Key Notes

Legislation Designed to Combat Money Laundering

Money laundering entails disguising capital as legally earned income in order to conceal its origin as the proceeds of crime. International financial channels are used increasingly for this purpose by criminals who take advantage of globalisation and technological progress as well as divergences between national legal systems. This is a large-scale phenomenon, since laundered funds, according to the IMF, represent between two and five per cent of global GDP. Governments have responded to this major problem by adopting a number of international legal instruments in the framework of international organisations, namely the United Nations, the OECD and the Financial Action Task Force on Money Laundering (FATF).

In the European Union, the fight against money laundering is part of the effort to create an area of freedom, security and justice (first pillar of the EU Treaty). In the conclusions of the Tampere European Council, the Heads of State and Government who form the European Council noted that ‘Money laundering is at the very heart of organised crime’ and expressed their resolve to root it out ‘wherever it occurs’. In addition, provision has been made in the context of the third pillar for a series of measures designed to combat this phenomenon more effectively through the mutual recognition of criminal decisions on the freezing of assets found to be the proceeds of crime.

Following the events of 11 September 2001, particular attention has been devoted to the fight against these activities in the light of revelations that money-laundering operations, which have always been closely associated with the drugs trade, are also conducted by terrorist organisations. For this reason, the fight against money laundering has become part of the strategy for combating international terrorism, as reflected in the action plan of the European Union on the fight against terrorism.

EU action against money laundering under the first pillar of the EU Treaty (powers of the European Union)

The fight against money laundering in the context of the first pillar is essentially based on the Directive of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering, the scope of which was extended by an amendment adopted in 2001. This first instrument requires credit and financial institutions to inform the competent authorities of any fact which might be an indication of money laundering. The disclosure in good faith of such information does not constitute a breach of banking secrecy. Nevertheless, some cross-border money movements escape these controls. The year 2002 saw the presentation by the Commission of a proposal for a Regulation on the prevention of money laundering by means of customs cooperation. This proposal introduces an obligation to declare movements of sizeable cash sums across the external borders of the EU.

Since the Directive was first adopted, the Group of the European People’s Party has highlighted its shortcomings on several occasions. The rapporteur on the amendment of the Directive in the European Parliament was Mr Klaus-Heiner Lehne of the EPP-ED Group. The main focus of the negotiations on the proposal for an amended Directive centred on its implications and consequences for the work of solicitors.

The new instrument contains various major innovations: the inclusion of non-financial businesses and economic sectors and a ban on the laundering of the proceeds of all organised crime, not just drug trafficking, the extension of the Directive to art dealers, the reduction of the customer-identification threshold for casinos to purchases or sales of gambling chips with a value of €1 000 and the inclusion in the Directive of a clause enabling Member States to exempt notaries, independent legal professionals, auditors, external accountants and tax consultants from the declaration requirement in order to protect the confidential nature of their relationship with their clients. The agreement between the Council and Parliament on the content of the final version paved the way for the adoption of the Directive in December 2001.

Another member of our Group, Mr Ingo Schmitt, was entrusted with the task of reporting on the proposal for a Regulation on the prevention of money laundering by means of customs cooperation. Mr Schmitt’s report was tabled on 25 March 2003. The proposal introduces an obligation to declare movements of sizeable sums of money across the external borders of the EU; anyone entering or leaving the territory of the EU carrying €15 000 or more in cash would be required to declare the amount in his or her possession to the customs authorities. If there were indications that the cash was being used for laundering operations, the content of the declaration or the result of customs controls in which the above amount of cash was discovered would be automatically communicated to the competent authorities of the relevant Member State and, in certain circumstances, to the Commission. The proposal also provides for sanctions and for exchanges of information with countries outside the EU.

Parliament’s rapporteur emphasised the need to combat money laundering more efficiently by supplementing the existing legislation but expressed doubts about an approach involving a universally binding declaration procedure. In place of such a measure, he recommended the adoption of a framework within which the Member States would be free to determine the best approach to follow, which might take the form of a procedure involving disclosure on demand. He also called for the creation of a database for the storage of information collected in the course of the procedure; the database would be jointly administered by the Member States and housed with Europol.

Criminal proceedings for money-laundering, being part of the third pillar, are a matter for the Member States

In the realm of judicial cooperation in criminal matters, the definition of the crime of money laundering has been harmonised in Europe by virtue of the Council of Europe’s Convention of November 1990 on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime. Since the Tampere summit, a series of measures have been adopted with a view to enabling Member States, in the framework of mutual judicial assistance, to collaborate on the conduct of investigations and prosecutions relating to financial crimes. These measures have also prompted them to harmonise their substantive and procedural provisions in the domain of criminal law. The EPP-ED Group has encouraged every initiative designed to develop a direct contacts between the investigators, examining magistrates and prosecutors of the Member States as well as every measure enabling Member States to request information on banking transactions. Our Group sees a need for the creation of a European cooperation unit with the aim of guaranteeing the most effective possible flow of information. In the future, this unit could become one of the components of Eurojust.

OUTLOOK

Money laundering is an ever more complex process involving more and more sophisticated forms of financial organisation. The networks engaged in this activity try to imitate legal commercial operations as faithfully as possible.

The development of the economic climate, financial deregulation and better countermeasures have prompted criminals to devise new solutions, which then require the forces of law and order to adapt to these new practices in their efforts to combat money laundering. This is another reason why the EPP-ED Group believes that these efforts should be pursued within an international framework. In the European Parliament the Group is striving to promote the adoption of new countermeasures which take into account the use of electronic payment facilities and the Internet for money-laundering purposes; it also strongly emphasises the need to encourage and simplify exchanges of information between Member States on pending criminal proceedings, on suspects and on quantities of frozen assets.

Lastly, the Group has expressed its support for the Convention’s draft Constitutional Treaty, which would strengthen the powers of the European Union in the domain of judicial cooperation in criminal matters.

Mercedes Alvargonzález, Advisor