The Government are strongly committed to tackling terrorist financing. Just as there should be no hiding place for those who perpetrate terrorism, so there should be no hiding place for those who finance terrorism.
This statement updates Parliament on counter-terrorist finance actions taken over the summer recess to strengthen further our framework for rooting out the financial networks underpinning terrorism.
On 10 August 2006, the police arrested a number of suspected terrorists in connection with an alleged plot to blow up airplanes leaving the UK in mid-flight. Acting on the advice of the police and the Security Service, the Treasury froze the assets of 19 of these individuals on 11 August. The asset freeze was imposed within 24 hours of the police arrests and was in place before banks opened in the morning. This was the quickest and most comprehensive asset freeze that the Treasury has undertaken and it has yielded valuable operational benefits. The Executive Secretary of the international Financial Action Task Force (FATF) has said in relation to the 11 August freeze that:
“The measures taken (by the Treasury) were exemplary, this is a concrete application and implementation of FATF standards.”
This latest action means that a total of 188 accounts and around half a million pounds of suspected terrorist funds have now been frozen in the UK.
The measures set out here are designed to help to detect, deter and disrupt money laundering and terrorist finance, while safeguarding the UK’s position as the world’s most secure and dynamic financial sector. The Treasury plans to produce a detailed strategy document around the end of the year.
Terrorism (United Nations Measures) Order
Today, the Treasury is asking the Privy Council to adopt a new Terrorism (United Nations Measures) Order updating the existing order. This makes a number of changes to the UK’s domestic asset freezing regime, allowing us to prevent funds, economic resources and financial services being made available to anyone who is designated under the order on suspicion of involvement with terrorism, while introducing a confidentiality provision to protect, where necessary, information that may be disclosed on a confidential basis
Closed Source Evidence
The Treasury has agreed, on the advice of law enforcement agencies, to use closed source evidence in asset freezing cases where there are strong operational reasons to impose a freeze, but insufficient open source evidence available. The use of closed source material will be subject to proper judicial safeguards. The Government intend to put in place a special advocate procedure to ensure that appeals and reviews in these cases can be heard on a fair and consistent basis. In order to ensure appropriate accountability to Parliament, we will report to Parliament quarterly on the operation of the UK’s asset freezing regime.
Money Service Businesses
On 29 September, the Treasury published a review into the regulation and performance of money service businesses in preventing money laundering and terrorist financing. The vast majority of bureaux de change, cheque cashers and money remitters are honest and important partners in the fight against financial crime. But the scale of the challenge we now face demands we strengthen our current financial controls so that we can root out money laundering and terrorist financing. Our proposals to replace the registration system with a licensing system, take tougher action against non-compliance and demand firms keep better records, build on the controls we introduced five years ago and give us the powers we need. I also want to give firms in the sector better support and guidance and recognise the important contribution they make to our financial system at home and abroad.
On 3 July, I made a statement to Parliament announcing that the Government would be restricting the payment of state benefits to the households of UN listed terror suspects. This policy has now been applied to six households. Following a legal challenge, the High Court ruled on 22 September that the Government's approach was lawful and was consistent with its obligations under the relevant UN Security Council Resolutions.
In February, the Government launched a review into the regulation and performance of the charitable sector in preventing terrorist financing and will make recommendations later this year for protecting the charitable sector from terrorist infiltration. It is essential that charities are protected from abuse by terrorists seeking to exploit the goodwill of donors. On 24 August, the Charity Commission, having consulted Treasury and Home Office Ministers, launched an enquiry into the charity Crescent Relief and froze its bank accounts.
Third Money Laundering Directive
On 31 July, the Treasury published a consultation document on implementing the EC Third Money Laundering Directive. This will ensure our systems for tackling money laundering and terrorist financing continue to be in line with international best practice and will implement a risk-based approach, allowing businesses to target their resources in the most effective and proportionate manner. The consultation closes on 20 October and we will report the results when we publish draft Regulations around the turn of the year.
Because terrorist financing operates globally, so the response must be global. Last year, the UK used its presidencies of the G7 and the EU to step up international action against terrorist financing. The Chancellor will, today, write to EU finance ministers about taking this agenda forward. The UK has recently been appointed to serve as president of the Financial Action Task Force (FATF) from summer 2007. We will use our presidency to drive forward a reform agenda urging the FATF to be more outward looking and more clearly focused on tackling abuses and risks in the international financial system.