EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 20.10.2004 
COM(2004) 700 final 
  
COMMUNICATION FROM THE COMMISSI ON TO THE CO UNCIL AND THE 
EUROPEAN PARLIAMENT 
on the Prevention of and the Fight against Terrorist Financing 
through measures to improve the exchange of  information, to strengthen transparency 
and enhance the traceability of financial transactions 
 
EN 2   EN TABLE OF CONTENTS 
1. INTRODUCTION ....................................................................................................... 3 
2. OVERVIEW OF THE FIGHT AGAIN ST TERRORIST FINANCING .................... 3 
3. TERRORIST FINANCING AND THE EXCHANGE AND ANALYSIS OF 
INFORMATION.......................................................................................................... 4 
3.1. Information exchange among competent authorities ................................................... 4 3.2. Information exchange between competen t authorities and the private sector ............. 5 
3.3. Outreach to the Private Sector...................................................................................... 6 4. TERRORIST FINANCING AND THE TRACEABILITY OF FINANCIAL 
TRANSACTIONS ....................................................................................................... 6 
4.1. Financial Investigation................................................................................................. 6 4.2. Funds Transfers........................................................................................................... .6  
4.3. Transactions outside the formal financial system ........................................................ 7 
4.4. Customer Identification................................................................................................ 7 5. TERRORIST FINANCING AND TRANSPARENCY .............................................. 7 5.1. Legal Entities ............................................................................................................ ... 7 
5.2. Non-Profit/Charitable Sector ....................................................................................... 8 6. TERRORIST FINANCING AND HORIZONTAL MEASURES .............................. 8 
6.1. Asset Freezing............................................................................................................ .. 8 
6.2. Effective and Targeted Training .................................................................................. 9 6.3. Security Research......................................................................................................... 9 
6.4. External Action .......................................................................................................... 1 0 
7. CONCLUSIONS........................................................................................................ 10 ANNEX 1........................................................................................................................ ......... 12 
ANNEX 2........................................................................................................................ ......... 14 
ANNEX 3........................................................................................................................ ......... 19 
 
EN 3   EN 1. INTRODUCTION 
At its extraordinary meeting of 21st September 2001, the European Council called upon the 
Council to take all necessary measures to combat  the financing of terrorism. In response to the 
11th March 2004 terrorist atta cks in Madrid, the European Counc il adopted the Declaration on 
Combating Terrorism1. The Declaration committed the Union and its members “…to do 
everything within their power to combat all forms of terrorism…”  and identified a number of 
Strategic Objectives to help achieve this goal. These include a requirement on the Union and its members to take all necessary measures “to reduce the access of te rrorists to financial and 
other economic resources” . The revised ‘EU Plan of Action on Combating Terrorism’
2, sets 
out detailed proposals for developing th e fight against terrorist financing.  
This Communication considers what further meas ures may be needed to tackle terrorist 
financing most effectively. Based on considerat ions set out in this Communication, Annex 1 
constitutes an indication of poten tial further measures in the fi ght against terrorism financing 
to be further examined in terms of feasibility and cost/benefit. Annex 2 is a summary of EU measures relevant to the fight against terrori st financing adopted since October 2001. Annex 3 
lists relevant measures which are currently under discussion.  
2. OVERVIEW
 OF THE  FIGHT  AGAINST  TERRORIST  FINANCING 
Terrorist financing covers two distinct aspect s – the financing of te rrorist attacks and of 
terrorist networks. The Madrid bombings ar e estimated to have cost a mere €8.000. The 
indications are that transactions to finance terro rist networks, as opposed to a specific attack, 
generally also have a small monetary value. Since such sums may be small and unlikely in 
themselves to generate suspicion as they move through the financial system, detection of 
financial transactions for the purpose of  terrorist financing is difficult.  
This does not mean that financial instituti ons should not attempt to apply anti-money 
laundering techniques to the detection of terroris t financing. It does, however, suggest that 
additional methods, centred on the major risks id entified by the security  services, must be 
developed and used to undermine the logistics a nd operations of terrorist networks, adopting a 
broader approach than purely the drying up of fi nancial flows. Above all, we need to ensure 
that terrorist financiers must operate in a hostile environment where all options are high risk. 
Important EU-level progress has been made in the fight against terrorism and its financing3. If 
these are to be effective in the fight agains t terrorist financing, they need to be duly 
implemented and applied by the Member Stat es – a number of important gaps remain4.  
Three principal areas can be identified as releva nt to the fight agains t terrorist financing: 
improved co-operation in the exchange of information, enhanced traceability of  financial 
transactions and greater trans parency of legal entities . By addressing these effectively, 
                                                 
1 Brussels, 29th March 2004, 7906/04 
2 10586/04 of 15 June 2004 
3 See Annex 1 
4 For example, the Commission Report of June 2004 on Member States’ complia nce with the Framework 
Decision on combating terrorism indicates a number of shortcomings at national level 
(COM(2004)409). 
 
EN 4   EN significant further benefits are achievable in the preventive disruption of  terrorist activity, the 
reduction of financial flows to  terrorist groups and enhan ced understanding of terrorist 
networks. 
The right balance must be found between prev entive/disruptive measures on the one hand and 
civil liberties on the other. For example, care must be taken to ensure that nationality or 
religious affiliation does not become a ground for placing a person under suspicion.  
Appropriate intelligence or other objective grounds to suspect that a person may have 
involvement in terrorist activities should be the driving force in all pr eventive and repressive 
action.  
Data protection issues are central to much of the debate surrounding how to improve the fight 
against terrorist financing. A ny exemptions from the Commun ity Data Protection Directives5, 
such as the prevention and detection of crime, have to be necessary, relevant and foreseen by 
law. To strengthen police and judici al cooperation, while at the same time ensuring robust 
data protection, a coherent legal  framework at the level of  the Union based on common 
standards regarding the processing of personal data is envisaged.  Such a policy shall 
encompass appropriate safeguards  so that processing of personal data by intelligence, police, 
customs and judicial au thorities observes the principles  of personal data protection enshrined 
in Article 8 of the Charter of Fundamental Rights.   
3. TERRORIST  FINANCING  AND  THE  EXCHANGE  AND  ANALYSIS  OF 
INFORMATION 
3.1. Information exchange amon g competent authorities 
Information exchange between relevant bodies at national level is as important as such 
exchange at EU and inte rnational levels. In both  cases there is a need to implement co-
operation and exchange structures encompassi ng fiscal authorities, financial oversight 
bodies, the Justice Department, intelligen ce community, law enforcement authorities and 
authorities in charge of administrative freezing6. Such a network could be the forum for 
structured exchange of information on persons  under investigation by participating bodies. 
The Communication on improving access to inform ation by law enforcement authorities of 
June 2004 has proposed action to enhance the ex change of information between relevant 
actors7. Its aim is to establish a European ‘intelligence-led’ law enforcement capability 
whereby available information can be used by  the appropriate authorities in their fight 
against organised crime and terrorism. 
The Communication 8 on the fight against terrorism c ontains in Annex a Proposal for a 
Council Decision enabling the services involved  as well as Europol and Eurojust to have 
access to the most complete and up-to-date information.  The obligation to exchange 
                                                 
5 Notably the general Data Protection Directive 95/46/EC and Directive 2002/58/EC on privacy and 
electronic communications.  
6 The Netherlands’ FEC is an example of such co llaboration and is a network comprising the General 
Intelligence and Security Services, the tax services, fiscal and economic law enforcement agency. 
7 Doc COM(2004)429 of 16.6.2004. 
8 European Commission Communication on measures to be taken to combat terrorism and other forms of 
serious crime, in particular to improve exchanges of information of 29.03.2004. COM(2004)221.  
 
EN 5   EN information would apply to all terrorist offences , including participation in the activities of a 
terrorist group through a ny form of financing.  
The FIU.NET, funded by the Member States and the Commission, aims to establish a 
computer network for the exchange of inte lligence among FIUs. In line with the revised 
definition of FIUs adopted at the June 2004 Egmont meeting, the FI U.NET will become an 
important element in facilitating the sharing of  intelligence related to terrorist financing. The 
Commission and Member States must ensure that adequate funding and other appropriate 
resources continue to be provided to the FIU.NET. 
Europol’s “SUSTRANS” project s eeks to establish links between transactions and associated 
terrorist activity. Further consideration is needed as to whether suspicious transaction reports for SUSTRANS should become part of the Europol  Information System or whether a separate 
database of such reports should be establishe d for this purpose. Many Member States are not 
providing adequate data to allow the SU STRANS project to achieve its potential
9. Moreover, 
the Protocol to the Europol Convention10, extending Europol’s competence to all money 
laundering offences, would significantly promot e SUSTRANS’ effectiveness, but has still not 
come into force due to slow ratification of the Protocol by certain Member States11. Those 
Member States who have still not ratified the Protocol should do so as a matter of urgency. 
Joint Investigation Teams must be further promot ed in cross-border inves tigations of terrorist 
financing and are well suited to operating with  teams of law enforcement, prosecutors and 
judges. The sharing of intelligence with criminal prosecutors  would enhance the prospects of 
successful prosecutions. 
3.2. Information exchange between competen t authorities and the private sector 
Real time data exchange between law enforcemen t/intelligence services and the private sector 
generally (financial transactions  but also purchase of air line tickets, car hire) can play an 
essential role in both preventiv e and repressive law enforcement activity in the fight against 
terrorism and its financing. This could allow real time tracking of fi nancial transactions. 
The financial sector does not have the inform ation which FIUs (and others) can work with 
when analysing suspicious transactions and fi nancial patterns of suspects. Lack of direct 
access to information constrains the FIU’s ab ility to configure data from many different 
sources. Discussions with the financial community, s ecurity services and FIUs should identify 
where the problems lie and the most cost-effective ways to address these . A possible means 
could be to give FIUs full access to dedicated databases located in and under the control of 
the financial community.  This might allow linking of subject s, identifying flows of money and 
tracking of sources. To address privacy concerns, financial institutions could give access on the basis of “encrypted” data.   
                                                
 
9 In July 2004 the European Commission’s Directorat e-General Justice and Home  Affairs wrote to those 
Member States who have ratified the Europol Convention and who are not providing adequate data for 
the purpose of SUSTRANS. The letter asked to be informed why relevant data were not being provided. Replies have been requested by 20 September 2004. 
10 Council Act of 30 November 2000 drawing up a Protocol amending Article 2 and the Annex to the 
Europol Convention (2000/C 358/01). 
11 Of the former EU 15 the following Member States ha ve ratified the Protocol: Germany, Spain, France, 
Greece, Portugal, Finland, Sweden an d the UK. Of the new Member States all but Estonia have ratified 
the Protocol. 
 
EN 6   EN 3.3. Outreach to the Private Sector 
To ensure that the financial community and ot her branches of the private sector give the 
highest priority to the fight against terrorism, high level contacts shoul d be established and 
maintained between law enforcement agencies specialised in terrorism and private sector 
representatives.  Appropriate mechanisms for co-operation, information exchange and 
feedback between intelligence services and financi al institutions must be further developed. 
4. TERRORIST  FINANCING  AND  THE  TRACEABILITY  OF FINANCIAL  
TRANSACTIONS 
4.1. Financial Investigation 
Member States must ensure that law enforcemen t services have resource to develop financial 
investigative skills allowing them to follow money trails backwards to the person providing 
finance and forwards to terrorist cells. Financial investigation must  be prioritised in the 
Member States and should become a routine pa rt of all law enforcement investigations of 
terrorist suspects.  
Designation or establishment of national bodies dedicated to the identification, tracing, 
freezing and confiscation of terrorist (and other criminal) assets which may combine investigative, fiscal and legal skills, should be promoted. Such bodies could also represent the 
point of contact both for guidance to the fi nancial community on freezing and related 
questions and to competent authorities of  third countries concerning designation of 
individuals or groups. Implementation of a co-operation network among such bodies should 
be further encouraged
12. 
Establishing adequate links between funding activities and th e pursuit of terrorism/terrorist 
attacks, would allow financial data to be turned into intelligence which can be turned into evidence. As financial institutions use elect ronic communications channels, work conducted 
in the gathering of electronic evidence is of vital importance. A European funded project, 
“CTOSE”
13, aims to provide a common understanding of the measures needed to present 
electronic evidence in Court. The gathering of elec tronic evidence must be recognised as a 
key priority. 
4.2. Funds Transfers 
The European Commission will  adopt a draft Regulation on payer’s information 
accompanying funds transfers  in the autumn of 2004. This  lays down rules on payer’s 
information accompanying funds transfers, to en sure that basic information is immediately 
available to the author ities responsible for combating terrorism. The proposal will enhance 
the traceability of funds transfers and should be  implemented by the financial sector as soon 
as possible, which pleads for a speed y adoption in Council and Parliament.  
                                                 
12 Through its AGIS funding programme for 2004 the European Commission is currently funding two 
projects in this area, namely th e CARIN network and an assessmen t of multi agency alternative 
strategies for targeting the pr oceeds of criminal activity – a European Union perspective. 
13 http://www.ctose.org 
 
EN 7   EN 4.3. Transactions outside the formal financial system 
Informal money remittance systems, e.g. Hawala, are an important means of transferring 
illicit money. The Commission is preparing a draft Directive on a Ne w Legal Framework for 
Payments in the Internal Market to ensure  harmonised implementation of SR VI into 
Community law. The planned regulatory regime for money remitters will foresee registration 
of the transmitter by introducing a special licence and will take into account  the risk profile of 
providers by establishing tailo r-made supervisory requirements.  
A preferred method of moving funds  for terrorist financing is via individuals who carry cash 
and other equivalent instrume nts across borders. Technology fo r detecting this phenomenon 
should be developed and deployed. Th ere is also a pressing need to  ensure that an appropriate 
EU instrument is adopted to address the use of cash couriers. The Commission proposal for a 
Regulation on cash movements14, negotiations on which have already been unduly delayed, 
should be prioritised to ensure adoption of a Common Position during the Netherlands 
Presidency. 
Use of large scale cash payments to transact business constitutes a vulne rability to terrorist 
financing which is largely unaddressed. The proposal for a third Money Laundering Directive 
extends the preventive mechanism of the anti-m oney laundering system to cash payments for 
goods with a value in excess of €15.000.  
4.4. Customer Identification 
Financial institutions are already under an obligation to identify and know their customers.  
This is essential to a ssist the law enforcement effort agai nst terrorism financing. There may be 
value in common minimum standards for EU financial in stitutions as regards verification of 
customer identity and record ing of identifying data. 
Consideration could be given to establishing an electronic data base of sample EU (and other) 
identity documents for law enforcement and the private sector, includi ng examples of forged 
documents. A cross-check of documents presen ted could help authorities and businesses 
identify possible forgeries. 
5. TERRORIST  FINANCING  AND  TRANSPARENCY 
5.1. Legal Entities 
The absence of international standards in key mechanisms used in global financial 
transactions, including interna tional business companies, trusts  and offshore funding vehicles 
creates a degree of financial opacity of real  advantage to those financing terrorism. The 
European Commission intends to launch a cost  benefit analysis of a broad range of 
transparency measures to cont ribute to this on-going debate.  
Improving transparency of legal persons is a ke y element in countering infiltration by terrorist 
organisations and their sympathisers. The Commission Communicati on of 29 March 2004 on 
                                                 
14 European Commission proposal for a regulation of the European Parliament and the Council on the 
prevention of money laundering by means of customs cooperation (COM(2002)328-C5-0291/2002-
2002/0132(COD)). 
 
EN 8   EN the fight against terrorism high lighted the potential benefits of including in legislation on 
formation and management of legal persons, mechanisms for the disqualification of 
individuals or firms convicte d of offences related to terrorism or organised crime.  Similarly 
an effective mechanism for exchanging informa tion on convictions in the EU, may help in 
preventing terrorist groups and/or their financ iers from infiltrating legitimate activities. 
5.2. Non-Profit/Charitable Sector 
Transparency is a core issue as regards the charitable/non-profit sector. The numbers of 
charitable/non-profit organisati ons and the amount of aid they  dispense have increased 
considerably over recent years. Many such or ganisations raise money destined for conflict 
zones. Once money arrives in such areas, the ab ility to rely on international co-operation in 
order to trace its destination, is much redu ced, particularly where funds are moved around 
such territories in the form of cash.  
A minimum EU-wide standard of regulation designed to enhance transparency of the  sector 
should be explored further15.This could either take the form of binding regulation or a Code of 
Conduct for the voluntary sector.  Appropriate transparen cy standards could  include annual 
publication of independently au dited accounts, corporate govern ance rules, and a requirement 
to produce an audit trail for disbursements.  Bearing in mind the large numbers of non-
profit/charitable organisations based outside the EU but with offices in one or more Member 
States, transparency measures would also need to impact beyond the EU. 
In most Member States the charitable sector enj oys special tax status so that fiscal authorities 
have detailed information on revenue and disbur sements of most charita ble sector bodies. The 
role of tax authorities in the context of Speci al Recommendation VIII should be further 
considered. 
The European Commission will enhance its automatic inte lligence gathering, information 
extraction and analysis tools to apply to the charitable sector.  The Commission will conduct 
a feasibility study, with input fr om Europol, to map the charitabl e sector in the EU 25 along a 
number of dimensions that could help to dete ct high risk for terrorist financing or other 
criminal activity. The study is also expected to  include a review of national risk analysis 
efforts, if any, and will try to establish a methodology to arrive at vulnerabilities and risk indicators. 
6. TERRORIST
 FINANCING  AND  HORIZONTAL  MEASURES 
6.1. Asset Freezing 
The EU mechanism for designation of terrorists  and terrorist organisa tions other than Al-
Qaeda16, set up in particular to allow the freezing of  assets, has not produced a list that can be 
considered to be comprehensive and entirely effective. Divergent interpretations of the conditions for designation and the ensuing delays  caused by the unanimity requirement seem 
to be the main cause for this, wh ereas lack of guidance to third countries th at intend to make a 
                                                
 
15 The European Commission is organising a workshop on 29 October on the question of an EU approach 
to prevent abuse of the charitable sector for the purpose of terrorist financing. 
16 Common Position 2001/931/CFSP and Regulation (EC) No 2580/2001. 
 
EN 9   EN request for designation may also have had its impact. A standard interp retation and approach 
on areas of divergence is a key requisite to improve effectiveness, including:  
– designation of groups or enti ties that have renamed themselves after designation; 
– designation of ‘front organisations’; 
– designation of leaders of groups and entitie s that have already been designated. 
The electronic-Consolidated Targeted Financial Sanctions List is a joint initiative of the 
European Commission and European banks17. It is a consolidated database of persons and 
entities subject to EU financial sanctions. Since financial sanctions  are applicable on the date 
of their publication in the Official Journal, the Commission will strive to ensure that the 
database is updated on the same day as  Official Journal publication.  Financial institutions 
have requested guidance on matching standard s on whether a given person is a designated 
person. Such guidance would increase the effectiv eness of sanctions and,  since it concerns EU 
financial sanctions, should pref erably be provided by the Coun cil or the Commission (e.g. in a 
recommendation). 
6.2. Effective and Targeted Training 
The presence of suitable numbers of properly tr ained persons within competent authorities 
and the private sector is essential. 
The case for adequate numbers of trained fi nancial investigators must be promoted.  The 
European Commission and Europol have begun a joint project to establish common minimum 
standards in the area of financial investigative training in the EU. This will seek to promote 
best practice and a common minimum approach to financial investigative training.  
CEPOL has a key role to play in developing a Eu ropean culture of financial investigation and 
other training among senior poli ce officers and in spreading best  practice in this vital area. 
6.3. Security Research 
The European Commission manages anti-terrori sm research activities which can support, 
among other things, the fight against terrorist financing. The “Preparatory Action on the 
Enhancement of the European industrial potenti al in the field of Security Research”  has a 
budget of € 15 million for 2004 and a planned budget of €24 and €26 million for 2005 and 2006 respectively. A “Group of Personalities”  (GoP) was established in 2003 and tasked to 
propose key orientations, principl es and priorities for a future European Security Research 
Programme  (“ESRP”) in line with EU policy objectives. The GoP report
18 recommends the 
establishment of an ESRP from 2007 onwards with funding of at least €1 billion per year 
additional to currently exis ting resources. As a follow-u p, the Commission adopted on 
7.9.2004 a Communication  entitled “Security Research: The Next Steps”19. It has noted 
the recommendation of the report, expressing the need for the establishment of a European 
                                                 
17 European Banking Federation, European Savings Banks Group, European Association of Cooperative 
Banks, European Association of Public Banks. 
18 « Research for a Secure Future »,  Report of the GoP in the field of  Security Research, ISBN 92-894-
6611-1, Luxembourg Office for Of ficial Publications of the European Communities, 2004. 
19 COM 2004/353 
 
EN 10   EN Security Research Advisory Board to advise on the content and the implementation of the 
ESRP and for the submission of a proposal for an ESRP in early 2005, to become part of the 7
th Framework Programme of Community Resear ch from 2007 onwards. Areas where further 
research should be encouraged  include distributed problem  solving among competent EU 
authorities and social-cognitive configurations specific to an effective co-ordinated fight 
against terrorist financing. 
6.4. External Action 
Combating the financing of terror ism must play an integral part  of EU political dialogue and 
technical assistance programmes with third coun tries, including the development of ad hoc 
expert level dialogue. Joint effort s to combat terrorist financing will also continue to be an 
important and regular part  of EU-US cooperation. 
Financial havens which allow opaque banking a nd corporate structures provide refuge for 
terrorist money. The European Union must prom ote greater transparency and exchange of 
information with third countries and dependent or  associated territories.  Positive action could 
help cooperative partners overcome difficulties of  a regulatory, technical or economic nature 
when introducing more transparency, in the form  of reinforced technica l assistance, where the 
EU as a whole has considerable experience, or  through some form of economic support. The 
annual and mid-term reviews of Country Strate gy Papers could also provide for appropriate 
actions. The Commission will monitor the e fficiency and the progress made by overseas 
financial havens towards more transparency. 
7. CONCLUSIONS   
Making it more difficult for terrorists to rais e money is one element of the fight against 
terrorist financing. In addition, tracking financial and other transactions is an effective means 
of locating terrorists and their supporters and disrupting terro rist activity. This would be 
facilitated through enhanced transparency of financial transactions  and legal entities, 
including those operating in the non -profit sector. To be really effective and achieve real time 
data exchange in preventive and repressive activ ity in the fight against terrorist financing, we 
need to address closer co-operation and enhanced mechanisms for information exchange at national, EU and international levels both among competent aut horities and betw een the latter 
and the private sector. 
 
EN 11   EN TECHNICAL ANNEXES 
 
EN 12   EN ANNEX  1 
Possible Future Measures relevant to the fight against terrorist financing 
Information Exchange: 
• Establish appropriate mechanisms to achieve mu ltilateral co-ordination with all authorities 
and bodies involved in supervisi ng and detecting irregularities in the financial sector (to 
include fiscal authorities, financial oversi ght bodies, Justice Department, intelligence 
community, law enforcement authorities, author ities in charge of administrative freezing 
measures). 
• Promote appropriate information sharing mechanisms between intelligence services and 
prosecutors. 
• Promote intelligence led law enforcement by en suring access to privat e sector information 
to facilitate information gathering on , detection and locat ion of suspects.  
• Promote outreach and other mechanisms to fac ilitate real time trackin g and data exchange 
by means of the financial and other systems. 
• Consider ways to improve communication be tween FIUs and the financial community 
through enhanced access to relevant databases.  
Traceability of Financial Transactions: 
• Promote financial investigation as a law en forcement technique in the Member States. 
Encourage establishment of common minimum sta ndards in financial i nvestigation training 
standards in the EU via Joint Commission/Europol project).  
• Promote establishment of national bodies dedica ted to identification, tracing, freezing and 
confiscation of terrorist (and other criminal) assets and implementation of a co-operation 
network among such bodies to facilitate co-ope ration in the tracing of fast moving terrorist 
and other criminal funds. 
• Promote organisational and technical measures needed to present electronic evidence in 
Court. 
• Consider need for common minimum EU standa rds for verification of customer identity.  
• Consider case for database with samples of all identity documents issued in the EU and 
beyond to facilitate detection of false ident ity papers by financial institutions when 
verifying customer identity. 
• Guidance on matching standards to be applie d when checking whethe r any given person is 
a designated person to improve the effectivenes s of financial sanctions  (see Section 6.1).  
 
EN 13   EN Transparency: 
• Consider what further measures may be needed  to enhance transparen cy of legal entities 
having regard in particular to ant recomm endations to be made in the Commission’s 
planned Study on cost benefit assessment of transparency measures. 
• Consider further EU-wide mechanisms for th e disqualification of individuals of firms 
convicted of offences related to  terrorism or organised crime. 
• In the non-profit/charitable sector assess appr opriate EU-wide transparency measures and 
mechanisms to ensure complian ce with these together with methods to identify high risk 
for terrorist financing or  other criminal activity. 
Asset Freezing: 
• Promote standard interpretation on designation of groups or entities that have renamed 
themselves after designation, desi gnation of ‘front organisations ’, designation of leaders of 
groups and entities that have  already been designated. 
 
EN 14   EN ANNEX  2 
1. Measures Adopted at EU level relevant to  the fight against te rrorist financing. 
Since October 2001 an important number of acti ons have been taken at EU level aimed at 
countering terrorism as well as preventing the ac quisition, retention and use of funds or assets 
by such organisations. Taken together with earl ier actions, these constitute powerful measures 
in the Union’s arsenal to fight  terrorism and its financing.  
Legislative Actions 
1.1. Council Act of 16 October 2001 establishing , in accordance with Article 34 of 
the Treaty on European Union, the Pr otocol to the Convention on Mutual 
Assistance in Criminal Matters between  the Member States of the European 
Union (2001/C 326/01) (OJ C 326 of 21 November 2001 p.1) 
This Act provides for the exchange of information between Member States 
concerning bank accounts held by any pers on who is the subject of criminal 
investigations. It has not yet been ratified and Member States are encouraged to accelerate this process. 
1.2. Directive 2001/97/EC of the European Parliament and of the Council of 4 
December 2001 amending Council Directiv e 91/308/EEC on prevention of the 
use of the financial system  for the purpose of money laundering (OJ L 344 of 28 
December 2001, p. 76) 
The second money laundering Directive, am ending the 1991 Directive, was adopted 
in December 2001. The definition of criminal activity giving rise to money laundering is widened to include all organi sed crime and a wide range of serious 
crimes, including offences related to terrori sm. The professions which are required to 
report money laundering suspicions, in additi on to the credit and financial and related 
institutions, now include accountants, lawyers,  notaries, real esta te agents, casinos 
and dealers in high value goods.  
1.3. Council Decision of 6 December 2001 extendi ng Europol’s mandate to deal with 
serious forms of international crime listed in the Annex to the Europol 
Convention (2001/C 362/01) (OJ C 362 of 18 December 2001, p.1) 
The effect of this Council Decision was to enable Europol to deal with the serious 
forms of international crime listed in the Annex to the Europol Convention, such as 
murder, grievous bodily injury, kidnapping, hostage-taking, orga nised robbery and 
illicit arms trafficking. Europol’s mandate  now includes support for law enforcement 
against serious international orga nised crime, including terrorism. 
1.4. Council Common Position of 27 December 2001 on combating terrorism 
(2001/930/CFSP) (OJ L 344 of 28 December 2001, p. 90) 
The Common Position sets out a number of ac tions to be taken to combat terrorism. 
The principal measures contained in the Common Position are: criminalising the financing of terrorism within the EU, fr eezing of financial assets or economic 
 
EN 15   EN resources of persons or entities involve d in terrorism, prohibiting the giving of 
financial or other assistance to such persons  or entities, requiri ng measures to be 
taken to suppress any form of support for th ose involved in terrorist acts, taking steps 
to prevent terrorist acts and denying safe haven to those involved in such acts. 
1.5. Council Common Position of 27 December 2001 on the application of specific 
measures to combat terrorism (2 001/931/CFSP) (OJ L 344 of 28 December 
2001, p. 93) 
The Common Position establishes the primar y list of persons, groups and entities 
involved in terrorist acts20. It sets out the criteria to be  used to decide who should be 
considered as terrorists for inclusion on th e list and the actions  which constitute 
terrorist acts. The names on the list are to be  reviewed at least once every six months. 
Under the Common Position the European Community is required to order the 
freezing of the funds and other financial a ssets or economic resources of, and the 
prohibition on the provision of financial se rvices to, the listed  persons, groups and 
entities. Member States are required to a fford each other assistance in preventing and 
combating terrorist acts.  
1.6. Council Regulation (EC) No 2580/ 2001 of 27 December 2001 on specific 
restrictive measures directed against certain persons and entities with a view to 
combating terrorism (OJ L 344 of 28 December 2001, p. 70) 
The Regulation provides for the freezing of  the funds, financial assets and economic 
resources of certain persons, groups a nd entities involved in terrorism, for a 
prohibition on the making available of funds , financial and economic resources to 
such persons, groups and entities and a prohibition on the provision of financial 
services to them. It authoris es the Council to establish and maintain a list of persons, 
groups and entities i nvolved in terrorism21. Provision is also made for the granting of 
authority for the use of funds frozen in  accordance with the Regulation to meet 
essential human needs and for certain other payments (e.g. taxes, utility bills etc.). 
1.7. Council Decision of 27 December 2001 esta blishing the list provided for in 
Article 2(3) of Council Regulation (E C) No 2580/2001 on specific restrictive 
measures directed against certain persons a nd entities with a view to combating 
terrorism (2001/927/EC) (OJ L 344 of 28 December 2001, p. 83) 
This decision contains a list or persons , groups and entities against whom specific 
restrictive measures are to  be applied in accordance with C ouncil Regulation No 
2580/2001. An updated list of persons, groups and entities to which the measures imposed by the Regulation apply has been  published seven times, the latest 
publication being that of Council Decision 2004/306/EC. 
1.8. Council Decision of 28 February 2002 setting up Eurojust with a view to 
reinforcing the fight against seriou s crime (2002/187/JHA) (OJ L 063 of 6 
March 2002 p. 1) 
                                                
 
20 The latest version of the list is set out in Common Position 2004/500/CFSP. 
21 The latest version of the list is set out in Council Decision 2004/306/EC. 
 
EN 16   EN This Decision establishes Eurojust, to be composed of seconded prosecutors, judges 
or police officers from each Member Stat e. The objectives of Eurojust are to 
stimulate and improve the co-ordination, be tween the competent authorities of the 
Member States, of investig ations and prosecutio ns, to improve co-operation between 
the competent authorities of the Member  States and to support the competent 
authorities of the Member States in or der to render their investigations and 
prosecutions more effective. 
1.9. Council Common Position of 27 May 2002 concerning restrictive measures 
against Usama bin Laden, members of the Al-Qaida organisation and the 
Taliban and other individuals, groups, undert akings and entities associated with 
them and repealing Common Posi tions 96/746/CFSP, 1999/727/CFSP, 
2001/154/CFSP and 2001/771/CFSP (2002/402/ CFSP) (OJ L 139 of 29 May 2002, 
p. 4) 
It prohibits the supply of arms etc. to Usama bin Laden, members of the Al-Qaida 
organisation and the Taliban and associated  persons or groups in accordance with 
UNSCR 1267(1999) and 1333(2000). It also pr ovides for the freezing of their funds 
and economic resources and prohibits the making available to them of funds and 
economic resources. The Common Position is  to be kept under constant review. 
1.10. Council Regulation (EC) No 881/2002 of 27 May 2002 imposing certain specific 
restrictive measures directed against c ertain persons and entities associated 
with Usama bin Laden, the Al-Qaida network and the Taliban, and repealing Council Regulation (EC) No 467/2001 proh ibiting the export of certain goods 
and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial reso urces in respect of  the Taliban of 
Afghanistan (OJ L 139 of 29 May 2002, p. 9) 
The Regulation freezes the funds and econom ic resources of, and prohibits the 
making available of funds and economic re sources to, a large number of persons, 
groups and entities which are set out in an Annex. The Commission has amended the 
Regulation on 36 occasions for the purpose of updating the list of persons, groups 
and entities which are subject to the restric tions set out in the Regulation, the latest 
publication being that of  Commission Regulation (EC)  No 1728/2004. Modification 
of the list is an on-going process. 
1.11. Council Framework Decision of 13 June  2002 on joint inve stigation teams 
(2002/465/JHA) ( OJ L 162 of 20 June 2002, p. 1) 
The Framework Decision is intended to make the combating of international crime as 
effective as possible. It considered it appropriate that a specific legally binding 
instrument on joint investigation teams should be adopted to apply to joint 
investigations into drugs/human trafficking and terrorism and that they should be set 
up, as a matter of priority, to combat  offences committed by terrorists. The 
Framework Decision provides that two or more Member States may establish joint 
investigation teams for a specific purpose and for a limited period to carry out criminal investigations in one or more of the States establishing the team. Member States are required to co mply with the Framework Decision by 1 January 2003.  
 
EN 17   EN 1.12. Council Framework Decision of 13 June 2002 on combating terrorism 
(2002/475/JHA) (OJ L 164 of  22 June 2002, p. 3) 
The Framework Decision requires Member States to adopt a common definition of 
terrorist offence as set out in Article 1. It also obliges Member States to criminalise 
certain actions related to terrorist groups  or terrorism, such  as directing or 
participating in the activitie s of a terrorist group includi ng by funding its activities in 
any way, as well as inciting, aiding or abet ting and attempting to commit a terrorist 
offence. Member States had to comply  with the Framework decision by 31 
December 2002. In June 20041 the Commissi on produced a report analysing national 
measures taken to comply with the Framework Decision (COM 2004 409 of 8.6.2004).  
1.13. Council Framework Decision of 13 June 2002 on the European arrest warrant 
and the surrender procedures between  Member States (2002/584/JHA) (OJ L 
190 of 18 July 2002, p. 1) 
The Framework Decision provides for the execution in any Member State of a 
judicial decision made in another Member  State for the arrest and surrender of a 
person for the purpose of criminal proc eedings or the execution of a custodial 
sentence. The offences covered by the Fr amework Decision include terrorism. After 
1 January 2004 extradition between Member  States will be governed by rules 
adopted pursuant to the Framework Decision. Member States were required to take 
the necessary measures to comply w ith the Framework Decision by 31 December 
2003.   
1.14. Directive on Insider Trading and Market  Manipulation (Market Abuse) (2003/6 
of 28 January 2003) (OJ L 96 of 12 April 2003, p. 16 -25) 
The Insider Dealing and Market Manipul ation (Market Abuse) Directive was 
adopted by the Council and the Parliament on 3 December 2002. Terrorists may 
abuse financial markets by financing activ ities through insider dealing or market 
manipulation (using clean money in a dirt y way) or by laundering ‘dirty’ money on 
financial markets through insider deali ng and market manipulation. The Market 
Abuse Directive contributes to strengthen the fight against criminal activities on 
financial markets. 
1.15. Council Decision of 19 December 2002 on  the implementation of specific 
measures for police and judicial cooperati on to combat terrorism in accordance 
with Article 4 of Common Position 2001/931/CFSP (2003/48/ JHA) (OJ L 16 of 
22 January 2003, p. 68) 
The Decision relates to access and collecti on of information concerning and resulting 
from criminal investigations and proceedi ngs with respect to terrorist offences 
involving any of the persons, groups or entities listed in the Annex to Common 
Position 2001/931/CFSP with a view to its communication to Europol and Eurojust. 
The information in question concerns the identity of the person, group or entity, the acts under investigation or prosecution and links with related cases. In cases 
involving any of the listed persons, groups or entities the Decision al so calls for joint 
investigation teams in appr opriate cases, urgent treatme nt of requests for mutual 
 
EN 18   EN legal assistance and recognition and enfor cement of judgements in connection with 
terrorist offences and sharing of information. 
1.16. Ratification of international convention s in accordance with UN SC Resolution 
1373 (2001) 
In accordance with resolution 1373 (2001), Me mber States have accepted a political 
commitment, by means of Article 14 of Common Position 2001/930/CFSP to 
become parties to the UN Convention for the Suppression of the Financing of 
terrorism (New York, 9 December 1999) and 12 other conventions on Terrorism. 
1.17. Council Framework Decision 2003/577/JHA of  22 July 2003 on the execution in 
the European Union of orders freezing property or evidence. (OJ L 196/45 of 2nd 
of August 2003) 
This Framework Decision introduces the prin ciple of mutual rec ognition of judicial 
orders freezing property and evidence. It establishes the rules pursuant to which 
Member States must recognise and execute  such orders issued by the competent 
judicial authorities of another Member Stat e. It applies to freezing orders issued for 
the purpose of securing evidence or subse quent confiscation of property. For this 
purpose terrorism is included among the o ffences for which no verification of double 
criminality is required. 
 
EN 19   EN ANNEX  3 
1. MEASURES UNDERWAY AT EU LEVEL RELEVANT TO THE FIGHT AGAINST 
TERRORIST FINANCING  
1.1. Draft Framework Decision on Confiscation of Crime-related Proceeds, 
Instrumentalities and Property 
The draft Framework Decision attempts to  harmonise certain confiscation related 
provisions in the Member States, not ably in connection with “extended 
confiscation”. According to this concept,  a Court shall have power in certain 
circumstances to order confiscation of a c onvicted person’s assets where the Court is 
fully convinced, inter alia, that the pers on’s assets derive from other criminal 
activity. The Framework Decision received political agreement in December 2002 
but is still subject to Memb er State scrutiny reserves.  
1.2. Draft Framework Decision on the application of the principle of mutual 
recognition to Confis cation Orders  
The purpose of this draft Framework Decision  is to facilitate co-operation between 
Member States in the recognition and executi on of orders to conf iscate property. It 
obliges Member States to r ecognise and execute in its territory c onfiscation orders 
issued by a court competent in criminal matters in another Member State. The draft Framework Decision received political agr eement in June 2004 but remains subject 
to a number of scrutiny reserves.  
1.3. Control of Large Scale Cash Movements - Proposal for a Regulation of the 
European Parliament and Council on th e prevention of money laundering by 
means of customs co-operation 
On 25 June 2002 the Commission adopted a report together with a proposal for a 
Regulation to introduce controls on signifi cant cash movements by persons entering 
or leaving the Community. The proposed  Regulation would complement the 
Community Money Laundering Directives and oblige persons entering or leaving the 
Community customs territory carrying cash or equivalent instruments with a value of 
€15.000 or more, to make an appropriate declaration.  
1.4. Proposal for a third Money Laundering Directive 
The proposal for a third Money Laundering Directive was adopted by the 
Commission on 30
th June 2004. The proposal seeks to ensure a common EU-wide 
approach to the FATF 40 Recommendations  as revised in June 2003. It proposes to 
extend the scope of the Directive to trust and company service providers, introduces 
more detailed requirements regarding customer due diligence and identification of the beneficial owner and extends the anti-money launde ring preventive mechanism 
to transactions suspected  to be associated with terrorist financing.  
 
EN 20   EN 1.5. Proposal for a Council Decision on the exchange of information and co-
operation concerning terrorist offences 
The European Commission adopted a Comm unication on the fight against terrorism, 
including financing of terrorism on 29th March 200422. The Communication contains 
in annex a Proposal for a Council Decision en abling the services involved to have 
access to the most complete and up-to-da te information. The Commission's proposal 
widens the scope of the exchange of information to all terrorist offences within the meaning of the Framework Decision of  13 June 2002 on combating terrorism. The 
obligation to exchange information would appl y to all terrorist offences or offences 
relating to a terrorist group known to the Me mber States, includi ng participation in 
the activities of a terrorist  group through any form of fi nancing. The exchange of 
information will apply to all stages of pr oceedings. Europol and Eurojust must be 
sent information on terrorist offences at all stages of proceedings, including convictions. 
1.6. Proposal for a Regulation on payer’s in formation accompanying funds transfers 
The European Commission is expected to  adopt a proposal for a Regulation on 
payer’s information accompanying funds tran sfers in the course of October or 
November 2004. The proposal for a Regula tion aims at transposing Special 
Recommendation VII into Community la w. It lays down rules on payer’s 
information accompanying funds transfers, in order to ensure that  basic information 
is immediately available to the authorities responsible for combating terrorism, to 
assist them in their task. These rules result  in a number of obligations applicable to 
all payment service providers involved in the payment chain. The payer’s payment service provider must ensure that funds  transfers contain complete, accurate and 
meaningful payer’s information. Any inte rmediary payment service provider must 
ensure that all payers’ information that acco mpanies a transfer is  retained with the 
transfer or that appropriat e records are kept. The payee’ s payment service provider 
must have effective risk-based procedures in  order to identify funds transfers lacking 
complete payer’s information and, as appropriate, report suspicious transactions to 
the authorities responsible for combating terrorism. 
1.7. Draft Directive on a New Legal Framew ork for Payments in the Internal 
Market 
The Commission is working on the above draft proposal which will ensure the 
harmonised implementation of Special Reco mmendation VI of the Financial Action 
Task Force into Community law and there by guarantee a level playing field for all 
providers. The planned regulatory regime for money remitters will not only foresee registration of the transmitter by the intr oduction of a special licence of a payment 
service provider but will also take into account the specific risk profile of these 
providers by the establis hment of tailor-made supervisory requirements.  
                                                
 
22 COM(2004)221