12. Controls on cross-border cash movements
| (a)
(23610)
10404/02
COM(02) 328
(b)
(24711)
11151/03
COM(03) 371
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Commission Report on controls on cross-border cash movements and draft Regulation on the prevention of money laundering by means of customs co-operation.
Amended draft Regulation on the prevention of money laundering by means of customs co-operation.
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| Legal base | (b) Articles 95 and 135 EC; co-decision; QMV
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| Document originated | (b) 1 July 2003
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| Deposited in Parliament | (b) 10 July 2003
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| Department | HM Treasury/HM Customs and Excise
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| Basis of consideration | (b) EM of 16 July 2003
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| Previous Committee Report | (a) HC 152-xxxvii (2001-02), paragraph 5 (17 July 2002) and HC 63-xii (2002-03), paragraph 1 (12 February 2003)
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| To be discussed in Council | No date set
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| Committee's assessment | Legally and politically important
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| Committee's decision | (Both) Not cleared; further information requested
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Background
12.1 On 17 October 2000 the Council concluded that cross-border
movements of cash presented a potential risk to Community and
national interests and that the current very diverse approaches
to control by the Member States suggested that greater consistency,
supported by new provisions for information exchange, was required.
The draft Regulation is proposed by the Commission in response
to the Council's request for a proposal aimed at rendering existing
national provisions more consistent and providing for the exchange
of information.
The document
12.2 Document (b) contains the modified position adopted by the
European Commission in response to amendments proposed by the
European Parliament at first reading of the original draft Regulation
(document (a)).
12.3 Overall, the current position remains largely
unchanged in that the Commission has accepted (in full or in part)
only five of the Parliament's 23 proposed amendments.
12.4 The proposal envisages the introduction of an
obligation to declare any export from, or import into, the EU
of cash sums of 15,000 or more. According to Article 1 the requirement
to make a written declaration to the Customs authorities would
apply to every natural person, irrespective of nationality, crossing
the external border of the EU but not to cross-border cash movements
within the EU. In order to check compliance with the obligation
under Article 1, Article 4 grants Customs authorities certain
investigatory powers, including the power to search persons and
baggage and to detain any cash generally for up to three days.
12.5 Article 3 covers the exchange of information
and would grant competent authorities an automatic right to transmit
information to Customs services of other Member States and to
authorities concerned with money laundering.
12.6 Article 5 makes provision for the imposition
of civil penalties for failure to make a declaration or for making
an inaccurate or incomplete declaration. These penalties will
be in addition to any criminal penalties for any money laundering
offences. The text also provides for caps on penalties which,
for the purposes of this Regulation, are restricted to a maximum
of 25% of the sum carried.
12.7 Article 6 specifically addresses cash movements
in connection with terrorism, and provides that, in such cases,
information about cash transactions may be provided to non-Member
States.
12.8 The Commission's amended proposal differs from
the original only in that it is now based on Article 95 EC as
well as Article 135 EC at the suggestion of the European Parliament
(Recital 6).
12.9 In addition, the Commission has accepted the
European Parliament's amendment to limit to a maximum of one month
the period for which Customs authorities may detain cash.
12.10 The other three amendments are technical in
nature and concern the definition of cash, the definition of the
authorities which would receive information where detection of
cash suggested evidence of money laundering, and the name of the
Official Journal consequent upon changes made by the Treaty of
Nice.
The Government's view
12.11 In her Explanatory Memorandum of 16 July 2003
the Paymaster-General (Dawn Primarolo) writes as follows:
"As the Commission's proposal remains largely
unchanged, the Government's opposition to the proposal therefore
remains for broadly the same reasons as set out in the original
Explanatory Memorandum. In addition, the Government's strong
preference for a Third Pillar instrument as described in paragraph
11 of the earlier Explanatory Memorandum is reinforced by the
success of the extended cash seizure and forfeiture scheme in
the Proceeds of Crime Act 2002. Since these provisions came into
force on 30 December 2002, Customs and Police have jointly seized
in excess of £28 million of suspected criminal cash and
initiated criminal investigations for money laundering in relation
to a number of the more significant detections. This demonstrates
the benefit and potential impact of properly targeted intelligence-led
enforcement intervention throughout the jurisdiction as opposed
to a regulatory requirement limited to the external frontier which
does not focus on criminal movements throughout the EU.
"The joint Article 95/135 legal base does not
alter the Government's view that the use of a first pillar Qualified
Majority legal base in the fight against crime is inappropriate.
We have previously pointed out in relation to Article 135 (customs
co-operation) that improved co-operation is only an incidental
effect of the proposal, the principal purpose of which is the
creation of a mandatory cash declaration requirement. Article
95 is concerned with the establishment and functioning of the
internal market in relation to the objectives set out in Article
14, which include the free movement of goods, persons, services
and capital. The Commission's proposal is aimed at the prevention
of crime and terrorism through the control of money laundering,
to be achieved by the introduction of a mandatory declaration
scheme. It is not aimed at the establishment or functioning of
the internal market.
"The Government has already expressed concern
(paragraph 9 of the earlier EM) about the original proposal as
it would apply to cash for which there is no evidence of a criminal
link. The new limitation on the total detention period to one
month introduces further concerns because it is operationally
unrealistic to expect all cases of genuinely suspect movements
of cash to be brought to a conclusion within this period. This
reality is explicitly recognised in the Proceeds of Crime Act,
under which the maximum detention period under the authority of
magistrates is two years.
"The technical amendments are of no particular
concern."
12.12 The Minister adds that:
"There would be costs to the UK arising from
the implementation of the proposal (eg changes to UK law, resourcing
the declaration and control arrangements) but these are currently
unquantifiable."
Conclusion
12.13 We share the Government's objections to
the modified proposal and thank the Minister for her helpful comments.
We are grateful to the Minister in particular for her explanations
as to why the proposed measure may exceed the EC's powers under
the proposed legal base for the measure.
12.14 We continue to await the Government's conclusions
as to the lawfulness both of the provision for three-day cash
detention and the 25% cap on fines proposed under the draft Regulation.
In relation to the search and investigatory powers granted to
Customs authorities under Article 4 of the draft Regulation, which
appear significantly to exceed those presently available under
UK law, we continue to await the Minister's response on whether
the Government shares our view that the proposed search powers
would constitute a potentially unacceptable intrusion into privacy
and the right to peaceful possession of property.
12.15 We shall hold the documents under scrutiny
until we receive the Minister's reply.
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