WRITTEN QUESTION E-0565/98 by Karla Peijs (PPE) to the Commission (4 March 1998)

Subject: Effective legislation against fraud involving non-cash means of payment

Member States have widely divergent laws to combat fraud against new means of payment. In most EU Member States, no specific criminal legislation exists dealing with e-money stored on pre-paid cards. Overall, the approaches followed in the various countries differ substantially. These discrepancies and gaps in legislation and policies are causing significant difficulties in the fight against organized crime. This could affect public confidence in new means of payment and hinder the full functioning of the single market. The Commission was formally notified of this in 1995 by the international payment card schemes and the three European Credit Sector Associations.

In several documents, the Commission has recognized the need for an initative in this area. Reference is made to the Commission's Green Paper on the practical arrangements for the introduction of the single currency (May 1995, par. 136), Commission policy concerning new means of payment (XV/III/96 of 21 June 1996, p. 7) and a European initiative in Electronic Commerce (COM(97)157, par. 49). The Council's action plan to combat organized crime (97/C 251/01 adopted on 28 April 1997) called on the Council and the Commission to 'address the issue of fraud and counterfeiting relating to all payment instruments, including electronic payment instruments' (political guideline No 15 at p. 6).

Can the Commission state its intentions in this area and inform the EP on progress made so far?

Answer given by Mrs Gradin on behalf of the Commission (31 March 1998)

Endorsing an action plan to combat organised crime ((Action plan to combat organised crime, adopted by the Council on 28 April 1997, OJ C 251, 15.8.1997. )), the European Council in Amsterdam, June 1997, has shown the resolve for a coherent and coordinated approach by the Community. The action plan calls on the Council and the Commission to examine and address, by the end of 1998, the issue of fraud and counterfeiting relating to all payment instruments, including electronic payment instruments. The Commission will meet this request by proposing an integrated set of measures for consideration by the appropriate bodies, with a view to promoting an adequate 'security environment' for means of payment.

To this end, the Commission has initiated preparatory work with all parties concerned (the payment systems industry, but also small and medium sized enterprises (SMEs) and consumers) to assess the scale of the issue and the nature of any solutions. Although not yet at a stage of formulating a definitive set of measures, the Commission already has some preliminary views.

First, the response should avoid exclusively addressing specific payment instruments or products. Any partial response could lead to policy arbitrage, so that fraud and counterfeiting would migrate towards alternative instruments and systems. Therefore, the Commission is of the opinion that the issue of fraud should be tackled in respect of all means of payment including electronic means.

Second, understanding the phenomenon requires assessment of the potential forms of illicit behaviour. While offences may be directed at payment instruments, fraud and counterfeiting may also occur on the level of the underlying payment transaction itself or on the level of the preparations of the criminal activity. Therefore, the Commission is of the preliminary view that, given rapid technological and service innovation, too precise a codification of offences should be avoided.

Third, consistency is needed at international level to ensure effectiveness. Attention will need to be paid to coherency and compatibility of approach within the Community. To this end, it is particularly important that all parties (authorities, industry and users groups) seek to co-ordinate their initiatives in the relevant international fora and groups, establishing wherever possible global agreement. Therefore, in elaborating an integrated approach, the Commission will endeavour to maximise the scope for collaboration and co-operation at all levels and in all suitable forms.

Finally, no single initiative, whether legislative or not, will offer the optimal solution to the problem. It is rather the implementation of a comprehensive and consistent set of actions, aimed at preventing fraud from occurring and at sanctioning fraudulent behaviour where it has occurred, that will allow the problem to be tackled at its roots. In this context, the Commission will assess whether the absence of convergent laws to combat fraud constitutes a significant weakness and what the most suitable course of action should be.