WRITTEN QUESTION E-3497/01

by Maurizio Turco (NI) to the Commission

(7 January 2002)

Subject: EU cooperation with countries which do not cooperate with the FATF (Financial Action Task Force on Money Laundering, established within the OECD)

The European Commission is a member of the FATF (Financial Action Task Force on Money Laundering, established within the OECD), and Europol has observer status. On 7 December 2001 the FATF published an updated list of non-cooperative countries and territories. The following countries have critical deficiencies: Egypt, Guatemala, Hungary, Indonesia, Burma and Nigeria. The FATF has called on its members to request their financial institutions to give special attention to businesses and transactions with persons, including companies and financial institutions, in these countries or territories.

Can the Commission answer the following:

- Does this list include countries with which the EU has cooperation relations? If so, which countries and what type of cooperation?

- Does this list include countries which, in any way, whether directly or via a third party, are in receipt of funds from the Union budget? If so, have specific checks been carried out, by whom and what was the outcome?

- What action has the Commission taken in response to the FATF's requests, and what have been the results?

Answer given by Mr Bolkestein on behalf of the Commission

(20 March 2002)

There are currently 19 countries on the Financial Action Task Force's (FATF) list of non-cooperative countries and territories (NCCTs). They are: Cook Islands, Dominica, Egypt, Guatemala, Grenada, Hungary, Indonesia, Israel, Lebanon, Marshall Islands, Myanmar, Nauru, Nigeria, Ukraine, Niue, Philippines, Russia, St Kitts and Nevis, St Vincent and the Grenadines. Inclusion on this list generally signifies that the defences against money laundering have been considered insufficient.

Cooperation relations with the above countries vary widely.

The Cook Islands, Marshall Islands, Nauru and Niue are signatories to the African, Caribbean and Pacific States (ACP)-Union Partnership Agreement signed in Cotonou in June 2000. They will benefit in future from ACP-Union financial and technical cooperation under the Cotonou Agreement. The Commission has welcomed the progress made by the Cook Islands, the Marshall Islands and Niue in addressing deficiencies.

Nauru enacted an anti-money laundering act in August 2001, which does not adequately address the problem yet. The Commission will call upon its Pacific ACP partners to continue to deal constructively with the gaps in their anti-money laundering systems and will seek to ensure that these countries will no longer be on the FATF list of NCCTs by the time the ACP-Community cooperation programmes will go ahead.

Dominica, Grenada, St Kitts and Nevis and St Vincent and the Grenadines have received funding under the Lomé Conventions and are also signatories to the Cotonou Agreement. The Commission is cofinancing a very substantial anti-money laundering project in the Caribbean.

Nigeria is also covered by the above Agreement. Cooperation has been resumed in 1999. There are no initiatives regarding money laundering.

Guatemala is covered by the Regional Framework Agreement for Central America and is in receipt of Community funds. It should be pointed out that the budgets for projects financed by the Commission in Guatemala are not managed directly by the Government of that country. Projects are carried out by non-governmental organisations (NGOs) or other associations or by independent project management units. The results of the audits and ex-ante and ex-post checks show that these arrangements generally ensure sound and efficient financial utilisation.

Israel does not receive Community funds. The Union-Israel Association Agreement, which entered into force in June 2000, makes explicit reference to the FATF standards and provides for the possibility of cooperation in combating drugs and money laundering.

There are no cooperation activities with Burma/Myanmar.

Community bilateral cooperation with Indonesia and the Philippines is implemented solely in the framework of the Community-Association of south-east Asian Nations (ASEAN) Cooperation Agreement of 1980. Such cooperation is focused primarily on poverty reduction, the environment and support for the integration of the two countries into the global economy. Assistance is not provided directly to Government agencies but rather to support specific activities agreed in the context of the preparation of country strategy papers and national indicative programmes. These inputs are subject to the normal contracting, accounting and administrative control procedures of the Commission.

The Union has substantial cooperation relations with Russia and Ukraine within the framework of the Partnership and Cooperation Agreements and the Union Common Strategies. Both countries have received funding under the TACIS assistance programme. All projects have been monitored by the TACIS Monitoring Units in Kiev and Moscow.

Hungary is a candidate country for accession and accession negotiations have been underway since April 1998. Until accession, the relations between the Union and Hungary are governed by an Association Agreement. Hungary benefits from considerable funds from the Union budget under the PHARE, ISPA and Sapard programmes. The principal reason for Hungary's listing by the FATF was the existence

of anonymous savings passbooks. These anonymous passbooks are also incompatible with the Community acquis. This issue was discussed in the accession negotiations under the chapter on capital movements and agreement was reached that Hungary would align its regime with the acquis by the time of accession. The FATF, however, did not address this issue from the perspective of accession but rather looked at the existing situation in Hungary. In a new law on combating terrorism and money laundering that entered into force on 19 December 2001, Hungary has addressed the concerns of the Union and of the FATF, particularly as regards the bearer passbooks. Provided the new measures continue to be implemented as envisaged, the Commission is of the opinion that the conditions are now in place for Hungary's early delisting by the FATF.

The Union has close economic and political relations with Egypt in the context of the Barcelona process. These will be consolidated and expanded on the basis of a recently signed, but not yet fully ratified Association Agreement. There is a large portfolio of Community funded cooperation programmes in Egypt, all of which are carefully monitored and subject to regular audit and evaluation. There is no evidence whatsoever to suggest any link between these programmes and money laundering. On the basis of the FATF listing and of representations made by members of the international community, collectively and severally and including the Union, the Government of Egypt has undertaken to urgently address the issue and legislation to that effect is currently before the Egyptian Parliament. Clause 57 of the recently signed Union-Egypt Association Agreement specifically calls for cooperation in the suppression of money laundering.

The Community signed a Cooperation Agreement with Lebanon in 1977 and initialled a Euro-Mediterranean Association Agreement with Lebanon on 10 January 2002. This upgrades political, economic, trade and social relations with Lebanon. Financial assistance has been provided under four Protocols and under the MEDA I Programme (1995-2000). Funding will continue under MEDA II (2001-2006). Projects are regularly audited and evaluated in accordance with the Commission's rules on financial control and evaluation. The Commission, in accordance with the 1995 mandate for negotiations from the Council, insisted on an article on prevention of money laundering in the new Association Agreement (Article 60). In addition, it insisted on a separate joint declaration which establishes the FATF as the reference for money laundering prevention. Furthermore, the Commission is to earmark a significant part of the MEDA II funding to Lebanon to assist with implementing the provisions of the Association Agreement. This will encompass improving its financial and banking legislation and regulatory framework, secrecy and reporting systems.

In all the cases where Community financing is involved, programmes are carefully monitored, expenditure is routinely audited and outcomes are evaluated. However, it should be pointed out that listing by the FATF as a non-cooperative country does not imply that Community funds have been more at risk. No specific additional checks have been considered necessary in respect of these countries beyond the normal high level of control which the Commission exercises.

The Commission regularly stresses to all partner countries the need to comply with international anti-money laundering standards, as reflected in the FATF 40 Recommendations and the Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering(1) as amended by Directive 2001/97/EC of the Parliament and of the Council of 4 December 2001(2).

The FATF again reviewed its list of noncooperative countries and territories at its recent meeting in Hong Kong, China. In its press release (available at http://www.fatf-gafi.org), the FATF welcomed the additional progress made by a number of the 19 jurisdictions.

Until now countermeasures have only been applied in the case of Nauru. At their joint meetings in October 2000 and October 2001, the Union Finance and Justice Ministers agreed to apply the countermeasures decided on by the FATF in a coordinated fashion. All of the Member States have taken action in response to the FATF's decision to call for countermeasures against Nauru.

(1) OJ L 166, 28.6.1991.

(2) OJ L 344, 28.12.2001.