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REPORT     ***I
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25 March 2003
PE 319.258 A5-0073/2003
on the proposal for a regulation of the European Parliament and the Council on the prevention of money laundering by means of customs cooperation
(COM(2002) 328 – C5‑0291/2002 – 2002/0132(COD))
Committee on Citizens' Freedoms and Rights, Justice and Home Affairs
Rapporteur: Ingo Schmitt
PROCEDURAL PAGE
 DRAFT LEGISLATIVE RESOLUTION
 EXPLANATORY STATEMENT
 OPINION OF THE COMMITTEE ON ECONOMIC AND MONETARY AFFAIRS
 COMMITTEE ON LEGAL AFFAIRS AND THE INTERNAL MARKET

PROCEDURAL PAGE

By letter of 25 June 2002 the Commission submitted to Parliament, pursuant to Article 251(2) and Article 135 of the EC Treaty, the proposal for a regulation of the European Parliament and the Council on the prevention of money laundering by means of customs cooperation (COM(2002) 328 – 2002/0132(COD)).

At the sitting of 1 July 2002 the President of Parliament announced that she had referred this proposal to the Committee on Citizens' Freedoms and Rights, Justice and Home Affairs as the committee responsible and the Committee on Economic and Monetary Affairs and the Committee on Legal Affairs and the Internal Market for their opinions (C5‑0291/2002).

By letter of 16 January 2003 the Committee on Citizens' Freedoms and Rights, Justice and Home Affairs asked the Committee on Legal Affairs and the Internal Market for its opinion on the legal basis for the proposal, pursuant to Rule 63(2) of the Rules of Procedure.

The Committee on Citizens' Freedoms and Rights, Justice and Home Affairs appointed Ingo Schmitt rapporteur at its meeting of 11 September 2002.

It considered the Commission proposal and draft report at its meetings of 12 November 2002 and 21 January and 19 March 2003.

At the last meeting it adopted the draft legislative resolution by 18 votes to 5, with 2 abstentions.

The following were present for the vote: Jorge Salvador Hernández Mollar, chairman; Johanna L.A. Boogerd-Quaak and Robert J.E. Evans, vice-chairmen; Ingo Schmitt, rapporteur; Alima Boumediene-Thiery, Kathalijne Maria Buitenweg (for Pierre Jonckheer), Ozan Ceyhun, Carlos Coelho, Thierry Cornillet, Gérard M.J. Deprez, Giuseppe Di Lello Finuoli, Adeline Hazan, Ewa Hedkvist Petersen (for Michael Cashman), Anna Karamanou (for Martine Roure), Margot Keßler, Eva Klamt, Ole Krarup, Alain Krivine (for Fodé Sylla), Marjo Matikainen-Kallström (for Mary Elizabeth Banotti), Hartmut Nassauer, Marcelino Oreja Arburúa, Elena Ornella Paciotti, Paolo Pastorelli (for Timothy Kirkhope), Hubert Pirker, Bernd Posselt, Heide Rühle, Patsy Sörensen, Sérgio Sousa Pinto, Anna Terrón i Cusí and Christian Ulrik von Boetticher.

The opinion of the Committee on Economic and Monetary Affairs and the opinion of the Committee on Legal Affairs and the Internal Market on the legal basis are attached. The Committee on Legal Affairs and the Internal Market decided on 3 December 2002 not to deliver an opinion on the proposal itself.

The report was tabled on 25 March 2003.


DRAFT LEGISLATIVE RESOLUTION

Legislative resolution embodying Parliament's opinion on the proposal for a regulation of the European Parliament and the Council on the prevention of money laundering by means of customs cooperation (COM(2002) 328 – C5‑0291/2002 – 2002/0132(COD))

(Codecision procedure: first reading)

The European Parliament,

–   having regard to the Commission proposal to Parliament and the Council (COM(2002) 328(1)),

–   having regard to Article 251(2) and Article 135 of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C5‑0291/2002),

–   having regard to the opinion of the Committee on Legal Affairs and the Internal Market on the proposed legal basis,

–   having regard to Rule 67 and Rule 63 of its Rules of Procedure,

–   having regard to the report of the Committee on Citizens' Freedoms and Rights, Justice and Home Affairs and the opinion of the Committee on Economic and Monetary Affairs (A5‑0073/2002),

1.   Approves the Commission proposal, subject to Parliament's amendments;

2.   Asks to be consulted again, should the Commission intend to make substantial modifications to the proposal or replace it with another text;

3.   Instructs its President to forward its position to the Council and Commission.

Text proposed by the Commission   Amendments by Parliament
Amendment 1
Title

Legislative resolution embodying Parliament's opinion on the proposal for a regulation of the European Parliament and the Council on the prevention of money laundering by means of customs cooperation.

Legislative resolution embodying Parliament's opinion on the proposal for a directive of the European Parliament and the Council on the prevention of money laundering by means of customs cooperation.

 

(This amendment applies to the whole of the text. If it is adopted, technical adjustments will be required throughout the text.)

Justification

Amendment 2
Recital 6

The existing legislation should therefore be supplemented by having recourse to customs cooperation arrangements under Article 135 of the Treaty, which now gives formal expression to customs cooperation. This should serve to harmonise the control methods instituted by national law and enable all the Community's customs administrations to gather information on cash entering or leaving the Community customs territory in sums equal to those covered by Directive 91/308/EEC. In these circumstances, the most appropriate way to gather such information is by imposing an obligatory declaration. In case of suspicion, the information is designed to be transmitted to the authorities which, by virtue of Directive 91/308/EEC, coordinate action against money laundering.

The existing legislation should therefore be supplemented by having recourse to customs cooperation arrangements under Article 135 which now gives formal expression to customs cooperation, in conjunction with Article 95 of the Treaty, which governs the approximation of the laws, regulations and administrative provisions of the Member States in connection with the functioning of the internal market. This should serve to harmonise the control methods instituted by national law and enable all the Community's customs administrations to gather information on cash entering or leaving the Community customs territory in sums equal to those covered by Directive 91/308/EEC. In these circumstances, the most appropriate way to gather such information is by imposing an obligatory declaration or disclosure. In case of suspicion, the information is designed to be transmitted to the authorities which, by virtue of Directive 91/308/EEC, coordinate action against money laundering.

Justification

Alongside the obligation to declare, Member States should also have the option of introducing an obligation to disclose.

Amendment 3
Recital 6 a (new)
 

6a.   Where the obligation to declare applies, sums of EUR 15 000 or more in cash must be declared at the external borders. Where the obligation to disclose applies, at the request of a customs official sums of EUR 15 000 or more in cash must be disclosed to that official. Member States may choose one of the procedures.

Justification

See justification for Amendment 2.

Amendment 4
Recital 7

(7)   Accordingly, cash movements should be subject to the principle of obligatory declaration at the external frontiers. This is the most expedient way to control acts by which Community and national rules on laundering might be circumvented. However, in order to focus the authorities' action on significant instances of laundering, only movements of EUR 15 000 or more should be subject to an obligatory declaration.

Deleted

Justification

See justification for Amendment 2.

Amendment 5
Recital 8

(8)   The form of the obligatory declaration should also be laid down, otherwise it should be void. Imposing the use of a standard pre-printed declaration form will enable customs administrations to improve synergies and to exchange information more easily. In view of the preventive purpose and dissuasive character of the declaration, it may not be lodged after the external frontier has been crossed. The moment at which this formality has to be accomplished must therefore be determined. Lastly, it must be specifically laid down that the obligation to declare applies to the person carrying the cash, regardless of whether that person is the owner.

Deleted

Justification

See justification for Amendment 2.

Amendment 6
Recital 13

(13)   The powers of the customs authorities should be supplemented by the Member States' obligation to lay down penalties. However, penalties should only be imposed for failure to make a declaration, not for money laundering offences disclosed by the customs controls set out in this Regulation. Though genuinely dissuasive penalties are called for, fines should nevertheless be restricted as to their amount. The absence of any limit would enable Member States to impose fines so high as unduly to compromise the principle of the free movement of capital, or even to negate it altogether.

(13)   The powers of the customs authorities should be supplemented by the Member States' obligation to lay down penalties. However, penalties should only be imposed for failure to make a declaration or disclosure, not for money laundering offences brought to light by the customs controls set out in this Directive. Though genuinely dissuasive penalties are called for, fines should nevertheless be restricted as to their amount. The absence of any limit would enable Member States to impose fines so high as unduly to compromise the principle of the free movement of capital, or even to negate it altogether.

Justification

Penalties should also be imposed for failure to make a disclosure.

Amendment 7
Article -1 (new)
 

Article -1

Member States' right to choose

1.   Member States shall ensure that money laundering is combated by imposing checks on sums of EUR 15 000 or more in cash entering or leaving the Community customs territory.

2.   In that connection, Member States may choose between two procedures.

Justification

The statement of the aim of the directive at the beginning of the operative part of the text would seem to make sense against the background of the two procedures by means of which that aim is to be achieved. The reference to the choice between two alternatives prefigures the subsequent detailed description of the procedures.

Amendment 8
Article 1, paragraph 1, subparagraph 1

1.   Any natural person entering or leaving the Community customs territory and carrying a sum of EUR 15 000 or more in cash shall be obliged to declare that sum in accordance with this Regulation.

1.   Member States shall have the option of introducing an obligation to declare in such a form that any natural person entering or leaving the Community customs territory and carrying a sum of EUR 15 000 or more in cash is obliged to declare that sum in accordance with this Directive.

Justification

The new phrase incorporated is needed in order to enable the Member States to take advantage of the right to choose laid down in the second paragraph of Article -1.

The regulation is replaced by a directive. Given the Member States' right to choose between two procedures, a directive would seem to be preferable to a regulation as the legal form for the act. The adoption of a directive will enable the Member States to implement the act by choosing one of the two procedures, thereby ensuring that account is taken, in particular, of the subsidiarity principle.

Amendment 9
Article 1, paragraph 1, subparagraph 2

Any natural person entering or leaving those parts of the Community customs territory to which Directive 91/308/EEC does not apply and carrying a sum of EUR 15 000 or more in cash shall also be obliged to declare that sum in accordance with this Regulation.

This obligation shall also apply to any natural person entering or leaving those parts of the Community customs territory to which Directive 91/308/EEC does not apply and carrying a sum of EUR 15 000 or more in cash.

Justification

Placing the reference to the obligation at the start of the text emphasises that this provision also applies to natural persons entering those parts of the Community customs territory to which Directive 91/308/EEC does not apply.

Amendment 10
Article 1, paragraph 2 a, subparagraph 1 (new)
 

In order to check compliance with the obligation to declare, the competent authorities shall be empowered, even where there is no prior evidence that an offence is being committed, to control persons and their baggage, to question persons about the provenance, the identity of the owner and the purpose of the cash found in the course of such controls and to detain such cash by administrative decision.

Justification

For the sake of consistency, and taking account of the twin procedures, the provisions governing the powers of the competent authorities to check compliance with the obligation to declare (originally Article 4) belong in Article 1, which governs the first alternative, the obligation to declare. The reference to Article 1 thus becomes superfluous.

Amendment 11
Article 1, paragraph 2 a, subparagraphs 2 and 3 (new)
 

Cash may be detained for up to three working days; that period may, however, be extended once up to a period of one month in accordance with national law.

The period shall, in any event, be no longer than is necessary for the investigation.

Justification

This is the original text of the second paragraph of Article 4, with minor changes.

As a matter of principle, restrictions should be imposed in keeping with constitutional considerations. A restriction to one month of the period during which cash may be detained would seem to be appropriate. Multiple extensions of that period should also be ruled out on constitutional grounds.

Amendment 12
Article 1 a (new)
 

Obligation to disclose

1.   Member States may also introduce an obligation to disclose in such a form that persons entering or leaving the Community customs territory with sums of EUR 15 000 or more in cash must, at the request of a customs official of the State concerned, disclose the nature, denominations and value of that cash and give details of its provenance, owner and purpose. In addition, the first subparagraph of Article 1(2a) shall apply, mutatis mutandis.

 

2.   Member States shall ensure that customs officials of the States concerned secure the cash referred to in paragraph 1 by the end of the third working day following its discovery and take it into customs detention in order to establish its provenance and purpose. In accordance with national law, this period may be extended once up to a period of one month. The period shall, in any event, be no longer than is necessary for the investigation.

Justification

This provision laying down alternative methods of preventing money laundering by means of customs cooperation should offer the Member States adequate leeway to achieve this objective. Alongside an obligation to declare, Member States will be given the opportunity to introduce an obligation to disclose in accordance with which cash sums above a given amount must be disclosed at the request of a customs official.

The introduction of this alternative procedure also reflects the fact that in general, as experience shows, persons deliberately smuggling cash are unlikely to make a declaration.

The wordings are taken almost unchanged from the Federal Republic of Germany's finance administration law, of which the obligation to disclose is a legally valid provision.

Amendment 13
Article 2, paragraph 3, letter (b)

(b)   traveller’s cheques or postal cheques;

(b)   cheques;

Justification

There seems little sense in drawing a distinction between traveller’s cheques and postal cheques, particularly as the latter are recognised as a means of payment only within Europe.

Amendment 14
Article 3, paragraph 1, subparagraph 1

Reporting

Reporting

Where there is material or circumstantial evidence that cash is being carried for the purposes of money laundering operations, information obtained through the declaration provided for in Article 1 or subsequent controls shall automatically be transmitted to the competent authorities of, respectively, the Member State of residence of the person referred to in Article 1(1) and the Member State through which that person entered or left the Community customs territory.

Where there is material or circumstantial evidence that cash is being carried for the purposes of money laundering operations, information obtained through the declaration or disclosure procedure or subsequent controls shall automatically be transmitted to the competent authorities of, respectively, the Member State of residence of the person concerned and the Member State through which that person entered or left the Community customs territory.

Justification

Reporting must also cover information obtained by means of the disclosure procedure. This information is the same as that obtained by means of the declaration procedure – only the approach differs. A general reference to the two procedures outlined in Articles 2 and 3 would therefore seem to be adequate here.

As a result of the incorporation of the disclosure procedure, a reference to the person referred to in Article 1(1) would be misleading. In this connection, it seems simpler to avoid any reference to specific articles and to refer instead in a general way to persons carrying cash.

Amendment 15
Article 3, paragraph 1, subparagraph 2

It shall also be transmitted to the national authorities responsible under Article 6 of Directive 91/308/EEC for combating money laundering in the country through which the person concerned entered or left the Community customs territory.

It shall also be transmitted to the national authorities responsible under Article 6 in conjunction with Article 1 of Directive 91/308/EEC for combating money laundering in the country through which the person concerned entered or left the Community customs territory.

Justification

Article 1 of Directive 91/308/EEC lays down, for the purposes of that directive, a legal definition of the ‘competent authorities’ referred to in Article 6 of the directive.

Amendment 16
Article 3, paragraph 1, subparagraph 2 a (new)
 

Member States shall also forward the information obtained by means of the procedures outlined in Articles 2 and 3 to a database jointly administered by the Member States and held by the European Police Organisation (Europol). In that connection, steps should be taken to ensure that each Member State enjoys the same access to that database. It should be possible to call up the data stored on that database only in connection with measures to prevent money laundering.

Justification

Amendment 17
Article 4

Powers of the competent authorities

Deleted

In order to check compliance with the obligation under Article 1 to declare, officials of the competent authorities shall be empowered, even where there is no prior evidence that an offence is being committed, to control persons and their baggage, to question persons about the provenance of cash found in the course of such controls and to detain such cash by administrative decision.

 

Cash may be detained for up to three working days; that period may, however, be extended in accordance with national law. The period shall, in any event, be no longer than is necessary for the investigation.

 

Justification

Self-explanatory.

Amendment 18
Article 5, paragraph 1, subparagraph 1

Penalties

Penalties

Without prejudice to the penalties applicable in the event of money laundering, the Member States shall, in accordance with their national legislation, make sure that proceedings are initiated against those responsible where controls or inspections carried out under this Regulation establish that the obligation to declare laid down in Article 1 has not been fulfilled.

Without prejudice to the penalties applicable in the event of money laundering, the Member States shall, in accordance with their national legislation, make sure that proceedings are initiated against those responsible where controls or inspections carried out under this Directive establish that the obligations laid down in Article 1 or 1a have not been fulfilled.

Justification

For drafting reasons, reference must also be made here to the obligation to disclose. An obligation to disclose without penalties for non-compliance would be pointless.

Amendment 19
Article 5, paragraph 3

3.   Member States shall notify to the Commission, at the latest by 31 December 2003, the applicable penalties in the event of non-compliance with the obligation to declare.

3.   Member States shall notify to the Commission, at the latest by 31 December 2003, the applicable penalties in the event of non-compliance with the obligations.

Justification

This provision concerns breaches of both the obligation to declare and the obligation to disclose, which enjoy equal status.

Amendment 20
Article 6 a (new)
 

Transposition into national law

 

1.   Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 31 December 2004, at the latest. They shall forthwith inform the Commission thereof.

 

2.   When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such a reference shall be laid down by the Member States.

 

3.   Member States shall communicate to the Commission the text of the main provisions of national law they adopt in the field covered by this Directive and shall forward a table setting out correlations between the provisions of this Directive and the national provisions they adopt.

Justification

Amendment 21
Article 7

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Communities.

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Justification

Self-explanatory.

Amendment 22
Article 7 a (new)
 

Article 7a

Report

 

Two years after 31 December 2003 the Commission shall draw up a report on the application of this Directive and submit that report to the European Parliament and the Council.

Justification

A final report will serve to assess the effectiveness of the directive adopted, in particular in the light of any subsequent provisions enacted in this area.

The two-year deadline for drawing up the report would seem to be appropriate.

Amendment 23
Article 7 b (new)
 

Article 7b

Addressees

 

This Directive is addressed to all the Member States.

Justification

The regulation is replaced by a directive, whose addressees must be named.

(1)OJ C 227E, 24.9.2002, p. 574.


EXPLANATORY STATEMENT

I.   INTRODUCTION

With a view to combating money laundering the amended version of Directive 91/308/EEC(1) lays down provisions governing controls at Community level on transactions carried out by financial institutions involving sums of EUR 15 000 or more. As regards controls on cash movements at the Community’s external borders, however, although some Member States have already introduced such controls it is not yet possible to monitor movements along the entire length of the Community frontier.

The Council’s request to the Commission to draw up a legislative proposal in the area of the fight against money laundering was made against the background of the report on Operation Moneypenny. Operation Moneypenny(2) was a joint operation carried out by the Member States’ customs services in the period between September 1999 and February 2000 with the aim of monitoring cross-border cash movements in excess of EUR 10 000 and examining whether the scale of such movements posed a threat to the effectiveness of the controls carried out by financial institutions to prevent money laundering.

The results reveal the scale of cross-border cash movements, some of which may also be money-laundering transactions. In the course of the operation, means of payment totalling EUR 1.6 billion were recorded, EUR 1.35 bn of it in cash. Although at present no figure can be put on the amount of money laundered by means of cash movements, the sheer volume of cash moved in this way is enough to highlight the threat to the interests of the Community and the Member States.

The Moneypenny report shows that the effectiveness of the existing controls implemented with a view to combating money laundering is partly undermined by the varying nature of the measures taken to monitor cross-border cash movements. As a result of the widely differing approaches adopted by the Member States, criminals are still able to exploit loopholes and no comprehensive protection has been established at Community level. In the wake of the events of 11 September 2001 the monitoring of transactions conducted by financial institutions has been tightened up. One conceivable response might be greater use of cash to launder money.

European economic integration, which culminated in the introduction of the euro, is forcing a rethink regarding the need for a Community approach in this sphere. Whereas in the past the territorial division of Europe and, as a logical extension, the coexistence of different national currencies may have made disparities in national controls understandable, in the light of the interpenetration of the Member States' economies such disparities are now hard to justify and must increasingly come to be the exception, particularly as strict controls in one Member State may easily result in movements being diverted via a neighbouring Member State which carries out only cursory controls, or indeed no controls at all.

II.   THE COMMISSION PROPOSAL FOR A REGULATION ON CONTROLS ON CROSS-BORDER CASH MOVEMENTS

1.   SUBSTANCE

The aim of the proposal is to complement the controls currently imposed on transactions conducted via financial institutions and so plug any loopholes created by the lack of a uniform Community approach to cash movements. Accordingly, only significant cash movements should be monitored; the threshold triggering controls should be the same as that for transfers through financial institutions, namely EUR 15 000.

According to the Commission proposal, against the background of increasing unease concerning money laundering and, in particular, its role in the financing of international crime and international terrorism a Community approach to controls on cash movements is needed.

The introduction of a control system would make it possible to monitor significant cash movements into or out of the Community without excessively inconveniencing the public or unduly burdening administrations. The Member States which apply controls employ widely differing approaches, ranging from systems based on a formal declaration backed up by intelligence to systems based on almost exclusively on intelligence. Under some systems, a written declaration is required, whereas under others such a declaration is obligatory only if customs requests information. Still other systems make no provision for a declaration. For this reason, a uniform framework governing controls on cross-border cash movements should be established.

The Commission proposal stipulates that every natural person entering or leaving the Community customs territory must declare cash sums of EUR 15 000 or more to the competent customs authorities. The information obtained by means of the declaration procedure may be forwarded to the competent authorities of the Member State in which the person concerned is resident. In specific cases, the information may also be forwarded to the Commission. The powers needed to monitor compliance with the obligation to declare are transferred to the customs authorities. The Member States are required to introduce a procedure for the imposition of penalties in the event of non-compliance with the obligation to declare. Lastly, the proposal makes provision for the forwarding to third states of information suggesting that cash movements may be connected with terrorism.

2.   APPRAISAL

Your rapporteur endorses the Commission’s view that a legislative act supplementing the directive on the combating of money laundering is needed with a view to the introduction of controls on significant cash sums crossing the Community’s external border.

However, in your rapporteur’s opinion that aim can be achieved by means other than the introduction of a universally binding declaration procedure.

Accordingly, Member States should have the option of introducing a disclosure procedure along the lines of that already employed in Germany for many years. An obligation to submit a written declaration will not deter criminals from moving cash sums across borders with a view to laundering the money involved. It would still be possible simply to make no declaration, to give false information when making a declaration or to carry cash in amounts which fall below the threshold triggering the requirement to make a declaration. The declaration procedure proposed by the Commission will not automatically lead to an increased number of controls at the European Union’s external borders. In purely psychological terms, it will likewise not serve to motivate customs officials.

There is a need to monitor cash movements at the Community’s external borders and to supplement Directive 91/308/EEC, which imposes controls on transactions conducted by financial institutions, by introducing appropriate rules which also, and above all, serve to combat money laundering. However, this joint objective can also be achieved by means of the introduction of the disclosure procedure. Under that procedure, a traveller who is carrying a sum of EUR 15 000 or more in cash and who wishes to cross the European Union’s external border would be required to provide information at the request of a customs official. In particular, he or she would be required to disclose the provenance, owner and purpose of the cash. The huge volume of red tape which the declaration procedure proposed by the Commission would generate would disappear and customs officials would be motivated to carry out more controls.

Your rapporteur sees a need for an additional measure in the form of the establishment of a database to be jointly administered by the Member States. On workability grounds, that database should be housed with the European organisation for cooperation in combating international organised crime (EUROPOL), which is already responsible for information management. In this way, all Member States would have the same access to the information obtained in the course of controls carried out at external borders and stored on the database.

Given that Member States would be able to choose between two procedures for conducting controls at the Union’s external borders, your rapporteur feels it would be more appropriate to replace the proposed regulation with a directive to be transposed in detail by individual Member States. The fundamental objective is to ensure that controls are carried out at the external borders. In the light of the successes achieved by both Member States which have introduced a written declaration procedure and those which implement a disclosure procedure, there is a clear case for allowing Member States to choose between the two procedures. This approach would also be consistent with the subsidiarity principle. On the basis of that principle, objectives are laid down at Community level and Member States are free to choose the means of achieving those objectives. In order to provide for such a choice, in technical legal terms the adoption of a directive would be the appropriate course of action.

(1)Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (OJ L 166, 28.6.1991, p. 77), as amended by Directive 2001/97/EC of the European Parliament and of the Council of 4 December 2001 (OJ L 344, 28.12.2001, p. 76).
(2)Document 9630/2/00 rev. 2. of the Council of 7.9.2000.


OPINION OF THE COMMITTEE ON ECONOMIC AND MONETARY AFFAIRS

20 February 2003

for the Committee on Citizens' Freedoms and Rights, Justice and Home Affairs

on the proposal for a regulation of the European Parliament and the Council on the prevention of money laundering by means of customs cooperation

(COM(2002) 328 – C5‑0291/2002 – 2002/0132(COD))

Draftsman: Helena Torres Marques

PROCEDURE

The Committee on Economic and Monetary Affairs appointed Helena Torres Marques draftsman at its meeting of 1 October 2002.

It considered the draft opinion at its meetings of 21 January and 19 February 2003.

At the latter meeting it adopted the following amendments unopposed, with 1 abstention.

The following were present for the vote: Christa Randzio-Plath, chairman; José Manuel García-Margallo y Marfil, Philippe A.R. Herzog and John Purvis, vice-chairmen; Generoso Andria, Pervenche Berès, Hans Blokland, Armonia Bordes, Jean-Louis Bourlanges (for Brice Hortefeux), Renato Brunetta, Hans Udo Bullmann, Manuel António dos Santos (for a full member to be nominated), Harald Ettl (for Giorgos Katiforis), Jonathan Evans, Hélène Flautre (for Alain Lipietz pursuant to Rule 153(2)), Ingo Friedrich, Carles-Alfred Gasòliba i Böhm, Robert Goebbels, Lisbeth Grönfeldt Bergman, Mary Honeyball, Christopher Huhne, Othmar Karas, Piia-Noora Kauppi, Christoph Werner Konrad, Jean Lambert (for Miquel Mayol i Raynal pursuant to Rule 153(2)), Werner Langen (for Ioannis Marinos), Astrid Lulling, David W. Martin, Hans-Peter Mayer, Fernando Pérez Royo, Mikko Pesälä (for Karin Riis-Jørgensen), Alexander Radwan, Bernhard Rapkay, Herman Schmid (for Ioannis Patakis), Olle Schmidt, Peter William Skinner, Charles Tannock (for Mónica Ridruejo), Bruno Trentin, Ieke van den Burg (for Helena Torres Marques) and Theresa Villiers.

SHORT JUSTIFICATION

Horizontal issues

The has been considerable discussion concerning the legal basis of this proposal with many delegations in the Council apparently challenging the legal basis proposed by the Commission (Article 135 TEC). There have been some suggestions that there is no legal basis in the EC Treaty, and that the only option would be a third pillar initiative.

Your rapporteur takes note of this controversy, but considers that this is not a matter for an opinion-giving Committee, but rather for the Committee responsible, and, possibly, the Legal Affairs Committee.

Critical Appraisal

In general terms, your rapporteur welcomes the proposal and supports its main aims and objectives, and she thus hopes that a satisfactory solution can be found as regards the legal basis, possibly on the basis of Article 308 of the Treaty if no other legal basis can be found.

Your rapporteur considers that this is an extremely important proposal which should be adopted as soon as possible. The issue at hand - cross-border cash movements - is not a minor one. Evidence has shown that cash movements across borders generally involve money laundering or the financing of terrorist operations, and that such movements involve enormous sums of money each year.

The scale of the problem was revealed by Operation Moneypenny, carried out by the Member States' customs authorities during a six-month period in 1999/2000. During that period alone, authorities recorded some € 1,6 billion in cash movements. One should also bear in mind that money laundering regulations applicable to financial institutions have been strengthened considerably as a result of the events of September 11 2001. It is therefore probable that cash movements, for which no similar steps have been taken, have increased as a result.

There has also been some criticism against this proposal on the grounds that it would be too bureaucratic and cumbersome to administer. Your rapporteur strongly disagrees with this assertion and points to the fact that declaration based systems exist in many jurisdictions. For example, all travellers to the USA must fill out a similar declaration.

As for the substance of the proposal, your rapporteur sees a few areas where the proposal could be improved.

First, she considers that the definition of cash is not sufficiently broad and is an open invitation to circumvention. Although she is fully aware that one has to draw the limit somewhere as to what, and what not to consider as cash or cash equivalents, the proposed definition is too narrow.

The proposal rightly recognises that cash can take many forms, not only notes and coins, but also bearer bonds and instruments, as well as, cheques. However, the definition of currency (Article 2.3 (a)) should be updated to also cover electronic money stored in electronic purses, prepaid cards and similar devices. A single such card, the size of a normal credit card, may hold considerable sums. The Irish e-money legislation, for example, allows a maximum amount of €5000 per card. Although e-money may not yet be widely used, it will become an increasingly important means of payment and transfer of funds in the near future. Your rapporteur consequently proposes that the definition of cash should be expanded to also cover electronic money.

As indicated above, your rapporteur does find the use of the word "cash" in the proposal somewhat unfortunate as its is in many ways limited in scope. This is evidenced by the Commission's own definition of cash which also (rightly) indicates fungible instruments such as bearer bonds. But what about other traditional, fungible bearers of considerable values such as bars of precious metals? Your rapporteur considers that these too, ought to be covered but that would admittedly stretch the word "cash" too far. She is therefore proposing an additional horizontal amendment applicable to the whole proposal replacing the word "cash" with "cash or other fungible assets". This would also make the text and the recitals more consistent, especially as Recital 9 states that "cash" should encompass "the whole range of fungible assets".

AMENDMENTS

The Committee on Economic and Monetary Affairs calls on the Committee on Citizens' Freedoms and Rights, Justice and Home Affairs, as the committee responsible, to incorporate the following amendments in its report:

Text proposed by the Commission(1)   Amendments by Parliament
Amendment 1
Recital 1

(1)   Money laundering via cross-border cash movements represents a threat to the security and financial interests of the Member States and the Community. This threat can be effectively combated by the customs administrations. Customs officials are present at the borders, where controls are most effective. Indeed, some have built up practical experience in the matter. They are, moreover, able to control both cash and the valuables that are substitutes for it.

(1)   Money laundering via cross-border movements of cash and other fungible assets represents a threat to the security and financial interests of the Member States and the Community. This threat can be effectively combated by the customs administrations. Customs officials are present at the borders, where controls are most effective. Indeed, some have built up practical experience in the matter. They are, moreover, able to control both cash and the valuables that are substitutes for it.

 

(This amendment applies throughout the text. Adopting it will necessitate changing the word "cash" to "cash and other fungible assets" throughout.)

Justification

It is necessary to amend the definition of cash to make it more comprehensive.

Amendment 2
Article 2, point 3, introduction

(3)   “Cash” shall mean:

(3)   “Cash and other fungible assets” shall mean:

Justification

See justification to amendment 1.

Amendment 3
Article 2, point 3 (aa) (new)
 

(3)   (aa) electronic purses, prepaid cards and other forms of electronic money as defined in Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions;

Justification

See justification to amendment 1.

Amendment 4
Article 2, point 3 (ca) (new)
 

(3)   (ca) other fungible assets, including, but not limited to, bars of precious metals.

Justification

See justification to amendment 1.

(1)OJ C 227, 24.9.2002, p. 574.


COMMITTEE ON LEGAL AFFAIRS AND THE INTERNAL MARKET

Mr Jorge Salvador Hernández Mollar

Chairman

Committee on Citizens' Freedoms and Rights, Justice and Home Affairs

BRUSSELS

Subject:   Legal basis of the proposal for a regulation of the European Parliament and the Council on the prevention of money laundering by means of customs cooperation

(COM(2002) 328 - C5-0291/2002 - 2002/0132(COD))

Dear Mr Hernández Mollar,

1.   By letter of 16 January 2003, the Committee on Citizens' Freedoms and Rights, Justice and Home Affairs requested that the validity and appropriateness of the legal basis of the above-mentioned proposal be verified. The Commission had chosen Article 135 of the EC Treaty relating to customs cooperation which provides for the codecision procedure to be applied. The rapporteur, Mr Ingo SCHMITT (PPE-DE), considered that Article 95, relating to the internal market and also providing for the codecision procedure (Amendment 1) should be taken as an additional legal basis. Mr Schmitt also tabled an amendment seeking to replace the proposal for a regulation with a proposal for a directive (amendment 2).

The Commission indicated in the explanatory memorandum that the proposal was aimed at complementing Council Directive 91/308/EEC of 10 June 1991 (on prevention of the use of the financial system for the purpose of money laundering, OJ L 166, p.77), by means of controls on movements of significant sums in cash across the external borders of the Community.

The aim of the proposal is therefore to establish an ‘obligation to declare’ on persons entering or leaving the Community customs territory(1); to make the use of the uniform declaration form obligatory(2); to provide for the imposition of sanctions for failure to make such a declaration(3), and to establish a mechanism for the exchange of information gathered as a result of controls to verify declarations(4).

It is worth remembering that Directive 91/308/EEC establishes common rules on the taking-up and pursuit of activities as self-employed persons. This Directive, based on Article 47(2), first and third sentences of the EC Treaty and on Article 95 of the EC Treaty imposes an obligation on credit and financial institutions and on certain legal and natural persons to check transactions by service providers involving sums of more than EUR 15000. However, the directive does not provide for the exchange of information between authorities responsible for combating money laundering.

2.   Under the system of Community competences, the choice of legal basis for a legal act cannot be determined solely on the basis of what an Institution considers to be the aim pursued but must rest on objective factors which are amenable to judicial review. These include the purpose and the content of the legal act in question.

Therefore, in order to determine the appropriate legal basis, it is necessary to establish whether the measures to be adopted predominantly affect a specific field of action, having only a secondary impact on other Community policies, or whether there are two equally important objectives. The Court of Justice has consistently ruled that a single legal basis suffices if the former is true(5); whereas joint legal bases are possible if the latter applies so long as the procedures specified in the appropriate provisions are not incompatible(6).

It is therefore necessary to determine whether in the case in point the proposal for a regulation, which is aimed at combating money-laundering, should be based on Article 135 of the EC Treaty, or whether it also constitutes a harmonisation measure within the meaning of Article 95 of the EC Treaty.

3.   Article 95 of the EC Treaty

Pursuant to Article 95 of the EC Treaty, the Council has the power to adopt, acting under the codecision procedure, the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market. Article 95(2) expressly excludes fiscal provisions and those relating to the free movement of persons from the scope of this article although it may possibly be applicable to the free movement of capital.

The principal aim of the proposal for a regulation under discussion as established notably under recital 6 is to supplement existing legislation by having recourse to customs co-operation arrangements in order to combat money-laundering. ‘This should serve to harmonise the control methods instituted by national law and enable all the Community’s customs administrations to gather information on cash entering or leaving the Community customs territory in sums equal to those covered by Directive 91/308/EEC’. There is therefore no disputing that the text essentially concerns customs cooperation and that the legal basis should correspond to this objective.

One may, no doubt, note that the provisions of the text establishing an obligation to declare sums of cash when crossing the borders of the Community are not without relevance to the ‘movement of capital’. However, on the one hand, its impact is of a secondary nature and does not constitute the principal objective of the act and, on the other hand, the ‘obligation to declare’ at the external borders of the Union cannot be considered an obstacle to the free movement of capital ‘within the Union’.

While Directive 91/308/EC, which the proposal for a regulation under discussion seeks to complement, may well rest on Article 95 of the EC Treaty and on Article 47(2), first and third sentences, of the EC Treaty, this does not constitute a clear-cut precedent.

4.   That said, even if the Committee on Citizens' Freedoms and Rights, Justice and Home Affairs did not pose this question, it is worth examining the appropriateness of the legal basis chosen by the Commission for this proposal for regulation, i.e. Article 135 of the EC Treaty.

Article 135 of the EC Treaty provides that the Council, acting under the codecision procedure, shall adopt measures in order to strengthen customs cooperation between Member States and between the latter and the Commission. The article, however, expressly states that the Council may act only within the scope of the EC Treaty and that the measures adopted may not concern the application of national criminal law or the national administration of justice.

However, combating money-laundering is not one of the objectives of the Community listed under Article 2 of the EC Treaty nor is it among the activities of the Community provided under Article 3 of the EC Treaty.

5.   That said, if one rules out Articles 135 and 95 of the EC Treaty it is difficult to establish a more appropriate legal basis.

Under Article 47 of the EC Treaty the Council shall, acting under the codecision procedure, issue directives for the coordination of the provisions laid down by law, regulation or administrative action in Member States concerning the taking-up and pursuit of activities as self-employed persons.

In the case in question, however, the proposal does not to establish rules governing the taking-up and pursuit of activities as self-employed persons. Instead, it establishes obligations for any person crossing an external border of the Community customs territory, whether or not one of the freedoms of movement within the Community is being exercised.

Article 308 of the EC Treaty gives the Council the power to take appropriate measures, acting unanimously on a proposal from the Commission and after consulting the European Parliament, if action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community, and if the Treaty has not provided the necessary powers.

However, combating money-laundering is not one of the objectives of the Community listed under Article 2 of the EC Treaty nor is it, consequently, among the activities of the Community provided under Article 3 of the EC Treaty.

There therefore remain two possibilities.

Article 56 et seq. of the EC Treaty: all restrictions on the movement of capital between Member States and between Member States and third countries are prohibited (Article 56). Article 57(2) provides that the Council may, acting by a qualified majority on a proposal from the Commission, adopt measures on the movement of capital to or from third countries involving direct investment - including investment in real estate - establishment, the provision of financial services or the admission of securities to capital markets. Article 58 provides that the restrictions on the movement of capital are without prejudice to the right of Member States to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security (Article 58(1)b). Article 58(3) provides that the measures and procedures concerned may not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments.

Articles 56 et seq. could constitute a legal basis under the first pillar but would exclude codecision.

Having explored the possibilities under the first pillar, one should look at those under the third pillar.

Article 30 of the Treaty on European Union provides for common action of the Member States in the field of police cooperation. This action includes operational cooperation between the competent authorities, including the police, customs and other specialised law enforcement services of the Member States in relation to the prevention, detection and investigation of criminal offences (Article 30(1)a), and the collection, storage, processing, analysis and exchange of relevant information, including information held by law enforcement services on reports on suspicious financial transactions, in particular through Europol, subject to appropriate provisions on the protection of personal data (Article 30 (1)b).

In view of the above, having considered the legal implications of the issues at stake and the legal arguments put forward by Parliament's Legal Service, at its meeting of 20 February 2003 the Committee on Legal Affairs and the Internal Market decided unanimously(7) that it would not be appropriate to take Article 95 of the EC Treaty as an additional legal basis.

Yours sincerely,

Willi Rothley

First vice-chairman

(1)Article 1(1) of the proposal for a regulation
(2)Article 1(2) and annex to the proposal
(3)Article 5 of the proposal for a regulation
(4)Article 3 of the proposal for a regulation
(5)Judgment of 4 October 1991, Parliament v Council, Case C-70/88, ECR 1991, p. I-4529.
(6)Judgment of 11 June 1991, Commission v Council, Case C-300/89, ECR 1991, p. I-2867
(7)The following were present for the vote: Willi Rothley, vice-chairman and acting chairman; Marie-Françoise Garaud, draftsman; Paolo Bartolozzi, Michel J.M. Dary, Bert Doorn, Janelly Fourtou, Fiorella Ghilardotti, José María Gil-Robles Gil-Delgado, Malcolm Harbour, The Lord Inglewood, Piia-Noora Kauppi, Carlos Lage, Kurt Lechner, Klaus-Heiner Lehne, Neil MacCormick, Arlene McCarthy, Manuel Medina Ortega, Marcelino Oreja Arburúa, Carlos Ripoll y Martínez de Bedoya, Anne-Marie Schaffner, Ioannis Souladakis, Marianne L.P. Thyssen, Diana Wallis and Stefano Zappalà.

Last updated: 29 January 2004Legal notice