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Counterterrorism: Asset Freezing

Volume 718: debated on Monday 8 March 2010

Statement

My honourable friend the Exchequer Secretary to the Treasury (Sarah McCarthy-Fry) has made the following Written Ministerial Statement.

In a Written Ministerial Statement on 10 October 2006, the then Economic Secretary undertook to report to Parliament on a quarterly basis on the operation of the UK’s counterterrorism asset-freezing regime. This is the thirteenth of these reports and covers the period October to December 2009.1

Asset-freezing designations

In the quarter October to December 2009, the Treasury issued no directions designating persons under the Al-Qaida and Taliban (United Nations Measures) Order 2006.

The Treasury gave 39 new directions under the Terrorism (United Nations Measures) Order 2009. All of these were in respect of persons designated under earlier orders.

There were no financial sanctions designations of persons with links to the UK made at the UN or at the EU, in relation to the terrorism or Al-Qaida and the Taliban asset-freezing regimes.

As of 5 March 2010, a total of 229 accounts containing just over £370,0002 of suspected terrorist funds were frozen in the UK. This figure is lower than previous quarters, primarily because some frozen assets were surrendered to the Legal Services Commission to repay legal aid, but also reflecting that some funds have been unfrozen as a result of delistings in this period.

Reviews under the Terrorism Order 2006

The Treasury keeps domestic asset-freezing cases under review and completed 42 reviews in this quarter; 39 persons remained designated under the Terrorism Order 2009. Three persons had their designation revoked.

Licensing

Licensing is the means by which the UK gives effect to exemptions in asset-freezing provision whether related to UN or EC regulations or domestic terrorism legislation. Each licence is considered on a case-by-case basis. The key objective of the licensing system is to strike a balance between minimising the risk of diversion of funds to terrorism and the humanitarian rights of individuals and third parties affected.

Seventy-one licences were issued this quarter in relation to individuals and/or entities subject to an asset freeze under the Al-Qaida and Taliban and terrorism orders.

Litigation

The Advocate-General’s opinion on the household benefits policy:

EC regulation 881/2002, implementing UN financial restrictions against Al-Qaida and the Taliban in the EU, states that it is an offence to “make funds available directly or indirectly for the benefit of the designated person” without a licence from a competent authority. The Treasury’s interpretation of this provision, as set out in a Written Statement to Parliament by the then Economic Secretary Ed Balls MP in July 2006, is that it includes the provision of state benefits to the spouses or partners of designated persons where they are living together in the same household.

The Treasury’s interpretation of the relevant provision of the EC regulation is the subject of litigation. The Treasury’s position was upheld in the UK by the High Court and then the Court of Appeal. Following referral of the case by the House of Lords to the European Court of Justice, the ECJ Advocate-General issued an opinion on 14 January 2010 indicating that in his view the provision should be interpreted narrowly and should not include the payment of state benefits to the households of designated persons. A final ECJ decision is expected within the next few months.

When the ECJ clarifies the interpretation of EC regulation 881/2002 on this matter, the Treasury will review its policy and make any changes that are needed to give effect to the Supreme Court’s judgment. In the mean time, as set out in my Written Ministerial Statement of 5 February, I have made changes to how we implement the licensing of household benefits to ensure that our approach remains fair and proportionate.

Developments

The Supreme Court judgment and the Terrorist Asset-Freezing (Temporary Provisions) Act 2010:

On 4 February 2010, the Supreme Court quashed the Terrorism (United Nations Measures) Order 2006 and the Al Qaida and Taliban (United Nations Measures) Order 2006. My Written Ministerial Statements of 27 January and 3 and 4 February refer to this.

The Government fast-tracked temporary legislation to prevent suspected terrorists’ assets from being unfrozen. The Terrorist Asset-Freezing (Temporary Provisions) Act 2010 came into force on 10 February and temporarily validates the Terrorism (United Nations Measures) Orders 2009, 2006 and 2001. The Act:

maintains existing asset freezes under the terrorism orders;

includes a retrospective provision to protect the financial sector from damages claims for maintaining asset freezes in the period between the Supreme Court’s order quashing the Terrorism Order 2006 and the Act coming into force; and

allows further designations to be made under the Terrorism Order 2009.

The Act expires on 31 December 2010. Before then, the Government intend to introduce more permanent legislation that will establish the asset-freezing regime in primary legislation. A draft of the Bill was published on the Treasury’s website on:

www.hm-treasury.gov.uk/d/finsanc_assetfreezingbill_draft_050210.pdf

The Treasury will be launching a public consultation on this draft Bill and I will be making a further Statement on this shortly.

Al-Qaida and Taliban (Asset Freezing) Regulations 2010:

Assets frozen under the Al-Qaida and Taliban Order 2006 remain frozen under EU regulation (881/2002). The EU regulation is directly applicable in UK law, but secondary legislation is required to provide for penalties for failing to comply with the prohibitions in the EU regulation and to establish a UK framework for the effective administration of asset freezes against persons listed by the EU as being associated with Al-Qaida or the Taliban.

The Government laid the Al-Qaida and Taliban (Asset Freezing) Regulations 2010 on 25 February 2010. As noted in my Written Ministerial Statement of 3 February, we have chosen to make these regulations subject to the affirmative procedure so that they can be properly debated by Parliament.

1 The detail that can be provided to the House on a quarterly basis is subject to the need to avoid the identification, directly or indirectly, of personal or operationally sensitive information.

2 This figure reflects account balances at time of freezing and includes approximately $58,000 of suspected terrorist funds frozen in the UK. This has been converted using exchange rates as of 5/3/10. Future fluctuations in the exchange rate may impact on the contribution that this sum makes to future totals of suspected terrorist funds frozen.