Lucy Sutcliffe Fiscal Crime Liaison Officer Pretoria, South Africa

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1 Lucy Sutcliffe Fiscal Crime Liaison Officer Pretoria, South Africa

HM Revenue & Customs (HMRC) is the tax administration and customs authority for the United Kingdom. HMRC ensures that money is available to fund the UK s public services.

2 HM Revenue & Customs (HMRC) is the tax administration and customs authority for the United Kingdom. HMRC ensures that money is available to fund the UK s public services. HMRC defends the integrity of the tax system, protects the economy and prevents illicit goods reaching the United Kingdom s borders. HMRC relentlessly pursues those who bend or break the rules.

3 Organised crime groups have spread across the globe, threatening the financial and physical wellbeing of citizens of every country. Strong partnerships with law enforcement colleagues and private sector partners around the world are very important in that fight. A collaborative approach and working together will allow our respective businesses to prepare, share learning and improve our resilience to future attacks.

5 Tobacco fraud is costing the UK Government an estimated 2.2 billion (R38.3 billion) a year. (2011) Tobacco fraud deprives the general public of revenue to fund vital public services. Illegal tobacco products undermine public health objectives and impact on the health of individuals and communities. Tobacco smuggling is being used by organised crime groups across international boundaries to fund other criminal activities.

6 Unregulated distribution networks associated with smuggling make it more accessible to vulnerable groups. It is now a global problem carried out by highly organised criminal gangs that operate across international boundaries. The UK is also facing the continued threat from cheap counterfeit and illicit white cigarettes.

The Tackling Tobacco Smuggling Strategy was launched in 2000.

8 The Tackling Tobacco Smuggling Strategy was launched in Its primary objectives were: to make it harder for smugglers to source tobacco; to disrupt the supply and distribution chains; to Increase the risk of, and reduce the rewards from, smuggling; to tackle the demand side by raising public awareness.

9 The UK Border Agency (UKBA) was launched in (Latterly, renamed the UK Border Force - UKBF). Joint working initiatives between HM Revenue & Customs and the UKBF help to combat illicit tobacco entering and being sold in the UK. This relationship has increased the enforcement capability at the border to make effective use of combined intelligence, powers and sanctions.

10 The expansion of the Fiscal Crime Liaison Officer (FCLO) network. Applying new powers of assessment, penalties and pursuing the proceeds of crime to deter offending and prevent re-offending. Reducing the minimum indicative levels for EU travellers. A revised closer working protocol with Trading Standards and other organisations to combat the sale and supply of illicit tobacco products.

11 A review of the Memoranda of Understanding (MoU) with tobacco manufacturers to ensure there is a strong framework of co-operation in place for closer collaboration to tackle the illicit trade in tobacco.

12 The network consists of officers based at strategic locations around the world. Our role is to disrupt and dismantle organised criminal attacks on the UK through engagement with foreign law enforcement agencies and private sector partners. FCLOs are concerned with the full range of HMRC objectives including money laundering, asset recovery, criminal attacks on indirect tax regimes, such as smuggling and counterfeiting of tobacco and alcohol products.

13 We work closely with international organisations and agencies around the world. We all have the same adversary organised crime. Our commitment to working with our partners within the private and public sectors beyond UK borders is strong. We understand that mutual support, sharing information within the law, working together and respecting each others priorities is the best way to disrupt and dismantle organised crime groups and prevent crime undermining the integrity of society in all our countries.

14 Hard-hitting sanctions: seizure of the goods; seizure of vehicles/vessels and potential nonrestoration; seizure of cash under the Proceeds of Crime Act 2002; criminal prosecution with custodial sentences of up to 7 years; confiscation of assets as part of the proceeds of crime legislation.

15 Hard-hitting sanctions: assessment for the loss of duty; financial wrongdoing penalties of up to 100% of the duty due; civil action including winding-up orders and bankruptcy; fines of up to 5,000 (R87,000) for selling illicit tobacco not bearing the UK duty paid fiscal markings; prohibition on the sale of tobacco products for up to 6 months; travel restrictions on repeat tobacco smugglers.

17 Rapid enforcement of Confiscation Orders. Nonpayment of a Confiscation Order can result in a further period of imprisonment of up to 10 years. The use of Serious Crime Prevention Orders (SCPO) Serious Crime Act The use of Financial Reporting Orders (FRO) Serious Organised Crime and Police Act 2005.

18 This Order successfully banned one defendant from worldwide travel for 5 years. The same offender was also banned from any contact with 15 co-offenders. He was also restricted to one mobile phone and limited internet use. He was restricted to holding a maximum of 1,000 (R17,414) in cash at anytime. A breach of any of the conditions of an SCPO could result in an additional 5 year prison sentence.

19 This Order compels a subject to report details of all their financial affairs every 3 months for up to 15 years. This includes details of bank accounts, loans, assets valued over 1,000 (R17,414), any monetary gifts received any involvement in any business. A breach of any of the conditions of an FRO could result in an additional 51 weeks in prison to run consecutively.

20 To combat the abuse of cross-border shopping rules, buying quantities of tobacco in excess of duty free or EU minimum indicative levels for onward sale to colleagues, friends and family on their return home. Reduction in the minimum indicative levels to 800 cigarettes and 1kg of hand-rolling tobacco per person.

21 Multi-agency enforcement is essential to tackle the illicit tobacco problem. HMRC continues to work with the Department of Health, Trading Standards, the Police Service, Licensing officers and other national, regional and local partners to develop joined up approaches to tackle illicit activity.

22 HMRC has joint initiatives with tobacco industry partners: to develop an improved and shared understanding of the illicit market in the UK; assess the current and emerging threats the industry and HMRC face from the illicit trade; identify key intelligence gaps to obtain a more complete picture of the illicit trade and emerging threats both in the UK and overseas;

23 understand how the industry operates in perceived source countries that have a history of smuggling illicit products; other information from the industry that could inform the picture of risk; share insight into consumer and retail education with the aim of improving consumer knowledge and awareness of illicit tobacco products.

24 Investment in additional resources in the form of additional HMRC staff. Regulatory changes introducing fiscal marks and supply chain legislation. Increased sanctions a strong seizure and restoration policy and fines of up to 5,000 (R87,000) and bans in tobacco trading. Confiscation and recovery of offenders assets.

25 Working with the tobacco industry formalised through the signing of Memorandum of Understanding. EU anti-smuggling agreements with the major tobacco manufacturers.

McGowan was on the UK's most-wanted list of tax fugitives after he was found guilty in 2001 of

27 Malcolm McGowan a cigarette smuggler was found in Valencia after 12 years on the run. He had been sentenced to four years in jail in his absence. McGowan was on the UK's most-wanted list of tax fugitives after he was found guilty in 2001 of smuggling 28 million cigarettes into the country. Spanish police arrested the 61-year-old, who previously lived in Nottingham and Edinburgh, at a swimming pool in Valencia.

28 When he appeared at court to finally begin his sentence - Judge Julian Goose QC said: "You sought to evade justice and have been on the run for 12 years; "You will now serve the four-year sentence you were given in The total haul of cigarettes McGowan smuggled was worth approximately 16 million (R278 million) and cost the UK Government in excess of 4 million (R69 million) in unpaid duty.

29 McGowan was part of a wider conspiracy to smuggle about 56 million cigarettes into the UK between November 1999 and March Ten others were involved in the plot which is estimated to have cost the UK in excess of 8.2 million (R142 million) in lost revenue. The recovery of the financial proceeds of his role in the crime is now being pursued.

31 Contact: +27 (83) (12)

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL HC 226 SESSION JUNE HM Revenue & Customs. Progress in tackling tobacco smuggling

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL HC 226 SESSION 2013-14 6 JUNE 2013 HM Revenue & Customs Progress in tackling tobacco smuggling 4 Key facts Progress in tackling tobacco smuggling Key facts