CHAPTER 6:
Terrorist finance
This chapter discusses the offences in the PTA relating to terrorist funding, the powers available to the police to investigate suspected terrorist financing and the forfeiture of terrorist-related funds. It makes proposals for revising sections 9 - 11 and 13 of the PTA, and for strengthening powers to counteract terrorist fund-raising, particularly by international groups. Views are invited on:
- the proposed revision of sections 9 - 11, including the extension of the powers to the financing of terrorist acts anywhere abroad;
- the proposed extension of the current forfeiture powers;
- the proposed new power to seize and forfeit cash suspected of being used, or intended, for terrorist purposes;
- further extension of the powers of forfeiture in terrorist cases in line with the thinking set out in the recent consultation paper on criminal assets.
The current legislation
6.1 The PTA contains a number of provisions which are designed to help the police and the courts deprive terrorists of the resources they need to pursue their activities.
The fund-raising offences
6.2 Section 9 of the PTA makes it an offence in various ways to contribute money or other property for terrorist purposes. The section applies to both Irish and international terrorism but its scope in relation to the latter is limited (by subsection (4) of section 9) to those acts of international terrorism which also constitute offences triable in the UK. This means that if the terrorist act in question is, or is intended to be, committed abroad, it must, if it is to be caught by the offence in section 9, be either one of a small number of offences which are triable in the UK irrespective of where in the world they are committed (murder or hijacking are examples of these) or one of a list of offences covered by, and carried out in a country that has been designated under, the Suppression of Terrorism Act 1978. In practice this means that the offence must be carried out in a Council of Europe country or in the USA or India.
6.3 Section 10 of the PTA makes it an offence to do any of the things prohibited by section 9 for the benefit of a proscribed organisation. Only Irish terrorist organisations are affected since the Secretary of State's powers to proscribe in the PTA and the EPA do not extend to international terrorist groups. For the purposes of sections 10, 11 and 13 of the PTA, the term "proscribed organisation" includes any organisation which has been proscribed under the EPA.
6.4 Section 11 of the PTA makes it an offence to "launder" terrorist funds. The offence applies whether the funds in question are, or are intended to be, used for the commission of acts of terrorism to which section 9 applies; or are the proceeds of the commission of any such acts; or are the resources of a proscribed organisation. It is for the defendant to prove that he did not know, and could not reasonably suspect, that the funds in question were terrorist funds.
Sanctions
6.5 Section 13 of the PTA sets out the penalties and forfeiture arrangements which may be imposed following conviction for an offence under sections 9, 10 or 11 of the PTA. It provides first, that each of the offences is punishable by up to 14 years' imprisonment, or an unlimited fine or both. And second, it empowers the courts, in addition to imposing either imprisonment or a fine or both, to order the forfeiture of any money or other property which the convicted person had in his possession or under his control at the time of the offence, provided he intended, knew, or had reasonable cause to suspect that the money would be used in connection with terrorism or for the benefit of a proscribed organisation.
6.6 Forfeiture orders are enforced in accordance with Schedule 4 to the PTA. Separate forfeiture schemes are provided for England and Wales, Scotland and Northern Ireland reflecting the differences between the different legal jurisdictions. But they all allow the courts to order that money or property be handed over to the court or to the police, or that it be disposed of as directed by the court and the proceeds of disposal paid over to the court. Schedule 4 also allows the High Court, or its equivalent in Scotland and Northern Ireland, to order that any property which is, or may be, the subject of a forfeiture order under section 13 should be restrained pending the outcome of proceedings against the individual concerned.
6.7 Section 4 of the new Criminal Justice (Terrorism and Conspiracy) Act 1998 provides that where a person is convicted of membership of a proscribed and specified organisation the court may order the forfeiture of money and other property in that person's possession or control if satisfied to the civil standard of proof that it has been used in furtherance of, or in connection with, the activities of that proscribed and specified organisation, or may be so used unless forfeited.
Investigating terrorist funding
6.8 The PTA also contains a number of provisions which are designed to help the police investigate the financial arrangements of terrorists. Section 12 for example enables anyone who, in the course of their business, comes to suspect or believe that money or property is, or is derived from, terrorist funds, to inform the police of their suspicions. It does this by lifting any restrictions (imposed by statute or otherwise) which prevent the disclosure of such information to the police. And, section 18A, by making it an offence to fail to disclose such information, effectively requires banks and other financial institutions to notify the police of any suspicious transactions or arrangements which come to their attention and which suggest that a third party is providing some form of financial assistance to terrorism. Section 17, in contrast, makes it an offence to disclose any information which is likely to prejudice a police investigation or to dispose of material which may be relevant to that investigation. This provision too is aimed principally at banks and similar institutions. And its purpose is to prevent them from "tipping off" any of their clients that they may be the subject of such an investigation.
6.9 Additional investigative powers given to the police under section 17 and Schedule 7 to the PTA apply where a terrorist investigation, including a financial investigation, is in progress and the information and other material which is being sought is likely to be of substantial value to that investigation. The principal powers - and the ones of most use in financial investigations - enable the police in England, Wales and Northern Ireland to:
- apply to a justice of the peace for a search warrant in respect of material which does not include excluded or special procedure material or material subject to legal privilege (as defined by sections 10 to 14 of PACE) - paragraphs 2 and 2A of Schedule 7 refer;
- apply to a circuit judge for a production order in respect of excluded or special procedure material. A production order requires the holder of the material in question to hand it over to the police or to give them access to it within a specified period - paragraph 3 of Schedule 7 refers;
- apply to a circuit judge for a search warrant in relation to excluded or special procedure material. This power may only be used where a production order has been made but not complied with or where the making of such an order would be impracticable or inappropriate - paragraph 5 of Schedule 7 refers; and
- apply to a circuit judge for an explanation order. An order of this sort requires an individual to provide an explanation of any material which has been found as the result of a production order or of a search under warrant under Schedule 7. As a safeguard against the abuse of this power, the Act imposes limits on the extent to which any statement may be used in evidence against the individual concerned and it also provides that material subject to legal professional privilege is exempt from the force of the provisions. Making a false statement, however, constitutes an offence under the PTA punishable by up to 2 years' imprisonment - see paragraph 6 of Schedule 7.
6.10 There are no circuit judges in Northern Ireland. The powers conferred on circuit judges by section 17 and Schedule 7 to the PTA are exercisable in Northern Ireland by a county court judge.
6.11 Equivalent provision is made in paragraphs 11 - 17 of Schedule 7 for Scotland save for some minor adjustments to reflect the differences in the legal system there. In Scotland, for example, production and explanation orders are granted by a sheriff on an application from a procurator fiscal.
6.12 And lastly, and only in Northern Ireland, paragraph 8 of Schedule 7 empowers the Secretary of State in certain circumstances to authorise the police to carry out searches for, or require the production of, material in connection with investigations into the offences in sections 9 - 12 of the PTA and/or that of directing a terrorist organisation. (The last is an offence under section 29 of the EPA - see chapter 12.)
6.13 The investigative powers described above are modelled very closely on similar provisions in PACE. But they differ from those in PACE in three fundamental ways. First, the PTA powers do not require the police to satisfy a magistrate or judge that they have grounds for believing that a serious arrestable offence has been committed. All that is necessary is for the police to demonstrate that a terrorist investigation is being carried out; that they have reasonable grounds for believing that material which is likely to be of substantial use to that investigation may be found on the premises, and that in accordance with the relevant paragraph a warrant or production order is necessary. Second, the powers in the PTA go beyond those in PACE by empowering a circuit judge to issue an order, or a warrant as the case may be, in relation to "excluded" material. And lastly, hearings of applications for production orders under the PTA can be held ex parte and up to 28 days before the information or material comes into the hands of the individual who may be made subject to the order. These provisions together mean that the police can take action in terrorist investigations at a much earlier stage than they are able to in other kinds of criminal investigation.
Are these provisions useful and effective?
6.14 Lord Lloyd considered this question carefully in his report. He concluded that, whilst there were some weaknesses in the current provisions, particularly in relation to fund-raising by international terrorist groups and their supporters, provisions of the sort described above would continue to be needed for the foreseeable future and should therefore be included in any new permanent counter-terrorism legislation. The Government agrees. Whilst there have been relatively few convictions in Great Britain for any of the fund-raising offences - only 4 in the last eleven years - there have been 169 convictions in Northern Ireland since 1989. There is also evidence to suggest that the existence of the offences in sections 9-11 of the PTA and the vigorous use made by the police of their Schedule 7 powers to obtain information has deterred some, and made it much more difficult for others, to raise money here and transfer it to those intent on using it to fund terrorist activities.
The need for revision of the provisions
6.15 But this does not mean that the Government believes that all the above provisions should be re-enacted as they stand. There are, as Lord Lloyd's report makes clear, some weaknesses in the scope of the offences in sections 9-11 of the PTA and in the present arrangements for forfeiture which need to be remedied; and other areas in which the powers of the police might usefully be enhanced.
Revision of the scope of sections 9-11 of the PTA
6.16 The first, most obvious, deficiency with the current legislation is that the offences in these sections do not apply to fund-raising for all terrorist purposes. Fund-raising for domestic terrorism is excluded altogether from their ambit, and fund-raising for international terrorism is only covered in part. It is currently illegal, for example, for the supporters of an international terrorist group to raise funds here to enable the group to carry out terrorist attacks in the UK or anywhere abroad if the attacks are prosecutable here, including in one of the 24 countries which are designated under the Suppression of Terrorism Act 1978. But if the acts of terrorism for which they are fund-raising are to be carried out in some other country, and are not prosecutable here, those raising the necessary funds here could do so without committing any offence. This is clearly unacceptable.
6.17 Extending the Secretary of State's powers to proscribe terrorist organisations to include both domestic and international terrorist groups would help to address this deficiency. Once any such organisation had been proscribed, provisions equivalent to sections 2 and 10 of the PTA would come into force, making it an offence to be a member of such an organisation or to give or receive funds for its benefit. And an application could be made to restrain the organisation's assets pending proceedings potentially leading to their forfeiture. As Lord Lloyd makes clear in his report, a proscription-based approach could overcome some of the difficulties currently encountered under the existing legislation of establishing the links between the funds in question and any particular terrorist acts.
6.18 In chapter 4, the Government proposes that the existing proscription provisions should be re-enacted, and invites views on whether they should be extended to international and domestic terrorist groups. And it recognises that to so extend the measures could assist in tackling non-Irish terrorist fund-raising. But, as is set out in chapter 4, the Government is aware too that there are arguments against extending the proscription provisions. Moreover, proscription alone would not in any case do the trick in respect of identifying and seizing all terrorist funds (Irish, domestic or international). For instance, terrorist funds may be held by individuals who support the cause in question, but in circumstances where it is difficult to prove that they are linked to a terrorist group. They can also be laundered through legitimate businesses, charities and other institutions. Such monies are often raised for ostensibly legitimate purposes - the support of widows and orphans, or prisoners' welfare - and then secretly diverted to buy arms and ammunition or to fund some other terrorist operation. In these circumstances the link to any proscribed organisation could be very hard to demonstrate.
6.19 The Government therefore believes that any new legislation in this area should focus at least as much on the individual and his criminal activities as the proscription of particular groupings. And so it proposes to extend the offence in section 9 of the PTA to include fund-raising and related activities in connection with domestic terrorism and all international, as well as Irish, terrorism irrespective of where in the world the target of the fund-raising is. One way in which this could be done would be to repeal sections 9(3) and (4) thus removing any qualification on the nature of the acts of terrorism which would be covered by the offence. But the Government thinks that this could cause difficulties, as it could cause the offence to turn on whether the act constituted an act of terrorism in the foreign country. Not all countries share our understanding of what constitutes an "act of terrorism" or even a "terrorist". A better solution, and one which the Government favours, would be to repeal section 9(3) and to amend section 9(4) so that section 9 would apply to all funds raised for terrorist purposes irrespective of where the acts of terrorism in question were, or were intended to be, carried out provided that those acts are such that, if they were carried out in the United Kingdom, they would constitute an offence under our law.
Forfeiture
6.20 Lord Lloyd suggests in his report that the current forfeiture provisions in section 13 are too narrow because they may only be used where someone has been convicted of an offence under sections 9, 10 or 11 of the PTA, (a "Part III offence"), and then only in relation to money or other property which the person has in his possession or under his control at the time the offence was committed and which he intended, knew, or had reasonable cause to suspect would be used in connection with terrorism or for the benefit of a proscribed organisation. To remedy these deficiencies, he recommends that the forfeiture powers should be exercisable on conviction for any "terrorist offence" and that the powers should apply to all identifiable funds in the control of the offender at the time of his arrest save that it should be open to the offender to prove, on the civil standard of proof, that the funds in question did not come into his possession as a result of any criminal activity.
6.21 The first element of Lord Lloyd's proposal is linked to his recommendation that any new legislation to counter terrorism should create a new concept of "terrorist offence". The Government is not fully persuaded that it is necessary to create a new category of "terrorist offences" - see paragraph 7.16. Nor is it persuaded that it is necessary to extend the forfeiture arrangements in any new legislation on terrorism to cover all the offences, other than the fund-raising or money laundering offences in the PTA (eg murder, manslaughter, explosives related offences, firearms offences). It appears to be implicit in the scheme of the present legislation that individuals convicted of terrorist offences other than those established in part III of the PTA are not as a rule involved in terrorist fund-raising and hence are not thought to merit the application of a special terrorist forfeiture scheme. Furthermore the Government notes that where property was obtained as a result of, or in connection with, the commission of the offence (which is how the Criminal Justice Act 1988 defines "benefitting"), the existing criminal law would permit confiscation (under the Criminal Justice Act 1988 as amended by the Proceeds of Crime Act 1995 for England and Wales, and for Scotland and Northern Ireland respectively by the Proceeds of Crime (Scotland Act) 1995 and the Proceeds of Crime (Northern Ireland) Order 1996). The Government would, however, welcome views as to whether, and if so how, the special forfeiture scheme in the PTA should apply to persons convicted of terrorist offences generally, as well as terrorist fund-raising offences.
6.22 The Government agrees with Lord Lloyd that the forfeiture arrangements in section 13 of the PTA could benefit from amendment as they currently apply to money or other property which the court judges the convicted person knew or had reason to suspect would be used in connection with terrorism or as the resources of a proscribed organisation. The focus is thus currently on the intended use of the property (which can be difficult to prove). To deal with this difficulty the Government proposes that additional forfeiture provisions should be created which focus on the origin of the property (as opposed to its intended use) - a test which, in certain circumstances, should be easier to meet. Under the additional new arrangements the Government proposes, (which it envisages would run alongside the existing PTA forfeiture provisions), the courts would be empowered to order the forfeiture of all funds or other property in the possession of, or under the control of, anyone convicted of a Part III offence save that it would be open to the offender to prove, on the civil standard of proof, that the property did not come into his possession as the result of his criminal activity. The Government is aware that Lord Lloyd proposed the abolition of the present PTA scheme and its replacement with one based on the forfeiture of property resulting from any criminal activity - a different approach from the one proposed above, under which proposals along the lines of Lord Lloyd's would be implemented in addition to, rather than instead of, the existing powers. The Government would welcome views as to whether the existing powers should be abandoned or augmented as proposed.
6.23 The Government will develop the detail of its proposals for the forfeiture of counter-terrorist related property in the context of the wider consultation exercise now underway on the confiscation of criminal assets (see 6.30).
A police power to seize cash in transit?
6.24 Lord Lloyd's report also suggests that the police should be empowered to seize money which is being taken out of the country where they have reasonable grounds for suspecting that it is intended for use in terrorism overseas. A power of this sort, he suggests, would give the police the opportunity to investigate the origins of the cash and, if appropriate, make an application for the money to be forfeited. The courts could be empowered to order forfeiture if they were satisfied that the money was intended for use in connection with acts of terrorism.
6.25 The Government sees considerable merit in this proposal. Terrorists frequently use cash to fund their activities because it leaves no trail. But the Government suggests that the effectiveness of the new power would be further enhanced if it were capable of being exercised by others in addition to police officers. Examining officers under the PTA at ports, for example, may include immigration officers. They would know what to look for and why any particular activity might be suspicious.
6.26 The Government also believes that the new power would be more effective if the police were able to seize cash which they believe may be being used or held for terrorist purposes, whether connected with Irish, domestic or international terrorism, wherever they find it within their jurisdiction rather than just at the point of entry or exit. The Government therefore proposes that police officers should be empowered to seize any cash which they find anywhere in their jurisdiction provided that they have reasonable grounds for suspecting that it is intended for use in terrorism or otherwise represents the subject matter of a Part III offence. The definition of cash would include cash held in any currency, postal orders, travellers cheques and similar monetary instruments.
The form of the new power to seize cash in transit
6.27 Lord Lloyd suggests that the new power should be modelled on similar provisions in the Drug Trafficking Act 1994 which allow the police or customs to seize cash which is being imported or exported and which they have reasonable grounds for suspecting is the subject matter of, or is intended for use in, drug trafficking. The Government agrees. It therefore proposes that any new legislation should provide for cash seized under the new power to be detained for up to 48 hours on the authority of a senior officer. For longer than that, its continued detention would have to be authorised by a magistrate, or the sheriff in Scotland. The courts would have power to a u t h o r i s e successive periods of detention for up to three months at a time. Appropriate safeguards against abuse would be important. These might include that authorisation would not be given unless the court was satisfied that there were reasonable grounds for suspecting that the money was being, or was intended to be, used for terrorist purposes or otherwise represented the proceeds of a Part III offence and that its continued detention was necessary whilst the origin or destination of the funds was further investigated or consideration was given to instituting criminal proceedings against anyone with whom the cash was connected. Furthermore, it would be open to anyone affected by the retention of the money to challenge its continued detention at any time.
6.28 Lord Lloyd suggests that a limit of £2,500 should be imposed below which cash would not be seized. (A limit of £10,000 applies in the Drug Trafficking legislation in relation to the seizure of suspect cash on import or export). The Government wonders, however, whether, in the particular circumstances of terrorism (where a relatively small amount of money can fund a potentially devastating attack), a constraint of this sort should be placed on the exercise of the power. It would welcome views on whether the better course might be to allow a police officer to exercise his discretion on a case by case basis.
Civil forfeiture
6.29 The Government proposes that the forfeiture procedures for cash seized in transit should be modelled on current drug trafficking legislation. Thus the venue for the forfeiture proceedings would be the magistrates court, and the proceedings themselves would be civil. The owner of the funds would have a right of appeal to the Crown Court or, in Northern Ireland the County Court, against the magistrates' court' s decision. The courts would have the power to order the forfeiture of the money if satisfied that it was being, or was intended to be, used for terrorist purposes and whether or not proceedings had been brought against any individual for an offence with which the cash in question was connected. The prosecutor would be required to prove, to the civil standard, the illegal provenance or destination of the money. The Government envisages that the provisions for civil forfeiture would run alongside the existing PTA criminal forfeiture laws, as amended in accordance with paragraph 6.22 above.
6.30 The Government is attracted too to the possibility of extending civil forfeiture powers more generally in terrorist cases in line with the thinking set out in the paper "Criminal Assets" recently issued by the Home Office Working Group on Confiscation. Among other things, the paper proposes the extension of civil forfeiture powers in non-terrorist cases to other forms of property as well as cash (for example, houses, cars, money in bank accounts) and discusses the case for the establishment of a confiscation agency. It also recognises that appropriate safeguards would be important if the powers were thus extended. The aim will be to ensure both that specific counter-terrorist powers dovetail with the general confiscation regime and that any new general civil forfeiture procedures take full account of the nature of terrorist related offences by targeting the instrumentalities of crime as well as its proceeds.
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