as much to business as residential communities. Certain business communities will know a lot about criminality in their industry but will not inform the authorities, even though the criminality is in direct competition with their legitimate business. EVorts must therefore be made to gain the confidence of the business community and encourage them to divulge information on criminality to the authorities. Generally, the public gains confidence in the police if they perceive that they themselves are being treated fairly by the police, and by seeing criminality dealt with in a robust manner. This can be achieved by adopting a policy of “selective zero tolerance” (SZT), whereby persons involved in organised crime are prosecuted for every indiscretion, even if the average person would receive a degree of leniency in similar circumstances. This assures the public that such criminals are not above or beyond the law.

Defence in depth—utilising British police forces to target NI criminals The major flaw in policing organised crime is when the criminals operate outside their usual locality. Police criminal intelligence indexes hold information on criminals resident within, or known to operate in, the said jurisdiction—often defined by county boundaries. Whereas certain police units monitor cross- border criminality, intelligence on oVenders is limited or diYcult to access often with no central point of reference. The Police National Computer is readily accessed by all police forces, but largely only list convictions as opposed to current intelligence relevant to investigating crime. This is compounded by the fact that Northern Ireland has diVerent databases to the remainder of the UK. Therefore, if an individual has no previous convictions, or has been convicted in a diVerent jurisdiction, their involvement in crime may not be immediately apparent. As a large amount of criminals engaged in organised crime within NI travel to other parts of the UK, either for criminal purposes or otherwise, opportunities are lost if police in those other areas are not aware of their links to organised crime. Were interest in the criminals from NI to be overtly flagged in Great Britain, further crime could be detected and/or intelligence gained. Project Focus, explained below, utilises such a flagging system to counter criminality linked to terrorist fundraising. Overtly flagging organised criminals allows for passive intelligence gathering at times when covert resources are not deployed against them. The process is reliant on the criminal coming to the attention of police, which invariably happens. Police oYcers are immediately aware that they are dealing with a major criminal and can exploit any intelligence gathering opportunity that presents itself. This process also provides an immediate point of contact for further information on the subject.

Denial of ground—make ports and main transport routes hostile areas for criminals Ground is denied to criminals by eVective patrolling making it diYcult for them to operate freely. The majority of organised crime is not only a national problem, but also international due to the origins of various commodities ie drugs, cigarettes and weapons. The status of the United Kingdom as a series of islands provides a very clear first line of defence against crime—ports. Much contraband entering UK 3392501029 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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markets must first transit a port of some description. The larger ports are already set up to tackle security and criminality with law enforcement agencies in place. Law enforcement agencies at port use advanced passenger information and vehicle manifest lists to monitor criminals entering or leaving the country, with Automatic Number Plate Readers (ANPR) as a backup. To exploit this fully it is essential that an individual’s involvement in organised crime is immediately apparent to law enforcement agencies at port. Another major line of defence in the fight against organised crime is the national road network, particularly motorways. Criminals must regularly use the road network, either to conduct their criminal business, transport their illicit goods or even more innocuous activities. With the increased proliferation of “traYc cameras’ of one form or another on the nation’s motorways this makes the criminal vulnerable to law enforcement action. Roads Policing Units and other agencies such as VOSA, can make life diYcult for criminals traversing the country. Seemingly minor road traYcoVences can accumulate, resulting in a driving disqualification. This in turn can lead to a custodial sentence for driving while disqualified, disrupting other criminal activity. Each encounter a criminal has with the police increases the risk of oVences being detected. Additionally, intelligence is a by-product of any contact with, or investigation of, a criminal with routines, associations and antecedent details becoming apparent. The above principles can be put into practice, to tackle NI linked organised crime within Great Britain, in the following two ways: — Overt flagging of major criminals, combined with selective zero tolerance. — Partnership with the UK haulage industry.

Overt Flagging of Criminals &Selective Zero Tolerance This is a simple but eVective way of both tracking and targeting criminals without the use of major covert resources and techniques. Special Branch already uses overt flagging, of criminals and their vehicles, for Project Focus, which monitors and tackles the overlap between organised crime and Irish related terrorism. This method can be used in the absence of, or in conjunction with, covert resources and techniques, and in fact compliments the use of the same by filling intelligence gaps. Where past convictions or current intelligence, suitable for wider dissemination, exist to link an individual to organised crime they are flagged overtly on the PNC. This ensures that if a flagged individual comes to the attention of police anywhere in the UK for any reason, they immediately become aware that the person is of interest and there is a requirement for further action. A single point of contact can direct that a full intelligence report of the contact be forwarded to the oYcer in the case, or where oVences are apparent they are dealt with robustly. Even if the oVence is simply a road traYcoVence, the cumulative eVect of minor prosecutions will chip away at the criminality and present opportunities to gather and exploit intelligence. A similar initiative to the Special Branch Project Focus, eVectively run, would enable NI based criminals to be targeted should they venture into GB. This method would also have the potential to expose links into similar criminality within GB. A central co-ordination unit, along the lines of the Northern Ireland Organised Crime Task Force, could ensure that, where appropriate, resources and intelligence from all agencies are pooled or shared to focus the full weight of the law against organised criminals.

Partnership with the UK Haulage Industry Much criminality in Northern Ireland has historically revolved around smuggling. Ever since the border was established, a black economy has thrived around communities, families and trade routes that all pre- date the symbolic boundary. The haulage industry plays an integral, if sometimes unwitting, role in this form of criminality. Areas of criminality concerned involve the transporting of stolen or counterfeit goods, smuggling and revenue evasion and immigration crime. It therefore, stands to reason that the Government and law enforcement agencies must engage with the haulage industry in an eVort to reduce the amount of criminality exploiting the industry.

Understanding the problem Why do drivers and owners of haulage firms become involved in organised crime? No doubt some are genuinely dishonest and exploit the industry. However, it is likely others fall foul of the law due to economic pressures. Like many industries, the profitability of a haulage firm relies on very narrow margins. Many factors eVect whether a haulier can break even on a contract—wages and fuel costs to name but two. The increased use of Eastern European drivers by Irish based hauliers, an area not short of HGV licence holders, suggests an attempt by some firms to cut overheads. With illicit fuel readily available in many parts of Northern Ireland, another method of reducing costs is apparent. A reduction in running costs and wages would enable one firm to undercut others on the price for a contract. This advantage can mean some firms going out of business. This prospect is clearly suYcient to persuade someone to use illicit fuel or even smuggle contraband, the proceeds of which can render fuel duty and employers’ national insurance contributions insignificant. 3392501029 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Proposal — The first step necessary is to gain the confidence of the haulage industry and encourage drivers and hauliers to pass intelligence to law enforcement agencies. This would best be achieved initially at governmental level with engagement of industry bodies such as the Road Haulage Association. To rely on public spirit and moral values to achieve this is perhaps somewhat naı¨ve. In short, some form of incentive may be necessary. What incentive might be available is clearly best left to the Government to decide. However, a suggested incentive may involve a concession on fuel duty or alike. Obviously this would only apply to the haulage industry and then only upon certain conditions. This could perhaps be achieved as some form of tax relief. A haulier would be obliged to complete tax returns in a timely fashion and ensure that all employees are registered with the Inland Revenue and declare their earnings etc. Transgressions would be penalised. The benefit to the haulier would need to be suYcient to outweigh the temptation to not declare earnings or use illicit fuel etc—equally the same applies to the penalty for any illegal activity. Of course, as discussed above legitimate haulage companies would be at a disadvantage to firms that still chose to avoid paying revenue or transport contraband. Any arrangement between the government and haulage industry could be on condition that crime within the industry is significantly reduced, providing added incentive for legitimate hauliers to pass information gleaned from truckstops, roadside cafe´s and other areas usually inaccessible to law enforcement authorities. It may also be possible to include in any such agreement for haulage firms signed up a similar arrangement to display an advertisement for Crimestoppers on the rear of all trailers, providing almost subliminal reminders to HGV drivers on long motorway routes, and increasing the possible impact beyond just the haulage industry. — Law enforcement action can be largely, but not exclusively, targeted at those companies identified by intelligence. Drivers and haulage firms found to be involved in or assisting organised crime could then be subjected to closer scrutiny by a multi-agency approach, utilising SZT to impact upon any further criminality irrespective of thresholds. An indiscretion by one driver within a firm could result in the entire fleet being flagged and examined further. This may encourage individual drivers to inform police of criminality by fellow drivers. The onus would be on the owner of a haulage firm to ensure that everything within their company is correct and above board. Drivers convicted of smuggling may find it diYcult to find future employment. — With greater intelligence-led policing of the nations roads and ports, organised criminality across the UK would be severely disrupted and displaced criminality would be tracked from region to region. The chances of finding contraband would be drastically increased based on firm intelligence with better prospects for prosecutions, as well as preventing illicit goods reaching their markets. The benefits would also become apparent to legitimate hauliers who would not have to factor in additional time into contracts, based on time lost at port controls and alike. Any governmental concession to the haulage industry to facilitate the reduction of organised crime would need to be balanced by expenditure or revenue gains elsewhere. This is likely to be achieved by preventing revenue evasion through smuggling goods, as well as asset recovery from criminals. More eVective deployment of law enforcement resources will also be achieved, although the savings made in this area are harder to quantify and less tangible. In addition, a suitable concession to the running costs of haulage companies, may eVectively remove the haulage industry from the fuel-lobby, giving the government an easier ride in this area and saving costs on policing future fuel protests. The above proposal regarding the haulage industry would address similar issues across the UK and not solely in NI Similarly, tackling N.I based criminality within Great Britain will also result in domestic criminality being disrupted and displaced, providing justification for the use of law enforcement resources outside NI to address the issue. 12 December 2005

14. Written evidence from The Northern Ireland Policing Board

Inquiry into Organised Crime in Northern Ireland 1. Members of the Northern Ireland Policing Board welcome this opportunity to make a submission to the NIAC Inquiry into Organised Crime in Northern Ireland. The following comments were considered and agreed at the December 2005 meeting of the Policing Board. 2. Board Members noted that the Committee intend to examine: “the nature of organised crime in Northern Ireland, the impact of organised crime on society and the economy in Northern Ireland, and the eVectiveness of measures taken by the Government and relevant agencies to counter organised crime. The Committee may also choose to examine other associated issues which arise in the course of the inquiry.” 3392501030 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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3. Board Members believe that organised crime is a scourge on Northern Ireland society. It has a grip on communities in Northern Ireland, most notably working class communities, and a concerted joined-up approach to tackling organised crime is the only solution. 4. Board Members have noted that the NIAC Inquiry will take into consideration the social impact of this crime and also the economic impact of it. Organised Crime is widely believed to be a victimless crime with the Treasury being the only “losers”. However, there are numerous examples of organised crime putting businesses in Northern Ireland out of business particularly, although not exclusively, those in border areas which can be significantly aVected by fuel and tobacco smuggling. 5. In light of the emphasis the Board has placed on tackling organised crime through setting targets in the Annual Policing Plan, PSNI representatives brief the Board every six months on the PSNI activity to combat organised crime. We have been advised that organised criminal gangs are engaged in a wide range of activity including drugs, smuggling of fuel, tobacco and other commodities, counterfeiting, extortion, armed robbery and money laundering. We have also noted that paramilitary organisations are heavily involved across a wide range of such activities and are generating significant criminal profits for both personal and organisational use. PSNI is wholly committed to working with partner agencies to tackle organised crime gangs at all levels and to make the most eVective use of relevant legislation to seize their criminal gains and to take the profit out of crime. PSNI also intend to place continued emphasis on tackling the Class A drugs market. 6. Board Members would refer Committee members to the various reports and assessments completed by the Organised Crime Task Force and available at www.octf.gov.uk which contain significant detail on the impact of the crime and successes in tackling it. 7. The following policing objective set by the Secretary of State provides the overarching framework for the Board objectives, and consequently PSNI activity, that contributes towards tackling organised crime: “To work in partnership with other relevant agencies to help reduce the incidence of crime, including organised crime, in line with the Government’s published targets; and to diminish the fear of crime.” 8. It is intended in the 2006–09 Policing Plan that the Board will set a range of objectives and targets around clearance and detection rates for various crimes, including violent and drug related crime, which will set the focus for PSNI activity. 9. In the past 12 months PSNI have reported to the Board on two occasions how they have contributed to the fight against organised crime and aside from instances of crime detection, Board Members have noted the focus that has been placed on disrupting the activities of various organised crime gangs. Board members have also noted the cross border working between PSNI and An Garda Siochana and indeed PSNI and other UK forces and other jurisdictions. Given that this type of crime knows no boundaries this joined up working is to be welcomed. 10. On this point Members would like it noted that the links between the Organised Crime Task Force and the National Criminal Intelligence Service, and the new Serious and Organised Crime Agency should be maintained. 11. The NIO chaired Organised Crime Task Force brings together the various agencies in Northern Ireland who have a contribution to make to fighting organised crime. Board members have for a long time considered that they should have a seat on this Task Force in view of their statutory role in ensuring an eVective and eYcient police service and in holding the Chief Constable to account. Board Members believe that while the Task Force brings a coordinated approach to this problem the impact of organised crime on communities in Northern Ireland, and how the police tackle it, in conjunction with other agencies, brings it firmly into the remit of the Board. We welcome the fact that, following a review of the Task Force, the Chairman and Vice-chairman of the Board have recently been oVered seats on the stake-holder group of the Task Force. The Board looks forward to playing a significant role in this regard. 12. Finally, Members believe that careful thought needs to be given to how the approach to organised crime will be developed following the transfer of primacy for National Security in 2007 and under any future devolution of policing and justice. The Board’s role and contribution in both scenarios needs to be maintained. 14 December 2005

14A. Supplementary written evidence from the Northern Ireland Policing Board Further to the Board’s submission to the above Inquiry, dated 14 December 2005, I would like Committee Members to take the following into account. You may be aware the Board has been lobbying over the past four years for a seat on the Organised Crime Task Force (OCTF), chaired by the NIO. We were initially refused a seat but following a review of the OCTF during 2005 the Board was oVered a seat on the newly created Organised Crime Stakeholder Group. This seat was taken by the Chairman and Vice-chairman of the Board. Other groups/organisations represented on the Stakeholder Group include: 3392501031 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Police Service on NI (PSNI), Her Majesty’s Revenue & Customs (HRMC), The Assets Recovery Agency (ARA), the Serious Organised Crime Agency (SOCA), the Home OYce (HO), the Head of the NI Civil Service, the Northern Ireland OYce and, to reflect the views of the wider NI community and business interests; the NI Policing Board; the NI Chamber of Commerce and Industry, the Federation for Small Businesses and the Confederation of British Industry. Given the ongoing NIAC Inquiry, and notwithstanding the fact that the Board accepted the seat oVered to us, we would ask the Committee to note that we remain dissatisfied with the current situation. We consider that the Stakeholder Group has an extremely important role to play but we consider that the Board, given its remit and standing, should have a greater role and involvement than simply reflecting the views of the wider Northern Ireland community and business interests. Organised Crime aVects the Northern Ireland Community and the fabric of our society and is a drain on public sector resources, resources that could be used for policing, hospitals, education etc. We believe that we should have a greater role in informing the strategic direction of the work of the OCTF. Furthermore, we recognise that the OCTF is a voluntary Federation of organisations and given the fact that the NIO Chair and convene this federation we would be concerned about the future of the Task Force after devolution. Professor Desmond Rea Chairman 15 May 2006

15. Written evidence from the Northern Ireland Bankers Association The nature of organised crime in Northern Ireland, the impact of organised crime on society and the economy in Northern Ireland, and the eVectiveness of measures taken by the government and relevant agencies to counter organised crime. The Northern Ireland Bankers’ Association welcomes the opportunity to comment on the document . NIBA is a Trade Association, which handles matters of a non-competitive nature, mainly of local interest, for its members—Bank of Ireland, First Trust Bank, Northern Bank Ltd and Ulster Bank Ltd.

Introduction It is diYcult to make a substantive submission on a topic which, other than through news reporting, is an area outside most people’s knowledge and experience, and the expert view has to be relied upon. In this connection it is appropriate to reflect on the International Monitoring Commission (IMC) findings, a view which has also been endorsed by both Government Ministers and Senior PoliceOYcers. In its first report, published in April 2004, the IMC said that “organised crime in Northern Ireland is significantly greater in its scale, impact and complexity than it otherwise would be because of the involvement of paramilitary groups” and concluded that it might “present the biggest long-term threat to the rule of law in Northern Ireland”. The information and analysis set out in subsequent reports reinforced this view. Unlike most parts of the United Kingdom, Northern Ireland is a relatively small geographic and populated region that experiences a relatively high concentration of organised criminal activity. The insidious nature of organised criminal gangs, whether they have their roots in paramilitary organisations or not, is such that they represent a threat to legitimate commerce. Their well documented activities range from counterfeiting, a so called “victimless” crime, to kidnapping, a victim centred crime. In a threat that is both direct and indirect, the nature of this form of criminal activity is such that it cannot be ignored. Tacit acceptance of victimless crime, in some parts of the population, must be countered and the unacceptable nature of kidnapping must be challenged at its root. We recognise and support the actions that have been introduced in recent times to counter organised crime, ie the establishment of both the NI Organised Crime Task Force and the Assets Recovery Agency, and the forthcoming establishment of the Serious and Organised Crime Agency. We are also conscious that a number of investigations and reports into this area have been conducted and many of the findings implemented or planned eg the report by Professor Ronald Goldstock on organised crime in Northern Ireland, the Organised Crime Task Force Threat Assessment & Strategy 2004 and also that agency’s annual report. It is, we believe, fair to say that significant time and eVort has been expended by those best placed to investigate and direct on this matter and that attention and resource should now be focused on allowing these new agencies to get on with the job of tackling organised crime. The recent publicised successes by the police, Customs and other agencies are welcomed. 3392501032 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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It is against this background that we set out the impact of organised crime in Northern Ireland as viewed from the point of our Members. As mentioned above, there are a number of areas where crime in Northern Ireland diVers from the rest of the United Kingdom, in particular the extent, sophistication and impact of organised crime are significantly influenced by the involvement of paramilitary/former paramilitary groupings. “Threat” levels remain high. Violent crimes are a particular concern, with levels of cash-in-transit robberies increasing and the use of kidnapping, which impacts greatly on the victims and their families.

Direct Threat The best known of the direct threats that is faced is kidnapping. While always a threat, their incidence within Banks over the last two years is such that they are only less likely to occur than an ordinary robbery. Yet the impact that they have on the families that are held hostage can be devastating and the losses than can occur can be substantial. It appears that a number of organised criminal gangs have become involved in kidnapping. The kidnappers normally hold a family overnight and send into work the following day, a member of staV whose concern for the safety of their families is such that they feel they must co-operate. When the cash is dropped oV by the victim, the hostages are released and the kidnappers escape. Normally the Bank involved in the incident and the Police are not aware of what has happened until the hostages have been released and the money lost. Security is a significant issue in the banking sector in NI. There have been a number of high profile security incidents in recent years, including the following: — July 2004, a member of staV from Ulster Bank’s branch in Strabane and three generations of his family were held hostage overnight. — October 2004: an armed gang broke into the home of a member of staV from Ulster Bank’s branch in Strabane and held him, his wife and three children at gunpoint — December 2004: a gang escaped with £26.5 million after a robbery on the Northern Bank’s Belfast headquarters in Donegall Square. In addition to these high profile raids, a number of less well publicised attacks on businesses have taken place across the province during the last 18 months, including an attack on a Boots branch in Belfast in May 2005 and Marks & Spencer at Sprucefield in August 2005. There has also been an increase in attacks on cash- in-transit (approximately 46 such attacks took place in NI in 2004). Crime levels have risen in the Province as the former paramilitary groups have fragmented following the Good Friday Agreement. Police investigation of the crime, while it may be painstaking, projects the impression that little is being achieved. Few arrests are made and convictions gained. The risk for the kidnappers is therefore low and without the fear of conviction kidnapping is a crime, perpetrated by organised criminal gangs, that is likely to continue. Defensive measures that can be taken are limited but are being devised, however, without substantial work by the Police in: — Monitoring and disrupting the activities of thse gangs. — Supplying timely and accurate information to potential vistims on the gang’s capability and intent. — Without securing convictions and with the assistance of the courts ensuring that those found guilty face substantial prison sentences, the threat of kidnapping will probably not diminish and the serious risk to the wellbeing of hostages and the financial losses that are made will continue.

Indirect Threat All Banks rely on Cash in transit, (CIT) companies to deliver and collect cash from branches, ATM’s and customers. Without CIT companies taking on the risk of cash transportation, High Street Banks would have great diYculty in operating as the needs of customers may not be met. CIT companies however, by the very nature of their work, are prime targets for organised criminal gangs. They suVer from a substantial number of attacks as they cross the pavement with cash and are subject to kidnappings. Their level of victimisation is much greater than the Banks who are the primary customers of the services that they provide. While CIT companies, in conjunction with the Police, try and maintain a normal level of service it can and is aVected by threats. CIT deliveries are disrupted with runs either not being conducted, pulled mid way through or stopped for a period of time. This has an eVect on bank branches and does increase the risk to them as surplus cash cannot be lifted or alternatively cash stocks can run and eVect customers. 3392501032 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Effect on the Economy The opportunity costs (and legacy) of 30 years of terrorism in Northern Ireland in terms of business investment and job creation can be seen just 100 miles away. More than half the Fortune 500 companies have their European base in the Republic of Ireland. Northern Ireland has virtually no meaningful or systematic pattern of foreign direct Investment. The decision to locate in the Republic of Ireland was of course influenced by a very attractive corporate tax break but equally it is true that Northern Ireland was eVectively “closed for business” for the past 30 years. While the position is improving, as evidenced by investment primarily by large UK retailers, even after the terrorist cease-fires, the Belfast Agreement and now the latest IRA statement, there is still a residual risk premium attached to investment in Northern Ireland.

Impact on Member Banks The Banks have made financially significant investments to enhance the quality of their physical security and operate under a separate regional pricing structure for cash handling services (ie they pay more for their services). For example, a cash drop to a branch in Northern Ireland costs over three times more than a cash drop to a bank branch in Scotland. A Northern Ireland “risk premium” is a significant contributor to this diVerence of cost.

Money Laundering With the introduction of the new agencies, Suspicious Activity Reports (SARs) have increased by 150% over the last three years. This can largely be attributed to the formation of the new agencies and the training given to the banking communities.

Summary Organised crime gives the impression of being endemic within Northern Ireland. A PSNI Assistant Chief Constable once said to a group of Bank Security Managers that we lived in Northern Ireland, and not Surrey, which would suggest that this impression is not wrong. Cracking Organised Criminal activity requires a multi layered, multi agency approach which it is believed is happening. However, while substantial victories over these gangs are made, progress in defeating them is slow, they give the appearance of being self generating and have, as it is supposed all criminals must, contempt for the law and the communities in which they live. As victims of crime, it is important that partnerships are maintained with the Police and other authorities to ensure that organised criminal activity is counteracted and defeated. Member Banks are concerned about the increased sophistication of criminals and their organisation. They are worried that the gangs (and their culture) are becoming entrenched/embedded in our society. Of most concern are the tiger kidnaps which have been spectacularly successful for the criminals. They are also concerned at the shortage of police resources, the ease by which criminals get bail; and the weak sentence policy of courts. At trial stage the process is stacked in favour of defence ie disclosure and similar facts evidence. W A McAlister Secretary 21 December 2005

16. Letter from the Department of Justice, Equality and Law Reform I am directed by the Minister for Justice, Equality and Law Reform, Mr Michael McDowell TD to refer to your letter dated 2nd November 2005 requesting submissions in relation to organised crime in Northern Ireland. The Minister has asked me to state that, while he has no specific comments to make in relation to the nature or impact of organised crime in Northern Ireland, and the measures taken to combat such crime, he is aware that there is a high level of co-operation between law enforcement agencies North and South of the border in the fight against organised crime. It is clear that criminal organisations seek to exploit the border to their advantage in their eVorts to obtain money and it is therefore incumbent upon law enforcement agencies, and on the bodies and agencies that support them in their work, to co-operate fully in the fight against organised crime. A number of very successful joint operations have been undertaken in recent times between agencies form both sides of the border. These operations have led to prosecutions in the Courts resulting in the forfeiture of assets and the breaking up of a number of organised crime gangs involved in illegal cross border activity. 3392501033 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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In particular, co-operation between the Assets Recovery Agency in the North and the Criminal Assets Bureau in the South has proven to be very eVective. To ensure that there are no legislative obstacles to such co-operation, the Irish Government enacted legislation in March 2005 to allow the Criminal Assets Bureau to cooperate formally with similar asset recovery agencies abroad including the Assets Recovery Agency. The amendment enacted provides that the Criminal Assets Bureau can engage in “co-operation with any authority with functions related to the recovery of proceeds of crime”. The Minister has also asked me to say that he is pleased to note that the third seminar on cross border co-operation on organised crime took place in Dublin in October. This seminar was attended by representatives of law enforcement agencies from both sides of the border. Seminars such as this provide an opportunity for law enforcement agencies and civil servants from both jurisdictions to exchange information and examples of best practice and help enhance the shared understanding of cross border organised crime. The results of such undertakings are undoubtedly reflected in the successes of actions against organised crime gangs. The Minister looks forward to future successes arising from the continued co-operation between law enforcement agencies from both sides of the border in the fight against organised crime. Private Secretary 20 December 2005

17. Written evidence from The Petrol Retailers Association You will be aware that the Petrol Retailers Association (PRA) gave extensive written evidence submission and appeared before the Northern Ireland AVairs Committee on two previous occasions in 1998 and 2002. The evidence that we gave contributed significantly to the conclusions and recommendations of the respective reports. I have reviewed that evidence and am satisfied that it remains extant, and I cannot add anything that is new on behalf of my members. Sadly the Government chose to implement few of the recommendations from the NIAC, and I am attaching a copy of this letter. Ray Holloway Director 2 February 2006

18. Letter from Dawn Primarolo MP, Paymaster General, HM Treasury to the Chairman of the Committee You wrote to me on 15 February asking me about the treatment of protection money for tax purposes. Before 1993, the legality of a payment was not a factor in deciding whether expenditure could be deducted in computing the profits of a trade. The only test was whether expenditure is incurred wholly and exclusively for the purposes of the trade. It was possible that a payment such as protection money paid by a trader to protect his business (but not his own person or his family) qualified for a deduction for tax purposes. In relation to expenditure incurred after 10 June 1993, Section 577A of Income and Corporation Taxes Act 1988 now for income tax purposes, Section 55 Income Tax (Trading and Other Income) Act 2005 denies tax relief for payments the making of which constitutes a criminal oVence. The purpose of Section 577A is to ensure that those guilty of certain criminal oVences are not indirectly subsidised through the tax system ie payments tainted with criminality should not be allowed a tax deduction. 1 March 2006

19. Written evidence from Northern Ireland Federation of Clubs I am writing on behalf of the Northern Ireland Federation of Clubs the representative body of almost 600 registered clubs in Northern Ireland having over a quarter of a million members. I have had an opportunity to read the uncorrected minutes of the evidence provided by Mrs Nichola Caruthers of the Federation of Retail Licence Trade to the Northern IrelandAVairs Committee on 8 March 2006 in connection with the issue of organised crime in Northern Ireland. 3392501036 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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I am aware that the members of the committee are likely to have an input into the ongoing review of liquor licensing legislation in Northern Ireland and because of that I am compelled to write to you because Ms Caruthers’ evidence may have left members of the Committee with a misleading picture of the operation of registered clubs in Northern Ireland. Could I stress at the outside that the legislation governing the operation of registered clubs in Northern Ireland is diVerent from that governing the operation of public houses, restaurants, hotels, etc. There are two diVerent statutes in force, one for general licensed premises and one for registered clubs. There are distinct and important diVerences in the relevant legislation governing each sector. In particular the surrender principle about which the FRLT are very concerned does not appear in Club law. For various reasons Ms Caruthers’ organisation is vigorously opposed to the changes in the licensing regime relating to public houses, hotels and restaurants. However, the clubs Federation is very much in favour of the proposed changes to the licensing regime governing the registration of clubs for reasons which I will make clearer below. Initially however I wish to comment on the responses given by Ms Caruthers to certain questions put to her by the committee. In answer to question 236 Ms Caruthers responded by suggesting that “A lot” of the registered clubs in existence today originated as “shebeens”. This is a slur on the reputation of registered clubs in Northern Ireland. Ms Caruthers did not provide a shred of evidence to support her contention. In answer to Question 247 she referred to the issue of money laundering and implied that if the accounts regulations currently imposed on registered clubs were relaxed then this would open the door to money laundering activity. Again this suggestion was wholly unsupported by empirical or other evidence. It is a fact that the proposal to relax the club accounting regulations came from the PSNI. In that regard please see Pages 32 and 33 of the liquor licensing consultation document which deals with the accounts of registered clubs. It states: “In 2004 the PSNI acknowledging the eVorts of registered clubs to improve their accounting procedures, proposed that the regulations should be reconsidered with a view to relaxing them.” It continues: “the Government believes that registered clubs can act as a centre for the community in many areas and provide a resource which is useful in terms of taking forward neighbourhood renewal”. It concludes “the PSNI have advised that the climate in which the regulations were introduced has changed for the better and that such an intense level of scrutiny is no longer necessary”. Furthermore when Sir Hugh Orde and Mr McQuillan gave evidence to your Committee, neither suggested that registered clubs were currently a source or likely to be a source in the future for money laundering activity. In fact the Organised Crime Task Force’s own paper headed “Way Forward—Serious & Organised Crime in NI” indicates that the focus of the taskforce’s energies is presently on hotels, pubs and taxis and nowhere is the clubs sector mentioned as a source of money laundering activity. Our own consultations directly with the PSNI indicate that registered clubs in general do not cause problems in terms of nuisance in their locality, under age drinking, racketeering, paramilitary involvement or money laundering. In the alternative, clubs make a massive contribution to their local communities. Not only are they a major employer in Northern Ireland with employment provided for approximately 6,500 people province wide but any profits generated in registered Clubs cannot be creamed oV by businessmen but remain in the club to enhance the facilities available giving benefits both to its members and those in the wider local community. The Federation believe that it is very important to draw to the attention of your members the above facts so that they can make a distinction between the two licensing systems in Northern Ireland which are currently under review. It is also vital that they are aware that the PSNI are in favour of relaxing the onerous accounting regulations imposed on clubs. Our Federation are strongly in support of the proposals for changing the licensing law regarding registered clubs. We believe the proposed changes will produce positive benefits for clubs in their membership and we hope that members of the committee will wholeheartedly support the said proposals in any dealings with the liquor licence review team. John Davidson Chairman 8 April 2006 3392501037 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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20. Written evidence from Crimestoppers I attach our response to your letter of 20 March.

1(a) Whether the NI experience of paramilitary involvement in organised crime aVects the approach Crimestoppers takes in terms of carrying out its work The situation of NI Crimestoppers is indeed unique, due to the previous threat of terrorist activity. Post ceasefire the situation of organised crime has been run by the diVerent paramilitary organisations, as is well documented by the Independent Monitoring Commission. Due to this, the threat of reprisal against those members of the public that wish to rid their community of criminality frequently carries the ultimate price of death. This puts greater responsibility on to our experienced call handling team in ensuring that the anonymity of callers is preserved right from the outset, including careful procedures within the Crimestoppers oYce, and that the caller is assured as to their anonymity. Assessment of calls to Crimestoppers tends to indicate callers emanate from all sections of the community from all sections and divisions of the NI community and social strata. Although the oYce is part of PSNI, its operates behind a Chinese wall, adhering to ACPO Guidelines on the management and protection of information passed to it.

1(b) Whether the NI experience of paramilitary involvement in organised crime aVects the volume of calls made to Crimestoppers in NI Prior to the introduction of NI Crimestoppers and during the height of the troubles, a Confidential Telephone service was introduced. Whilst it was not anonymous (albeit it was used as such on occasion) it was publicised as confidential and a “safe” number in the context of the time. It would be safe to say that these two numbers cannot be compared due to the fact that the confidential telephone was marketed in such a way that it was an instrument through which the security agencies sought to further protect the community and at the same time ensure the safety of those that called. Another diVerence between the two would be that Crimestoppers relates to all aspects of crime, not just terrorism. Volume of calls relating to organised crime (Annex 1) can only be compared against other Crimestopper regions. Compared to the NI population being 2.85% of the UK’s population, in 2005 3.73% of the calls made to Crimestoppers originated in NI; therefore Crimestoppers in NI “does better”. This may not be just due to the nature of criminality; the NIO is highly supportive and Crimestoppers is very well publicisied there. Also, in 2004 in NI, 38.7% and in 2005, 50.7% of calls received, related to areas that would traditionally be perceived as those relating to organised crime.

2. Whether the work of Crimestoppers in NI diVers from its GB regional oYces In principle, the work of Crimestoppers NI does not diVer to that carried on at the other GB regional oYces. However, as referred to in 1(a) above, one obvious diVerence relates to the impact of organised criminality that has emerged as a consequence of the 30 years of civil unrest. The fear and knowledge of reprisal is well known and well documented thereby all sections of the community are aware of the consequences of it being known that they have helped the authorities. Whether the knowledge and awareness of these reprisals is as extensive throughout other communities within GB, we are unable to comment on, but we suspect not.

3. What steps Crimestoppers NI takes to publicise its independence from the police It is an accepted reality within NI society that Crimestoppers is perceived as being part of the police. The fact we are an independent charity operating in partnership with the police has a low level of awareness throughout NI, and this is accepted by our local Board to be one of the major challenges to be faced in terms of developing our work. Crimestoppers’ campaigns regularly stress its independence. In pursuance of this we recently secured funding from the Northern Ireland OYce to launch a major television/radio/newspaper advertising campaign focusing on our: — charitable status; — our independence from the police; and — the fact all callers are guaranteed total anonymity. The recent trend of calls would indicate that whilst call volume is down, results determined by arrests etc is up (Annex 1). The programme also provides for Market Research to be carried out at the conclusion of the campaign to evaluate the success in achieving the core objectives. 3392501037 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Annex 1

Call Type 2005 2004 % 2005 2004 Total Calls Received 1,887 2,368 "25 Arrested/Chgd/ Reported Alcohol Bootlegging 6 6 0 0 0 Murder/Attempted Murder 141 81 !43 11 0 Counterfeit Currency 14 19 "36 0 0 Counterfeiting 46 32 !30 1 3 Drugs (dealing and traYcking) 346 435 "26 26 14 Explosives 11 15 "36 0 7 Firearms 55 35 !36 4 3 Fraud 73 32 !56 9 2 Handling Stolen Goods 11 35 "218 1 1 Robbery 102 90 !12 18 15 Terrorist Activity 116 98 !16 5 7 Tobacco Bootlegging 35 39 "11 0 0 Total 956 917 !47552 Percentage increase !31% in arrests Property recovered £282,405 £430,240 "52

Drugs Recovered £443,574 £123,572 !72 % of calls received 50.7 38.7 The above figures relate to oVence categories traditionally associated with paramilitary involvementin organised crime and are NOT an analysis of all Crimestopper calls received. Michael Laurie Chief Executive 15 May 2006

21. Letter from The Rt Hon the Lord Goldsmith QC, Attorney General to Sir Patrick Cormack MP, Chairman of the Committee

I am grateful to you and the Committee for the opportunity to meet informally with you on Tuesday last and I hope the Committee found it useful too. As I said then, the importance of what we are doing in Northern Ireland in setting up the Public Prosecution Service cannot be over-estimated. It is also vitally important for the work of the PPS to be better understood by the people of Northern Ireland. Only in that way can confidence in the prosecution, and criminal justice system generally, be maintained and built upon. I very much welcome, therefore, the interest shown by the Committee. I promised to write with further information on some of the issues that arose. First, I mentioned my role in referring sentences I consider to be unduly lenient. The Criminal Justice Act 1988 gives me, as Attorney General for Northern Ireland, the power to seek leave to refer a sentence to the Court of Appeal for reconsideration if it is, in my view, unduly lenient. Whilst this is an extremely important and useful power, it is not a prosecution right of appeal, in the way that a defendant may appeal a sentence imposed on him. An unduly lenient sentence is one that falls outside the range of sentence that a judge, having regard to all proper factors, could reasonably consider appropriate. A degree of discretion in applying sentencing guidelines is an important judicial responsibility. My power of review is not intended to limit the exercise of discretion to impose the sentence that fits the crime, rather it catches those sentences where the judge has failed to apply his discretion within the correct range. A case I have referred gives the opportunity to the Court of Appeal to give guidance to lower courts. I enclose transcripts from three such cases that may be of interest. The first is a case involving a robbery— Zoe Pearson. It is clear from the judgment that the Court of Appeal applied the correct current guidelines and adopted the guidance given by the Sentencing Advisory Panel in London. There is no significant diVerence, therefore, between the guidance applicable in Northern Ireland and that in England and Wales. The case also indicates the point I made at the meeting that although the Court of Appeal will usually express what the correct sentence should have been, it does not for a number of reasons, apply that sentence in the case before it. 3392501041 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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I was also asked whether my power to refer could be used to ensure commensurate sentences in organised crime cases. I will always consider any case drawn to my attention and will refer it if I think it unduly lenient. Whether I have the power to refer the sentence in any particular case depends on the nature of the charges for which the sentence is imposed but I have, in recent years, referred cases involving serious fraud and the importation of drugs. In 2004 I referred a case of blackmail in a case called Potts. This is the second judgment I enclose. The use of blackmail by paramilitaries is a substantial problem for the construction industry in particular in Northern Ireland, although other businesses are aVected. Unless money is paid to the paramilitaries, damage is done to the shop, premises or site, workers are threatened or otherwise discouraged from attending the business and work or progress becomes impossible. Historically, too many businesses see this as an unavoidable evil. It is particularly diYcult to get witnesses to go to the police because of the threat of reprisal. You will see from the judgment that the Court of Appeal took account of these factors to bring a particular Northern Ireland perspective to the guidance. The third judgment is the case of Robinson and others. These were, in fact, five cases involving death or serious injury caused by dangerous or drunken driving. There was a growing public concern that this sort of oVending was not being combated successfully by the criminal justice system in Northern Ireland. The reference process allowed me to take a representative sample of cases to the Court of Appeal to argue that the sentencing guidance for this type of oVending needed to be revisited. The reference was successful with the Court of Appeal adopting recent guidance given by the Court of Appeal in London. I think the judgments, in particular, point up two of the points I made on Tuesday. The first is that the Court of Appeal in Belfast give weight to current sentencing guidance from England and Wales and not just Northern Ireland cases and has adopted the Sentencing Advisory Panel’s Guidance in a number of areas. Secondly, that although the Court is unable, for a number of reasons, to substitute in the particular case before it the sentence that would have been appropriate at first instance, it provides strong guidance for the lower courts for the future. The second matter I promised to return to you on was the possibility of the Committee visiting the new PPS oYces in Lisburn. I understand the Director of Public Prosecutions for Northern Ireland, Sir Alasdair Fraser; will write to you extending such an invitation. I know he too welcomes the interest of the Committee in the roll out of the Service. I was asked how many PPS staV came from outside Northern Ireland. I am not yet in a position to provide this figure—key PPS staV were on leave last week—but will do so as soon as possible. The fourth point was to confirm that the two regional towns for which accommodation has not yet been found are Newry and Londonderry. The fifth point was a question from Gregory Campbell concerning what eVorts would be made to try to ensure that regional oYces had a staV reflective of the community. He has also since tabled a Parliamentary Question on the same point and I enclose a copy of the Solicitor General’s reply. Employment law and practice in Northern Ireland is complex. It is so to try to ensure equal opportunity for all and to eliminate any possibility of discrimination based on community or any other factor. Recruitment is by open competition and by merit and is carried out for the PPS by the Northern Ireland Civil Service in accordance with best practice and guidance from the Civil Service Commissioners. All PPS staV are Northern Ireland Civil Servants. Historically, this process has, for the PPS as a whole, worked well. There are sensitivities about the compilation and publication of staYng statistics based on community background and none are compiled or sought by the PPS. However the last time I was informed, about a year ago, the figures made available by the Northern Ireland Civil Service showed a community background breakdown in the PPS of 50% Protestant, 46% Catholic and 4% undetermined. In staYng individual oYces, however desirable a balanced community breakdown of staV may appear to be, nothing can be done by the Service that is either illegal or discriminatory. Normal staYng procedures must be followed. The sixth point was a request to see the evaluation reports for the Belfast and Fermanagh and Tyrone pilots. I have asked the Director to provide these direct. Finally there were two points of practice. The first was whether the PPS would have a role in cases referred to community restorative justice schemes. The answer is yes, all such references would be through the PPS. This is set out in the consultation paper issued by the Northern Ireland OYce in December last, a copy of which I enclose. Responses to the consultation are currently being considered. The second point was whether local councils could seek Anti-social Behaviour Orders. The Anti-social Behaviour (Northern Ireland) Order 2004 provides that the relevant authorities for applying for such orders are district councils, the Chief Constable and the Northern Ireland Housing Executive. Further, following conviction of a relevant oVence the prosecution may apply for an order to be made or the court may so order on its own initiative. I think I have covered the specific points raised but if I have not, or if there is any other matter on which I can assist, I would be happy to do so. 24 April 2006 3392501042 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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22. Written evidence from the Law Society of Northern Ireland

There are several preliminary points I might usefully make to provide some context for these issues. The first is that in the discharge of its responsibilities as regards the ethics, standards and education of the solicitors’ profession, the Law Society is committed to upholding and promoting the rule of law. We are committed also to upholding the core values of the legal profession, including its independence of the state and the proper and lawful protection of client confidentiality. We believe that both of these commitments and objectives are right in principle, and would command the confidence and support of the Committee. The practical expression of these commitments in terms of the involvement of any solicitor involved in criminal activity is clear. The Society is committed to doing all we can within the scope of our remit and authority to promote compliance by solicitors with the law in the conduct of their practice. (For example, in the immediate context of your inquiry, solicitors’ obligations under the Proceeds of Crime legislation). Solicitors are of course subject to the normal criminal law. Where evidence is obtained or received by the Society in the course of its regulatory work which suggests the commission of a criminal oVence the consequences are two-fold. First, our policy (based on the terms of the Criminal Law Act (NI) 1967) is to report the matter to the relevant authorities where we have a reasonable basis for believing that an oVence has been committed. You will appreciate that the powers conferred on the Society by statute are (quite rightly) focused primarily on the protection of the interests of clients rather than the investigation and prosecution of criminal oVences, which is properly the function of the several prosecution agencies. The Committee will understand that the Society is not empowered to conduct the same kind of investigation with the same range of powers available to the state authorities, and that the Society is not and should not be an agent of the state. Nevertheless we have in place an extensive range of monitoring processes, details of which are summarised in the enclosed Note A. We believe we can demonstrate that these processes are at least as eVective as elsewhere in the British Isles. In any event in the circumstances I have described a report is made to the relevant authorities in accordance with the policy set out above. The Society is also subject to obligations specific to the proceeds of crime/money laundering regulations to report money laundering activities of which we become aware. The second potential consequence where there is cogent proof of criminality is that this will result in action taken by the Society to bring professional disciplinary proceedings against the solicitor concerned before the separate and independent Solicitors Disciplinary Tribunal. This may result in a range of disciplinary sanctions being imposed, ranging from fines through suspension from practice and the ultimate sanction of “striking oV” the solicitor. I comment below in more detail on our experience to date in respect of cases in which we understand there to have been some connection between the solicitor and organised crime. You mention in your letter that the Committee has received evidence from a range of sources in the course of the inquiry. In the terms of your letter these are referred to as “reports of members of the profession who may be dishonestly assisting organised criminal gangs”. It is not immediately clear from your letter whether these reports have been received by the Committee as part of the public record or in the course of private meetings, but in any event we have no information as to the basis, source, quality or nature of the evidence which has been presented to the Committee. I believe it would be commonly accepted that the percentage of solicitors who become deliberately and consciously involved in assisting organised crime is extremely small (there are currently some 2,000 solicitors in private practice in Northern Ireland). It seems clear that the vast majority of solicitors are concerned to be able to observe proper ethical standards, and are concerned to understand and comply with their obligations under the law. This is so, notwithstanding the complexities of those obligations, in particular the uncertain and evolving case law on the sometimes complex interface between the requirements to report and the obligation to maintain the confidential nature of the individual citizen’s private aVairs, as reflected in the principle of legal professional privilege (see, for example, the English Court of Appeal decision in the case of Bowman -v- Fels). This being so, a concentrated eVort has been made by the Society to promote understanding and compliance by the profession with their lawful obligations. I enclose Note B which identifies the extensive formal guidance promulgated by the Society, and the various means by which training in this matter has been delivered. We anticipate that a high priority will continue to attach to this work in the future. In the same connection it might be helpful for me to confirm that contacts and working relationships between the Society and the prosecution agencies is evolving and improving. Obviously we share the common objective of upholding the rule of law. Thus, for example, within the past few months we have held a meeting with the most senior Assets Recovery Agency personnel in Northern Ireland, the Society being represented by the President and me. We had the opportunity to discuss issues of mutual interest, and the dialogue has resulted in several useful proposals for enhancing compliance. We have had frequent contact with the police authorities over recent years, usually in connection with individual cases. I think it is fair to say also that in part any problems in eVective dialogue have arisen from a perception of disparate responsibilities within the prosecution authorities which are not always easily or fully understood. (For example, the PSNI Fraud OYce, the Assets Recovery Agency, the National Criminal Intelligence Service, the PSNI Economic Crime Bureau, HM Customs and Excise and the Serious Organised Crime Agency). I confirm that our intention is to maintain and improve these lines of communication. 3392501042 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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As matters stand at present, apart from information which is in the public domain, we have no knowledge or information about the reports which have been made to you, or the evidence on which they are based. This being so, it is impossible for us to comment. What we can confirm is that as and if the authorities make information available which requires action by the Society, those matters will be properly and fully addressed. Against this overall background, I can deal more briefly with the series of questions you have raised. Incidentally, as regards your use of the term “malpractice” I have assumed that in context the point of Committee concern is not the various types of regulatory breach which may constitute professional misconduct, but more specifically malpractice in circumstances which suggest some financial or other irregularity connected to organised criminal activity of third parties, perhaps most obviously paramilitary activity. 1. I have set out in the enclosed Note A (not printed) the nature of our monitoring and regulatory processes. I have also explained above the basis on which information is reported to the authorities as and when it becomes available to the Society. 2. I have mentioned above that in individual cases we have had regular contact with the police authorities, particularly the Serious Fraud OYce. I have explained the more structured basis of our recent contacts with the Assets Recovery Agency. I have also identified the potential for a more structured contact at senior level with the Police Service of Northern Ireland and other prosecution agencies, perhaps on a more unified and coherent basis. 3. We are aware of two instances in which the circumstances of an investigation by the Society has suggested some connection with organised crime. In both cases a report was made to the authorities at an early stage, immediately after the Society became aware of the information, and pursuant to the policy I have set out above. In both cases the solicitor concerned has already been subject to disciplinary proceedings by the Society in respect of the conduct of his practice, and both have in fact been struck oV. The question of criminal investigation and proceedings is a matter for the prosecution authorities. 4. We have no direct knowledge of any other cases which have been investigated or prosecuted without reference to the Society, nor as to the extent of any involvement with organised crime. We understand that two solicitors have been convicted of failure to comply with money-laundering obligations (in connection with which professional disciplinary proceedings are pending) and one other solicitor is presently subject to prosecution. 5. Solicitors are under a general regulatory obligation to draw the attention of the Society to breaches of the Society Regulations. This requirement attaches to professional obligations generally. In terms of obligation to report criminal activity and evidence thereof on the part of any other person, solicitors are subject to the same obligations as any other citizen, subject only of course to the obligations of client confidentiality. 6. The obligation to report in connection with suspected money-laundering is the same as that which is imposed on any other business or financial institution, subject only to consideration of issues of legal professional privilege to which I have already alluded. As I have explained the policy of the Society is to promote and encourage full compliance by solicitors with their legal obligations. J W Bailie Chief Executive 6 June 2006

23. Written evidence from the Lord Chief Justice

SENTENCING IN ORGANISED CRIME CASES: SUBMISSION FROM THE LORD CHIEF JUSTICE’S OFFICE

The Lord Chief Justice would like to thank you for your letter of 23 April setting out further details of the concerns expressed to the Committee. In his letter to the Committee of 6 April 2006 the Lord Chief Justice suggested that if he could be given specific details then he would seek to provide information. The points raised with the Committee, as reflected in your letter, are rather general and the Lord Chief Justice considers thatitisdiYcult to respond to them. Nevertheless he hopes that it will be helpful to the Committee if he makes a number of comments on sentencing and organised crime and on one or two of the issues those you have met have raised with you about sentencing in this area. 3392501044 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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As you helpfully note, it is important to be mindful of the full circumstances of each case. For instance, does the defendant have previous convictions, what is his level of culpability, what are the recommendations of the Probation Service, what is the impact on the victims, the mitigating and aggravating features associated with the crime, congruence with sentencing guidelines and many other factors which judges are obliged by law to take into account. In addition, it has to be recognised that the outcome of a case may well be disappointing for one party or the other, and this can impact upon the parties’ portrayal of it. Similarly, media reports of cases can create a misleading impression. What concerns the Lord Chief Justice and his fellow judges is that public comment on sentencing, or reporting of sentencing, often fails to recognise the diYcult judgments judges have to make or the relevant factors they must weigh. The consequence of less than full reporting is an erosion of public confidence in the administration of criminal justice. The Lord Chief Justice would like to make it clear, however, that judges do not lay claim to infallibility. The diYculty for him as Lord Chief Justice, therefore, is to try to address the situation in the round; to give an overall view. Some comparative work on the sentencing outcomes in Northern Ireland and England and Wales has been undertaken and the Lord Chief Justice believes that the results of this have been made available to the Committee. Given the small number of “organised crime cases” passing through the courts here clearly the figures need to be treated with caution. Also, one or two exceptional cases can skew the results. Taking that caveat as read, the figures illustrate a not dissimilar picture in Northern Ireland and England and Wales for most of the oVences. There is a discrepancy in the case of smuggling oVences, however, it should be noted that in England and Wales a proportion of these convictions were for importing controlled substances— these convictions are likely to have raised the average sentence. In general terms, the figures for Crown Court convictions show that in 2003 (the last year for which statistics are available, though they are, therefore, somewhat dated), custodial sentences were imposed only slightly less often in Northern Ireland, and where custody was used here, the average sentence was slightly longer. The Lord Chief Justice acknowledges that the situation was less comparable on custodial sentences in 2002 and 2001 but the numbers receiving sentences (custodial and suspended) in NI are significantly higher in these years as well as 2003. Suspended sentences have been used significantly more often in Northern Ireland. It is important to recognise the seriousness of a suspended sentence—the oVence must warrant the imposition of the period in custody, which can then be suspended only if there are circumstances which justify the suspension. This is a slightly diVerent test than must be satisfied in England and Wales. Nevertheless, it is not an easy test to satisfy and a sentence will only be suspended after careful consideration of the circumstances. Community sentences are used less often in Northern Ireland. It is important to recognise that comparisons between England and Wales and Northern Ireland, while interesting and relevant, do not always paint the full picture. We do not slavishly follow England and Wales precedent here. The case last month of R v Quinn (2006) NICA illustrates the point. The Court of Appeal, in reviewing the authorities in England and Wales in cases where death had been caused by a single blow, declined to adopt the starting point of 12 months’ imprisonment suggested by the Court of Appeal in that jurisdiction. The Northern Ireland Court of Appeal held that, “A more suitable starting point in Northern Ireland for this type of oVence is two years and . . . this should rise, where there are significant aggravating factors, to six years”. In setting this guideline, the Lord Chief Justice noted that: “. . . The courts must respond to this experience (of such cases) by the imposition of penalties not only for the purpose of deterrence but also to mark our society’s abhorrence and rejection of the phenomenon and the devastation wrought on a victim’s family.” There may, therefore, on occasion, be circumstances in this jurisdiction to justify a diVerent view of a particular type of oVence than is taken in England and Wales. An additional point is illustrated by R v McAuley (2004) NICC. In this case the trial judge noted that the quantity of drugs which was described as a “very large consignment” in Northern Ireland was significantly less than the quantity that would attract that description in England and Wales. We also have diVerent provisions in certain areas of the law which might make our approach diVerent, for example the point made above about suspended sentences. It is also worth noting that the courts here, including the Court of Appeal, have made it clear repeatedly that to obtain the maximum discount the co-operation of the defendant immediately after arrest is required. Solicitors have been warned that if they advise their clients to remain silent that if they plead guilt later then they will not obtain as great a discount. (See for example Attorney General’s Reference No1 of 2006 NICA4.) It is important to note when considering criticism of sentences that statutory procedures are in place, introduced by the Criminal Justice Act 1988, which allow a sentence passed in the Crown court to be challenged. As already mentioned, judges do not claim to be infallible and this route exists to deal with that. This provision enables the Attorney General to refer unduly lenient sentences to the Court Of Appeal. The provision can be used in all indictable and a range of other serious oVences. 3392501044 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Lord Lane set out the approach to the Act in Attorney General’s Reference No4 of 1989 11 Cr App R(S) 517: “A sentence is unduly lenient where it falls outside the range of sentences which the judge, applying his mind to all the relevant factors, could reasonably consider appropriate. In that connection, regard must of course be had to reported cases, and in particular to the guidance given by this Court from time to time in the so-called guideline cases.” Also in Attorney General’s Reference No5 of 1989 11 Cr App R(S) 489 he held that “Before the Court grants an application of this sort, it must be shown that there was some error of principle in the judge’s sentence; that in the absence of the sentence being altered by the Court, public confidence would be damaged; and that the Court should only grant leave in exceptional circumstances, and not in borderline cases.” Where appropriate, the Court of Appeal will vary the original sentence; and set down sentencing guidelines in suitable cases. As noted by Carswell LCJ in R v Murdock 2003 NICA 21, guidelines set the general level of sentence that will be appropriate, but allow flexibility to take account of the individual circumstances. They also allow for the fact that particular types of oVence may have become more prevalent or be causing particular danger to the public, and thus warrant higher sentences. Judges generally set about the diYcult task of sentencing with scrupulous care and only a very small percentage of the sentences handed down are appealed or referred. Indeed in 2005, out of over 1,000 cases dealt with, only six were referred by the Attorney General. (The figure for 2004 was nine.) Having checked the files from these 15 references it appears that perhaps five of these could have been concerned with organised crime. In one of the five, a blackmail case, the Court allowed the reference in another, a case of supplying drugs, it would have allowed it but for a technicality. In the case that was allowed the sentence of three years plus two on probation was increased to five plus two on probation. The Lord Chief Justice regards this as a reliable barometer of the adequacy of sentences imposed. A number of respondents to the Committee raised the issue of deterrent sentences. This is also something which has been recognised by the courts (for example, R v McAuley). It is, however, important to note that it is not the only consideration and the sentence imposed must be proportionate to the crime and judges must not be drawn into responding to newspaper headlines when undertaking the diYcult task of sentencing. Whether special legislation should be introduced to provide for increased sentences for organised crime oVences is ultimately a matter of policy for the government. The Lord Chief Justice does not regard this as necessary because he thinks that it is a factor which judges in Northern Ireland take into account when sentencing oVenders. It is also addressed, at least implicitly, in the guidelines. For example, in relation to drugs oVences it is clear that those involved in importing drugs will be more heavily sentenced that a wholesaler, who in turn will be more heavily sentenced than a lesser supplier (R v Hogg (1994) NI 258 and R v Murdock). At present sentences tend to be more severe where the oVence is linked to a paramilitary organisation (see for example AG Reference No5 of 2004 (Potts) 2004 NICA 27). The Lord Chief Justice would also be concerned that there may be practical diYculties in drafting an adequate definition of “organised crime” while retaining suYcient flexibility to address widely diVering circumstances. Defining the level of involvement an oVender would be required to have in the actual organisation of the criminal activity in order to qualify for an enhanced sentence would be a particular issue. The question of whether paramilitary linked oVences should be considered as a separate category would also need to be addressed. The Chief Constable and ACC Sheridan commented on bail being granted at lower courts, the implication apparently being that it was easier to secure bail there (see Q161). The Lord Chief Justice thinks that it is important to clarify that the same criteria will be used in considering a bail application at any level. Furthermore, the prosecuting authority will have an opportunity to make representations regardless of the level of court. It might perhaps be helpful to outline some of the legal principles that must be applied by the judges and magistrates in dealing with the matter of bail. Since the incorporation of the European Convention on Human Rights and Fundamental Freedoms into domestic law there is a presumption in favour of granting bail for a person awaiting trial (WemhoV v Germany (1979-1980) 1EHRR 55 ECtHR) unless there are “relevant and suYcient” grounds to justify his or her continuing detention. These grounds are generally recognised in the jurisprudence of ECtHR as (i) a risk that the accused might not present himself for trial; (ii) a risk that witnesses might be intimidated; and (iii) a risk that further oVences might be committed. Clearly the accused’s record will be of particular relevance to the last of these criteria, but it is just one of the many factors to be considered. The strength of the evidence against the accused is also a relevant consideration but only in so far as it aVects one of the stipulated reasons for refusing bail. The seriousness of the charge is specifically not a reason for refusing bail unless it can be linked to one of the three grounds outlined above. It is clear from Strasbourg case-law that, having identified the risks, a balancing exercise must be undertaken by the court, weighing these risks against the rights of the untried accused. Any decision to deny bail must be a proportionate response to established risks. It has been held that a generalised risk is not suYcient. The prosecuting authorities must establish that there is a specific risk arising from the individual circumstances of the particular case. Even where such a risk is established the judge may only deny bail where he is satisfied that conditions cannot be fashioned to deal with the risk. 3392501044 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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Finally, the Lord Chief Justice noted that some of the evidence presented by Mr Wilson of the Confederation of British Industry and Federation of Small Businesses referred to cases in which alleged oVenders were not convicted because of a lack of evidence. Clearly this is an entirely separate matter. The diYculties in prosecutions for certain types of organised crime oVences have been recognised and this would appear to be part of the reason for the expanding use of civil recovery procedures. I have attached brief summaries of the relevant points from the cases referred to above and others which illustrate the approach taken by the Court of Appeal to sentencing in cases linked to organised crime. Simon Rogers 27 June 2006

24. Supplementary written evidence from HM Revenue & Customs Thank you for your letter of 30 March requesting further information following the evidence session on 22 March. Set out below are responses to the questions you asked in your letter and those areas where we promised in our evidence session to provide further information.

What use does HMRC make of information from personal taxation regimes and investigations in combating organised crime? Does S20 of CRCA place a significant restriction on the flow of information between HMRC and the CAB in the Republic? HMRC recognise the importance of providing other law enforcement agencies with information and intelligence that is needed for the prevention and detection of crime. The Commissioners of Revenue and Customs Act 2005 also recognises this in the provisions which otherwise impose a duty of confidentiality on us. S19 of the Act specifically allows us to disclose information for the purpose of criminal investigations or proceedings for matters where we have functions (for example in a case being prosecuted jointly between HMRC and a police force). S20 of the Act provides that the Commissioners may direct that information may be disclosed where it is the public interest to do so and it is for the purposes of the prevention and detection of crime. S19 of the Anti Terrorism Crime & Security Act also provides a legal gateway for HMRC to disclose information to law enforcement agencies where they are considering commencing a criminal investigation or criminal proceedings. HMRC is therefore ready, willing and able to provide other law enforcement agencies with information needed for the prevention and detection of crime and that includes information from former Inland Revenue systems. We work closely with PSNI and have arrangements with them to provide information that they need and we can and do bring relevant information to the table in joint working situations. The question recognises, and Mr Toon said in his response to Mr Grogan (Q353) that there have been some diYculties in getting information to the CAB following the commencement of CRCA. This is because the public interest provisions in CRCA are drawn very tightly and may prevent us from disclosing information where another agency is conducting an investigation with a view to civil as opposed to criminal proceedings. HMRC values its relationship with CAB and is presently seeking advice on the application of CRCA in respect of civil cases involving the recovery of assets obtained through criminal conduct. It is possible that we will need to regulate to close any gap that does exist.

What assessment has HMRC made of the IMC’s recommendations to introduce a licensing regime for petrol retailers which would enable the closure of businesses that have engaged in the illicit fuel trade, and would this model be applicable to other sectors, such as the licensed trade or construction industry? The licensing of fuel retail sites throughout the UK is the responsibility of other agencies within Government. However, HMRC believe that a more eVective, up-to-date and robust licensing regime would provide a number of additional benefits in tackling illicit oil supply. Most importantly, it would provide: — comprehensive and auditable records of deliveries, stock and sales which would allow HMRC to be more eVective in identifying illegal fuel itself because HMRC could: — carry out complete reconciliations and identify either oV-record deliveries; — “follow” individual deliveries through records to establish their duty-status and the supplier; and — apply sanctions such as fines, duty assessments and prosecutions based on documentary evidence in the records; — opportunities when HMRC identify activity which contravenes the conditions of their petroleum licence, alongside illegal fuel supplies, to inform this contravention to the Licensing Authority who could take action. 3392501045 Page Type [O] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

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In terms of the licensing of fuel retail sites we note the recent announcement by the Northern Ireland OYce of the consultation on this subject at the end of April 2006. The diVerent nature of sectors in industry means that there will be diVerent solutions for tackling revenue loss and it is, therefore, diYcult to apply a single model across such diverse sectors. However, where licensing regimes take into account involvement in illegal trade as one of the factors which can decide the granting of such licences, then such a model provides another potential intervention for HMRC when they detect illicit activity.

What has been the impact of the Registered Dealers in Controlled Oils Scheme (RDCO) in Northern Ireland? Could it be more eVective? The RDCO scheme was introduced in 2003 as an integral part of the UK Oils Strategy (which had been launched the previous year in 2002) and was designed to make the supply chain for rebated diesel fuels— marked gas oil (red diesel) and marked kerosene—more transparent and controllable. The key elements of the RDCO scheme are that: — any individual or business selling red diesel or kerosene must be authorised by HM Revenue and Customs; — continued authorisation by HM Revenue and Customs is dependent upon compliance with two key elements of the scheme: — making monthly returns of how much and, with certain de minimis limits, to whom they have sold red diesel and kerosene has been sold; and — taking reasonable steps to ensure that they do not sell red diesel or kerosene to those who do not have a legitimate need. The UK Oils Strategy is a multi-faceted strategy and includes not just regulatory control but also operational measures. It is, therefore, very diYcult to assess the specific contribution of any one element such as the RDCO scheme. However, since the introduction of the UK Oils Strategy: — the GB illicit diesel market has reduced from 6% in 2001, before the strategy’s reduction, to 4% in 2004—a reduction of 33%; — the revenue loss in the diesel sector in Northern Ireland as a result of both shopping and fraud has reduced from 58% of the market in 2002 to 42% in 2004—a reduction of 28%. Our assessment, based on a range of information and intelligence sources, is that the RDCO scheme has made a critical contribution to the reduction in diesel fraud levels, including the fraud element of the losses in Northern Ireland, because it has made it much harder to source red diesel and kerosene as the supply chain has become more transparent and the RDCO population as a whole is much harder to exploit. However, the RDCO scheme is still a relatively young regime; it only went live in April 2003. As HMRC understands better the risk that individual RDCOs pose and as RDCOs themselves understand ever better the requirements of the regime, we expect to be able to target more precisely those RDCOs who pose the greatest risk. This ability to target risk more eVectively using the appropriate sanctions to either ensure compliance or remove those unwilling to be compliant from the scheme will further impact on the ability of criminality to source red diesel and kerosene.

What additional measures could HMRC propose to help enforcement agencies tackle organised crime? HMRC’s experience from its strategies to tackle, as examples, cigarette, oils, and VAT MTIC fraud is that tackling organised crime needs an approach which looks at all aspects of the illicit activity in an “end- to-end” way using all the interventions, both civil and criminal, available to frustrate, disrupt, prevent and stop organised criminal attacks on the tax regimes. Moreover, our experience in Northern Ireland and overseas is that co-operation outside organisational and national boundaries allows law enforcement to tackle organised criminality far more eVectively. Certainly, our experience in tackling VAT MTIC fraud, cigarette smuggling and oils fraud illustrates this.

Is there scope for oils companies to use or develop tracers or markers that could be added to rebated fuel which would be more diYcult to remove through laundering? Is there scope for oil companies to use technology to mark their authentic delivery vehicles that would help in identifying tankers using fake livery? HMRC have an ongoing programme of examining marker technology in order to counter the problem of laundering by making the statutory markers more resilient. In addition, we also examine continually testing technology which will allow us to be ever more precise in identifying illegal fuel. What scope the oil companies have to use or to develop their own markers in addition to those statutory markers is clearly a matter for the oil companies. 3392501045 Page Type [E] 30-06-06 00:40:24 Pag Table: COENEW PPSysB Unit: PAG4

Ev 166 Northern Ireland Affairs Committee: Evidence

The situation as regards tanker liveries is less clear. The legitimate oil distribution industry has changed over recent years, with more third party hauliers being used to deliver oil; these can be in plain, white tankers which may only carry a small placard saying who they are on hire to. Moreover, there has always been interchange between diVerent oil companies which could see a marked tanker from one company delivering oil to a franchised station of a diVerent company. HMRC do detect cloned vehicles engaged in oils fraud but it is a rare occurrence and, of course, cloned vehicles can be utilised in other frauds outside oils.

The Committee recently heard that pre-1993 protection money was clawed back as a legitimate tax deduction; since that time it has no longer been the case. What eVect has this change since 1993 had and in particular what kind of impact has this had? How much was being tax deducted in the first place? What eVect has it had on businesses and on the people who are carrying out the extortion? Have they changed the levels that they would seek to extort from businesses because it was a taxable expense and now it is not? (Question 332) Businesses may deduct from their operating profits any business costs incurred before any liability to Income or Corporation tax is calculated. Before 1993, the legality of a payment was not a factor in deciding whether expenditure could be deducted in computing the profits of a trade. The only test was whether expenditure is incurred wholly and exclusively for the purposes of the trade. It was possible that a payment such as protection money paid by a trader to protect his business (but not his own person or his family) would have qualified for a deduction for tax purposes. In relation to expenditure incurred after 10 June 1993, Section 577A of the Income and Corporation Taxes Act 1988 (now for income tax purposes, Section 55 Income Tax (Trading and Other Income) Act 2005) denies tax relief for payments the making of which constitutes a criminal oVence. This change was made to ensure that those guilty of certain criminal oVences are not indirectly subsidised through the tax system ie payments tainted with criminality should not be allowed a tax deduction. The change was not focussed wholly on protection rackets in Northern Ireland. HMRC have no information on the impact of that change on business.

Northern Ireland Results—oils and cigarettes (Question 349) The table below sets out the volume of cigarettes and HRT in Northern Ireland seized in 2004–05, the most recent year for which details have been published. However, as explained in evidence this does not equate to the number of cigarettes seized which were intended for the Northern Ireland market as interventions made elsewhere in the UK and internationally would have had an impact on the illicit tobacco market in Northern Ireland.

2004–05 Cigarettes seized 19.7m sticks HRT seized 1,121 kilos The table below sets out operational outputs in the oils sector for Northern Ireland in 2004–05, the most recent year for which details have been published.

2004–05 Vehicles Challenged 19,007 Vehicles Detected on Illegal Fuel 891 Laundering Plants Broken Up 18 Gangs Dismantled/Disrupted 5 Fuel Seized 1.78m litres Results for 2005–06 will be published as part of HM Revenue and Customs Annual Report for 2005–06. Paul Gerrard Deputy Head of Enforcement 30 April 2006

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