WRITTEN QUESTION E-3149/01

by Brice Hortefeux (PPE-DE) to the Council

(15 November 2001)

Subject: Tax havens in the EU

The attacks of 11 September have heightened awareness both among the general public and the European institutions. However, any criticisms have been levelled at the scope of the campaign against the funding of terrorism though off-shore financial centres and illegal money laundering routes. Many of these centres are located at the very heart of the European Union, in particular in the City of London and the British crown dependencies (Gibraltar, Jersey and Guernsey).

It seems inconceivable and illogical that the existence of these tax havens is not questioned by those who are combating terrorism and its funding. We should make no mistake by waging war against 27 entities we are not attacking the existence of a system that is thriving even within one of the Member States of the EU. These territories provide not only a tax, banking and financial haven but also in many respects a safe haven from criminal prosecution.

In view of this dreadful state of affairs, what is the Council's position and what kind of measures does it intend to take to remedy the situation?

Reply

(1 March 2002)

At the Council meeting on 16 October 2001 several conclusions were made concerning the progress made and measures to be taken in the fight against terrorism, money laundering and fiscal crime.

Among these conclusions the following can be mentioned:

1. The Member States signed the draft Protocol to the Convention of 29 May 2000 on Mutual Assistance in Criminal Matters between the Member States. This Protocol represents an important improvement of the co-operation within the Member States in the area of fighting economic and financial crime. The Member States undertake to ratify this Protocol as soon as possible, and at the latest by the end of next year.

2. The Council has adopted, in codecision with the European Parliament, the Directive which amends the Directive of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering. This new Directive on money laundering, broadening the prohibition of money laundering to cover not only drug trafficking but also other serious crimes and extending the obligations of the Directive to certain non-financial activities and professions, including lawyers and accountants, is of major importance when combating organised crime.

3. The Council has the intention to adopt the draft Framework Decision on the execution in the European Union of orders freezing assets or evidence.

4. In line with its conclusions of its meeting on 17 October 2000, the Council reiterates, as recommended by the Financial Action Task Force on money laundering (FATF), that the Member States' financial institutions shall give special attention to businesses and transactions with persons, including companies and financial institutions, with the Non Co-operative Countries and Territories (NCCT). The list of NCCTs was updated on 7 September 2001 and is now as follows; the Cook Islands, Dominica, Egypt, Guatemala, Grenada, Hungary, Indonesia, Israel, Lebanon, the Marshall Islands, Myanmar, Nauru, Nigeria, Niue, the Philippines, Russia, St Kitts and Nevis, St Vincent and the Grenadines and Ukraine.

5. The Council notes that the FATF found, on 22 June 2001 and repeated on 7 September 2001, that the Philippines has failed to enact significant anti-money laundering and called on its members to implement counter-measures against the Philippines. It has been reported that the Philippines on 29 September 2001 has enacted an anti-money laundering legislation. The FATF has accordingly informed all their members to suspend the application of counter-measures to the Philippines, pending verification that the anti-money laundering legislation has in fact been enacted. The FATF has also noted that Nauru enacted an anti-money laundering Act on 28 August 2001. However, this new legislation is considered to have several deficiencies and does not adequately address the major money laundering problem in Nauru. It was therefore decided by the FATF that its members should implement counter-measures against Nauru unless appropriate legislative amendments are enacted by 30 November 2001.

At the meeting on 17 October 2000 the Member States undertook to implement immediately, in concert and concomitantly, the counter-measures decided by the FATF and if necessary adapt their legislation.

The measures recommended by FATF are;

(a) stringent requirements for identifying clients and enhancement of advisories, including jurisdiction specific financial advisories, to financial institutions for identification of the beneficial owners before business relationships are established with individuals or companies from these countries;

(b) enhanced relevant reporting mechanisms or systematic reporting of financial transactions on the basis that financial transactions with such countries are more likely to be suspicious;

(c) in considering requests for approving the establishment in FATF member countries of subsidiaries or branches or representative offices of banks, taking into account the fact that the relevant bank is from an NCCT;

(d) warning non-financial sector businesses that transactions with entities within the NCCTs might run the risk of money laundering.

The Member States meeting within the Council have decided to apply, in concert and concomitantly, the counter-measures above against the Philippines and Nauru, if necessary, with immediate effect. Where an adoption of legislation is necessary to enable the counter-measures to take effect, the Member States, meeting within the Council, undertake to ensure that their legislation will enable them to apply the counter-measures as from 1 January 2002.

6. The Council emphasises the urgency of taking strong action against the financing of terrorism in line with Security Council Resolution 1373/01. The Council decides to use the FATF mechanism for co-ordinated counter-measures against NCCTs also in relation to those countries that harbour, support or provide safe havens to terrorists and their means of financing. The Council urges the Commission to examine swiftly proposals to ensure that the Member States take efficient action against such countries in concert and concomitantly.

7. The Council welcomes the work already done on a model agreement on mutual legal assistance with NCCTs and instructs the competent group to speed up the work. After developing the model agreement, the Council intends to rapidly authorise the Presidency, on a case by case basis and assisted by the Commission as appropriate, to open negotiations with the NCCTs, including on the basis of and in accordance with the procedure laid down in Articles 24 and 38 of the Treaty on European Union.

8. The EU Member States urge the IMF to accelerate its efforts, in close contact with the Financial Stability Forum, to asses the adequacy of supervision in offshore financial centres and to provide the necessary technical assistance to strengthen their integrity. In addition, they ask the IMF and the World Bank to take further steps to take into account the anti-money laundering standards in their policy advice and programs.

As may be noted by the Honourable Member, the Council attaches great importance to non-cooperating jurisdictions and is ready to take the necessary measures to prevent them from being used for purposes of money laundering.