5 Controls on cross-border cash movements
| (a)
(23610)
10404/02
COM(02) 328
(b)
(24711)
11151/03
COM(03) 371
(c)
(26102)
14064/04
+ ADD 1
—
|
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)
Draft Regulation on controls of cash entering or leaving the Community
|
| Legal base | Articles 95 and 135 EC; co-decision; QMV
|
| Deposited in Parliament | 9 November 2004
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| Department | Customs and Excise
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| Basis of consideration | (c) Minister's letter and EM of 23 November 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)
(a) and (b) HC 63-xxxii (2002-03), paragraph 12 (17 September 2003), HC 42-i (2003-04), para 6 (3 December 2003) and HC 42-xxxiv (2003-04), para 2 (27 October 2004)
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| Discussed in Council | 16 November 2004
|
| Committee's assessment | Legally and politically important
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| Committee's decision | (All) Not cleared; oral evidence from Minister requested
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Background
5.1 The Council concluded in October 2000 that cross-border movements
of cash presented a potential risk to Community and national interests
and that the current 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 for legislative
initiatives in this regard. Document (b) contains the modified
position adopted by the European Commission in response to amendments
proposed by the European Parliament on first reading of the original
draft Regulation (document (a)). When we last considered those
documents we decided to hold them under scrutiny on the grounds
of continuing doubts about the adequacy of the proposed legal
base for the measure. Document (c) is the final Presidency text
of the proposal, on which political agreement was reached at ECOFIN
on 16 November 2004. It contains a number of further important
changes from earlier texts.
Document (c)
5.2 The title, recitals and substantive articles have been amended
to emphasise that the primary objective of the proposal is the
control of movements of cash entering or leaving the Community.
5.3 Article 1 provides for an obligation to declare
any export from, or import into, the EU of any cash sums of €10,000
or more. The latest text still shows the old limit of €15,000
but the Minister informs us that this was reduced at the meeting
itself and will be reflected in the text sent to the European
Parliament for second reading. Article 3 has been amended to give
Member States the option of requiring oral declarations from travellers
as an alternative to written declarations. The provision for
capping of fines (at 25% of the sum carried) for non-declaration
or mis-declaration has been deleted.
5.4 Article 4 has also been changed and now no longer
contains a provision for cash to be detained for up to three working
days pending further enquiries to check compliance with the Regulation.
The proposal now provides for a power under the Regulation to
detain cash solely in cases of failure to comply with the Regulation
and then only under conditions provided for in national legislation.
5.5 Finally the geographical scope of the proposal
has been altered to apply to the Community (having previously
applied to territories which form the Community customs territory)
in order to accommodate a request from Spain for the Regulation
to apply to its dependant territories of Ceuta and Melilla.
5.6 Political agreement on the text contained in
document (c) was reached at ECOFIN on 16 November.
The Government's view
5.7 The Paymaster General (Dawn Primaralo), in her
Explanatory Memorandum of 23 November 2004, welcomes the amendments
to the latest text of the proposal and explains the Government's
reasons for agreeing to the amended proposal as follows:
"The changes that have been made to the text
have done much to allay the Government's concerns about the proposal.
"In the July 2002 EM, it was argued that the
requirement to cap fines for non or misdeclaration would impose
an unacceptable fetter on Member States when introducing enforcement
provisions in national law to deal with such conduct, and that
a requirement which harmonises maximum limits on fines throughout
the European Community did not appear appropriate to a first pillar
instrument. Consequently, the Government views the deletion of
this requirement favourably.
"It was thought that the provision in the original
text to detain cash for up to 3 working days whether or not there
were suspicions of its being linked to criminal activity might
not be compatible with the civil nature of the declaration system
and might have human rights implications. The Government considers
that this concern has been satisfactorily addressed by restricting
detention to cases of non compliance and deferring to national
legislation for prescribing the conditions thereof.
"Previously, the Government had concerns about
the acceptability of the legal base because the purpose of the
draft Regulation purported to be the prevention of money laundering,
which we would regard as a measure to combat crime and as such
not appropriate to the first pillar. However, the Government no
longer has objections in principle to a first pillar legal base
primarily because the amendments to the title, recitals and substantive
articles make it clear that the purpose of proposal is now the
control of cash entering or leaving the Community, and as such
it is more reasonable to characterise it as a procedural rather
than a prosecution or investigatory measure. This view is supported
by the fact that:
- the provision in earlier drafts
for the application of criminal sanctions for non compliance has
now been withdrawn;
- concerns about whether it is appropriate for
first pillar instruments to harmonise limits on fines no longer
apply as this provision has been deleted; and
- the Regulation is now stated to be complementary
to the EC Money Laundering Directives, which were themselves made
under Article 95 of the Treaty.
"As a consequence, the Government is now prepared
to accept that the Regulation can be properly based on Articles
95 and 135 of the EC Treaty.
"In the interests of achieving consensus, the
Presidency proposed that as an alternative to requiring a written
declaration from travellers entering or leaving the Community
with cash in amounts of €15,000 or more, Member States should
be allowed the option of requiring an oral declaration in such
circumstances. The Government regarded this option as an improvement,
but considered that for an oral system to be more efficient for
both the travelling public and customs officers, there needed
to be flexibility over the extent to which information received
from travellers was recorded and processed and the means by which
any such recording and processing was carried out. However, there
was very little support for such flexibility from other Member
States, with the result that no such provision was incorporated
into the text.
"The Government's view remains that this text
is likely not to maximise its effectiveness in disrupting the
movement of criminal or terrorist cash. At the same time, however,
the Government is mindful of international developments on the
counter terrorist financing front, which, as part of the wider
fight against terrorism, is a high priority for the UK. In the
aftermath of the Madrid bombings, the Council endorsed a Counter
Terrorism Action Plan, which included a specific commitment to
early introduction of this Regulation. As expected, the proposal
attracted widespread support amongst other Member States. At ECOFIN,
continued opposition to seek to improve the text would not have
had an effect on the outcome, while sending a negative signal
about the Government's commitment to EU action to counter terrorism.
Consequently, the decision was taken to support the proposal and
also not to intervene on the reduction of the threshold to €10,000
for which there was a qualified majority in favour."
5.8 In her letter of 23 November 2004, the Paymaster
General further expresses the Government's regret that a political
agreement had been reached in breach of the scrutiny reserve of
both Houses of Parliament. She explains that in her letter of
7 October she "anticipated that the Presidency would revise
the text of the proposal to address concerns from the UK and others
as to control and cash detention powers and the capping of fines
for mis-declaration or non-declaration" and that the breach
of the scrutiny reserve "became unavoidable, not only because
of the scrutiny timetable being overtaken by events, but also
because of the need to consider carefully [the Government's] voting
position at ECOFIN in the light of wider developments".
Conclusion
5.9 We are grateful to the Minister for her response
and explanations in connection with the final amendments to this
proposal. It is still not clear to us why the Government changed
its mind over the adequacy of the proposed legal base for the
draft Regulation and why the latest amendments make it any more
appropriate for it to be adopted as a customs cooperation rather
than a criminal justice measure. We also remain to be convinced
both about the Government's reasons for agreeing to a reduction
of the cash limit to €10,000, and about the adequacy of the
reason for breaching the security reserve resolution. Accordingly,
we invite the Minister to appear before us to give oral evidence
on these matters.
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