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Brussels, 28th October 2004

Free movement of capital: Commission closes proceedings against France on money transfer penalties

Following the satisfactory amendment of French legislation, the European Commission has closed infringement procedures against France concerning excessive penalties for breaches of administrative requirements under French law to declare any incoming or outgoing transfer of money, stock or securities equal to or exceeding €7622.45 (FRF 50 000). The Commission had considered the excessive penalties to be incompatible with EC Treaty rules on the free movement of capital.

The Commission has never called into question the principle that a prior administrative declaration is compulsory under French law, nor the fact that penalties are imposed in case such an obligation is breached. It has rather challenged the excessive level of these penalties, which at the time of the Commission’s investigation amounted to the confiscation of the undeclared money, stocks or securities plus the imposition of a fine that could reach the full amount involved. Following an extensive inquiry, in January 2002 the Commission decided to refer France to the European Court of Justice on this issue. However, as France had indicated its willingness to amend the incriminated legislation, the referral to the Court was temporarily suspended.

The French legislation at stake was finally amended by the adoption of Law Nr 2004-204 of 9 March 2004 (‘Loi portant adaptation de la justice aux évolutions de la criminalité’, published in the ‘Journal officiel de la République française’ of 10 March 2004). In its section 6, article 33-V amends significantly article L152-4 of the Monetary and Financial Code. The level of the penalty is now limited to a quarter of the undeclared amounts, and the rules include stricter procedures and conditions for seizure and confiscation of the transported means of payment.

In addition, the French authorities have committed to realign their current national threshold for cash transfers of €7622.45 to the new, most likely higher, threshold which is due to be set at EU level in forthcoming proposals for secondary legislation on preventing money laundering and monitoring cash payments.

Therefore, taking into account the new amended legislation and this commitment, the Commission has decided to close the infringement procedure against France. However, the Commission intends to monitor closely the concrete implementation of the new amended legislation, in order to ensure that the free movement of capital is not unduly restricted.

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