Documents considered by the Committee on 10 January 2018 Contents

8Combating payment fraud

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Home Affairs Committee

Document details

Proposed Directive on combating fraud and counterfeiting of non-cash means of payment and replacing Council Framework Decision 2001/41/JHA

Legal base

Article 83(1) TFEU, ordinary legislative procedure, QMV


Home Office

Document Number

(39018), 12181/17 + ADDs 1–2, COM(17) 489

Summary and Committee’s conclusions

8.1As the number and value of transactions using non-cash payment instruments, particularly credit and debit cards, has increased in recent years, so too has the risk of fraud. Non-cash payment fraud is often connected to the activities of organised crime groups. It also undermines trust in the integrity of online payment systems and the digital single market. A 2001 Council Framework Decision requires Member States to criminalise fraud and counterfeiting of non-cash means of payment but the Commission considers that it is out of date, resulting in regulatory gaps. It says that a “technology neutral” approach is needed to keep pace with the latest developments, such as the growth in payments made on mobile devices and payments using virtual currencies (bitcoin) or other forms of e-money (for example, vouchers and coupons). It has therefore proposed a new Directive which would replace the 2001 Framework Decision and establish a more comprehensive framework for preventing, investigating and prosecuting non-cash payment fraud.

8.2The 2001 Framework Decision is one of a number of EU police and criminal justice measures which formed part of the UK’s 2014 “block opt-out” decision and ceased to apply to the UK in December 2014. The proposed Directive is subject to the UK’s Title V (justice and home affairs) opt-in, meaning that it will only apply to the UK if the Government decides to opt in. In his Explanatory Memorandum, the Security Minister (Mr Ben Wallace) told us that the measures proposed in the Directive were “broadly in line with existing UK legislation and practice on fraud” but added that the Government was carrying out further analysis to determine whether any legislative changes would be needed if the UK were to opt in. He indicated that the three-month deadline for opting in at the negotiating stage (thereby securing a vote on the outcome) would expire on 15 December 2017.

8.3We noted that, in deciding not to rejoin the 2001 Framework Decision in 2014, the then Coalition Government had made clear that it was “not for Europe to impose minimum standards on our police and criminal justice system”.98 We asked the Minister whether this remained the Government’s position or whether different considerations now applied. In his response dated 1 December, the Minister confirms that the position remains unchanged. He sets out the factors which will inform the Government’s opt-in decision and says that the Government no longer has concerns regarding Article 9 of the proposed Directive on corporate liability.

8.4The Minister writes shortly before the expiry of the three-month opt-in deadline on 15 December. We ask him to inform us of the Government’s decision and the reasons for it.

8.5The Minister does not address the wider question we raised about the longer-term prospects for maintaining cooperation in this area post-Brexit, given that the UK will not be part of the network of operational contact points responsible for exchanging information on non-cash payment fraud and supporting cross-border investigations and prosecutions. We ask him to do so when he next writes to us. He should explain what practical mechanisms will be available to the UK to ensure effective operational cooperation post-exit. We also request regular progress reports on negotiations.

8.6Pending further information, the proposed Directive remains under scrutiny. We draw this chapter to the attention of the Home Affairs Committee.

Full details of the documents

Proposal for a Directive of the European Parliament and of the Council on combating fraud and counterfeiting non-cash means of payment and replacing Council Framework Decision 2001/413/JHA: (39018), 12181/17 + ADDs 1–2, COM(17) 489.


8.7Our earlier Report listed at the end of this chapter provides an overview of the proposed Directive and the Government’s position.

The Minister’s letter of 1 December 2017

8.8In his Explanatory Memorandum on the proposed Directive, the Minister indicated that Article 9 of the proposed Directive on the liability of legal persons “arguably goes further than domestic law currently”. We noted that the UK participates in two EU criminal law measures—Directives establishing minimum rules on trafficking in human beings and on the sexual abuse and exploitation of children—which contain identical provisions on corporate liability. We asked the Minister to explain whether and why these provisions raised particular concerns in relation to non-cash payment fraud. In his response, the Minister says that he has sought further clarification from officials, adding:

“I have now concluded that, as with the other two initiatives with identical measures, the UK law is sufficient as it stands to implement the draft Directive’s provisions on liability of legal persons.”

8.9In deciding whether to opt into the proposed Directive, the Minister sets out the main factors to be considered:

8.10The Minister continues:

“On the first point, the UK is broadly compliant with the central aims of the proposed Directive. The offences set out in that proposed Directive are equivalent to those set out in the Fraud Act 2006 (sections 6 and 7), the Theft Act 1968 (sections 1, 7 and 22), the Criminal Attempts Act 1981 (section 1), the Computer Misuse Act 1990 (sections 2 and 3), and the Serious Crime Act 2007 (sections 44 to 46). The UK’s existing offences meet the minimum standards as set out in the draft Directive. The UK also exceeds in some cases the sentences proposed by the draft Directive.

“On the second point, the position is that until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force. During this period the Government will continue to negotiate, implement and apply EU legislation.”

Previous Committee Reports

First Report HC 301–i (2017–19), chapter 27 (13 November 2017).

98 See the comments made by the then Home Secretary (Mrs Theresa May) during a debate in the House on 15 July 2013, HC Deb, col. 777.

15 January 2018