13 MONEY LAUNDERING
(26744)
11549/05
COM(05) 343
| Draft Regulation on information on the payer accompanying transfers of funds
|
| Legal base | Article 95 EC; co-decision; QMV
|
| Department | HM Treasury
|
| Basis of consideration |
Minister's letter of 29 November 2005 |
| Previous Committee Report |
HC 34-x (2005-06), para 13 (16 November 2005) |
| Discussed in Council | 6 December 2005
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
13.1 The Financial Action Task Force (FATF) is an inter-governmental
body whose purpose is the development and promotion of national
and international policies to combat money laundering and terrorist
financing. Many of FATF's recommendations have been the subject
of Community legislation.[34]
This draft Regulation would incorporate into Community law FATF's
Special Recommendation VII on originator information accompanying
wire transfers of money.
13.2 When we considered this document last month we said the measure
seemed a useful addition to the important regime countering terrorist
financing and money laundering. But before considering the document
further we asked for an assurance from the Government that a derogation
for the transfer of funds to charitable organisations within Member
States would not create a loophole exploitable by terrorists.[35]
The Minister's letter
13.3 The Economic Secretary to the Treasury (Mr Ivan Lewis) now
says that the purpose of the exemption is to avoid discouraging
donations and payments to non-profit organisations carrying out
activities for charitable, religious, cultural, educational, social,
scientific or fraternal purposes. He argues that in the absence
of an exemption individuals wishing to make low-value donations
or payments to such organisations would have to verify their identity,
which could increase costs and might become a barrier to such
donations or payments. But he acknowledges the risk that such
an exemption could create a loophole exploitable by terrorists
or other criminals. He says that consequently the Government,
as Presidency, reflecting the views of a number of Member States,
has made a number changes to the text of the draft Regulation
in order to allow Member States to ensure that the exemption does
not give rise to abuse by terrorists as a cover for or a means
of facilitating finance for their activities.
13.4 The Minister tells us that the Government believes
the revised text has the support of all Member States, saying
that it would:
- make the exemption an option
for Member States;
- limit to €150 the value of payments falling
within the scope of the exemption;
- require organisations eligible to receive such
payments to be subject to reporting and external audit requirements
or supervision by a public authority or self-regulatory body recognised
under national law;
- limit the scope of the exemption to payments
within Member States;
- require Member States making use of the exemption
to communicate to the Commission the measures they have adopted
to check that organisations are eligible to receive payments,
a list of organisations covered by the exemption and the names
of the natural persons who ultimately control the organisations;
- require this information also be made available
to law enforcement authorities; and
- require Member States to ensure that payment
service providers have an up-to-date list of the organisations
covered by the exemption.
13.5 The Minister concludes that the Government believes
that these requirements strike the right balance between ensuring
the draft Regulation is designed in line with better regulation
principles and the need to build in a sufficient safeguard to
ensure that the exemption cannot be abused.
Conclusion
13.6 We are grateful to the Minister for this
information. It seems to us that the proposed exemption is sufficiently
hedged with limitations as to prevent its abuse and, as we have
no further questions, we now clear the document.
34 See (25949) 11134/04: HC 34-i (2005-06), para 50
(4 July 2005). Back
35
See headnote. Back
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