No C 332/86 Official Journal of the European Communities 31. 12. 90 
Opinion on the proposal for a Council Directive on prevention of the use of the financial 
system for the purpose of money laundering (*) 
(90/C 332/26) 
On 5 April 1990 the Council decided, in accordance with Article 57(2) of the Treaty 
establishing the European Economic Community, to ask the Economic and Social Committee 
for an Opinion on the abovementioned proposal. 
The Section for Economic, Financial and Monetary Questions, which was responsible for 
the preparatory work on the matter, adopted its Opinion on 11 September 1990. The 
Rapporteur was Mr Pelletier. 
At its 279th plenary session (meeting of 19 September 1990) the Economic and Social 
Committee adopted the following Opinion by 113 votes to 11, with 10 abstentions. 
A moral obligation 
1.1. The ESC cannot but support the stepping-up of 
action to combat serious crimes condemned by the 
international community, and particularly drug-related 
crime. 
1.2. Everyone has a moral obligation to join in the 
fight against a scourge which undermines human dig­
nity and the physical and moral integrity of its victims, 
many of whom are young people. Moreover, credit 
institutions cannot remain insensitive to the risk of the 
whole financial system being destabilized or of the loss 
of public confidence which could result if financial 
channels were used for laundering money gained from 
serious crimes condemned by the international com­
munity. 
1.3. In these circumstances a proposal for a directive 
to prevent the financial system being used for launder­
ing money gained from serious crimes condemned by 
the international community can only be approved. In 
particular it must facilitate harmonization of any laws 
or regulations which the Member States are preparing 
or are on the point of adopting. Such harmonization is 
vital to avoid distortions of competition. 
Trying to neutralize this laundering machinery by using 
information obtained from compulsory movements 
through banking channels represents an objective which 
the ESC approves wholeheartedly, its main concern 
being to see that the means used are effective and in 
keeping with the importance of what is at stake. The 
hearing of representatives of Interpol has confirmed the 
Committee's views here. 1.4. Traffickers amass enormous amounts of capital, 
generally in the form of banknotes, from their drug-
using customers. Schemes which are often highly com­
plex are set up on an international scale in order to 
feed the proceeds from these criminal activities back 
into the international economic system. Because money 
is fed through a host of shell companies in legal and 
tax havens, it has already been laundered when it arrives 
in Europe. 
The amount of money gained from drug trafficking has 
been assessed by a special task force (2). Although the 
figures are of course approximations they are probable. 
Using the United Nations method based on estimates 
of world drug production, the value of sales of illegal 
drugs to final consumers was thought to be 
300 billion US$ in 1987. Other reliable sources put the 
value of the drugs trade in 1990 at 500 billion US$, of 
which 300 billion US$ is now thought to be the figure 
for the USA alone. 
Using different methods the task force has assessed 
sales of cocaine, heroin and cannabis at around 
122 billion US$ a year in the USA and Europe, of which 
50 to 70 %, or 85 billion US$ a year, could be available 
for laundering or investments. 
The task force points out that most revenues come from 
retail sales in Western Europe, the USA and Canada. 
Need for more action 
1.5. But in the light of the explanations given at the 
hearing of leaders of Interpol the Committee feels that 
one cannot simply deal with the question of money 
laundering without tackling the whole issue of drug use 
and the marketing of drugs. It is essential that the 
present proposal be backed up by the harmonization 
of laws and practices designed to prevent drug con­
sumption. 
(*) OJ No C 106, 28. 4. 1990, p. 6. (2) Financial action task force against money laundering set up 
at the Paris Summit in July 1989. 
31. 12. 90 Official Journal of the European Communities No C 332/87 
It would be much easier to stamp out money laundering 
if, from the outset, there were not major differences 
within the EEC as regards the level of drug sales and 
consumption and the methods used for preventing and 
stopping them, differences which are incompatible with 
the UN Convention of 1988. 
1.6. The suppression of drug trafficking and organ­
ized crime at international level concerns all countries 
and requires the active involvement of public opinion 
and all economic operators. The ESC asks that it be 
involved in the reflections which the high-level co­
ordinating group (CELAD) submitted to the European 
Council in June 1990 'on measures likely to ensure 
more effective coordination and on the priorities to be 
laid down for action by the Community and the Mem­
ber States as part of a concerted campaign to combat 
drug addiction and the production, distribution and 
illegal sale of narcotic drugs'. These measures are to be 
finalized in an overall plan to be presented as the Rome 
Summit at the end of 1990. 
The Committee particularly notes that the Dublin Sum­
mit approved the CELAD recommendation calling for 
the implementation of the United Nations Convention 
by 31 December 1990, or 30 June 1991 at the latest. 
1.7. Provision should also be made for extending the 
rules on using the financial system for money laundering 
to include territories which are under the influence of 
the Member States without being legally in the EEC and 
the countries of the European Free Trade Association 
(EFTA), and it is essential that there be close co-oper­
ation with countries where capital is allowed to move 
freely. 
The effective suppression of this sort of crime is, beyond 
any doubt, hampered by the existence of financial cir­
cuits outside the EEC, or even the Organization for 
Economic Co-operation and Development (OECD), 
which accept all types of financial flows, including 
laundered money. 
The Committee suggests that the Commission start 
negotiations with the International Monetary Fund 
(IMF) on an international convention to be drawn up 
by the latter in collaboration with the UN, whereby 
any credit or other financial institutions which refuse 
to abide by the terms of the Vienna Convention will be 
excluded from the international financial community 
and the world payments system. This exclusion would 
take the form of a breaking-off of international finan­
cial relations with the relevant institutions. There is 
little doubt that such a convention would have a decis­
ive impact on cleaning up the international financial 
system. A draft Directive in relation to certain international 
acts or drafs acts 
1.8. Several converging initiatives have resulted from 
the international Community being mobilized to stamp 
out drug trafficking, such as: 
— the UN international Convention against illicit traff­
ic in narcotic drugs and psychotropic substances 
concluded in Vienna on 20 December 1988, 
— the Basle Declaration of principles of 12 December 
1988 by the banking supervisory authorities of the 
Group of Ten, 
— the setting-up of a financial action task force against 
money laundering after the heads of State Summit 
in July 1989, which led to the task force report in 
February 1990 with its 40 recommendations, and 
— the draft Convention of the Council of Europe dated 
25 April 1990 on the combatting of crime, Article 6 
of which says that countries should make laundering 
a punishable offence. 
1.9. The draft Directive is sometimes less precise 
than the task force's recommendations. The Committee 
wonders if it would not be useful to include some of 
the Recommendations in the directive in a more binding 
form than that set out by the task force, especially 
that which prohibits financial institutions and their 
employees from warning their customers that they have 
been the subject of a declaration to the law enforcement 
authorities or that which calls for a particularly careful 
examination of operations with countries which do not 
apply the Recommendations. 
1.10. At any rate, it would be unfortunate if the draft 
directive seemed less directly operational than the task 
force Recommendations, which were the result of some 
thorough work and a sound identification of the prob­
lems involved. These Recommendations have been 
endorsed by several Member States and by the Com­
mission itself. The Houston Summit in July 1990 con­
firmed them and called for their full and immediate 
application. 
The language used falls short of the firm resolve shown 
in the explanatory memorandum and the recitals, with 
expressions such as 'Member States shall see that' which 
are closer to the style of a Recommendation than that 
of a directive. 
An uncertain legal basis 
1.11. The Committee wonders about the legal basis 
of the proposed Directive. 
In reality one of the proposal's aims is to approximate 
the laws of the Member States in the field of criminal 
law and penal procedure. 
No C 332/88 Official Journal of the European Communities 31. 12. 90 
Under the proposal the Member States will be obliged 
to introduce into their legislation the definition of a 
criminal offence (Article 2) and an obligation to report 
facts likely to constitute such an offence, which comes 
under penal procedure. 
Article 57, which empowers the Council to issue direc­
tives to make it easier for people to take up and pursue 
activities as self-employed persons as part of the right 
of establishment and the freedom to provide services, 
would not be an adequate legal basis. 
It is up to the Commission to propose another basis, 
such as Articles 100,100A or 235 of the Treaty. 
1.12. If the Commission considers it should propose 
to the Council a directive dealing with criminal law 
and penal procedure, it should make specific and strict 
proposals which are really designed to ensure the 
desired approximation of Member States' laws in the 
field. 
Following the above reasoning the scope of the directive 
would be limited to 'credit institutions' and 'financial 
institutions', but it should be extended to any person 
subject to the law. 
1.13. The concept of a 'serious crime' has no mean­
ing in criminal law. It is therefore insufficient to ensure 
an approximation of Member States' laws. 
Similarly the concept of a 'crime' without any other 
definition is also insufficient to ensure the desired 
approximation of Member States' laws, as in criminal 
law a crime is not defined by the nature of the offence 
but by the nature of the penalty laid down for it. 
The offence of money laundering must therefore be 
defined in a strict manner conducive to equivalent appli­
cation in all the Member States. 
If one limits oneself to laundering money from drug 
trafficking, one must—and it will be sufficient to do 
so—incorporate the terms of the Vienna Convention in 
the directive, i.e.: 
'The Member States shall adopt the measures 
necessary to confer the status of a criminal offence 
in accordance with their domestic legislation on any 
of the following acts committed intentionally: 
a) the conversion or transfer of goods when the 
person carrying out such actions knows that such 
goods originate from one of the offences defined 
in accordance with Article 3(1) (a) of the United Nations Convention against illicit traffic in nar­
cotic drugs and psychotropic substances adopted 
in Vienna on 19 December 1988, or participation 
in such actions, with the purpose of concealing 
or disguising the illicit origin of the said goods 
or of helping any person involved in the carrying-
out of one of these offences to escape the legal 
consequences of his actions; 
b) the concealment or disguising of the nature, ori­
gin, location, arrangement, movement or true 
ownership of the goods or the rights relating to 
them when the person carrying out such actions 
knows that such goods or rights originate from 
one of the offences defined in accordance with 
Article 3(1)(a) of the aforementioned Vienna 
Convention or from an involvement in one of 
these offences; 
c) the acquisition, holding or use of goods when 
the acquirer, holder or user knows at the time 
when he receives them that they originate from 
one of the offences defined in accordance with 
Article 3(1) (a) of the Vienna Convention or from 
an involvement in one of these offences.' 
Comments on the Articles 
Article 1 
The Committee considers that explicit mention should 
be made of the post among the financial institutions in 
Article 1(2). 
The definition of a 'serious crime' in the seventh indent 
is too vague because it includes 'any other serious 
criminal offence, whether or not connected with drugs'. 
It is not the job of credit institutions to become auxiliar­
ies of the police, the legal authorities or the adminis­
trations responsible for dealing with such things as 
customs and tax frauds, with all the risks of error or 
diversion that this would involve. 
Article 2 
Apart from the criticism made above, it must be pointed 
out that extending the Commission's powers to the 
field of criminal law gives rise to legal objections which 
need clarification. 
The Committee feels that it is perfectly possible to get 
round the difficulty by keeping the basic principle of 
describing money laundering as a serious criminal 
offence by referring to the Member States' obligation 
to ratify the Vienna Convention, which stipulates that 
the laundering of proceeds from drug trafficking must 
be made a crime. 
31. 12. 90 Official Journal of the European Communities No C 332/89 
Article 2 would then read: 'Member States shall under­
take to ratify the United Nations Convention of 19 
December 1988 against illicit trade in narcotic drugs 
and psychotropic substances by 31 December 1990, or 
30 June 1991 at the latest.' 
Article 3 
The identification of customers is part of the normal 
professional practice of credit and financial institutions. 
Moreover, this obligation is included in the Basle Dec­
laration of 12 December 1988 which was signed by the 
majority of EEC Member States. Its extension to non-
signatory states should be specified in the present draft 
directive. 
Establishing the real identity of the persons on whose 
behalf an operation is carried out or an account is 
opened when customers are not acting on their own 
behalf poses complex technical problems of application 
which the draft Directive certainly cannot set out in 
detail. 
Such is the case, for example, of orders carried out 
within a clearing system. In such systems it is absolutely 
impossible for these bodies to identify the customer for 
whom an affiliate is acting. It is therefore essential, if 
such cases occur, to transfer the check of the benefici­
ary's identify to the financial institutions in direct con­
tact with the final investors, which are the best placed 
to check the identity of beneficiaries; financial bodies 
working at an overall level with other financial insti­
tutions cannot possibly check the identity of the final 
beneficiaries of operations carried out by other financial 
intermediaries. 
A way should be found to clear up this lack of precision, 
which opens the door to all sorts of disorder when 
the Member States apply the rules. The Committee 
considers that the Commission should set out instruc­
tions in an Appendix to the draft Directive which 
harmonize the various legally binding obligations 
involved in respecting the principles of the proposal. 
Drawing up such a document should not pose any 
major difficulties, as most of the authorities which 
supervise credit institutions have prepared detailed 
guidelines for banks based on the Basle Declaration and 
dealing with these very problemes of implementation. 
Article 4 
The wording of this article will pose problems for credit 
institutions when put into practice. But these must not 
be exaggerated if one considers that banking practice 
based on knowledge of the customer enables many problems to be resolved which arise from the relative 
vagueness of expressions such as 'apparent economic 
purpose' or 'suspicion'. 
However, the Committee regrets that the draft Directive 
does not incorporate in their entirety Recommendations 
Nos 15 and 21 of the task force, which are both more 
precise and more comprehensive. These lay down that 
the background and the object of such operations 
should be examined; the findings of the examination 
should be set out in writing and be available for the 
assistance of the authorities responsible for supervision, 
detection and crime prevention, auditors and internal 
or external inspectors. 
If would also be desirable if the obligations set out in 
this article—in line with Recommendation No 22 of 
the task force—were extended to branches or subsidiar­
ies in which the credit institution had a majority holding 
and whose registered office was outside the EEC, unless 
local legislation prevented such a step. 
Article 5 
This article lays down a basic principle which is con­
trary to normal law and practice. It releases credit 
institutions from the obligation of professional secrecy 
and sets up an exceptional procedure for cooperation 
with the authorities competent for criminal matters. 
The Committee feels that a more binding formula 
would be preferable, such as 'Member States shall be 
obliged to take steps to ensure...'. The scope of the 
directive must not be weakened by divergences in appli­
cation by the Member States. Such wording would also 
be more consistent with point 6 of the explanatory 
memorandum, which mentions obligations. 
— Article 5(1): Cooperation between credit and finan­
cial institutions is only envisaged with the judicial or 
law enforcement authorities competent for criminal 
matters. Some Member States have thought it useful 
to set up special schemes to stamp out drug traffick­
ing and the laundering operations associated with 
it involving, among others, the customs authorities. 
For clarification, the following should be added at the 
end of Article 5(1): 'and with authorities which may be 
specially empowered by the Member States to combat 
money laundering.' 
So, Article 5 would then read: 'Member States shall be 
obliged to ensure: 
1. That credit and financial institutions and their 
directors and employees cooperate fully with the 
relevant judicial or law enforcement authorities 
competent for criminal matters, and with any autho-
No C 332/90 Official Journal of the European Communities 31. 12. 90 
rities which may be specially empowered by the 
Member States to combat money laundering: 
— by obligatorily informing these authorities, on 
their own initiative... 
— by furnishing these authorities...' 
— Article 5(2): Exemption from any criminal liability 
should also be extended to the credit or financial 
institution concerned, so Article 5(2) should end 
'...for such employees and directors or for the credit 
or financial institution concerned any civil or penal 
responsibility of any kind'. 
A new Article 5(3) should be added reading as follows: 
'3. The information gathered by the judicial or law 
enforcement authorities may not be used for any 
purposes other than those laid down in this Direc­
tive'. 
One must avoid any confusion arising about the scope 
and aim of the directive, which is to combat money 
laundering connected with drug trafficking. 
Article 5a 
The draft Directive does not cover the responsibility of 
credit institutions towards customers if an order is not 
carried out under Article 4, or if a mistaken suspicion 
is communicated in good faith. The financial conse­
quences of such acts may be very serious (money 
unavailable at the desired moment, breach of arising 
out of late payment, etc.). 
The Committee proposes the insertion of the following 
new Article 5a: 'Member States shall assume the costs 
of damages resulting from information given in good 
faith, in accordance with Article 5, or from the non­
performance of transactions mentioned in Article 4.'. 
Article 5b 
The Committee feels there should be an additional 
article prohibiting financial institutions and their 
employees from warning their customers that they are 
going to disclose information to the competent authori­
ties about operations concerning them. 
Article 5 c 
The draft Directive does not mention cases where credit 
or financial institutions do not fulfil the obligations laid 
down. The Committee proposes the insertion of a new Article 5c reading: 'When, as the result of a lack of 
attention or shortcomings in its own internal monitor­
ing procedures, a credit or financial institution fails to 
fulfil the obligations incumbent on it under this Direc­
tive, the supervisor authorities which have disciplinary 
powers may act automatically under the terms laid 
down by their professional rules. Such action shall not 
hinder application of the penalties laid down by the 
Member States in the event of complicity when the legal 
procedure reveals that failure to provide information 
is the result of collusion with the beneficiary of the 
laundering operation.' 
Article 7 
This article is too vague as regards both 'adequate 
procedures of internal control' and 'appropriate meas­
ures so that their employees are aware'. 
The Committee is aware that the directive cannot go 
into complex implementing provisions in detail. So, it 
would re-emphasize the need for the Commission, in 
collaboration with the competent authorities of the 
Member States, to draw up instructions setting out the 
technical implementing provisions in greater detail. 
If this is not done, there may be major divergences in 
the effective participation of the Member States in the 
combat against one of the serious scourges threatening 
society. 
Article 8 
Credit and financial institutions are not the only parties 
concerned by cash transactions. The Commission is 
therefore right to provide for the possibility of extend­
ing the Directive to other professions, but it is difficult 
to see why such an extension should be provided for 
'where applicable'. The Committee proposes that this 
phrase be deleted. 
The Committee also feels that Article 8 could be more 
precise, in line with Recommendation No 11 of the task 
force; this mentions the possibility of drawing up a 
joint basis list of financial institutions which are not 
banks and other professions handling cash sums; these 
would be bound by the name obligations. 
The Committee considers that among the professions 
who have to handle large sums there should be included 
the post office, casinos and gaming houses, stock­
brokers, solicitors, lawyers, estate agents, auctioneers 
and dealers in works of art and precious metals. 
3112.90 Official^oumal of the European Communities ^loCoB32B91 
Conclusion 
The Commissions aims and intentions can only he 
vigorously endorsed, but it would certainly be difficult 
to include in one directive all the highly complex pro^ 
visionsneededto stamp out money laundering effect 
tively. 
But the choice of a brief document including only 
essential provisions and, among otherthings, not dwelL 
ing on procedures for putting principles into practice 
involves inconveniences which the Committee must 
condemn. 
As the majority of member States have endorsed bind 
ing rules, such as those of theVienna Convention, one might hope that unanimous agreement can be reached 
onsettingupatechnicallyeffectiveprocessforstamping 
out money laundering. 
Phe above assessment of the proposals articles has 
certainly led to some additional technical proposals 
being put forward, but it cannot claim to have filled in 
the gaps in an obviously incomplete blueprint. As the 
Committee cannot tackle the whole issue withanew 
te^t, if feels that the proposal must be givenaclearer 
and more specific aim, by taloing the tasl^force^sRec 
ommendations and maloing them binding, in line with 
the decision of the Houston Summit of ]uly 1990. 
Foone at Brussels, 19 September 1990. 
o^^^o^o^^^^^o^^Co^^r^ 
Alt^rro^A^^Ot^ 
Opmionon the proposal foraCouncil Regulation laying down the health rules for the 
production and placmg on the market of raw nulk, of nulk for the manufacture of milk^ 
based products and of milkbased products^) 
(90BG332B27) 
On 23 Eebruaryl990 the council decided to consult the Economic and Social Committee, 
under Article 198 ofthePreatyestablishingthe European Community,ontheabovementioned 
proposal. 
The Section for Agriculture and Eisheries,whichwas responsible for preparing the Com^ 
mittee^s worsen the subject, adopted its Opinion on 12]ulyl990.The Rapporteur was 
^Blr Gardner. 
At its279th plenary session (meetingof 19September 1990), theEconomicandSocial 
committee adopted the following Opinion with no votes against and two abstentions. 
1. introduction 2. General comments 
1.1. Phis proposal is necessarytoprotectthe consumer 
in the market without frontiers and the Committee 
accepts it subject to the reservations below. 2.1. The Committee sees threeoverall problems with 
this proposals 
d^oi^ooe^^.i^D.u^ 2.1.1. Public health is not divisibleand smaller estabD 
lishments merely endanger fewer people. All establish^ 
ments must therefore be covered by proper health rules,