PREVENTION OF MONEY LAUNDERING
Draft Proposal amending Council Directive 91/308/EEC of 10 June 1991 on prevention and use of the financial system for the purpose of money laundering outcome of the 2nd reading of the European Parliament (Brussels 2-5 April 2001).
Commission opinion on European Parliament amendments to the Council's common position regarding a draft Directive amending Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering.
||Articles 47(2) and 95 EC; co-decision; qualified majority voting
||(b) 13 June 2001|
|Forwarded to the Council:
||(b) 14 June 2001|
|Deposited in Parliament:
||(b) 26 June 2001|
|Basis of consideration:
||EM of 19 July 2001
|Previous Committee Report:
||None; but see (20393) 10541/99: HC 34-xxviii (1998-99), paragraph 17 (20 October 1999) and HC 23-xxx (1999-2000), paragraph 11 (22 November 2000)
|Discussed in Council:
||ECOFIN 16 October 2001
27.1 The Council adopted the First Money Laundering
Directive in 1991. The previous Committee reported on 20 October
1999 on a Commission proposal to amend the Directive, and cleared
that document on 22 November 2000, before the adoption of a common
position by ECOFIN.
27.2 On 5 April 2001 the European Parliament voted
on second reading for a total of 15 out of 27 amendments to the
common position. On 13 June 2001 the Commission delivered a negative
opinion on the amendments proposed by the European Parliament.
The Commission's opinion
27.3 In its opinion the Commission explained that
it was unable to accept the 15 amendments of the European Parliament
to the Council's common position. It considered that the amendments
adversely reduced the scope of the Directive, imposed excessive
obligations disproportionate to the risks addressed, were unnecessary,
unclear or could not meaningfully stand alone where related amendments
were not also adopted. The Commission accepted the principle of
amendment 18, which raised the threshold that determines the exemption
from the customer identification obligation in respect of certain
27.4 The Commission opinion noted in particular
the following amendments. Amendment 22, and its related amendment
to the recitals, would change an optional provision of the common
position into a prohibition on Member States from requiring lawyers
to make suspicious transaction reports. The common position contained
an exemption, by which a lawyer would not be required to make
such a report where he was representing a client in proceedings,
or advising a client, except in those cases where advice was being
sought to further a criminal purpose. The common position allowed
Member States to extend the exemption to auditors, external accountants
and tax advisors.
27.5 The Commission expressed some sympathy with
the Parliament's wish to make it obligatory not to require the
reporting of suspicions of money laundering based on information
obtained by lawyers and notaries in assisting their clients in
legal proceedings or in advising them. The Commission did not
accept that the same considerations applied in the case of the
non-legal professions, and it considered that the Parliament's
amendments would provide an excessive exemption for such professions.
27.6 The Commission did not accept the Parliament's
amendment 22 which would prevent Member States from using information
from persons making reports for purposes other than combating
27.7 The Parliament's amendment 25 would replace
the criterion of 'good faith' for disclosures of information to
the relevant authorities (in which case the disclosure shall not
be a breach of any duty owed in public or private law) by a test
which would excuse such liability unless the information disclosed
'is untrue deliberately or owing to gross negligence'. The Commission
considers that the good faith test corresponds to international
standards and has not caused difficulties in practice.
The Government's view
27.8 In her Explanatory Memorandum of 19 July, the
Economic Secretary to the Treasury (Ruth Kelly) indicates that
the Government shares the concerns expressed by the Commission
about the European Parliament's amendments. The Minister comments
"It would not be acceptable
to the UK authorities to be required to weaken our existing domestic
anti-money laundering controls. One of the principles of the 1991
Directive was that it was permissive, allowing (indeed requiring)
Member States to adopt more stringent controls where there were
perceived risks to the integrity of their financial system. We
have taken advantage of this permissiveness in a number of areas.
Unfortunately, this principle has been undermined by the Parliament's
27.9 The Minister refers to amendments 22, 23 and
25 as ones to which the UK is strongly opposed, and comments on
each amendment as follows:
"Reports from lawyers are currently required
under UK law. Specifically excluding all forms of legal advice
from a reporting requirement would weaken the UK's existing anti-money
laundering controls, especially where the advice was sought to
further a criminal purpose.
"It is vital to include all gatekeepers to the
financial system within anti-money laundering controls
this was one of the main advances agreed in the Council's Common
"In the UK, as in other Member States, we currently
use intelligence gathered from Suspicious Transaction Reports
for wider crime fighting purposes beyond combating money laundering.
We believe that the ability for Member States to do this is necessary
for the effective control of serious crime, and do not agree with
the Parliament that doing so would be a contravention of the European
Convention on Human Rights. Such use is already permitted under
the 1991 Directive. Any restriction on our current use of this
information would constitute a weakening of our law enforcement
"We are concerned that Amendment 25 may be perceived
by financial institutions as a weakening of the indemnity given
to our reporting institutions when they breach client confidentiality,
and as such may well lead to a loss of confidence in their ability
to report all suspicions. Such doubts may at the very least, introduce
greater delays into the reporting process, and may even lead to
fewer reports being made. This would again be of great concern
to the UK.
"The UK agrees with the Commission's opinion
that there are a number of other amendments where the Parliament
has weakened the Directive, and on which we believe further dialogue
with the Parliament would be helpful.
"Nevertheless, the UK also recognizes that under
the co-decision procedure, the Council will need to reach agreement
with the Parliament and that a compromise may be possible with
respect to some of the amendments without harming the UK's anti-money
laundering systems. It is likely that such a compromise will have
to be reached within the context of the conciliation procedure.
The UK would be content to accept the Parliament's Amendment 18,
which raises the threshold determining exemption from the customer
identification obligation in respect of certain insurance contracts."
27.10 We are grateful to the Minister for her
helpful Explanatory Memorandum on the Commission's opinion. We
share the concerns expressed by her about the amendments proposed
by the European Parliament, and believe it to be singularly inopportune
to be weakening the existing system for preventing money laundering.
27.11 In particular, we think that amendment
25 would have the effect of imposing a duty on those making disclosures
to make efforts to establish that the information they disclose
is true. We believe this would be too burdensome and would seriously
impede reporting. We consider that it should be sufficient that
the disclosure is made in good faith.
27.12 We note the possibility that the Conciliation
Committee may soon reach agreement on a joint text, which
may be adopted shortly thereafter. In the meantime, we clear the