12 Measures against terrorist financing
| (26089)
13982/04
COM(04) 700
| Commission Communication on the fight against terrorist financing through measures to improve the exchange of information, to strengthen transparency and enhance the traceability of financial transactions
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| Legal base | — |
| Document originated | 20 October 2004
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| Deposited in Parliament | 4 November 2004
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| Department | Home Office |
| Basis of consideration | EM of 21 December 2004
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| Previous Committee Report | None; but see (26072) 13979/04: HC 38-v (2004-05), para 5 (26 January 2005) and (26076) 13978/04: HC 38-vii (2004-05), para 3 (2 February 2005)
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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 | Cleared
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Background
12.1 We considered on 2 February 2005 an introductory Communication
from the Commission providing an overview of the Commission's
work on the priority issues identified by the European Council
on 18 June 2004. These issues included the prevention of terrorist
attacks and management of their consequences, the protection of
critical infrastructures and the financing of terrorism. We considered
the Commission's Communication on the protection of critical infrastructure
on 26 January and we consider elsewhere in this Report the Communication
on action to prepare for, and manage the consequences of, terrorist
attack.
The Communication from the Commission
12.2 The present Communication is concerned with measures relating
to the financing of terrorist activities. It reviews the consideration
of this matter at the level of the European Council, and recalls
in an annex the measures which have already been taken at EU level
relevant to the prevention of terrorist financing. A further annex
lists measures currently being considered by the Council. The
Communication identifies three main areas as being relevant to
the prevention of terrorist financing, namely improved co-operation
in the exchange of information, enhanced traceability of financial
transactions and greater transparency of legal entities.
12.3 The Communication acknowledges that the exchange
of information at national level is as important as the exchange
of information at EU and international levels, and suggests that
there should be discussions with financial institutions and the
financial sector to identify areas where information is lacking
in the analysis of suspicious transactions.
12.4 With regard to the tracing of financial transactions,
the Communication urges Member States to give priority to financial
investigations, with the possible establishment of bodies of experts
to identify, trace and freeze terrorist assets. It also refers
to the Commission's intention to propose a draft Regulation on
the provision of basic information on the payer in relation to
the transfer of funds, and to work on the regulation of cash movements.
The Communication asserts that negotiations on the Commission's
proposal for a Regulation on cash movements have "already
been unduly delayed" and should be made a priority for the
adoption of a common position by the end of 2004.[39]
12.5 In relation to the transparency of legal entities,
the Communication argues that "the absence of international
standards in key mechanisms used in global financial transactions,
including international business companies, trusts and offshore
funding vehicles, creates a degree of financial opacity of real
advantage to those financing terrorism". The Commission concludes
that improving transparency of legal persons is a key element
in countering infiltration by terrorist organisations and their
sympathisers. It identifies the non-profit and charitable sectors
as being an area where transparency is a core issue and suggests
further exploration of minimum EU-wide standards.
12.6 In relation to the freezing of assets, the Communication
asserts that Member States have divergent interpretations of the
conditions for designation and suggests that effectiveness would
be improved by a standard interpretation and a standard approach
to such questions as the designation of groups or entities which
re-name themselves after designation, the treatment of "front
organisations" and the treatment of leaders of groups and
entities which have already been designated.
The Government's view
12.7 In her Explanatory Memorandum of 21 December
2004, the Parliamentary Under-Secretary of State at the Home Office
(Caroline Flint) explains that the Government broadly welcomes
the Commission's Communication and fully supports efforts to reduce
access by terrorists to financial and economic resources. The
Minister adds that the Government also agrees that "terrorist
financiers must be forced to operate in a hostile environment
where the range of options so far identified by both the private
sector and by the security services (as well as law enforcement)
continue to be developed and deployed". The Minister points
to the need to find the right balance between preventive measures
and civil liberties and emphasises that care must be taken to
ensure that nationality or religious affiliation does not become
a ground for placing a person under suspicion.
12.8 On the specific areas identified in the Communication,
the Minister agrees that information exchange at national level
is as important as that at EU and international level and that
there should be discussions with the financial sector to identify
areas where information is currently lacking in the analysis of
suspicious transactions and the financial patterns of suspects.
The Minister also agrees with the establishment of high-level
contacts between law enforcement agencies dealing with terrorism
and representatives of the private sector.
12.9 As regards the proposed Regulation on payer's
information to accompany the transfer of funds, the Minister indicates
that the Government will wish to ensure that the new procedures
are proportionate, effective and can be implemented by all EU
Member States.
12.10 On the question of a minimum EU-wide standard
of transparency for the charitable and non-profit sector, the
Minister comments that the Government will wish to establish more
clearly how the Commission wishes to develop this area. The Minister
adds that the UK already has highly regarded regulatory systems
for charities and that it will be important to ensure that no
legislative proposals emerge which undermine existing UK approaches.
Conclusion
12.11 We are grateful to the Minister for her
detailed Explanatory Memorandum and we endorse the point which
the Minister has made that any measures to combat terrorist financing
should be balanced, proportionate and effective. We think it particularly
important that the existing supervision of the charitable sector
in the UK is not made subject to excessive regulation at EU level.
12.12 We now clear the document.
39 (23610) 10404/02; see HC 38-i (2004-05), para 5
(1 December 2004), in which we express our view that a measure
essentially concerned with criminal justice could not lawfully
be adopted under Article 135EC. Back
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