Agenda item 3 is another one-off round-table evidence session—this time, on environmental crime and its connections to serious organised crime and money laundering. I welcome everyone to the meeting and thank you all for your written submissions.
For the benefit of those who have not given evidence at a parliamentary round-table meeting, I will first ask everyone to introduce themselves. The session gives us an opportunity to keep the politicians silent; it takes some doing, but we will do it.
I also welcome to the meeting Graeme Dey. I am not saying that you have to be silent all the time, Graeme, but it will make a nice change if you are. Of course, I am only saying that because he is my neighbour in Parliament.
As this is a listen and learn session for politicians, the interaction will take place mainly between witnesses. I have with me two lists: a yellow list for witnesses, who have priority, and a pink B-list, which is, as committee members know, for them.
We will try to get through as much as possible. We have always found such sessions to be extremely useful, as we found the previous session. Finally, I thank everyone for giving up their time.
I will now ask everyone to introduce themselves. I am Christine Grahame, MSP for Midlothian South, Tweeddale and Lauderdale—a bit of a mouthful, but a wonderful place—and I convene the committee.
I am MSP for Dumfriesshire and the committee’s deputy convener.
Good morning—
I am sorry, but I should also say that your lights will come on automatically. If you let me know that you want to be called, I will call you and your little red light will come on. When the light is on, you should be discreet and not say anything about your neighbour that you would wish not to be heard in public. Of course, I am thinking about myself when I say that.
Good morning. I am head of policy for the Crown Office and Procurator Fiscal Service.
I am a member of the Justice Committee and a Central Scotland MSP.
I am from the Scottish Environmental Services Association, which is a trade body for the waste industry.
I am MSP for North East Fife and a member of the Justice Committee.
Good morning. I am chair of the Scottish centre of the Chartered Institution of Wastes Management, which is the professional body for the industry.
Good morning. I am a North East Scotland MSP and member of the Justice Committee.
Madainn mhath. I am a Highlands and Islands MSP and member of the committee.
I am MSP for Angus South. I am attending today as deputy convener of the Rural Affairs, Climate Change and Environment Committee.
I am chief executive of Inverclyde Council. I am representing the Society of Local Authority Chief Executives and Senior Managers Scotland, and I am the portfolio lead on the environment, sustainability and waste management.
I am MSP for Glasgow Kelvin and a member of the committee.
Good morning. I am a detective chief inspector in Police Scotland’s organised crime and counterterrorism unit.
Good morning. I am assistant chief constable in Police Scotland responsible for organised crime, counterterrorism and safer communities.
I am a North East Scotland MSP and member of the Justice Committee.
Good morning. I am national operations waste and enforcement manager with the Scottish Environment Protection Agency.
I am MSP for Motherwell and Wishaw and a member of the Justice Committee.
Good morning. I am an executive director of SEPA and chairman of the environmental crime task force, which was established in 2012.
I am conscious that Mr Dey has come bearing his title of deputy convener of the Rural Affairs, Climate Change and Environment Committee. As we are seeking to explore the links between the environment and crime, we will not, I hope, tread on any toes.
I will start with a general question. Why on earth should one link serious organised crime and crimes involving environmental waste and so on? Would the public not ask, “What’s it all about, Alfie?”
Who wants to start? Assistant Chief Constable Nicolson looks like a man who is at the starting gate, ready to go.
I can start, convener. That is no problem at all.
Organised crime is in every facet of Scottish life, and the people in question will be involved in environmental crime as they will be involved in any other kind of criminality. They will try to get involved in legitimate business and to undermine legitimate business, which is a key component of what we are going to talk about today.
11:15We conduct data sweeps quarterly to give us a real understanding of what organised crime is involved in. We have roughly 220 organised crime groups in Scotland, with about 3,500 members, and their involvement in environmental crime has been growing. We think that it was about 1.3 per cent in 2012 and that it is about 4 per cent in 2014. About 10 organised crime groups are now involved to some degree in environmental crime. They do not adhere to legislation or regulation, which gives them a competitive advantage, because they can undercut legitimate business, and we want ultimately to stop that. We want to put a stop to the difficulties that arise from their dumping toxic waste into landfill sites and doing a wide range of other things that save them finance but cause difficulty for the environment and various parts of the economy.
I appreciate that, for reasons of prosecution, you cannot name names.
Absolutely.
I agree with everything that Ruaraidh Nicolson has just said. There is a very low barrier to entry into the waste industry for organised criminals, and the potential benefits for them are huge. There is little to dissuade them from becoming involved and there are high rewards.
The cost of being compliant within our industry is increasing, with taxes and requirements to separate waste. New regulations are coming in that require more people to do more things, which has a cost impact and provides a wider range for such people to operate below.
In addition to what Linda Ovens has said, organised criminals operate in a dynamic and flexible way. They are quite adept at putting up a legal façade and giving the impression of compliance, while sitting behind that their underlying motive is to gain money without adhering to the environmental requirements that apply to them. At the same time, they undercut legitimate business and do not allow a level playing field.
I have no other witnesses on my list. John Finnie wants to ask a question.
Thank you, convener. The question is on a point that you started off on.
The witnesses have talked about public awareness. For example, when someone is having repairs or renovations done to their house, it is important that they know that the waste from that work will be properly disposed of. Has there been any campaign or could there be some sort of collective action? I appreciate that, as Mr Wilson said, a business might have a legitimate front and its criminality might not be obvious. However, it is terribly important that there be some raising of public awareness.
We are looking into that, and we have sought to engage with the industry and those who are involved in infrastructure, supplying haulage and moving waste to and from various sites. The underlying evidence is that prices are too good to be true. We must get that message out to the industry, and we have sought to do that. There is a duty of care on the industry regarding its movement of waste back and forth, but we now need to reach out to the public. It needs to start somewhere. We will be reaching out to the private sector and the public and local authority sector through the work that we are doing with John Mundell and local authorities, but now is the time to reach out to the public and put that message across.
Public awareness is increasing. We have just had national litter week and there have been huge litter campaigns. The public is very aware of fly-tipping incidents and the small-scale crime that is going on, but what we are looking at today is a level above that. We are looking at the organisations that—
We are not on fly-tipping and litter. We are into toxic waste and so on—that is what we want to hear about.
The public are very aware of the low-level—if you like—criminality, but not about what we are talking about today.
We are still on publicity and so on. On that issue, I have John Mundell and Mr MacDonald to let back in again. Graeme Dey is on my list.
It is invariably the public who identify problems with dumping. They are usually the ones who have witnessed increased volumes of traffic going to particular sites and who report those incidents. However, there have been a number of campaigns to raise awareness, for example the dumb dumpers campaign, which is run by Keep Scotland Beautiful. Some of those campaigns have been on television and so on.
The convener said that she does not want to deal with fly-tipping, which I can understand, but there are varying degrees of fly-tipping, from small incidents—maybe an individual householder—up to building businesses. The latter is a form of crime as far as I am concerned. They may be dumping materials that can include asbestos. It may just be in a field entrance, but the problem of dealing with that is just the same, though perhaps on a smaller scale, as it is with major sites.
I am not disputing for a moment that it can be just a mattress or a whole lot of waste that has been fly-tipped on farmland. However, we are looking specifically at serious organised crime that is under a blanket—we do not know about it. We want to get publicity for this. How is it publicised to the public and perhaps to other agencies, and to the people who give the contracts, such as local authorities and health boards? What information are they being given so that they know, when they get bids in, who is behind the bid?
Mr Mundell, you have done your bit. I want to talk to Mr MacDonald. Is it along the lines of the large agencies?
Yes, absolutely. I would say that public awareness is low. John Mundell is right that it is often members of the public who draw illegal activity to our attention. However, among the public, there is very little awareness that organised crime is involved in the industry.
It is probably also fair to say that awareness among many responsible authorities is pretty low, although it is growing now. The people whom the committee has around the table have been meeting and discussing the issue with a view to working co-operatively. That includes the legitimate end of the industry in the shape of Linda Ovens and Stephen Freeland, as representatives of the trade body and the professional body.
Do you want to come in now, Mr Freeland? That is your cue.
One of the least well-known victims here is the regulated and legitimate industry. If we do not make greater efforts to clamp down on environmental crime and the serious organised criminals who are involved in this, materials can be diverted away from regulated sites. We have members who are committing to multimillion pound developments or new facilities to meet the zero waste plan objectives. Why would they want to risk all that money if there is no guarantee that they will get a return?
For me, the weakest link in the supply chain is the waste producer—the high-street business—that is now being bombarded with a whole lot of regulations. We fully support the regulatory framework—it is needed to drive improvements and raise standards—but it inevitably comes with an additional cost. If the waste producer is unaware of the regulatory requirements and somebody comes along and is able to offer a cut market price, there is a temptation to use that offer.
The existing duty of care has been there for 20 years; it is an existing requirement that just needs to be strongly enforced, and there needs to be a better understanding of the information that comes through the duty of care.
I will take Graeme Dey, then Margaret Mitchell and Elaine Murray. I will put Margaret and Elaine’s questions together, like last time.
I was struck by a comment in the written evidence from Mr Mundell’s organisation on the constraints of European Union procurement regulations on councils. Given the partnership approach that is being taken to tackling the issue, what needs to be done to put councils in a better place for ensuring that they do not give such organisations contracts?
The primary control that a council has in checking suppliers is the tendering process. A council cannot legally disbar a supplier or a tenderer from submitting a tender for works—which might well involve disposing of the domestic waste stream—purely on the basis of intelligence from the police.
Increasingly, the environmental crime task force is sharing hugely helpful intelligence. I feel positive about the task force’s work on that, because Her Majesty’s Revenue and Customs, the police, SEPA and the border force are all sharing such data. That is hugely helpful, but we are barred from excluding a tenderer for which no formal criminal convictions have been secured. Convictions could cover anything from bribery and corruption through to common-law offences. If there have been no convictions, it is extremely difficult for us to bar such sophisticated organisations from tendering and not to award tenders to them.
If, during the term of an awarded contract, we come across evidence that proves that a supplier did not declare a criminal conviction before the tender stage or at the time of the award, we can cease the contract immediately, without any recourse to compensation for the supplier. There are rules and regulations; the difficulty is getting the intelligence. The environmental crime task force is improving our information-sharing protocols, which will be hugely helpful, but that is not easy. Achieving effective fast-tracked information sharing is complex.
Do the criminal convictions have to be relevant to the contract? We are often talking about money laundering, when dirty money—literally—is put into a so-called legit business. Can any criminal conviction be relevant? How do councils get behind the façade of individuals’ and companies’ legal status? That is difficult technically and legally.
That is extremely difficult, and I am certainly no expert on the different forms of legislation. There are common-law powers, which I mentioned. A long list of convictions exists, including cheating HMRC and failing to pay VAT. Such convictions are all relevant and probably exist on a great scale in serious organised crime.
Perhaps ACC Nicolson can help me. I am trying to get at how convictions of individuals can be linked to a company name that veils a different identity.
That is extremely difficult. Many of the individuals whom we are talking about have no criminal convictions; they keep themselves distant from all that.
We have intelligence that we want to share, but that can become difficult. Even if we share it, there is no confidence that it can be used, because litigation might follow. We need to find ways of sharing intelligence that does not amount to information about a conviction, which is straightforward. We might have intelligence that we cannot legally share because of its source. We need to find ways to change that situation so that councils and other bodies have confidence in refusing to give contracts to the businesses, organisations and individuals that we are talking about.
We might come back to that.
I will broaden out the issue. As an agency, SEPA is constrained by current legislation on issuing licences and permits. We have a fit-and-proper-person test, but we are limited to considering environmental crime convictions, concerns about financial provision and technical competency.
We are looking at legislation on the fit-and-proper-person test under the Regulatory Reform (Scotland) Act 2014, but the problem is in piercing the corporate veil. Despite whatever conditions we set for the fit and proper person, we might still have intelligence that the company is merely a façade. As an agency, we are left asking what we should do. If all the boxes have been ticked, how do we stop such things happening?
11:30
Ms Dalrymple, I think that this is where the Crown Office comes in.
As ACC Nicolson identified, the issue is that of converting the intelligence into evidence that can be led in court to obtain a successful conviction. There is quite a lot of case law in the United Kingdom relating to piercing the corporate veil and looking behind a company that is being utilised for sham purposes. We are completely committed to working with all the different agencies to secure convictions when the evidence exists.
Piercing the corporate veil is also relevant when we are looking at assets and the utilisation of the proceeds of crime. That is another tool that we can use to successfully combat serious and organised crime group infiltration. We do everything that we can, working with all the different agencies, to ensure that we identify the benefits and assets that can be restrained and the assets that can be confiscated at a later stage.
Dealing with companies is a complex process.
It is complex and it requires a multi-agency approach—that is the key. We have already established very good links, and we have dedicated people working with all the agencies around the table.
We would be very interested in learning more and participating in any consultation around the secondary legislation that will come out of the Procurement Reform (Scotland) Act 2014, which gained royal assent in June. That seems to be an area on which we could provide some experience. We could pass on some of the issues that we have and see whether they are relevant to that secondary legislation while it is still in draft form.
I want to concentrate on public awareness of a crime such as fly-tipping. Fly-tipping and other such activities are very lucrative for organised crime. To what extent is the taxpayer aware of the cost to their pocket, and how much could be made of that to make them more aware of any intelligence that they could give? I am thinking of, for example, the cost of cleaning up after various breaches, the cost of the investigation and the cost of prosecution. Also, how do we address the leniency that seems to be shown in sentencing? Does the Crown Office and Procurator Fiscal Service have any particular specialism in environmental crimes that could help? Is the duty of care on businesses enough to make them aware that, if something is cut price and sounds too good to be true, it almost always is and they should be in fear of being prosecuted?
That was clever—that was three questions. They are too cute for me on this committee. I am going to get a pile of questions and put them out there.
My interest is also in deterrence. There are two aspects to that. The first is the issue of whether someone who commits a crime will be found out, and you have touched on some of the joint working that is going on around that. I am also interested in the suggestion in SESA’s evidence that, as Margaret Mitchell says, sentencing is lenient. Do the punishments that are available fit the crimes or do we need to address that?
To what extent are the public aware of the overall costs of clean-up and everything that happens that hits their pockets? Do you have figures for that? Is leniency in sentencing part of the punishment not fitting the crime? Are there specialists in environmental crime at the Crown Office? Through the duty of care on businesses, are companies informed that, if they are party to criminal activity, turn a blind eye to it or do not make too much of an inquiry, there will be some come-uppance for them?
Let us start with the overall cost. Does anyone have any figures to give us? It is quite a tough question.
As you say, the cost is hard to quantify. Earlier this year, the ESA educational trust produced a report, which you have probably seen, that tried to quantify the cost at a UK level rather than at a Scottish level. The figures were set according to a range of different variables, but they suggested an overall cost of about £570 million a year, of which £157 million was landfill tax evasion. The rest was split between fly-tipping, which accounted for £186 million, and dealing with illegal waste sites.
Those that you know about and those that you do not know about.
Yes.
Does anyone else want to respond on the cost?
In the cases about which we cannot go into detail, for obvious reasons, because they are live, we said in our written evidence that the financial benefit, the vast majority of which—between 80 and 90 per cent—is made up of tax evasion, amounts to £27 million. Since we submitted our evidence the figure has risen to £29 million. Ninety per cent of the current figure for those cases is to do with tax.
Are the public aware of that? No. Should there be more public awareness of it? Definitely. We are talking about theft from the public purse, pure and simple, and the money is not going back into the purse to be used for the operation of the Government.
Have you included the cost of detection and surveillance in that figure? I take it that that is just the cost of the clean-up. Does anyone have figures for the total cost of the effort?
Sorry, convener, I was not talking about the clean-up cost. The figure that I gave is the financial benefit that the individuals and companies themselves get.
The clean-up costs are substantial. I can say without going into detail that the costs in the cases that I have been talking about will run into millions and millions of pounds. The figures in the submission from Northern Ireland are startling. We have to combat the problem and make the Government and the public aware that this is a serious issue.
No one else wants to comment on the costs, so I will move on to leniency in sentencing. Do the witnesses think that the punishment does not fit the crime? I cannot ask the Crown Office or the police to respond, because you are not allowed to talk about that, but can we hear from local authorities, who bear the burden of doing all the work?
Does no one want to comment? Feel free, be bold, this is your chance! Go for it, Ms Ovens. Everyone seems to be very quiet on the question of leniency in sentencing.
Thank you, convener.
On the point about awareness, it is not just the general public who do not have much understanding of the costs that are involved. The compliant industry itself is shocked when cases come out and costs running into millions of pounds are made public.
You asked about leniency. Our experience for years has been that fines have been used for specific environmental crimes such as fly-tipping. The fines that are attributed to cases in England in the ESA report that was provided for the meeting are far lower than the costs of the tax evasion and clean-up and all the legal costs.
Can someone clarify whether statutory fines or common-law penalties are imposed?
I am not sure about the situation in England and Wales, but certainly in Scotland if the prosecution takes place under statutory legislation there is a statutory fine.
I will not criticise the judiciary. The level of fine is entirely a matter for the judiciary—
If it is a statutory fine, the judiciary is bound by that. That is why I asked the question.
Yes. What I will say is that there has been a trend in the right direction in recent years. Let me give you examples of cases that SEPA has brought to the courts. One such case resulted in a fine of £200,000, another resulted in a custodial sentence of six months, and another resulted in a restriction of liberty order. Those are all recent cases, so I think that there is a move in the right direction.
A conviction last year resulted in the first confiscation order in relation to environmental crime, with seizure of assets of £41,130 from a company.
The Crown Office has specialisms in fighting wildlife crime, environmental crime and so on. Can you tell us more about that?
One of the strategic priorities for our organisation covers the prosecution of serious crime and the recovery of assets from those who are involved in criminal activities. The serious and organised crime division, which was created in 2011, is split into seven units. We have the proceeds of crime unit, the economic crime unit, the international co-operation unit, the wildlife and environmental crime unit, the organised crime unit, and the criminal allegations against the police unit; in the course of this year, we will set up a regulatory crime unit. I think that that demonstrates that within those units there are specialists. For example, the proceeds of crime unit has about 19 or 20 members of staff who work exclusively on the seizure of assets in relation to live investigations.
I will draw in ACC Nicolson on specialisms, because they start to an extent with the police.
Exactly. I am the head of the organised crime, counter-terrorism and safer communities areas, just to add in some other bits and pieces. We adhere to the Scottish Government’s strategy in terms of letting our communities flourish and the four Ds: detect, deter, disrupt and—
Divert.
Divert. [Laughter.]
You did well to get three.
Fairly obviously, leads on each one of those allow us to take them forward. At the end of the day, once we are talking about fines we are probably at the wrong end of what we need to be doing. There are about £9 billion-worth of public service contracts in Scotland, and that is what we ought to be trying to protect. Every single penny of that ought to be going to legitimate business. That must be the outcome of what we try to do here and collectively.
All the agencies that are represented here are working together. Gartcosh brings benefits, in that all the various agencies come together there. Over the next three or four weeks, SEPA will be embedded into Gartcosh. Calum MacDonald and I signed an information-sharing protocol with SEPA in June. Great strides are being made in how matters are taken forward.
I return to what I said earlier on intelligence sharing. We would like to share much more intelligence about what is going on with not only SEPA but local authorities, because we know from our intelligence—although we do not have the level of conviction—that people are involved in serious organised crime and we know whether they are involved in money laundering. At times, we cannot share that level of intelligence with others when they could make decisions about whether to involve other organisations. We need to find ways of making—
Why can you not share?
It is illegal to share some intelligence that we gather with other organisations. Further, some intelligence is not at the level of corroboration at which councils and others could have confidence that they could take it forward—
Let us park “corroboration”—we are not allowed to use the C-word in here.
I understand your point about some intelligence not being secure and that if it was shared with local authorities they might think that the information was dodgy and could not be sustained. However, you said that there are other reasons why you cannot share intelligence. Without giving information about cases, can you say what those other reasons are?
Under part 1 of the Regulation of Investigatory Powers Act 2000, there is certain intelligence that we cannot legally share with anybody else. Such intelligence would give us confidence that organisations are involved in serious organised crime, but we are not in a position where we can share that with other people—
I am sorry, but I want to pursue that. Give us an example of something that you cannot share under RIPA, because that seems to be the whole problem for you.
It would be intelligence at a very sensitive level that we can gather but which we are not in a position to share with—
Us.
Exactly.
Okay.
Under RIPA part 1, we cannot share what we have at the most sensitive level of intelligence gathering. There is other intelligence for which we cannot give the source. Fairly obviously and legitimately, people in councils would want to know what the source of any intelligence was and how much they could rely on it. We can give them the intelligence, but we cannot tell them the source. It is not that the intelligence cannot be relied on—we would suggest that all the intelligence that we would give can be relied on. However, we cannot share its provenance. That causes a difficulty because, when the council goes forward, it gets challenged in the courts through litigation and does not have the confidence in using that intelligence. It cannot go back behind it to understand where it came from. There is a range of issues.
11:45We have suggested an intelligence and information commissioner—a High Court judge or whoever else—who might examine our intelligence and be able to give some form of certificate. I do not know what that would look like but, nonetheless, the commissioner would be able to say that they had examined the sensitive intelligence and to confirm whether an organisation is involved in serious organised crime or that it definitely is not and gets a clean bill of health. That would give the various organisations the opportunity to deal with the matter and decide whether an organisation or individual could get the contract that they were trying to procure.
We think that there are ways of moving forward and sharing more readily more of the intelligence that not only we but SEPA and the local authorities hold. As I said originally, this is about the £9 billion of public procurement spending. We are focusing today on environmental crime and I wholly understand that but, as I said at the start, serious organised crime is involved in every facet of Scottish life, whether that is in nurseries or whatever.
Yes, we know. Care homes, too.
Exactly. My plea is for something broader. It is really important that the public marketing of the matter is all about environmental crime, but it is also important that the public understand the other aspects of what organised criminals are involved in.
We do a lot of marketing. We go to the media and promote success as we see it, but anything that can be done to ensure that the public know, understand and do not buy into organised crime should be done. If something seems too good to be true, it will be too good to be true.
Margaret Mitchell’s question was about the duty of care of the parties issuing the contract. Does anyone want to comment on that? Is there a role for the Crown Office when someone wilfully turns a blind eye? Is there a legal remedy?
It is more likely to be a civil legal remedy, I suggest, under the tendering of contracts and the procurement process.
It is a duty of care. Yes, it is civil, but I meant that it might verge on being art and part.
It would depend entirely on the circumstances and the state of knowledge, for instance. However, we would not be averse to considering the matter if we had good evidence to suggest that that was the case.
Are there parties to contracts who regularly and easily give them out to the wrong sort of companies, which shows that they are in it together? That is what I am getting at.
I think that Calum MacDonald will come in on this.
There is provision for duty of care in a number of environmental acts. The question is whether the responsibilities on the operators under that duty of care are fully understood. The duty has been in effect for a number of years under various guises, but more needs to be done on enforcement and bringing it back to the industry’s attention.
We held and continue to hold discussions with industry and professional bodies. As recently as 2012, we outlined at the launch of SESA’s pathway to zero waste that the duty of care lies at the heart of that and that organisations have a joint responsibility to undertake that duty. That has also been reinforced in recent legislation.
Stephen Freeland mentioned that the duty of care legislation on waste has been around for 20-plus years. However, the key thing to note about it is that it was designed pretty much as a self-policing mechanism. There are literally millions of transactions a year on the movement of waste materials and it would be impossible to police them proactively. Therefore, when the system was designed 20 years ago, the intention was that it would be self-policing, and that is part of the problem.
We discuss the duty of care system in industry forums such as SESA. The duty is on the operators and the people who understand what it is and what it needs to do. It comes down to the fact that there is a bunch of new businesses that are required to look for contracts and do all the things that the system requires but, as a householder, would you know that you need a transfer note and that you have to be a regulated carrier to take waste away? You put your bin out and the local authority takes it.
I am not answering that question on the ground that I may have breached the duty of care.
As a householder, that is not something that you would think about automatically.
More and more small businesses in particular are not aware that the rules are different for business waste. That is at all scales. Duty of care works for the people who know what it is, but a whole layer of education about those responsibilities is missing at the moment.
There are moves to change from a paper-based approach to an electronic approach to the duty of care, which is very welcome and should provide a greater oversight of the movement and transaction of waste. We will then, I hope, be able to pinpoint exactly where the problems lie.
What do you mean by an electronic approach? Electronic is not a magic word. What does it actually mean?
At the moment, when a high-street waste producer contracts with their waste collector, a paper note is produced, which says, “I’ve picked up from X location. I’ve taken X waste and I’m taking it to destination Y.” That paper is then stored in a box—
It is more waste.
It is stored by various different parties in the chain. If SEPA is required to do an audit of where that waste has gone and who has been handling it, the paper note should be available. Unfortunately, less scrupulous operators are less inclined to keep hold of the notes.
If we all move to an electronic system rather than a paper-based system, all the information will be transferred on to spreadsheets using hand-held electronic gadgets.
Where does the information go? Does it just stay with the person who has put it on the database?
It can be uploaded to SEPA’s systems automatically, which should provide a bit more oversight of the process.
Thank you. I need these things to be explained to me.
There has historically been a gap between waste collection information and the site information. It has been quite difficult for SEPA to match where somebody says things are going on the collection systems—on paper systems—with the site information. Pulling the electronic systems together will make the process much more transparent.
The electronic duty of care is being introduced, and it is a voluntary system at the minute. Perhaps we could look at making it compulsory at some point, but we are a long distance away from that at the moment. We hope that it will allow for more systematic analysis of the waste flows.
The paper-based system that exists at the moment is open to abuse. If you are an unscrupulous operator, you can falsify, copy and do whatever you want with the paperwork. It is clearly an avenue that criminals will exploit.
On the specialist question, which kicked this whole discussion off, more work needs to be done on financial investigation and analysis of the waste flows to understand where the trends are: where we are seeing movements that do not make sense, and where there are hot spots—where waste that should not be going is going. That analytical work is being done by staff in SEPA, but it is difficult to do using the paper-based model, because there are so many copies of notes and so much paper is in the system.
You said that the system is voluntary. Can you give us some idea of the percentage of operators that are using it?
The electronic duty of care is just being introduced. A number of operators already have electronic systems in their business model. They have duty of care systems in an electronic form, which they use to follow the flow of their own materials, because it is in their commercial interests to do so. There is a natural reluctance to change from one system in which they have invested time and money, and with which they are content, to a centralised system that is effectively in the hands of the regulators.
Is this voluntary?
Yes, it is voluntary, Sandra. That is why I am pursuing this line.
Are councils not involved in putting it all together? To me, that is one of the biggest questions. If you are a small business—
You have jumped the queue, but I will let you in. There is a big queue here on my pink list.
I think that I have been pretty patient actually.
John Pentland will be very cross because he was next.
Let John in then. On you go.
The system is voluntary, and we will come back to that because it is a very important point. In these discussions we often get down to nitty-gritty, and we are doing so today.
I will let Graeme Dey in because he is representing the Rural Affairs, Climate Change and Environment Committee. That is the only reason I am letting you in ahead of the queue, Graeme.
Thank you for indulging me, convener.
I was struck by an assertion in the written evidence that some sites are operating without any licences at all. That might be small scale, but one question strikes me: if we are talking about duty of care, should there not be a basic requirement—if it is practical—that small companies or whatever are licensed? I presume that local authorities check whether sites are licensed, but should the person who is issuing or tying into the contract be required to check that whoever is taking away their waste has the appropriate licences? Could that be developed?
I am happy to take that question. That is the requirement at the moment: the duty of care requires that every person in the chain passes the waste on to someone who is entitled to take it, right through to disposal. However, that has not stopped the increase in the growth of completely illegal sites that have no licence.
I am going to take three questions as I did before—John Pentland to be followed by Christian Allard and Sandra White.
My question is a follow-up on the duty of care. Linda Ovens said that, when industry groups meet, the duty of care is one of the topical subjects that is brought to the table. My understanding is that most of the crimes are associated with recyclers who have exemption and do not require a licence.
A good example of that is the operator in my constituency who, a couple of months ago, left a situation that cost the public purse nearly £400,000 to clear up. That case also brings up the issue of awareness. The general public who live in and around the area did not think that there was anything wrong. People were of the opinion that, because they were able to dispose of their tyres, that was all right. Should we think about starting to suspend exemptions for recyclers?
My second point has also arisen because of something that happened in my constituency, and it is a question that my constituents have been asking me. Is there no proper auditing for tyre disposal?
That was two questions—thank you. At least it was just two questions and not the four that Margaret Mitchell asked.
Christian Allard and Sandra White are next. I am going to take Roderick Campbell and Alison McInnes in the next batch. You have not been forgotten.
I wonder whether we are not getting away from the main point, which is about serious and organised crime. What we have been talking about during the past five minutes has been more about regulating normal and legitimate businesses as opposed to serious and organised crime. Those businesses make sure that they have a façade and that they follow up on all the new regulations.
I want to go back to public awareness and particularly what Linda Ovens said about people in this sector. Are we a soft touch? Do we in Scotland see ourselves as being free from the serious and organised crimes that we perhaps see as prevalent in other countries such as Italy? I know that the Camorra was very much involved in the sector in the north-east that I used to work in, but that was seen as incredible; people rejected the idea. Companies working in the sector thought that it was not possible in the UK or in Scotland—that it would not happen.
How can we address that issue? Is part of the problem the fact that we feel that serious and organised crime does not happen in this country? Does the committee need to hold a private session to talk about it?
I think that that is something that the committee would discuss at the end of the next item, when we have our wash-up on the subject.
Sandra White is next. I am being very kind in letting you in when you jumped the queue.
I apologise for that, but we wandered off in slightly different directions.
What? This committee wandered off?
12:00
We have heard that there are already 10 organised crime groups involved in such crime, so the problem is expanding. The issue is not just in Scotland—there is a cross-border issue. Waste even comes from the rest of Europe, and it is exported from here, too.
From what I have heard so far, we are dealing with two issues. We are considering how we close down illegal sites, and we are talking about the so-called legal sites, which to my mind are where the organised crime is because they are part of money laundering.
What is the problem with the legal sites? Are they not licensed properly or are the licences not followed through? Is there an issue with audit, which has been mentioned? I find it unbelievable. Most members will have constituents with small businesses who have to pay quite a lot up front to dispose of hazardous waste such as asbestos. If somebody comes along and says, “I’ll take it off your hands at a cheap price,” the business owner might agree to it.
In other areas, there is an audit trail. Where does the problem lie? Does it lie in illegal sites that are opening up for dumping or in the legal sites that known criminal gangs use as a front? I think that Mr MacDonald mentioned the low barrier to entry to the industry. How do we tighten up the legal sites and prevent organised crime from laundering money? We have mentioned all this before, but the answer has to do with licensing, auditing and, basically, looking into it.
I ask members to tell me if I have your questions wrong—my handwriting is that of a medical practitioner. John Pentland asked about suspending exemptions for recyclers and about audit, which to an extent relates to Sandra White’s point about an audit trail. John referred to tyre disposal, but Sandra asked about an audit trail for illegal and legal sites.
To my mind, there are two issues. We are talking about illegal sites where waste is dumped and nobody is following up on that, but we are also talking about legal sites. I am not saying that I have evidence for this, but people in my area tell me that there are legal sites that are being run by criminals, as a front for other activity. How do we stop that?
So you mean the sites themselves. Okay—I hear your question.
A site could be council owned but run by criminals.
Christian Allard said that, in his experience in the north-east, people do not believe that we have a McMafia here—people just do not believe that serious organised crime is happening at such a level. Perhaps the criminals are so clever in Scotland that people do not think that crime is happening at that level. Christian asked how we can make that plain, although of course that is one of the reasons for this meeting.
Sandra White also raised the cross-border issue. Waste is being exported out of Scotland and brought into Scotland.
I will leave all those issues for discussion. The witnesses can start answering the whole lot together, or they can pick and mix.
Waste tyre recycling is a significant problem, not just in Scotland but across the UK and beyond. There are companies that operate business models that, frankly, do not stand scrutiny. A number of them are able to run under exemptions, which means that they are not required to have a full waste management licence, as the storage limits are under a certain quota. Obviously, I cannot go into the detail of the site that was referred to—
No—I think that serious organised criminals might just be listening to this meeting. We are aware of that.
We are working closely with the Government to consider the exemptions regime on waste tyres. Obviously, it cannot be changed overnight, but we are working with the Scottish Government’s environmental quality division on that.
The problem is not just in North Lanarkshire but beyond that. We are taking a close interest in the issue and monitoring a number of sites across the country. We have a priority list of sites for which we undertake regular and repeated compliance inspections and, if necessary, enforcement activity. That work will continue, but there is no short-term fix, because the legitimate markets for waste tyres in the country are limited, so there is an overflow of that waste product.
That touches on Mr Allard’s comment about export materials. Waste tyres can be exported along with other waste streams. Scotland exports significant quantities of waste overseas, especially to west Africa but also to the far east, particularly to China and India.
That is an area with which we are concerned, because we have a duty not only here in this country but beyond that, in relation to trans-frontier illegal waste shipments. The agency is strongly involved in the area, not just here but with European and other partners. We work with law enforcement agencies, such as Interpol and Europol, and with other professional groups in Europe.
It might be argued that we have a greater moral duty to underprivileged countries, which perhaps do not have regulation and are used as a waste dump by western societies.
We have a legislative responsibility, as well as a moral duty.
Absolutely.
You did not respond to John Pentland’s question about suspending exemptions for recyclers.
We can suspend exemptions. We can also suspend licences or, indeed, take licences from individual operators. As I said, it comes down to the course of action that best fits the situation that we find on a particular site. We have a range of enforcement options in relation to compliance, including warning letters. A suite of options is open to the agency, and we apply those options.
The key point is that simply removing a licence or suspending an exemption registration does not solve the problem. The tyres have to go somewhere, and the absence of a market for such materials, so that they can be reused, is part of the problem. Tackling the issue simply from the point of view of the site where the materials were dumped is not the whole answer. A collaborative effort is required, which includes developing markets and talking to the waste management industry about helping in that respect. A significant number of players have a role in that.
Is it a case of soft-touch Scotland, if I may put it colloquially?
I would not suggest that—
I am not talking about the police; I am talking about public perception. Do the public not believe that there is a serious issue?
I suppose that that is true to some extent. Do the public know that we have 220 organised crime groups, which have 3,500 members? I have said that on many occasions in the media, but do the public understand the consequences of that? Perhaps not, but I guess that one of the reasons for this discussion is to help the public to become more aware of the areas in which organised crime is involved.
It is part of the reason for this meeting. Police Scotland has run useful information campaigns. How much publicity has there been about the particular aspect that we are talking about?
Do you mean environmental crime or broader serious organised crime?
I am talking about environmental crime, which can be invisible, unlike vandalism—although it is vandalism.
We probably have not done very much on environmental crime. That brings me back to what I said earlier. We try to talk to the media and the public about all commodities in which organised crime is involved, because organised criminals are unlikely to be involved only in environmental crime—they will have firearms, drugs and everything else that we can think of.
Organised crime is about making money and it is about territory, so the issue is the threat and harm to our communities. Organised criminals will use violence to secure a competitive advantage. They undercut other operators and they use violence to ensure that they get contracts. Our campaigns have been about getting the public to understand what organised crime is involved in across the spectrum, rather than just being about environmental crime. That is my focus. I want to ensure that there is a real understanding of the areas in which serious organised crime is involved.
The convener asked whether Scotland is a soft touch. I would say that it is not. Is there more to be done? Definitely. How do we compare with other countries? We do better than a number of countries. Mr Allard mentioned Italy, where there is a well-entrenched problem with mafia clans, particularly in the waste sector and in the southern half of the country. Italy is anxious to do more to address that. That criminal model has been exported beyond Italian borders to eastern Europe.
We as an agency are in touch with Interpol and Europol, and we are a partner in Interpol’s pollution crime working group. We are anxious to participate in initiatives to learn from and share the best practice and perhaps the bitter experience of other countries. We are working on a project with funding that we have received from an EU LIFE+ bid that is looking at the vulnerabilities in the market that make it attractive to criminals. Why do they want to operate in that industry sector and not other sectors?
In the year ahead, we will look at the waste streams that are the target focus. Mr Pentland touched on waste tyres, which are one target, but a number of other challenging waste streams are difficult to dispose of and have little or negligible value for recyclability—the value has been taken out of them. Because of their commingled nature, they attract a higher tax rate.
Can you give examples, please?
There are waste fines—the detritus from materials at recycling facilities—that have been commingled to the extent that they can go only to landfill, which attracts the higher standard rate of tax. That rate is £80 per tonne, whereas the rate for inert material on its own is £2.50 per tonne. The difference between £2.50 and £80 is the margin in which criminals operate. Tax avoidance is an extremely attractive and highly profitable area to exploit.
I was going to speak about whether Scotland is a soft touch, but Willie Wilson has pretty much addressed that.
On international comparisons, I agree entirely with Willie Wilson that we do not have the same scale of problem as exists in other countries, such as Italy, and I never want us to get anywhere near that. We need to be vigilant, but I suggest that Scotland punches above its weight in Europe. The environmental crime task force model that we have developed is the envy of many countries, and the idea of rolling it out has been suggested in different parts of the world.
The question of raising public awareness has come up a number of times. I will take the opportunity to give a free advert for an event in November that the environmental crime task force is organising. It will be in Edinburgh and we will have keynote speakers who will include the Cabinet Secretary for Rural Affairs and the Environment; Frank Mulholland, the Lord Advocate; and representatives from bodies that are on the task force. I would very much welcome attendance at that by committee members and other parliamentarians. The message is that we are trying to raise awareness of the subject.
That was a poor trailer, because you did not tell us where or when the event will take place. If you want to advertise, you need to give those details.
The exact dates will be made available to the committee. I would dearly love to see some committee members in the body of the kirk to hear the speeches.
That will depend on parliamentary commitments.
Absolutely—I appreciate that.
However, the committee is interested in the subject.
I call Ms Ovens. I beg your pardon—Mr Freeland was first.
Was he?
Yes. I am sorry; my yellow lists are jumping before my eyes.
I am looking at my wee notes and I will go back to a point that Sandra White raised but, before I do that, I say for the record that there is a legitimate trade in the export of materials for recycling.
We accept that. You are not on trial.
If it were not for exports, our recycling rate would not be anywhere near what it is.
Sandra White tried to see whether there is a distinction between fully illegal sites and sites that operate with licences. We are talking about five types of site: the fully illegal landfill site; the illegal recycling operation; the licensed site that deliberately abuses its conditions for financial gain; the licensed site that acts as a front for illegal activity; and the site that deliberately misclassifies materials to benefit from lower tax rates, which Willie Wilson touched on. I am not sure whether there is a distinction between those sites. Environmental criminals operate across and have a foothold in all such sites and probably use a range of them. Our effort needs to focus on the bigger picture rather than on whether a site is illegal or is operating with a licence.
Thank you. That is helpful.
12:15
What would help raise awareness and raise the profile of all this is for some cases to make it through the system and be available to be talked about publicly in terms of the financial impact on the taxpayer and the general public.
I know that there are a number of cases in the system that we cannot talk about, but for events such as Calum MacDonald’s in November, it would help to be able to stand up and say, “This is the evidence.” The frustration for the industry is that we know that illegal activity is being undertaken but it is anecdotal. We cannot put facts and figures and numbers to it. We know that it is happening and we can pass some of it—or all of it, we hope—on, but then we hear nothing back.
The time that it takes for cases to go through the system means that we do not know whether anything has happened. In the meantime, the compliant operators are being regulated in their own capacity and they are perhaps falling foul of their conditions—not deliberately—and are therefore getting the hard line from regulators. However, they are not seeing what is happening with the bigger picture in those cases that are coming through.
We will come to that later. At last, Roderick and Alison, your time has come. Can I have your questions, please?
My points have largely been discussed. I will just raise the question of whether the regulatory regime is adequate or whether the more fundamental problem—following on from what Mr Freeland and Linda Ovens have said—is that organised crime groups evade the regulatory regime by presenting
“a façade of compliance, employing ... managers and consultants to mask their activities.”
Do the witnesses have any general comments on that?
My question is quite similar to Roddy Campbell’s. It would be useful to hear from the industry witnesses whether there are weaknesses in the current system of licensing and monitoring that make it particularly attractive to illegal operators.
I will comment on Ms Ovens’s point. I recognise that successful outcomes are a very good way of raising public awareness. It is important to recognise that organised crime is very fluid, with organised criminals seeking new opportunities. The increase that ACC Nicolson identified shows that this is a relatively new opportunity for organised criminals.
As people are aware, we are working closely with SEPA and the Police Service of Scotland on a very large and complex inquiry into environmental crime, money laundering and potential tax evasion, which we cannot talk about. However, we recognise that effective prosecution is an important element in the strategy to reduce the harm of organised crime.
We have not talked about asset recovery, which is also very effective, as it hits the criminals where it hurts—in their pockets. As ACC Nicolson identified, serious and organised crime is about making money so what we can do is try to take that money away from them. The legislation—the Proceeds of Crime Act 2002—is there and I know that SEPA now has its own financial investigators to identify the benefits and the assets. Where that occurs and there is a link to the organised crime groups, we can restrain those assets and ultimately, in the event of a conviction, seek for confiscation. We will do that as best we can when the evidence gives us the opportunity to do so.
Just touching on the legislation, I note that we now have the Regulatory Reform (Scotland) Act 2014, which came about as a result of the recognition that the various pieces of legislation that were in place needed to be substantially revisited to give us enhanced powers, to make us leaner in how we operate the legislation, and to make it easier and not overly bureaucratic for the industry.
We are looking towards having a simplified and integrated framework and to working under one regime rather than a series of regimes. Having a series of regimes was not helpful to industry and was not helpful to our own regulatory staff when it came to applying the compliance models. The 2014 act has been approved and we are working through it. It is giving us more enforcement powers as well.
Just touching on sentencing, I note that, as part of that work on the 2014 act, we are looking at improved compensation and an improved requirement on us to describe financial benefit. That is taken into close account when it comes to sentencing and when it comes to prosecutions.
Finally, we now have for the first time an offence of significant environmental harm, which brings in an aggravation, as it were, that did not previously exist in legislation, and which should allow us to place before the judicial system the evidence to support consideration of that element in sentencing.
The new enforcement powers that are coming to us as a result of the 2014 act are very welcome. They will be available to us from April next year, and there will also be some new sentencing powers available for the courts as a result of that legislation.
However, an improved environmental regulatory regime on its own will not be enough to successfully tackle organised criminals and environmental crime. That will take more collaboration between all the different parties involved, and a bit of creativity, as we move forward. The four Ds strategy must come into play in that respect too, which I would welcome.
Going back to Alison McInnes’s point about where the weaknesses in the system might be, I see three weaknesses. The first, as Calum MacDonald said at the beginning, is that the barriers to entry are low. People need a truck and a skip, and off they go. That problem needs to be addressed by the fit-and-proper-person test at the beginning to ensure that their suitability is properly considered.
The other weakness concerns the exemptions, which are also used by legitimate industry. They are in place purely to deal with a small amount of low-risk material, but that leads to a light-touch approach to the regulation of those activities that is being exploited. Greater oversight of exemptions is needed. The plans that are afoot to change the regulatory regime, including new tiers of regulatory oversight, should help to address that problem.
I will stop you there, Mr Freeland, because you have summed up your point.
As I said at the committee’s previous round-table session, if anyone would like to raise one issue for us to progress in the next session of Parliament, they should volunteer themselves.
We will move on from Mr Freeland now, as he has given three suggestions.
Can I have one more?
Okay—we will come back to you, and you can have one more.
Who else wants to suggest one issue that they believe the committee should progress? We are still waiting for the date, time and place, but that is not the issue.
I promise that I will stick to one issue. I would like us to get to the point at which we can use intelligence to influence procurement decisions.
Who wants to go next, with one issue that they want to remedy? You do not have to suggest one if you do not want to, but if you think that the committee should consider a certain issue, you can bring it to our attention.
We need to speed up the prosecution service, in whatever way we can work together to do so.
We need to close the loophole on the duty of care.
I think that this has been said already, but we need financial investigation information and financial intelligence to be shared between all the parts.
I support that suggestion—it is about opening the gateway so that we can better share intelligence and what we know. A good example is where there is local knowledge that criminality is involved—how do we use that information and intelligence to good effect? That is the type of thing on which we need to focus.
I support ACC Nicolson’s suggestion—
You are allowed a separate suggestion.
Dealing with information sharing and the barriers that are attached to that at present would allow us to create the biggest single step change. In turn, in due course, it would help to advance the pace of dealing with the enforcement side through the courts and so on.
I do not disagree with any of that, but my plea is that we continue the massive amount of on-going collaborative working by sharing information and talking to each other.
I think that everyone has had a say, so I thank you very much.
Sorry—did I miss you out, Mr Freeland?
No—I mentioned the duty of care.
We have looked after Mr Freeland—I did not miss him out.
I thank everyone. The session has been extremely useful and I thank you all for your time, which is very valuable.
12:25 Meeting continued in private until 12:32.