Terrorist Asset-Freezing Regime (17 December 2010 to 31 March 2011)

Wednesday 4th May 2011 Written Statements

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The Government are committed to reporting quarterly on the operation of the UK’s terrorist asset-freezing regime. We believe this is essential to ensure transparency and accountability of the regime. The Terrorist Asset-Freezing etc. Act 2010 (the Act) has enshrined in law the commitment to report quarterly to Parliament on the operation of the UK’s asset-freezing regime mandated by UN Security Council Resolution 1373.

This is the first report under the 2010 Act and it covers the period from when the Act came into force on 17 December 2010 to 31 March 2011¹. This report also covers the operation of the UN al-Qaeda and Taliban asset-freezing regime.

As of 31 March 2011, a total of just under £230,000² of funds relating to terrorism were frozen in the UK. This covers funds frozen under the UK’s domestic terrorist asset-freezing regime, mandated by UN Security Council Resolution 1373, and also funds frozen under the UN al-Qaeda and Taliban asset-freezing regime, mandated by UN Security Council Resolution 1267.

(1) UK’s domestic terrorist asset-freezing regime under the Terrorist Asset-Freezing etc. Act 2010

As of 31 March 2011, a total of 85 accounts containing just over £120,000 were frozen in the UK under the domestic terrorist asset-freezing regime.

Operation of the Terrorist Asset Freezing etc. Act 2010

Asset-freezing designations

In the period 17 December 2010 to 31 March 2011, the Treasury made one new designation under the Act. The final designation was made in respect of the military wing of Hezbollah, including the External Security Organisation (ESO). This replaced a designation of the ESO only, extending the freeze to the entire military wing of Hezbollah.

Reviews under the 2010 Act

The Act contains a transitional provision that ensured that all designations made under the Terrorism (United Nations Measures) Order 2009 which were in force at the time the Act came into force remained valid as final designations under the Act until 17 March 2011, whereupon they would lapse if not already renewed. All 57 UK domestic asset freezes were therefore reviewed during the quarter to see whether they should be renewed as final designations under the Act.

The review process was completed by 17 March 2011 and as a result of these 57 reviews:

37 persons³ had their final designations renewed;

Three persons ceased to be designated and the asset freezes in respect of them were lifted;

A further 16 persons and entities ceased to be designated under the Act but remain subject to asset freezes under EU or UN asset-freezing regimes; and

The designation of the Hezbollah External Security Organisation was revoked and replaced with a new final designation of the military wing of Hezbollah, which includes the ESO.

Licensing

Maintaining a fair and effective licensing system is crucial to ensuring the overall proportionality of the asset-freezing regime, whether the individuals concerned are subject to an asset freeze in accordance with a UN or EU listing, or domestic designation. A licensing framework is put in place for each person in the UK on a case-by-case basis. The key objective of the licensing system is to strike an appropriate balance between minimising the risk of diversion of funds to terrorism and implementing asset freezes in a proportionate way. Licences contain appropriate controls to protect against the risk of the diversion of funds for terrorist finance.

A total of 12 licences were issued this quarter under the Act in relation to four persons subject to an asset freeze. Of these, two were new licences, whereas the other 10 were existing licences which were reissued under the Act so as to reference the current legislation rather than the Terrorism (United Nations Measures) Order 2009, under the authority of which they were originally issued.

In addition to issuing licences relating to a specific person, the Treasury may also issue general licences, which apply to all persons designated under a particular regime or regimes. Licences are granted where there is a legitimate need for such transactions to proceed and where they can proceed without giving rise to any risk of terrorist finance.

Six general licences that had been issued under the 2009 order were reissued this quarter under the Act:

Prisoners’ funds—permitting the payment of funds to prison governors to be held and/or applied for the benefit of a designated person;

Provision of insurance to designated persons;

Legal Aid—licensing of payments of aid to designated persons’ lawyers;

Provision of emergency goods and services under insurance policies;^*

Payment of designated persons’ legal expenses by third parties.

^*During this quarter, this general licence was subsequently revoked and reissued with amendments.

Legal Challenges

Two legal challenges against designations made under the Terrorism (United Nations Measures) Order 2009 were ongoing in the quarter under review.

(2) UN al-Qaeda and Taliban Asset-Freezing Regime

The UN al-Qaeda and Taliban asset-freezing regime, established under UNSCR 1267, is implemented in the UK by Council Regulation (EC) No. 881/2002. Enforcement measures are provided for in the UK’s al-Qaeda and Taliban (Asset-Freezing) Regulations 2010.

As of 31 March 2011, a total of 83 accounts containing just under £110,000⁴ were frozen in the UK under the al-Qaeda and Taliban asset-freezing regime.

Designations

During this quarter, the EU added three people to the list in Annex I to Council Regulation (EC) No 881/2002.

Six people were de-listed during the quarter, three of whom had UK connections.

Licences

No individual licences were issued, varied or revoked in this quarter in relation to persons subject to an asset freeze under the al-Qaeda and Taliban asset-freezing regime.

The general licences referred to above also apply to the UNSCR 1267 regime, with the exception of the general licence for insurance, the provision of which is not prohibited under the UNSCR 1267 regime.

(3) Proceedings

In the quarter to 31 March 2011, no proceedings were initiated in respect of breaches of the prohibitions of the Act or the al-Qaeda and Taliban (Asset-Freezing) Regulations.

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 the most updated account balances available and includes approximately $64,000 of suspected terrorist funds frozen in the UK. This has been converted using exchange rates as of 08/04/11.

³ In this statement, “persons” is taken to refer to individuals and legal entities or bodies.

⁴ Includes approximately $64,000 of suspected terrorist funds in the UK.