Explanatory Memorandum to COM(2002)328-2 - Prevention of money laundering by means of customs co-operation - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2002)328-2 - Prevention of money laundering by means of customs co-operation. |
|---|---|
| source | COM(2002)328  |
| date | 25-06-2002 |
Contents
In March 1999 the Council's Customs Cooperation Group agreed to organise a joint customs surveillance operation to identify cross-border cash movements and gather statistics, which had so far been patchy in this field. All Member States took part in Operation Moneypenny, which ran from 1 September 1999 to 29 February 2000.
It revealed a considerable number of cross-border movements of currency and other liquid assets. Connected with organised crime, these movements were particularly significant in Member States with legislation controlling cash flows. To permit effective and coordinated action against organised crime, the Moneypenny report concluded that, in the interests of the Union, a number of legal loopholes should be plugged and that those Member States which had yet to do so should be invited to adopt the relevant legislation.
At its meeting on 17 October 2000 the Jumbo Council called on the Commission to examine whether a Community act instituting more widespread controls on cash flows and providing for the Member States to exchange information with each other and with the Commission could actually increase the effectiveness of the daily struggle in the Union against money laundering.
At its meeting on 16 October 2001 the Jumbo Council asked the Commission to continue preparing an analytical report. This document examines whether, and in what circumstances, Community-level controls are feasible and desirable in the field in question. Its conclusions suggest that such controls could usefully complement the battery of money laundering legislation currently applicable in the Union. The main thrust of the report is summarised below.
To combat money laundering, Directive 91/308/EEC, i as amended, provides for Community-wide controls on currency movements in excess of EUR 15 000 when the transactions are made via the financial institutions.
However, though some Member States have introduced controls on cash movements at their national borders, others have not. Yet the amount of cash being transported is sufficient to present a potential risk to Community and national interests. The Moneypenny report shows that the present controls to prevent money laundering could be undermined by the disparate nature of controls on cross-border cash movements. The highly divergent approaches adopted by the Member States undermine protection at Community level. Since the events of 11 September 2001 controls on money movements via the financial institutions have necessarily been tightened. Cash could increasingly be carried as an alternative solution.
The Commission therefore considers that the Money Laundering Directive should be complemented by a measure introducing controls on large sums of cash crossing the Community's external frontier. For the controls to be effective, a system is also needed whereby the Member States can exchange information on suspicious movements with each other and with the Commission.
The obvious advantages of such an approach in terms of prevention and law enforcement have to be reconciled with the need to adhere to single market principles, and especially the free movement of capital.
1.3.1. Any proposal would have to complement the controls applied to money transfers via the financial institutions and so plug any loopholes created by the present lack of a uniform Community approach to cash movements. Accordingly, only significant cash movements should be controlled. The threshold for controls should therefore be the same as that applicable to transfers through financial institutions, namely EUR 15 000.
1.3.2. The introduction of a control system will enable significant inward and outward cash movements to be monitored without excessively inconveniencing the public or increasing the administrative burden. Those Member States which apply controls have followed a diversity of approaches. These range from a system based on a formal declaration backed up by intelligence to approaches based almost exclusively on intelligence. Some Member States require a written declaration, while in others a declaration is obligatory if customs ask for information. Still others require no declaration.
Those Member States which apply declaration-based systems consider that obligatory declarations offer more clarity, greater legal certainty and more legally usable information for the purposes of risk management.
Those Member States without declaration systems, which in many cases favour risk analysis, fear that a declaration-based system would generate a mass of paperwork and take up customs resources when almost all the information obtained will come from legitimate travellers (rather than the targeted criminals). Proponents of a declaration-based system argue that its effect as a deterrent should not be underestimated and that the resources required are relatively limited when compared with the results and benefits obtained, especially if the threshold is high.
At Community level, the considerations are more complex still. Given the very divergent approaches applied and the fact that some Member States have very little experience of enforcing controls on cash movements, any system must be clear and uniformly applicable throughout the Union. However, a system based exclusively on intelligence would, since it admits divergent practices by customs administrations, offer little guarantee of a uniform approach.
In the interests of clarity, a uniform approach comprising fair warning to travellers, a universal obligation to declare, a common threshold and a clear standard form for use in all Member States seems the best way of introducing uniform controls.
1.3.3. In the past Member States applying controls at their national frontiers did so by virtue of Article 58 of the EC Treaty. However, uniform protection of the Community's external frontiers and the strengthening of Community instruments against money laundering will inevitably deprive such controls of their legitimacy or, at the very least, render them incidental. They are, moreover, hard to reconcile with the spirit and principles of the internal market, especially since the introduction of a single currency.
Any system introduced at Community level must guarantee the competent authorities of Member States which do not currently control such cash movements under national law the powers to apply effective controls.
This entails not only the power to administer and monitor the declaration system but the power to create penalties proportionate to the offence committed. The possibility of detaining cash for a limited period, a possibility usually intended to allow intelligence to be gathered in doubtful cases (particularly where funds are being channelled to a non-member country), will be crucial.
However, any proposal must respect the principle of the free movement of capital, meaning that any measure adopted must be confined to suspicious movements. The system must therefore be designed to enable suspicious movements to be identified and dealt with under the relevant Community or national legislation.
It is therefore logical that the customs administration should handle declarations. Its services are located along the external border and process declarations as a routine part of their work. Their powers include controlling valuables (gold, diamonds, etc.) that can be used as an alternative to cash. Using customs would be the most practical solution for the public and economise the Member States' resources. Customs administrations not only have the requisite experience of exchanging such information, they also have the procedures necesary for secure and rapid communications. Relevant information gathered by a customs administration would be shared as appropriate with the national financial control body responsible for money laundering. Special attention must also be given to exchanging information with third countries in serious cases, especially where terrorism might be involved. Provision must be made for the conclusion of special administrative arrangements in this field with the Union's major partners.
Article 1 establishes the principle of an obligatory declaration on entering or leaving the Community customs territory and defines the scope of that obligation. It states that only cash movements of EUR 15 000 or more have to be declared.
The Article also defines the geographical scope of the obligation, which is basically that of the Community customs territory. To ensure complementarity with Directive 91/308/EEC, specific provision has been made with regard to those parts of the Community customs territory to which that Directive does not apply. In both these areas and the Community customs territory, cash movements must normally be declared. This obligation applies on entry and exit. In these circumstances, the customs administration is both geographically and operationally best placed to enforce this obligation.
The form of the obligatory declaration has also been laid down, otherwise it would be void. Imposing the use of a standard form will help the customs administrations maximise synergies and exchange information more easily.
In order to dispel any doubt the declaration, though it can be lodged on crossing the border, cannot be lodged at a later date. This rule is necessary for controls to be effective.
The obligation to declare is imposed on the person carrying the sum, whether or not they are the owner.
Article 2 contains the definitions necessary for the uniform interpretation of the Regulation. The definition of 'competent authorities' is intended to include the customs services, which are most directly concerned, but also non-customs services (police, etc.) which may, according to their remit, be called on to help implement the Regulation by receiving and controlling declarations. As for the definition of 'cash', the aim is to encompass all fungible assets.
Article 3 governs exchanges of information. It establishes the automatic right to transmit information gathered in the course of controls. Such information will in all cases be accessible both to the customs services (Member State of residence and, as the case may be, the Member State of origin or destination) and the money laundering authorities of the Member States concerned. Where money laundering appears to involve the proceeds of fraud or other illegal activities affecting the Community's financial interests, the information gathered will be transmitted to the Commission.
Article 4 invests customs officials with the powers needed to exercise effective control.
Article 5 supplements these powers by providing for penalties to be imposed. This Article refers only to penalties for failure to lodge a declaration. It does not address the penalties for any money laundering activities that might be detected by the customs controls provided for in this Regulation. Such offences are punishable under a specific body of legislation, which is quite separate from Community customs law. This legislation covers, for example, the penalties already provided for by Community law i and the legislation under preparation in this area (e.g. the draft Regulation on the integration of administrative measures and penalties in the field of direct expenditure i).
This text places a cap on penalties. Otherwise Member States could impose fines so high as to undermine or indeed negate the principle of the free movement of capital.
Article 6 specifically addresses cash movements in connection with terrorism. It provides for information gathered through the declaration referred to in Article 1 to be transmitted, under certain conditions, to non-member countries.