2 Controls on cross-border cash movements
| (a)
(23610)
10404/02
COM(02) 328
(b)
(24711)
11151/03
COM(03) 371
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Draft Regulation on the prevention of money laundering by means of customs co-operation
Draft Regulation on the prevention of money laundering by means of customs co-operation (amendments)
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| Legal base | Articles 95 and 135 EC; co-decision; QMV
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| Department | HM Treasury |
| Basis of consideration | (b) Minister's letter of 7 October 2004
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| Previous Committee Report | (a) HC 152-xxxvii (2001-02), para 5 (17 July 2002) and HC 63-xii (2002-03), para 1 (12 February 2003)
(Both) HC 63-xxxii (2002-03), paragraph 12 (17 September 2003) and HC 42-i (2003-04), para 6 (3 December 2003)
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| To be discussed in Council | Imminent
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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
2.1 The Council concluded at its meeting in October 2000 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 exchange of information, was required.
The draft Regulation is the Commission's response to the Council's
request. 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)). Overall, the proposal remains largely
unchanged in that the Commission has accepted (in full or in part)
only five of the Parliament's 23 proposed amendments.
2.2 Article 1 of the draft Regulation envisages the
introduction of an obligation to declare any export from, or import
into, the EU of any cash sums of €15,000 or more. In order
to check compliance with that obligation, 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. Supplementary measures include provisions
facilitating the exchange of information between customs and money-laundering
authorities within the Community and for the imposition of civil
penalties in addition to any criminal liability 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 concerned.
2.3 The Paymaster General (Dawn Primarolo), in her
Explanatory Memorandum of July 2003, reaffirmed the Government's
concerns about the modified proposal. In particular, the Minister
emphasised the Government's doubts about the appropriateness of
the proposed use of Articles 95 and 135 EC as the legal base for
the proposed instrument and the Government's consequent strong
preference for a third pillar instrument instead of the proposed
first pillar Regulation.[4]
The Minister also expressed reservations about the practicability
of the envisaged limitation of the period for detaining cash to
one month.
2.4 When we last reviewed these documents we reiterated
our support for the Government's objections to the modified proposal
and asked the Minister to keep us informed about ongoing negotiations
or the Government's thinking about the proposed measure. We decided
to hold the documents under scrutiny pending further word from
the Minister.
The Minister's letter
2.5 The Minister has now written to us, as follows:
"The proposal was discussed at Council Working
Group on 13 July 2004 and again on 6 September. The primary focus
of those discussions has been the system of mandatory declarations
to be applied to movements of cash. The Dutch Presidency has
suggested a compromise approach that would give Member States
the choice of requiring either a written or an oral declaration
from people entering or leaving the Community and carrying 15,000
euros or more. It is understood that the Presidency will produce
a revised text providing for this approach which will also include
provision for officers, on a case by case basis, to determine
both the extent to which information received from travellers
is recorded and processed and the means by which any such recording
or processing is carried out. Subject to seeing the detail of
the text, this approach is one we are likely to accept, as allowing
officers such a degree of flexibility would in practice be little
different from requiring declarations to be made solely at the
officer's request.
"As you know, the Government has also had
concerns about the proposed legal base, in particular, that a
first pillar legal base was inappropriate given that the stated
purpose was to tackle a criminal activity. It is understood that
the Presidency's revised text will specify the primary purpose
of the regulation as being to control movements of cash across
the external borders, and will include a corresponding amendment
to the title of the proposal. If such changes are made the Article
95/135 legal base would be more acceptable.
"Other major issues of concern have been
the provisions in the draft proposal for:
- the introduction of control powers on persons
and their baggage to check compliance with the obligation to declare;
a power to detain cash for up to 3 working days;
and
fines for mis-declaration and non-declaration
to be capped at 25% of the sum carried.
"For control powers to be effective, they
would need to include search of person, and we were concerned
that such action could be vulnerable to human rights challenge
unless it was limited to cases where there were reasonable grounds
for suspicion. Similarly, we took the view that detention of
cash could also have human rights implications unless a link to
criminal activity was suspected.
"Our concern about the capping of fines
for mis-declaration and non-declaration was that it involved an
unacceptable fetter on Member States when introducing enforcement
provisions to deal with such conduct, and that a requirement which
harmonises maximum limits on fines throughout the Community does
not appear appropriate to a first pillar instrument.
"The Presidency has indicated that the revised
text will provide for control and detention powers and the imposition
of penalties to be determined in accordance with national legislation,
and for the capping limit on fines to be withdrawn. The Government
considers that such changes would satisfactorily address the above
issues.
"As timing is now very much in the hands
of the Presidency, we do not know exactly when they will produce
the compromise text, but we are aware that they hope to seek early
Council agreement. We will keep the Committee informed of developments."
Conclusion
2.6 We thank the Minister for keeping us informed
about the amendments likely to result from recent negotiations
on the proposal. On the basis that these will be reflected in
full in a revised text of the proposal, we agree with the Government's
attitude in most respects.
2.7 We are not convinced, however, that the proposed
changes will meet our concerns about the proposed legal base for
the measure. We consider the Minister's concerns about the human
rights implications of detaining cash unless a link to criminal
activity is suspected to be well founded, but they also tend to
show that the true purpose of the instrument is to prevent criminal
activity rather than to regulate the passing of bank notes across
frontiers.
2.8 We therefore ask the Minister to explain in
what sense, if any, the amendments envisaged by the Presidency
meet our original concern that the proposal exceeds the power
available under Article 135 EC in so far as it is principally
concerned with the administration of justice. We also ask the
Minister to explain how a measure regulating the movement of cash
across the community's external borders affects the operation
of the internal market.
2.9 We shall hold the documents under scrutiny
pending the Minister's reply.
4 The first pillar is the European Communities. The
third pillar is the inter-governmental pillar relating to police
and judicial co-operation in criminal matters, and is provided
for in the EU Treaty. Back
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