European arrest warrant and Financial Crime

Article in FT 6 November 2014

 

European arrest warrant move set to put £100m tax at risk

Britain will lose over £100m a year in tax evasion and face increased risks of fraud, money laundering and counterfeiting if it pulls out of the common European arrest warrant and other common EU justice measures, Treasury ministers have warned.

Parliament will vote on Monday after a full day’s debate on whether Britain should rejoin the European arrest warrant, which allows the extradition of suspected terrorists and other criminals across the EU.

The issue has generated a heated battle between the prime minister and his eurosceptic Tory backbenchers, who see the arrest warrant as a symbol of the “European superstate” they have pledged to resist. Opponents of the warrant argue that some EU countries could use it to extradite unfairly Britons who are accused of very minor offences.

Britain opted out of 130 EU justice policies last year in an effort to repatriate power from Brussels, but the government must now win parliamentary assent to opt back into 35 measures considered vital by police and security chiefs.

Sir Hugh Orde, president of the Association of Chief Police Officers, said that being excluded from the European arrest warrant would be “catastrophic” and the suggestion that Britain could set up 27 bilateral agreements with individual EU members was “barking mad”. Security chiefs have also privately expressed their fears about the consequences of losing the EU justice powers.

As the parliamentary vote approaches, the Financial Times has learnt that the arrest warrant has been used to extradite 869 white collar criminals from the UK over the past five years for crimes including money laundering, counterfeiting and fraud cases.

Priti Patel, Exchequer Secretary to the Treasury, said that financial crimes “corrode” the economy.

“With a month to go before the opt-in deadline, there is in my view a very simple choice between keeping police and customs officers equipped to tackle financial crime with tools like the arrest warrant and Naples II (another EU power), or handing back power to the criminal gangs who are intent on defrauding the British people,” Ms Patel told the FT.

High-profile cases of Europeans extradited back to the UK include the Belgian hacker Gilles Poelvoorde, who attempted to steal £229m from the Sumitomo Matsui Banking Corporation in London by breaking in at night and corrupting the computer system.

Another of the EU justice measures Britain wants to opt back into, the Naples II Convention, allows UK customs officers to seize smuggled drugs and contraband from the European black market which would otherwise cost millions of pounds in lost taxes.

In 2011 alone, a joint operation by HM Revenue & Customs and European police foiled a cigarette and alcohol fraud operation connected to an oil laundering scam which would have resulted in £120m revenue losses to the Treasury.

Despite fears of a large Tory rebellion against the EU justice measures, the whip’s office believes it has whittled 100 potential opposing MPs down to 40. This is partly owing to a strategy by Downing Street to hold the opt-ins vote before the Rochester by-election, in which the Tories expect to lose the seat to Mark Reckless, a former Conservative MP who defected to the anti-European UK Independence party.

One MP said on Thursday that the plan appeared to have worked because it had picked off softer rebels who were concerned about the impact of a party rebellion before an important by-election.

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