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Money laundering: EU Directive to be extended

European Commission - IP/98/654   13/07/1998

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ip/98/654

Brussels, 13 July 1998

Money laundering: EU Directive to be extended

The EU Directive on combating money laundering is to be made yet more effective by a forthcoming proposal to extend its scope, the European Commission has just announced. The proposal will extend the Directive's obligations to activities and professions outside the financial services sector (such as auditors, legal professions, real estate agents and casinos) and extend the definition of suspicious transactions to cover the proceeds of other serious crimes besides drug trafficking. Such an extension of the Directive will bring EU rules into line with the latest international recommendations, in accordance with the Amsterdam European Council's Action Plan to combat organised crime and requests from the European Parliament. The announcement is featured in a Commission report on implementation of the 1991 Directive. The report concludes that the existing Directive is working well in all Member States and has been successful in terms of denying access for 'dirty money' to the EU's financial system, as witnessed by the growing number of suspicious transactions reported. Money laundering is now a specific criminal offence throughout the Union, whereas this was the case in only one Member State when the Commission proposed the Directive in March 1990.

"I am pleased that the Directive has been effective at countering money-laundering and has proved to be a landmark in international efforts to combat this scourge", commented Financial Services Commissioner Mario Monti. "But to guard against the Single Market being exploited by organised crime, we will be coming forward with proposals to extend and improve the current rules. These stronger safeguards will be all the more necessary with the single currency, which will serve to further increase the process of integration within the Single Market as a whole and the financial services sector in particular".

The money laundering Directive (91/308/EEC) has provided the basis for Member States' efforts to prevent criminal money entering the financial system, which is a crucial part of the campaign against drugs trafficking and organised crime in general. Indeed, the Directive serves as a reference at the world level for other countries' measures to counter money laundering. The cornerstone of the Directive is the obligation on credit and financial institutions (including 'bureaux de change') to require identification of all their customers when beginning a business relationship (particularly the opening of an account or offering safe-deposit facilities), when a single transaction or linked transactions exceed ECU 15,000 or when they suspect laundering (even where the transaction is below the threshold).

All Member States except Austria have implemented the Directive in full (the Commission decided in October 1997 to refer Austria to the Court of Justice regarding anonymous savings accounts see IP/97/883). Many Member States have gone beyond the strict requirements of the Directive in a number of areas (e.g. lower thresholds and coverage of non-financial professions).

The new report concludes that the Directive is working well, but now needs to be updated and extended in line with recent international developments in the anti-money laundering effort. These are reflected in the 1996 update of the 40 Recommendations of the Financial Action Task Force on money laundering (FATF). The FATF is the leading world anti-money laundering body, to which the Commission and all the EU Member States belong together with 11 other countries and the Gulf Cooperation Council. For example, the FATF has noted a shift of laundering activities from the traditional financial sector to non-financial professions or enterprises. Moreover, the Action Plan on organised crime adopted by the Amsterdam European Council specifically called on the Commission to extend the suspicious transaction reporting requirement in the money laundering Directive to persons and professions outside the financial sector and to the proceeds of all offences connected with serious crime (rather than just drug trafficking). Similar requests also featured in the European Parliament's 1996 Resolution on the Commission's first report on the implementation of the Directive. Work has therefore started on a proposal for a second money laundering Directive.

In particular, the Commission, in consultation with the Member States, is considering amendments to the Directive in the following areas:

The need for a wider prohibition of money laundering. The current directive only obliges Member States to combat the laundering of the proceeds of drugs trafficking. In fact nearly all the Member States have already extended their legislation to cover the proceeds of a wider range of serious crimes including terrorism, trafficking in armaments, human beings, antiquities or human organs, prostitution, fraud, illegal gaming, kidnapping, blackmail and robbery (see MEMO/98/53).

The extension of the obligations of the Directive (e.g. customer identification and the reporting of suspicious transactions) to certain vulnerable non-financial activities and professions, where there is a serious risk of laundering. The Commission is looking for example at casinos, auditors, real estate agents and the legal professions when carrying out financial transactions on behalf of their clients.

The need for improved co-operation between the financial intelligence units (FIUs) set up by Member States to receive and process the suspicious transaction reports. Currently, FIUs in Austria, Denmark, Germany, Luxembourg, Ireland and Finland are prevented by their legal status from exchanging information with some of their counterparts in other Member States (see MEMO/98/53). Improved cooperation could contribute to increasing the relatively limited numbers of prosecutions, convictions and asset seizures based on suspicious transaction reports.

The Commission hopes to be able to present this new proposal towards the end of this year or early in 1999.

Copies of the report are available for downloading from the Europa Internet site:

http://ec.europa.eu/dg15


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