Proposal for a European Parliament and Council Directive amending Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering
C 177 E/14 EN Official Journal of the European Communities 27. 6. 2000 Proposal for a European Parliament and Council Directive amending Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (2000/C 177 E/03) COM(1999) 352 final - 1999/0152(COD) (Submitted by the Commission on 19 July 1999) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 47 (2), first and third sentences, and Article 95 thereof, Having regard to the proposal from the Commission, Having regard to the opinion of Committee, the Economic and Social Acting in accordance with the procedure referred to in Article 251 of the Treaty (1) Whereas Council Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering (hereinafter referred to as áthe Directiveí was adopted on 10 June 1991 (1); (2) Whereas in two reports presented to the European to Article 17 of Parliament and the Council pursuant the Directive the Commission has reported on the implementation of the Directive and on progress in the fight against money laundering (2); expressed by the European Parliament and the Member States; whereas in this way the Directive should not only reflect best international practice in this area but should also continue to set a high standard in protecting the financial sector and other vulnerable activities from the harmful effects of the proceeds of crime; (6) Whereas the GATS allows Members to adopt measures and to adopt necessary to protect public morals including for ensuring measures for prudential reasons, the system; the stability and integrity of whereas such measures should not impose restrictions beyond what is justified to safeguard those objectives; financial (7) Whereas the Directive does not establish clearly which should receive suspicious Member State’s authorities transaction reports from branches of credit and financial institutions having their head office in another Member State’s State are authorities responsible for ensuring that such branches comply with Article 11 of the Directive; nor which Member (8) Whereas this question has been discussed in the Money Laundering Contact Committee established by Article 13 of the Directive; whereas the authorities of the Member States in which the branch is located should receive such reports and exercise the above responsibilities; (3) Whereas in its Reports and Resolutions in response to the Commission’s two reports the European Parliament called for an updating and extension of the 1991 Directive (3); (9) Whereas this allocation of responsibilities should be set out clearly in the Directive by means of an amendment to the definition of insti- tutioní contained in Article 1 of the Directive; ácredit institutioní and áfinancial (4) Whereas the Action Plan of the High Level Group on Organised Crime endorsed by the Amsterdam European Council on 16-17 June 1997, and in particular recommen- dation 26, called for additional efforts to combat money laundering (4); (5) Whereas it is appropriate that the Directive, as one of the main international instruments in the fight against money in line with the laundering, the wishes conclusions should be updated of the Commission and (1) OJ L 166, 28. 6. 1991, p. 77. (2) COM(95) 54 final and COM(1998) 401 final. (3) Doc. A4-0187/96 and OJ C 198, 8. 7. 1996, p. 245; Doc. A4-0093/99 and OJ C. (4) OJ C 251, 15. 8. 1997, p. 1. (10) Whereas the European Parliament has expressed concerns that the activities of currency exchange offices (ábureaux de changeí) and money transmitters (money remittance offices) are vulnerable to money laundering; whereas these activities should already fall within the scope of the Directive; whereas in this matter the coverage of these activities should be clearly confirmed in the Money Laundering Directive; to dispel any doubt (11) Whereas to ensure the fullest possible coverage of the financial sector it should also be made clear that the Directive applies to the activities of investment firms as defined in Council Directive 93/22/EEC (the Investment Services Directive) (5); (5) OJ L 141, 11. 6. 1993, p. 27. 27. 6. 2000 EN Official Journal of the European Communities C 177 E/15 the laundering of (12) Whereas the Directive only obliges Member States to combat the proceeds of drugs offences; whereas there has been a trend in recent years towards a much wider definition of money laundering based on a broader range of predicate or underlying offences, as reflected for example in the 1996 revision the Financial Action of Task Force international body the devoted to the fight against money laundering; the 40 Recommendations of leading (FATF), (13) Whereas a wider range of predicate offences facilitates suspicious transaction international the co-operation in this Directive should be brought up to date in this respect; area; whereas, therefore, reporting and (14) Whereas in the Joint Action of 3 December 1998 adopted by the Council on the basis of Article K. 3 of the Treaty on European Union on money laundering, the identification, tracing, freezing, seizure and confiscation of instrumen- talities and the proceeds from crime (1) the Member States agreed to make all serious offences, as defined in the Joint Action, predicate offences for the purpose of their crimi- nalisation of money laundering; the suspicious reporting of (15) Whereas the Directive imposes obligations regarding in particular transactions; whereas it would be more appropriate and in line with the philosophy of the Action Plan to Combat Organised Crime for the prohibition of money laundering under the Directive to be extended to cover not only drugs offences but all organised crime activities, as well as fraud, corruption and any other illegal activities affecting the financial interests of the Communities, as referred to in Article 280 of the Treaty; in every Member particularly by the credit institutions, State; whereas there is evidence that the tightening of controls in the financial sector has prompted money launderers to seek alternative methods for concealing the origin of the proceeds of crime; (19) Whereas there is a clear trend towards the increased use by money launderers of non-financial businesses; whereas this is confirmed by the work of the FATF on money laundering techniques and typologies; (20) Whereas Article 12 of the 1991 Directive already provides for the extension of the obligations of the Directive to other vulnerable professions and categories of under- takings outside the financial sector; (21) Whereas the question of vulnerable non-financial activities has been discussed on a number of occasions in the Money Laundering Contact Committee; the obligations of identification, the Directive concerning (22) Whereas the customer reporting of suspicious transactions should be extended to a limited number of activities and professions which have been shown to be vulnerable to money laundering; keeping record and (23) Whereas notaries and independent subject to the provisions of legal professionals should be made the Directive when performing a limited number of specific financial or corporate transactions where there is the greatest risk of the services of those legal professionals being misused for the purpose of laundering the proceeds of drugs trafficking or organised crime; (16) Whereas, in the case of such fraud, corruption and other illegal activities, the Member States authorities responsible for combating money laundering and the Commission should cooperate with each other and exchange relevant information; (24) Whereas, however, where an independent lawyer or law firm is representing a client in formal legal proceedings it would not be appropriate under the directive to put the lawyer under an obligation to report suspicions of money laundering; (17) Whereas on 21 December 1998 the Council adopted a Joint Action on the basis of Article K. 3 of the Treaty on European Union on making it a criminal offence to participate in a criminal organisation in the Member the European Union (2); Whereas this Joint States of Action reflects the Member States’ agreement on the need for a common approach in this area; (18) Whereas, as required by the Directive, suspicious trans- action reports are being made by the financial sector, and (1) OJ L 333, 9. 12. 1998, p. 1. (2) OJ L 351, 29. 12. 1998, p. 1. (25) Whereas the Directive makes reference to áthe authorities responsible for combating money launderingí to which reports of suspicious operations must be made; whereas in the case of independent lawyers and to take proper account of the professional duty of discretion owed by the lawyer to his client Member States should be allowed to nominate lawyers’ professional organisation as the responsible authority; whereas such reports and their possible onward transmission to the police or judicial authorities and in general the appro- priate forms of cooperation between the bar associations or professional bodies and the authorities responsible for combating money laundering shall be determined by the Member States; the rules governing the treatment of the bar association or other C 177 E/16 EN Official Journal of the European Communities 27. 6. 2000 (26) Whereas there is a growing trend for financial services to be ordered and provided using means (such as post, telephone, computer) which limit or avoid direct contact between the supplier and the purchaser; whereas even in such cases the rules of the Directive on customer identi- fication must be respected; whereas the Money Laun- dering Contact Committee has examined such non-face to face operations and procedures that should govern customer identification; whereas those principles and procedures should be incor- porated in the Directive in an annex, agreed principles and has HAVE ADOPTED THIS DIRECTIVE: Article 1 Directive 91/308/EEC is hereby amended as follows 1. Article 1 shall be replaced by the following: Article 1 For the purpose of this Directive A. Credit institutionö means a credit institution, as defined as in the first indent of Article 1 of Directive 77/780/EEC (1) and includes branches within the that Article and the third indent of meaning of institutions located in the Community, of credit having their head offices the inside or outside Community, B. Financial institutionö means an undertaking other than a credit institution 1. whose principal activity is to carry out one or more of the operations included in numbers 2 to 12 and number 14 of to Directive list 89/646/EEC; these include the activities of currency exchange offices (ôbureaux de changeö) and of money transmission/remittance offices, annexed the an insurance 2. in company accordance with Directive 79/267/EEC (2), in so far as it carries out activities covered by that Directive, authorised duly C. Money launderingö means the following conduct when committed intentionally: - the conversion or transfer of property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action, - the concealment or disguise of location, disposition, movement, the true nature, rights source, to, or ownership of property, with respect such property is derived from knowing that criminal activity or from an act of participation in such activity, - the acquisition, possession or use of property, knowing, such time of property was derived from criminal activity or from an act of participation in such activity, receipt, that the at - participation in, association to commit, attempts to commit and aiding, abetting, facilitating and coun- the actions selling the commission of any of mentioned in the foregoing paragraphs. Knowledge, intent or purpose required as an element of the above-mentioned activities may be inferred from objective factual circumstances. Money laundering shall be regarded as such even where the activities which generated the property to be laundered were perpetrated in the territory of another Member State or in that of a third country. assets of every kind, whether D. Propertyö means immovable, corporeal or and legal documents or tangible or instruments evidencing title to or interests in such assets. incorporeal, movable or intangible, an investment firm as defined in Article 1 of 3. Directive 93/22/EEC; E. Criminal activityö means means of definition This includes financial branches located in the Community of financial insti- tutions whose head offices are inside or outside the Community, institution (1) OJ L 322, 17. 12. 1977, p. 30. (2) OJ L 63, 13. 3. 1979, p. 1. - a crime specified in Article 3(1)(a) of the Vienna Convention (3), (3) United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic substances adopted on 19 December 1988 in Vienna. 27. 6. 2000 EN Official Journal of the European Communities C 177 E/17 - participation in activities linked to organised crime, 3. Article 3 shall be replaced by the following: - fraud, corruption or any other likely to damage damaging or Communities’ financial interests and illegal activity the European Article 3 - any other criminal activity designated as such for this Directive by each Member the purposes of State. F. Competent authoritiesö means the national authorities empowered by law or regulation to supervise any of the institutions or persons subject to this Directive. í 2. The following Article 2a shall be inserted: Article 2a Member States shall ensure that the obligations laid down in this Directive are imposed on the following institutions: 1. 2. credit institutions as defined in point A of Article 1; financial institutions as defined point B of Article 1; and on the following legal or natural persons acting in the exercise of their professional activities: 3. 4. external accountants and auditors; real estate agents; notaries and other independent 5. when assisting or representing clients in respect of the: legal professionals (a) buying and selling of real property or business entities (b) handling of client money, securities or other assets (c) opening or managing bank, savings or securities accounts (d) creation, operation or management of companies, trusts or similar structures (e) execution of any other financial transactions 1. Member States shall ensure that the institutions and persons subject to this Directive require identification of their customers by means of supporting evidence when in the case entering into business relations, particularly, of the institutions, when opening an account or savings accounts, or when offering safe custody facilities. The identification requirement shall also apply for 2. any transaction with customers other than those referred to in paragraph 1, involving a sum amounting to Euro 15 000 or more, whether the transaction is carried out in a single operation or in several operations which seem to be linked. Where the sum is not known at the time when the transaction is undertaken, the institution or person concerned shall proceed with identification as soon as it the is apprised of threshold has been reached. the sum and establishes that Where an institution establishes business relations or enters into a transaction with a customer who has not identification purposes been physically for present and to face operationsö) (ônon-face procedures laid down in the Annex shall apply. the principles By way of derogation from paragraphs 1 and 2, the 3. identification requirements with regard to insurance policies written by insurance undertakings within the meaning of Directive 79/267/EEC, where they perform that Directive activities which fall within the scope of the periodic premium shall not be amount or amounts to be paid in any given year does or do not exceed Euro 1 000 or where a single premium is paid amounting to Euro 2 500 or less. If the periodic premium amount or amounts to be paid in any given year is or are increased so as to exceed the Euro 1 000 threshold, identification shall be required. required where 3a. By way of derogation from paragraph 2 identifi- cation shall be required of all customers of casinos purchasing or exchanging gambling chips with a value of Euro 1 000 or more. 4. Member States may provide that the identification requirement is not compulsory for insurance policies in respect of pension schemes taken out by virtue of a contract of employment or the insured’s occupation, provided that such policies contain no surrender clause and may not be used as collateral for a loan. dealers in high-value goods, such as precious stones 6. or metals 7. 8. transporters of funds the operators, owners and managers of casinos. í 5. In the event of doubt as to whether the customers referred to in the above paragraphs are acting on their own behalf, or where it they are not acting on their own behalf, the institutions and persons subject to this Directive shall take reasonable measures to obtain information as to the real identity of the persons on whose behalf those customers are acting. is certain that C 177 E/18 EN Official Journal of the European Communities 27. 6. 2000 The institutions and persons subject to this Directive 6. shall carry out such identification, even where the amount of the transaction is lower than the threshold laid down, wherever there is suspicion of money laundering. The institutions and persons subject to this Directive 7. shall not be subject to the identification requirements provided for in this Article where the customer is a credit or financial institution covered by this Directive. regarding transactions 8. Member States may provide that the identification requirements in paragraphs 3 and 4 are fulfilled when it is established that for the transaction is to be debited from an account opened in the customer’s name with a credit institution subject to this Directive according to the requirements of paragraph 1. í the payment referred to 4. In Articles 4 and 5 the words ácredit and financial insti- tutionsí shall be replaced by áthe institutions and persons subject to this Directiveí. 5. Article 6 shall be replaced by the following: Article 6 1. Member States shall ensure that the institutions and persons subject to this Directive and their directors and employees co-operate fully with the authorities responsible for combating money laundering: regard to information they receive from a client in order to be able to represent him in legal proceedings This dero- gation from the obligations laid down in paragraph 1 shall not cover any case in which there are grounds for suspecting that advice that advice is being sought for the purpose of facilitating money laundering. 4. Information supplied to the authorities in accordance with paragraph 1 may be used only in connection with the combating of money laundering. However, Member States may provide that such information may also be used for other purposes. í 6. Article 7 shall be replaced by the following: Article 7 suspect transactions which they know or shall ensure that the institutions and Member States to this Directive refrain from carrying persons subject to be out related to money laundering until they have apprised the authorities referred to in Article 6. Those authorities may, under conditions determined by their national legislation, give instructions not to execute the operation. Where such a transaction is suspected of giving rise to money laun- dering and where to refrain in such manner is impossible or is likely to frustrate efforts to pursue the beneficiaries of a suspected money-laundering operation, the institutions the authorities concerned shall apprise and persons immediately afterwards. í (a) by informing those authorities, on their own initiative, of any fact which might be an indication of money laundering, 7. In Article 8 the words Credit and financial institutionsí shall be replaced by The institutions and persons subject to this Directiveí. (b) by furnishing those authorities, at their request, with all the necessary procedures established by the applicable legislation. accordance with information, in 2. The information referred to in paragraph 1 shall be forwarded to the authorities responsible for combating in whose money laundering of territory the the information is situated. The person or persons designated by the institutions and persons in accordance with the procedures provided for in Article 11 (1) shall normally forward the information. institution or person forwarding the Member State In the case of 3. the independent legal professionals referred to in point 5 of Article 2a, Member States may designate as the authority referred to in paragraph 1 of this Article the bar association or appropriate self-regu- latory body of the profession concerned and in such case shall lay down the appropriate forms of cooperation between them and the other authorities responsible for combating money laundering. 8. Article 9 shall be replaced by the following: Article 9 The disclosure in good faith to the authorities responsible for combating money laundering by an institution or person subject to this Directive or by an employee or director of the information referred to in Articles 6 and 7 shall not constitute a breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, and shall not involve the institution or person or its directors or employees in liability of any kind. í 9. In Article 10 the words ácredit or financial institutionsí shall be replaced by áthe institutions and persons subject to this Directiveí. Member States shall not be obliged to apply the obligations laid down in paragraph 1 to such legal professionals with 10. In Article 11 the words ácredit and financial institutionsí shall be replaced by áthe institutions and persons subject to this Directiveí. 27. 6. 2000 EN Official Journal of the European Communities C 177 E/19 11. Article 12 shall be replaced by the following: Article 2 Article 12 1. Member States shall ensure that the provisions of this Directive are extended in whole or in part to professions and to categories of undertakings, other than the insti- tutions and persons referred to in Article 2a, which engage in activities which are particularly likely to be used for money-laundering purposes. In case of fraud, or corruption or any illegal activity 2. damaging or likely to damage the European Communities’ financial interests, the anti-money laundering authorities referred to under article 6 and, within its competences, the Commission, shall collaborate with each other for the purpose of preventing and detecting money laun- dering. To this relevant they information on suspicious transactions. Information thus exchanged shall be covered by rules of professional secrecy. exchange shall end 3. When independent legal professions are concerned, Member States may exempt bar associations and self-regu- latory under paragraph 2. í from obligations professional bodies the after years adoption of this Directive the Three Commission shall carry out a particular examination, in the context of the report provided for in Article 17 of Directive 91/308/EEC, of aspects relating to the specific treatment of independent legal professionals, the identification of clients in non-face to face transactions and possible implications for elec- tronic commerce. Article 3 1. Member States shall bring into force the laws, regulations and administrative decisions necessary to comply with this Directive by 31 December 2001 at the latest. 2. Where Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such a reference shall be laid down by the Member States. 3. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field governed by this Directive. Article 4 This Directive is addressed to the Member States. ANNEX IDENTIFICATION OF CUSTOMERS (PHYSICAL PERSONS) BY CREDIT AND FINANCIAL INSTITUTIONS IN NON FACE-TO-FACE FINANCIAL OPERATIONS Within the framework of the Directive, the following principles should apply to the identification procedures for non face-to-face financial operations: (i) The procedures should ensure appropriate identification of the customer. (ii) The procedures may apply provided there are no reasonable grounds to believe that face-to-face contact is being avoided in order to conceal the true identity of the customer and there is no suspicion of money laundering. (iii) The procedures should not apply to operations involving the use of cash. (iv) The internal control procedures stipulated in Article 11(1) of the Directive should take specific account of non-face- to-face operations. (v) When the counterpart of the institution undertaking the operation (ácontracting institutioní) is a customer, identi- fication may be carried out by the following procedures: (a) Using the contracting institution’s branch or representative office which is nearest the customer in order to carry out a face-to-face identification (b) If the identification is carried out without a face-to-face contact with the customer: - A copy of the customer’s official identification document or the official number of the identification document should be required. Special attention should be paid to the verification of the customer’s address when this is indicated on the identification document (e. g. documents concerning the operation to be sent by registered mail with advice of receipt to the customer’s address). C 177 E/20 EN Official Journal of the European Communities 27. 6. 2000 - The first payment of the operation should be carried out through an account opened in the customer’s name with a credit institution located in the European Union or in the European Economic Area. States may allow payments carried out through reputable credit institutions established in third countries which apply equivalent anti money laundering standards. - The contracting institution should carefully verify that the identities of the holder of the account through which the payment is made and of the customer, as indicated in the identification document (or ascertained from the identification number) are one and the same. In the case of doubt in this regard, the contracting institution should contact the credit institution with which the account is opened in order to confirm the identity of the account holder. If the doubt still remains a certificate from the credit institution should be required attesting to the identity of the account holder and confirming that the identification was properly carried out and that the particulars have been registered according to the Directive. (c) In the case of certain insurance operations, identification requirements may be waived when the payment is áto be debited from an account opened in the customer’s name with a credit institution subject to this Directiveí (Article 3(8)). (vi) When the counterpart of the contracting institution is another institution acting on behalf of a customer: (a) If the counterpart is located in the European Union or in the European Economic Area, identification of the customer by the contracting institution is not required. (Article 3(7) of the Directive). (b) If the counterpart is located outside the European Union and the European Economic Area, the institution should check the identity of its counterpart (unless it is well known), by consulting a reliable financial directory. In the case of doubt in this regard, the institution should seek confirmation of its counterpart’s identity from the third country supervisory authorities. The institution should also take áreasonable measures to obtain (Article 3(5) of the informationí on the customer of the Directive). These áreasonable measuresí could go from simply requesting the name and address of customer, when the country applies equivalent to requesting a counterpart’s certificate stating that the customer’s identity has been properly verified and registered, when in the country in question the identification requirements are not equivalent. its counterpart (beneficial owner of the operation) identification requirements, (vii) The above-mentioned procedures do not preclude the use of other ones which, in the opinion of the competent authorities, may provide equivalent safety for the identification in non-face-to-face financial operations