Action Against Financing Terrorism

– in the House of Commons at 4:36 pm on 15th October 2001.

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Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer 4:36 pm, 15th October 2001

With permission, Mr. Speaker, I wish to announce measures that seek to cut off the supply of funds to terrorism.

Those who finance terror are as guilty as those who commit it, so our response to the funding of terrorist acts must be every bit as clear, as unequivocal and as united as our response to the terrorist acts themselves. The action plan that I am placing in the House of Commons Library, which is now available in the Vote Office, arises from concerted work across Governments, and in particular from decisions of the G7 group of Finance Ministers and Central Bank governors on 6 October. It proposes to tighten our law, further empower the police and strengthen co-ordination across the world.

I can report to the House that having already fully implemented UN Security Council resolutions on the Taliban and on Osama bin Laden, the United Kingdom has now frozen 35 suspect bank accounts, immobilising more than £63 million of suspect terrorist funds. I can also report that by Order in Council, following the latest UN resolution 1373, we have frozen all UK bank accounts associated with the individuals and organisations named in the US Treasury's suspects lists and have already seized in total £180,000 held by those identified in Friday's updated list.

Our UK domestic controls are already among the best in the world, but as part of the emergency anti-terrorism Bill announced this afternoon by the Home Secretary the Government propose a new power to freeze funds when suspicious transactions are under investigation. That will be backed up by new reporting requirements on financial institutions so that they must disclose not only known transactions destined for terrorism, but transactions where there are grounds for suspicion.

Clearly, a balance has to be struck between individuals' right to privacy and their security at a time of increased risk, but we believe that there is a case for new powers for the police to monitor accounts that may be used to facilitate terrorism; for Customs to be allowed, where there are suspicions, to seize cash not only at our borders, as it can now, but within the UK as well; for the Inland Revenue and Customs where applicable to share information and co-operate more effectively with the police; and for the Treasury to freeze assets where there is a clear risk to safety and security.

We do this not least because of the weight of evidence concerning the finances of bin Laden and the al-Qaeda organisation, which is complex but becoming clearer daily. It is not primarily bin Laden's personal wealth that supports the Taliban and active terrorist operations, but the profits from the drugs trade and other businesses, and from individual and company sponsors. That money is channelled through a range of financial centres across the globe, with evidence already pointing to centres in the Gulf, Pakistan and central Asia and to money laundering through an established underground banking system. The cells that form part of the wider al-Qaeda network are often self-financing, possibly using business fronts and crime to sustain themselves. Unravelling that relies on first-rate co-ordination.

Since 11 September, the security services, police, special branch and Customs and Excise—co-ordinated by the National Criminal Intelligence Service—as well as our armed forces, have worked together to track down terrorist finance, and I believe that the whole House will wish to express its gratitude to them.

To enhance those efforts, we now propose to establish and fund within NCIS a new multi-agency terrorist finance unit, fully supported by additional special branch investigative resources. To improve financial intelligence further, a new taskforce will bring to the anti-terrorism effort the best of academic, financial and commercial expertise, using in particular the best skills of forensic accountancy in tracking assets. It will also investigate underground banking, which is often used for legitimate purposes such as remitting earnings to families and communities far away, but is also known to provide very easy means for criminals and terrorists to conceal the laundering of money and its movement around the world.

Bureaux de change are another network by which money can be laundered and transferred. In the past 18 months, Customs and Excise has charged 89 people in connection with laundering £590 million. That is just a start. In the consultation document that we are publishing today, we therefore propose the implementation from 12 November of a new regime of supervision to ensure the compliance of bureaux with money-laundering regulations, and we will consult on a registration charge. To make easier the tracing and tracking of criminal and terrorist assets, we are also consulting on a new requirement for proper disclosure of beneficial ownership of companies.

Large financial centres all over the world have an important part to play in cutting off the supply of terrorist funding. I am able to tell the House that many of the measures that we are bringing forward are to be replicated throughout UK Crown dependencies and overseas territories. They will be announcing their own plans to introduce appropriate equivalent measures.

The G7 Finance Ministers and Central Bank governors met in Washington on 6 October and concluded that a special plenary of the international financial action taskforce would meet later this month to agree the imposition, enforcement and monitoring of new international standards to combat terrorist finance. Our Government are also pressing for the UN to establish a permanent monitoring and enforcement unit for those standards; for the International Monetary Fund to provide the expert help that many countries need to set up economic crime units; and for the early ratification of the European Union second money-laundering directive and the international convention on the suppression of the financing of terrorism.

At international meetings, G7 Ministers also had a chance to review the current state of the world economy. We expressed solidarity with the United States Government and the whole of the USA after the tragic events of 11 September and agreed that the global economic challenge demanded a global response.

Not only have interest rates been brought down worldwide, but the central banks of America, the euro area, Japan and Britain have made clear their determination to take any necessary further action. Oil prices, which have previously risen in times of trouble, have fallen in the past month. We will continue to work with the oil-producing countries to ensure steadiness of supply and prices. Where markets have failed, as in airline insurance, Governments throughout Europe and America have acted together, with a new short-term insurance guarantee.

These remain uncertain and testing times. As Governments and Finance Ministers work together, every one of us is conscious of the human consequences of economic uncertainty, especially concerns about employment. Since 11 September, the world has acted together decisively to seek to maintain the conditions for stability and growth. The Government's assessment of the current state of the economy and our forecasts for next year will be published next month in the pre-Budget report for full discussion in the House.

If fanaticism is the heart of modern terrorism, finance is its lifeblood, and I believe that the whole House will agree on the need to move expeditiously to cut off the supply of terrorist finance. Once again, the House is demonstrating its unity and determination, standing firm, as one, to cut off all means of support to terrorism.

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

First, I express my gratitude to the Chancellor for the advance indication that he gave me of the contents of his statement.

I welcome the statement and the measures that the Chancellor has described. Draining the financial lifeblood of terrorism is as important a contribution to its defeat as any other measure we can take. The Chancellor will therefore have the full support of the Opposition for any appropriate action that he takes to achieve that aim.

We particularly welcome the recognition that whereas money laundering is about making dirty money clean, much of the financial support for terrorism comes, as the Chancellor made plain, from business activity of one kind or another—some of it apparently legitimate. Does he agree that a recognition of that distinction should be at the heart of our approach, and that simply building on existing laws against money laundering may not prove to be the right course?

Although we welcome the inquiry that the Chancellor has announced into what he described as underground banking, does he accept that any problems caused by that system will not be limited to this country? What assessment has he made of the extent to which the use of the system in other countries has implications for the financing of terrorism? What action, if any, is being taken in respect of that activity in those countries?

Will the Chancellor assure us that any new requirements that he intends to introduce will be straightforward and comprehensible to those who have to implement them? Does he agree that there has too often been confusion about what the banks are supposed to do? Does he agree that, if his approach is to be effective, there can be no room for ambiguity about the responsibilities of the banks?

This morning's edition of The Times says:

"The Home Office and the Treasury were unclear yesterday as to precisely how their responsibilities for the anti-terrorism measures were divided."

Has clarity now been introduced into that confusion? Finally, what progress, if any, has been made in the investigation of share movements in the days leading up to 11 September, which caused such widespread concern?

We shall scrutinise the detail of the Chancellor's measures when they become available, with a view to ensuring that Britain has legislation that does not merely adorn the statute book, but works effectively to make a real difference in our efforts to protect those to whom we are accountable, and others across the world, from the appalling consequences of terrorist acts.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I welcome the shadow Chancellor to his new responsibilities. From his experience as Home Secretary, he brings to the post a knowledge of terrorist activities and how to deal with them. I am grateful to him for what he has said this afternoon. I should have preferred to have this debate with him under different circumstances, but I am pleased that he has been able to support the measures that we have announced today.

The right hon. and learned Gentleman is right that the financing of terrorism is distinct from simple money laundering. Money from legitimate sources can go to an illegal destination to support terrorism. It is precisely for that reason that we have called back into action the international financial action taskforce, which made 40 recommendations on how to deal with the issues of money laundering.

We are now asking the taskforce to deal with the vexed question of the financing of terrorism. I believe that it will introduce an international standard that all countries will be asked to follow. I also believe that international institutions will be prepared to help countries that do not immediately have the resources or expertise to implement such measures, particularly through the creation of economic crime units. I therefore assure the right hon. and learned Gentleman that we are taking seriously the distinction between money laundering and the financing of terrorism.

On the investigation into underground banking, the right hon. and learned Gentleman is absolutely right to point out that such banking is not exclusive to Britain. Indeed, it is more prevalent in many other countries. Once the taskforce has examined the issue, with the expertise that we hope can be brought to bear from not just the public but the private sector, we will share with other countries the results of that review. We are determined to co-operate with other countries in asset tracking, so that we can identify the sources from which terrorism is financed.

My right hon. Friend the Home Secretary will be introducing the legislation. The economic crime unit will be part of NCIS, which is under my right hon. Friend's authority. The measure in the Bill that will be of interest to the banks and financial institutions is the obligation to report to the proper authorities any reasonable suspicion that funding could be used for terrorist activities. As the right hon. and learned Gentleman, a former Home Secretary, rightly said, previous legislation left some grounds for ambiguity. There can be no doubt now that any financial institution which has a reasonable suspicion that money is being used to fund terrorist activity is under a clear obligation to report that to NCIS. Investigative action will then be taken as a result.

Finally, the right hon. and learned Gentleman asked about the review of share movements in the period before 11 September. He will have noted that the Financial Services Authority has investigated the matter and issued a statement, but investigations are taking place throughout the world. I have spoken to the head of the Bundesbank in Germany, to the Federal Reserve bank and to the Bank of Japan; all are investigating the matter. Any conclusions that can be made will be brought before the House. The matter is obviously serious and we are determined to investigate it fully.

Photo of Mr Tam Dalyell Mr Tam Dalyell Labour, Linlithgow

When my right hon. Friend gets back to his office in the Treasury, will he ask his officials to produce a file—a very long file—which resulted from the Inter-Parliamentary Union's 1999 visit to Peru? The file is on drugs money laundering, in particular the immensely complex issue of anonymous numbered bank accounts. No one in their right mind thinks that there is any simple answer to that problem, but it has gained added importance, especially in view of the pressure—to which my right hon. Friend referred—on the United Nations in respect of a permanent monitoring unit. Such a unit—I cannot imagine who is resisting it—might give us some hope that the problem of anonymous numbered bank accounts will be addressed.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Yes, I will ask my officials to show me the papers to which my hon. Friend refers. He is absolutely right: the laundering of drugs money is a major problem on all continents and we need far better enforcement. I believe that the events of 11 September have given new urgency to efforts to deal with the problem.

My hon. Friend might have seen the performance and innovation unit report, published through the Cabinet Office a few months ago, which identified the scale of the money lost as a result of the drugs business. I assure him that we shall deal with those issues and that we shall continue to press for the UN monitoring unit.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

The whole House agrees that those who choose to finance terrorism are as loathsome as, and perhaps even more cowardly than, those who undertake terrorist acts of the kind that we have witnessed in the past month. We strongly welcome the Chancellor's attempt to tackle, to track down and to prosecute such individuals both here and internationally, but I have some questions relating specifically to his proposals.

Will the Chancellor make it clear that the laws on monitoring and freezing of bank accounts and extending new powers to the police will require reasonable grounds linked specifically to suspicion of terrorism or other illegal activities, and that court approval will be needed, perhaps in accordance with rules similar to those that already cover phone tapping?

NCIS already has a substantial number of disclosures, but I understand that currently few are investigated owing to lack of resources. Is the Chancellor confident that there will be—and is he able to tell the House about—increased resources for NCIS? Also, as it is not an executive body, will similarly increased resources be given to the Metropolitan police anti-terrorism unit so that it can pursue prosecutions? The PIU in the Cabinet Office has already identified that this country carries out a far smaller number of prosecutions than other countries such as the United States and Italy.

Can the Chancellor outline the Government's position on any action against non-compliant countries following the recommendations of the financial action taskforce, which said that members—compliant countries—should apply counter-measures to non-compliant countries by 30 September 2001? Were any measures applied and—perhaps more important—do the Government intend to apply any measures to non-compliant countries?

The Government have already said that they will take action on bribery of foreign Governments. Will similar action be taken against bribery of non-Government individuals and bodies? That is a route through which organisations that may ultimately engage in terrorism may raise funds.

Having promised action on money exchanges, do the Government intend to examine other routes through which such money is often laundered? The FSA has identified spread betting, financial advisers, online broking and credit unions as examples of those. It will be a difficult task, but if the Government are planning to tackle one or two routes, they must tackle them all if action is to be effective.

We shall support Government measures and I hope that the Chancellor will be able to reassure the House on the issues that we are considering.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to the hon. Gentleman. I talked to him this morning, as I did to the shadow Chancellor, about the detail of the measures that we are proposing.

In his first set of questions, the hon. Gentleman rightly spoke of getting the balance right between the civil liberties that it is our duty to defend in advance, and the need for security felt by people in the United Kingdom. I believe that the proposal that we are bringing forward gets the balance right. There will be every opportunity to debate the issue of police powers to investigate bank accounts. We intend that this will be done only where there is reasonable suspicion. We intend also that, where possible, this should go through the courts. I can assure the hon. Gentleman that we intend to work closely with the financial institutions in implementing this procedure.

The hon. Gentleman is right about NCIS. Thousands of reports are produced each year, which are passed on for further investigation by the police. It is generally accepted, not only in Britain but in America and elsewhere, that so far we have lacked the asset-tracking skills that would allow us to get to the source of funding for those who are engaged in terrorism. We intend to give NCIS and the economic crime unit that particular expertise and additional funding. We intend also that a taskforce will be set up that will bring in private and academic expertise where that is applicable. We have already had discussions with some private sector organisations. Special branch investigative resources will be increased.

The hon. Gentleman asked about tax reliefs. I should point out that it is illegal to claim tax relief for corrupt activities. The problem has been that in other jurisdictions subsidiary companies that are not British companies have claimed tax relief for the payment of bribes to officials. I can assure the hon. Gentleman that the new legislation that we propose will extend the requirement that no tax relief can be given not only to Government or public officials, but to anybody in the private sector and to anyone else who receives money for corrupt activities. The law will be improved and cleaned up in that way.

The hon. Gentleman also asked about spread betting and a range of other activities that may be the subject of money laundering. What those activities have in common is that usually they involve cash transactions, which are difficult to monitor. The FSA takes responsibility for examining the betting industry. I can assure the hon. Gentleman that as a result of a recent report that it has produced, the FSA intends to take further action. I can assure him also that in all the areas that he raised with me both this morning and now, we shall take whatever action is necessary.

Photo of John McFall John McFall Chair, Treasury Committee, Chair, Treasury Committee

I welcome the initiatives that my right hon. Friend has so quickly taken in the past few days. Has he any proposals to strengthen the oversight powers of the FSA so that it can find and publicly name individuals who are involved in money laundering? May I seek reassurance that there will remain the closest contact with the Channel Islands, the Isle of Man and the British dependent territories to ensure consistency of approach so that they do not act in any way differently from the United Kingdom?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to my hon. Friend, who chairs the Treasury Select Committee. I welcome him to his new post.

The FSA assumes all its powers in a month's time. In my view, it will have powers to deal with the matters that he has raised. If it needs additional powers to do so, we can consider that.

My hon. Friend referred to dependent territories and overseas dependencies. It has been a source of concern for many years that there are gaps in the law in those countries that prevent us from dealing with money laundering and, in this case, the financing of terrorism. I am pleased that, particularly over the past few weeks, there has been far greater contact with those countries, which are now willing to introduce laws similar to ours. Many of them have money-laundering laws, but they will now introduce laws that will enable them to do as we are doing and try to cut off the supply of funds for terrorism. I therefore believe that we will be able to take further action in that area.

As for naming countries, which was the second point made by my hon. Friend, the financial action taskforce will name countries that do not meet the regulations. In reply to the point made by the Liberal spokesman, Matthew Taylor, it will consider what action to take when it meets on 29 October.

Photo of Andrew MacKay Andrew MacKay Conservative, Bracknell

Will the Chancellor confirm that the legislation will apply to Northern Ireland? Does he accept that a series of measures, which were meant to deal with the funding and financing of paramilitaries, both republican and so-called loyalist in the Province, have singularly failed? What assurances can he give the House that on this occasion it will be different?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

In many ways, the legislation that has been applied to Northern Ireland is now being applied to the whole mainland to deal with the finance of terrorism. The right hon. Gentleman raised issues which I know are of concern, particularly in the United States of America, which has said that it is introducing new laws to tackle the finance of terrorism. However, it is for its authorities to administer them. As for the United Kingdom, we continue to do everything in our power to cut off the supply of funds to terrorist organisations, whoever they are.

Photo of Mrs Alice Mahon Mrs Alice Mahon Labour, Halifax

I am sure that the whole House welcomes the measures outlined by my right hon. Friend. Is he aware that at a recent meeting of the NATO Parliamentary Assembly the deputy director of Interpol's agency on organised crime told delegates about the bin Laden connection in the financing of the KLA, before and during the war in Kosovo, and before the war in Bosnia, via the Balkans route and the trafficking of arms, women and drugs. Can we have a full inquiry into the activities of the KLA, now renamed the Kosovo Protection Corps, where it gets its finances from and the organised crime in which it is currently engaged?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to my hon. Friend, who asked about a particular organisation. I can assure her that we shall get the authorities to look at it. On her more general point about bin Laden's funding and the funds that the al-Qaeda organisation amasses from a number of activities, we shall continue to examine in detail how those funds are acquired and try to cut them off at source.

Photo of John Redwood John Redwood Conservative, Wokingham

When the Chancellor said that our recent interest rate cut was co-ordinated with other countries, did he mean the Treasury requested the Bank of England to take that action or that the Bank of England decided independently to go beyond its normal remit and timing for those changes? I am not against the change; I would just like to know the process by which it took place.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to the right hon. Gentleman for raising the matter of interest rates so that I can put him right. The individual authorities—the Bank of England, the Federal Reserve bank and the European Central Bank—make their own decisions about interest rates. I know that many Opposition Members resisted our decision to make the Bank of England independent, but it is independent and makes its own decisions.

I was referring to what I thought and feel able comment on; everybody here should be able to do that. Following the decisive action by the relevant authorities, there was a boost to the world economy at a most difficult time. There have now been nine interest rate cuts in the USA, three by the European Central Bank and six by the Bank of England in the last few months. All those institutions have made statements in the past few weeks that they will not hesitate to take further action if necessary. I am therefore grateful to the right hon. Gentleman for allowing me to put the record straight.

Photo of Mr Harry Barnes Mr Harry Barnes Labour, North East Derbyshire

The measures announced mean that it will be easier to tackle underground banking, money laundering conducted nationally and, with the G7, that practised in overseas financial institutions. Will the provisions be extended so that problems can be tackled in countries like Nigeria, where the Abacha regime salted away masses of money under the dictatorship? Surely the fact that there is nothing internationally to stop the Tobin tax has been finally established. A tax on currency speculation is of great importance in tackling terrorism because it will get at the problem of global poverty.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

My hon. Friend wants to draw me into a very wide debate. May I answer him on the first point about Nigeria? I believe that under the measures that are being embedded in law and have been over the past few years, to which we are adding today, banks have an obligation to report suspicious transactions and we have the power to freeze the money involved. That makes it possible to say that what happened in the past should not happen in the same way again. We are determined to root out the sort of practice that caused us problems in the past. As for the Nigerian case, it is a matter of judicial review, so my hon. Friend would not expect me to comment further on that.

With regard to the Tobin tax, two issues are involved. The first is the volatility of the international financial markets, and the second is the need for finance for development. On the volatility of the financial markets, it has not been shown that the Tobin tax would make the difference in a liberalised set of capital markets. Interestingly enough, Professor Tobin himself now takes that view. On the financing of development, however, a powerful case has been made for all of us to do more, not just in terms of emergency aid in Afghanistan and Pakistan. My right hon. Friend the Secretary of State for International Development has made additional money available—and further money will be necessary—to feed people there during these difficult times, but more is needed for the general financing of development, so that education, health and anti-poverty programmes move ahead. We stand four square behind all those who want to see a better international approach to securing finance for development.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

Further to the question asked by Mr. McFall, the Chairman of the Select Committee on the Treasury, the Chancellor will be aware that many billions of dollars move through the banks of dependent territories. In recent months the Cayman Islands, Gibraltar and Bermuda have been highlighted. Could the Chancellor amplify his earlier answer and say specifically what measures are being taken to encourage the dependent territories to introduce new laws rapidly, and what time scale he envisages for the introduction of such laws to dry up money laundering in those countries? Legislation there is every bit as important as it is here in the United Kingdom.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

The hon. Gentleman is right. Those are big financial centres: the Cayman Islands is the fifth largest financial centre in the world, Bermuda is a world leader in insurance, ranking alongside New York and London for the insurance trades, and more than 300,000 international business corporations are registered in the British Virgin Islands, so what happens in those offshore centres is important. That is why their accepting anti-money laundering legislation and control systems based on the UK model is important. They have done so, and they are not named in the financial action taskforce list of countries where further action must be taken, because they have introduced anti-money laundering legislation. However, they will have to do more. That is why we have been in discussion with them about their adopting the same regulations and laws as we are adopting, or similar regulations and laws, to deal with the sources of terrorist finance. We remain determined to move ahead on all fronts. That means that we can only be as strong as the weakest link, and action must be taken in the dependent territories.

I believe that the hon. Gentleman will be reassured by the fact that those countries and dependent territories have issued statements to the effect that they are prepared to go in the same direction as we are going to increase the anti-terrorism powers available to them. We also had a debate with them on extending the exchange of information, and I believe that we are making progress on that as well.

Photo of Tom Clarke Tom Clarke Labour, Coatbridge and Chryston

Does my right hon. Friend accept that the House will warmly welcome his proposals? Can he tell us whether the G7 countries and the other important international concerns with which he has been in consultation have agreed with the measures that he has announced in the document that he said he would publish this afternoon?

On the subject of Peru, which was mentioned by my hon. Friend Mr. Dalyell, can my right hon. Friend tell the House whether the new President, Toledo, is prepared to co-operate in a way that his predecessor, Fujimori, despite his experience of the terrorist organisation Shining Path, was unable or unwilling to do?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall write to my right hon. Friend about that point, as I shall write to my hon. Friend Mr. Dalyell, who raised it previously, and I shall look at the papers affecting Peru, to which my attention has been drawn.

On international co-operation, there is no doubt that there has been an increased willingness to co-operate to tackle the sources of terrorist finance. That co-operation means that Germany has just set up a economic crime unit; the Americans have an asset-tracking centre, which has been set up since 11 September; France has issued, and will issue in more detail in the next few days, its action plan to combat financial terrorism, and the Japanese authorities have said likewise, so there is a degree of international co-operation that had not been in existence in this area before, and there is a determination that we will exchange information internationally so that we can deal with the problems. It is, of course, important that centres where little action has been taken in the past are the subject of further scrutiny. That is why we want the financial action taskforce to set down at the end of the month new rules on the financing of terrorism that all countries must apply.

Photo of Angus Robertson Angus Robertson Shadow SNP Spokesperson (Defence), Shadow SNP Spokesperson (Foreign and Commonwealth Office)

On behalf of the Scottish National party and Plaid Cymru, may I welcome the announcement of measures to cut off the supply of funds to terrorism? Clearly, such action is necessary and timely. May I also thank the Chancellor and the Home Secretary for providing copies of their statements?

Does the Chancellor recall that the Financial Services Authority said in March that it had found that 23 British banks had happily handled the money of the late Nigerian dictator General Sani Abacha and reported that 15 of them had significant control weaknesses in their anti-laundering rules? Is he confident that the measures announced today will make such cases, which involve state terrorists and murderous dictators, impossible in future?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

That is our intention. As I mentioned in reply to a previous question about exactly the same matter, the power that we now have to require financial institutions to report to the authorities when there are reasonable suspicions about the possible use of funds for terrorist purposes, as well as the power to freeze money, were not available when the authorities were originally dealing with the Nigerian case. I accept what the hon. Gentleman says about the 23 banks that were named. He might also note that we have offered official assistance to the Nigerian authorities to help them in the recovery of money. That is currently a matter for judicial review, so I cannot, of course, comment on the outcome. We are not only taking legislative measures to deal with potential problems but offering assistance to the Nigerian authorities in dealing with their current problems.

Photo of Ann Clwyd Ann Clwyd Labour, Cynon Valley

I welcome my right hon. Friend's statement, especially as the Select Committee on International Development identified in a report on corruption published in March many of the issues that he has raised. In particular, it dealt with the Abacha issue, money laundering and so on. On money laundering, the Committee concluded on the basis of the evidence given to us that there was gross under-reporting of suspicious transactions among professionals such as lawyers and accountants. Will he reassure us that people who refuse to report such transactions will be caught by the legislation that he is proposing?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

As my hon. Friend has shown, one of the problems is that there is currently no international obligation for financial institutions to report suspicious transactions. The tightening up that has occurred in Britain has not yet taken place in other countries, but we are determined that it should happen. My hon. Friend may note that the second European Union money laundering directive is now the subject of debate in the European Parliament. The directive would require lawyers, accountants and other financial practitioners to report suspicious transactions. If it were agreed to, it would represent a tightening up of the law throughout Europe. I urge the European Parliament to introduce it as quickly as possible.

Photo of John Baron John Baron Conservative, Billericay

As part of the Government's anti-terrorism measures, does the Chancellor intend to release additional moneys to allow a substantial increase in police numbers? As we all know, any legislation that is passed by the House is worth while only if it can be enforced on the ground. We know that our police forces are overstretched and that crime is increasing. I believe that the additional burden of anti-terrorism measures, together with progress on increasing security—sadly, this will become a fact of life—means that we need a step change in our policing levels.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I did not think that the first call to be made today for more money would come from the Opposition Benches, but indeed it has. We have said that we accept that, where security issues, international development responsibilities and the defence and military requirements of what is happening in Afghanistan cause additional resources to be required, that will be a priority for the Government. The hon. Gentleman may have noted that we said that additional resources would be available for NCIS. We also said that they would be available for special branch and its investigative resources. We are increasing Home Office expenditure and expenditure on the police by around 6 per cent. in real terms this year and next year. Of course, we shall continue to examine legitimate claims.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

My right hon. Friend knows that the House is with him when he says that the concealed ownership of bank accounts and companies can hide crime. However, he also knows that NCIS already receives 15,000 reports of money laundering a year and attempts to tackle them with a staff of 30. Each member of a police fraud squad deals with, on average, three to four live cases with a value of almost £1 million. Customs and Excise investigation and fraud teams are considering a major programme of job losses. Will my right hon. Friend assure hon. Members that the capacity will exist to implement the new laws that he proposes?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall outline two of the improvements that are being made at the request of the various services that form NCIS. First, there will be greater co-ordination, and the services will be put in the position of being able to work better and more closely together.

Secondly, we want better asset-tracking intelligence to enable us to distinguish between a suspicious transaction report, which, for example, claims that an additional amount of money was put in a bank account for something of no particular consequence, and the alternative—tracking the assets of terrorists. We want intelligence to be available that will allow us to distinguish between the important and the unimportant. After that has been done, it will be possible to say that many of the cases that are passed on for investigation give the police a clear lead about what they need to do. Of course, we will consider the resources that are necessary to ensure that the service is done well.

Photo of Edward Davey Edward Davey Shadow Chief Secretary to the Treasury, Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Chief Secretary to the Treasury)

We all agree about the difficulty of gaining international agreement on sanctions against financial centres that are not prepared to clean up their act. For what measures to sanction those countries will the British member of the financial action taskforce press.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

When the financial action taskforce made its original recommendations, it named several countries that had to bring their practices into line with the accepted standard for the international community. We gave those countries until 30 September to do that. Action against them, and appropriate future action will be considered at the meeting in October.

Every financial centre that refuses to operate in a way that fulfils international standards will increasingly be outlawed from the rest of the international community. We will lead the calls for the behaviour of centres that do not follow the rules, proper procedures and agreed international standards to be perceived as unacceptable, and for them to lose business increasingly as a result.

Photo of Ian Davidson Ian Davidson Labour/Co-operative, Glasgow Pollok

I welcome the Chancellor's drawing of links between terrorism, drugs, crime and associated problems. However, there is a major omission from the list: tax evasion. It would be helpful if my right hon. Friend extended his powers to cover that. Does he accept that there should be no undue restrictions on the search for financial information and that trawls, which should be carried out, would uncover many links between the different problems?

Would my right hon. Friend also consider amending the current balance between penalties and rewards for those engaged in money laundering? The profits are enormous and the penalties, especially for lawyers, accountants and bankers in the City of London and elsewhere who assist terrorists to hide their money, are slight. Does he agree that publicly hanging a couple of lawyers would greatly assist with concentrating the mind?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

We are against capital punishment.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I cannot say that.

My hon. Friend rightly draws attention to the problem of tax evasion. Since 1997, we have increased significantly the legislation that tackles tax evasion. Today, we have announced a change in the law on the ability of the Inland Revenue to pass information to the police. That information could not previously be passed on unless treason or murder was involved. We believe that a range of crimes justify passing information from the Inland Revenue to the police. We will consult on the details of the legislation, but the police will have more sources of information from the Inland Revenue about crimes that are being committed.

We are therefore not only increasing the laws that tighten up action against tax evasion, but making it increasingly possible to deal with financial terrorism through giving the Inland Revenue the ability to pass information to the police authorities in specific instances.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

Will the Chancellor ensure that the Secretary of State for Northern Ireland, as well as Ministers in the south of Ireland and the Stormont Assembly, are consulted as the measures are implemented?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

As I said earlier, some measures that we are introducing today already apply in Northern Ireland and we are therefore extending them to the rest of the United Kingdom. However, if measures specifically affect Northern Ireland or if there is a general need for discussion on measures that will affect Northern Ireland as they apply to the United Kingdom as a whole, we shall consult.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

My right hon. Friend is right to stress that money laundering and other illicit financial transactions are a worldwide phenomenon, so he is also right to stress the importance of co-operative action at European level in framing an international response. However, will he also consider the examples of best practice in other European countries, in particular the experience of a previous Italian Government and the Banca d'Italia in tackling organised crime in that country by making banking procedures more transparent, so cutting off Mafia access to Mafia funds? That example was studied in depth on a trip in March 2000 by the British-Italian parliamentary group to the Banca d'Italia and the Italian equivalent of the Speaker's Office, and I would be pleased to make the report available to my right hon. Friend.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to my hon. Friend. We shall examine the successes and the weaknesses of operations across the world in considering what we can best do. I believe that the degree of international co-operation now allows us to share experience about what is working and what is not likely to work. The EU money-laundering directive is on the table and I gather that it is to be discussed by the European Parliament on Wednesday. It is possible to move forward and the directive could be implemented next month. I urge all Members of the European Parliament to join us in getting it through.