According to the existing laws and policies of the UK with regard to compliance and counter-terrorism, the basic regulation are contained in The Terrorism Act 2000 which defines the CTF offences as under:
(i) Fund raising for terrorist activity is an offence and the offence is complete where funds are provided, received or where another person is invited to provide money or other property with the intention that the same be used for terrorism.
(ii) To possess money or property having a reasonable cause to suspect that it may be used or intended to be used for terrorism and its use for the purpose of terrorism constitutes an offence.
(iii) To enter into or become concerned in an arrangement to make money or other property available to another person having knowledge or reasonable cause to suspect that money or other property is going to be used for terrorism, the said act constitutes offence.
(iv) Involvement in an arrangement whereby one is facilitated to retain or control terrorist property on behalf of another through concealment, removal or through transfer will constitute an offence under the act.
Money laundering and CTF are inter-related offences and the UK has a comprehensive set of regulations. In this regard, the primary legislation containing such offences is set out in the following enactments:
(a) Proceeds of Crime Act, 2002; (POCA)
(b) Anti-terrorism, Crime and Security Act, 2001;
(c) Terrorism Act 2000;
(d) Terrorism Act 2006;
(e) Serious Organised Crime and Police Act 2005. (SOCA)
(f) The Money Laundering Regulations 2007.
Under the proceeds of Crime Act, 2002 (POCA), there are seven inter-related offences worth consideration. These offences include the following:
1) Assisting another to retain the benefit or proceeds of criminal activity, that is "arrangements"2;
2) Acquisition, possession or use of proceeds of criminal activity, that is "acquisition";3
3) Concealing or transferring the proceeds of criminal activity, that is "concealing"4;
4) Failure to disclose regulated sector;5
5) Failure to disclose nominated officers in the regulated sector;6.
6) Failure to disclose other nominated officers;7 and;
7) Tipping off.8
These offences have harsh penalties. Penalty for each of the offence can be a fine or a prison sentence up to 14 years.9 Failing in one's obligation to disclose an offence is punishable on indictment up to five years imprisonment or a fine or both.10
These laws and regulations regulate suspicious activities relating to terrorist financing and fall within the domain of SOCA.11 All reports (SAR) relating to such activities are forwarded to the FIU within the framework of The Terrorist Act, 2000 or under the proceeds of Crime Act, and these reports are analysed by the teams of experts available with THE UK's FIU and these experts analyse whether or not to proceed further.12 Where these experts find some actionable material, the same is forwarded to National Terrorist Financial Investigating Unit(NTFIU).13
The authorities named in the regulation14 are authorised to seek permission from the Judiciary to ask a financial institution to provide customer information for the purpose of investigation and for the specified purpose, the investigation officer can obtain i) Customer Information Order; ii) Production Order; and iii) Account Monitoring Order.15
The powers of seizure and forfeiture vest in the UK authorities particularly under ATCSA.16 The law authorises the authorities to seize and forfeit cash on a reasonable suspicion, for example, the same was meant to be used for terrorist purposes or the same belongs to a proscribed organisation and in such cases the burden of proof will lie on the accused, and the seizure of assets can vary from 48 hours up to three years. The author in fact quoted this to support his argument that the UK has a comprehensive set of laws for CTF.17
The assessment made by Financial Action Task Force (FATF) in respect of implementation of anti-money laundering and counter-terrorist financing standards states that:18
"UK has a comprehensive legal structure, the number of prosecutions is increasing as scope of the money-laundering offences is broad, the scope in respect of terrorist financing offence is also comprehensive; To restrain, confiscate, and recover proceeds of crime, there are comprehensive powers and also to freeze and seize terrorist-related assets; Housed within the Serious Organised Crime Agency, UK now has an effective FIU; Certain requirements, such as beneficial ownership, are not laid out in law; The supervisory system is comprehensive though; There exists a comprehensive monitoring of casinos, lawyers, and most accountants; the deficiencies lie in the lack of monitoring for the real estate and company service provider sectors."
An analysis conducted during 2001-2005, reports that out of 47 terrorist finance charges, 31 did not culminate in a verdict. For that different reasons have been assigned, in many cases the accused were convicted and sentenced for a higher period than the one related to CTF charges. The accused in many cases were tried and sentenced on various other charges. And in many cases culprits on the basis of other available laws were convicted and it is difficult to distinguish between CTF offence and an offence related to terrorism.19
It is noted that the use of the UN Orders to freeze terrorist assets, have resulted in 237 suspected terrorist accounts frozen in the UK as of June 30, 2009 and the millions of dollars of terrorist money also frozen by the UK Government that was later released back to the Afghan government (regime).20 It is evident that in many cases assets frozen have been unfrozen and released back at a later date.21
"There is no doubt that powers for the seizure and forfeiture of terrorist cash and property remain useful and necessary powers."22 But an important question here is, how effective these power are, if the funds are later released back (at a later date) to the same terrorist organisations and their governments than the effectiveness of laws is questionable.
The role of SARs is also important and according to available data SOCA is confronted with 200,000 SARs each year and out of that only 2000 are selected to be sent to NTFIU in order to correlate them with terrorist activities. However, all the investigation agencies have found that it is a time-consuming job and no immediate results are available.23
The UK government is of the view that SARs play an important role in unearthing the CTF related finances; however, the results do not support the fact. It proposes that in terms of identifying new suspects, the SARs are not effective as claimed.24
It has been claimed by UK government that around £1,769,955 were seized by the authorities. But it is not known that how much of it was finally confiscated and how much was released later on.
It is pointed out that:
i) Money Service Bureau are a weak point;
ii) It is challenging for the system to unearth violators who transmit relatively small amount.
Many researchers state that UK's CTF measures are not effective in controlling CTF. It is their point of view that CTF policies are not efficient, the existing money controls have driven out the money from regulated system; charities are suspected though, yet the interception of funds is counter productive.25
In the realm of anti-money laundering and CTF, there have been just over 100 convictions out of which CTF related convictions are only ten. Many others were booked though, yet they were convicted on more serious crimes. It is pointed out CTF laws are not effective, but the fact remains that the studies done up to date were not focused on the combined issue of money-laundering and CTF, hence we find distorted results.
We find that most of the assets frozen were later on released. Another problem confronting the UK authorities is that of outflows of money from the UK to the criminals. It appear that the view that war on terror is being lost does not appear to be correct.
In cases where fraud is suspected as the predicate activity, criminal liability frequently depends upon a jury's assessment of the defendant's state of mental awareness and whether he was acting dishonestly when he displayed the conduct in question. The classical test for dishonesty in criminal cases was established by the Court of Appeal in R v Ghosh.26 The Court of Appeal said that the test of dishonesty was both subjective and objective; it is subjective in that it is the state of mind of the accused not his conduct which must be considered. It is objective in that the standard of honesty to be applied is not that of the accused, but that of the reasonable and honest man. Halpin believes the lack of moral consensus in the application of the second limb of the test renders the test is unworkable.27 The twofold nature of the test makes prediction of a jury's decision rather hazardous. An alternative formulation of the notion of "suspicion" was put forward by the Privy Council in Hussein v Chong Fook Kam.28 The case concerned the circumstances in which the power of arrest may be exercised, and during the course of giving the Privy Council's Opinion Lord Devlin famously said that:
"Suspicion in its ordinary meaning is a state of conjecture or surmise where proof is lacking. 'I suspect but I cannot prove'. Suspicion arises at or near the starting-point of an investigation of which the obtaining of prima facie proof is the end."29
The Court of Appeal subsequently affirmed Lord Devlin's words in an extensive line of cases30 culminating in Al-Fayed v Commissioner of Police for the Metropolis.31 Applying Lord Devlin's definition in N2J Ltd v Cater Allen,32 which was a money laundering case, Nelson J noted that:
"Suspicion does not have to have a long history of misdoing before it arises. It may arise in an otherwise seamless period of good conduct from one important piece of new information."33
Notwithstanding how the test of suspicion may be formulated, two things are very clear. (1) the threshold for the forming of suspicion in the UK's AML disclosure regime is extremely low; and (2) the low threshold for suspicion has the potential to create severe challenges when the AML disclosure regime has to be applied in a case where legitimate tax avoidance appears to be involved but the possibility of criminal tax evasion cannot be entirely discounted. From what has been stated one concludes that UK has a suitable legal regime to combat terrorist financing.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates)
1. Ss 15, 16, 17, 18 of The Terrorism Act, 2000.
2. Proceeds of Crime Act, 2002, s.328.
3. Id. section 329.
4. Id. section 327.
5. Id. section 330.
6. Id. section 331.
7. Id. section 332.
8. Id. section 333.
9. See proceeds of Crime Act, 2002.
10. Id.
11. Id n.1
12. Id.
13. Id.
14. Para 1 of Schedule 6 of The Terrorism Act 2000.
15. See Para 1 to 8 of the Schedule 6 to The Terrorism Act, 2000.
16. See part 1 and schedule 1 of the Anti-Terrorism, Crime and Security Act, 2001.
17. Peter A. Sproat, Counter-terrorist finance in the UK, Vol. 13 no. 4, pp. 315-355, Journal of Money Laundering Control (2010).
18. FATF, third mutual evaluation report available at: www.fatf-gafi.org.
19. Id n.17
20. Id n.21
21. Id n.21
22. Lord Carlile of Berriew, Report on the operation in 2004 of the Terrorism Act, 2000, Bell Yard London (2005).
23. Id n.21
24. Id n.21
25. Id n.22
26. R v Ghosh, QB 1053 (1982).
27. Andrew Halpin, The Test for Dishonesty, Cr L R, 283, 294 (1996).
28. Hussein v Chong Fook Kam (Hussein), AC 942 (1970).
29. Hussein, Id n.28.
30. See, for example, Holtham v The Commissioner of Police for the Metropolis, unreported, Independent, November 26, (1987); Castorina v Chief Constable of Surrey, unreported, Independent, June 16, (1988); Parker v Chief Constable of Hampshire All ER (D) 676 (1999).
31. Al-Fayed v Commissioner of Police for the Metropolis, EWCA Civ 1579(2004).
32. N2J Ltd v Cater Allen (N2J), EWHC B10 (QB) (2006).
33. N2J, supra n.79, EWHC B10 (QB) [35] (2006).
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