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Regulation on controls on cash entering or leaving the Union

In “Civil Liberties, Justice and Home Affairs - LIBE”

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For a brief overview of the key points of the adopted text and its significance for the citizen, please see the corresponding summary note.

In the ‘Action Plan to strengthen the fight against terrorist financing’ presented in February 2016, the Commission undertook the commitment to put forward a package of measures ‘to disrupt and cut off the financial sources of criminals and terrorists.’ In this context, the Commission presented on 21 December 2016 three sets of measures: a Regulation for the mutual recognition of asset freezing and confiscation orders; a new Directive to criminalise money laundering; and an amended Regulation on cash controls.

In 2016, in its conclusions on the fight against the financing of terrorism, the Council underlined the importance of achieving rapid progress on legislative actions identified by the European Commission, including measures against illicit cash movements, and called on the European Commission to submit amendments to the Cash Control Regulation no later than the fourth quarter of 2016.

The proposal for a new regulation on cash movements, put forward by the Commission, is intended to replace the existing Regulation 1889/2005 and to reinforce current rules. The 2005 regulation complemented the existing rules on combatting money laundering and terrorist financing and created an obligation to provide a cash declaration for anybody crossing EU borders with more than €10 000 in cash. Although the Commission evaluation showed that overall performance of the regulation was satisfactory, some shortcomings and challenges has been identified. For example:

  • the regulation does not cover all ways to transfer cash across the borders (post, freight or courier shipments are not included),
  • the definition of “cash” is not precise enough and does not take into account new means,
  • sanctions for non-declaration differ in Member States,
  • the exchange of information between authorities is limited to cases of illegal activities and remains optional.

The proposal aims at closing these gaps, by extending the definition of cash as well as the regulatory scope to include all cross-border cash movements: it imposes a disclosure obligation for unaccompanied cash (such as cash sent in freight or parcel consignments). It would also allow the authorities to act upon lower amounts of cash in case of suspicions of illicit activity. Under the new definition, cash is divided into four broad categories:

  • currency;
  • bearer-negotiable instruments, such as bonds, shares, traveller's cheques;
  • commodities used as highly liquid stores of value, such as gold bars; and
  • prepaid payment cards not linked to a financial account.

Moreover, the proposal introduces several provisions on enhanced information exchange between competent authorities of Member States, but also with non-EU countries in specific cases, and requires the competent authorities to actively transmit the information collected to the national Financial Intelligence Units (FIU).

The Commission transmitted the proposal to the European Parliament and the Council for decision in accordance with the ordinary legislative procedure. It was also referred for opinion to the European Economic and Social Committee (EESC) and the Committee of the Regions (CoR). The EESC’s has adopted its opinion on 27 April 2017. The EESC supported the Commission's proposal and stressed the need to improve cooperation between competent authorities and Member States, while strengthening data protection mechanisms. It also proposed to include in the definition of cash, from the outset, other highly liquid commodities in addition to gold. Moreover, the EESC recommended that, following a comprehensive study and consultation of all the parties concerned, the Commission should draw up a plan to reduce the cash use in the EU, and welcomed the suppression of EUR 500 bills. The study, published in December 2017, concludes that cash restrictions would not significantly address the problem of terrorism financing. It indicates, however, that a prohibition of high value payments in cash could have a positive impact on the fight against money laundering. These conclusions were endorsed by the Commission's report on restrictions on payments in cash issued in June 2018. In light of these findings, the Commission does not intend to present any legislative proposal on the matter.

The Council's Working Party on Customs Union has held several discussions on the proposal in the first half of 2017 and COREPER (Permanent representatives' committee) agreed its position on the draft regulation on 28 June 2017, opening the way for the negotiations with the European Parliament.

Within the Parliament, the proposal has been assigned jointly to the Civil Liberties, Justice and Home Affairs Committee (LIBE) and the Committee for Economic and Monetary Affairs (ECON). The Committee for Legal Affairs (JURI), asked for opinion, decided not to give one.

The final report, adopted by ECON and LIBE Committees on 4 December 2017, clarifies some key provisions, such as definition and differentiation of “accompanied cash” and “unaccompanied cash”, as well as the designation of the person responsible for the declaration of accompanied cash. Members of both Committees called for a more efficient and swift information exchange and ask the Commission to assess the possibility of creating a Union Financial Intelligence Unit by 2019, as well as to present a legislative proposal, if appropriate, in order to introduce a coordinated set of penalties across the Union. Moreover, the report introduces a strong review clause, allowing for a regular update of the Regulation (every three years). The Parliament as a whole endorsed the negotiating mandate on 13 December 2017.

On 23 May 2018, the Parliament and the Council reached a provisional agreement on the proposal. COREPER endorsed the agreement on 27 June 2018. The European Parliament adopted the text in plenary session on 12 September 2018 and the document has been signed by the Presidents of the European Parliament and of the Council of the European Union on 23 October 2018. The legislation has entered into effect on 2 December 2018.

References:

Further reading:

Author: François Théron, Members' Research Service, legislative-train@europarl.europa.eu

As of 20/11/2019.