Commission communication to the Council, the European Parliament and the European Central Bank - Protection of the euro - Combating counterfeiting
Date: 1998-07-22
Institutions: European Commission
Subjects: European Central Bank, euro, fraud, industrial counterfeiting, single monetary policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 22.07.1998 
COM(1998) 474  final 

Commission communication 
to the Council, the European Parliament and the European Central Bank 

PROTECTION OF THE EURO 

COMBATING COUNTERFEITING 

Contents 

K 

INTRODUCTION 

1 

2. 

1.1 

1.2 

Problems and objectives 

The responsibilities of the ECB,  Europol and the Commission 

2 

AREAS FOR PRIORITY  ACTION 

3.  TRAINING 

4 

THE INFORMATION  SYSTEM 

5.  COOPERATION 

6 

PROTECTION  UNDER  CRIMINAL  LAW/APPROXIMATION  OF 
NATIONAL  LAWS:  CRIMINAL  LIABILITY,  PENALTIES,  MUTUAL 
ASSISTANCE  IN  LEGAL MATTERS 

7 

SUPPORT  FROM  EXISTING  INSTRUMENTS 

8.  THE DEADLINES 

I 

.....1 

4 

5 

6 

.7 

10 

; 11 

12 

13 

1i 

1. 

INTRODUCTION 

1.1 

Problems  and  objectives 

The  successful  introduction  of  the  single  European  currency,  the  euro,  is  part  of  an 
irreversible  process  which  necessitates  the  creation  of  a  framework  for  prevention, 
training,  cooperation  and 
from 
law  enforcement  strategies 
counterfeiting. 

to  protect 

the  euro 

Under  Council  Regulation  974/98  of  3  May  19981  euro  banknotes  and  coins  will  be  put 
into circulation  in the countries  participating  in the first wave of EMU  on  1  January  2002. 
In  accordance  with  the  provisions  of  the  E.C.  treaty  (article  105  A)  the  ECB  alone  is 
authorized  to  issue  euro  bank  notes.  The  Member  States  retain  the  responsibility  for  the 
issue  of  coins  with  the  ECB's  approval.  The  European  Monetary  Institute  has  taken 
important  initiatives  to  ensure  a  high  level  of  technical  protection  of  the  notes  by 
providing  for  security  elements  in line with the  latest technical  progress. 

The  Board  of  Governors  of  the  European  Central  Bank  adopted  on  7  July  a  number  of 
guidelines to protect euro  notes. A recommendation  refers  more  particularly  to  combating 
counterfeiting  and asks  the Council,  Member  States, Europol  and  the Commission  to  take 
the measures  required2. 

I;or  its  part,  the  European  Parliament  by  means  of  its  committee  on  budgetary  control, 
asked  the  Commission  to  develop  targeted  initiatives  at  Community  level  to  strengthen 
the  protection  of  the  euro.  The  parliament  referred  in  particular  to  experience  gained  in 
the area of protection  of the Communities'  financial  interests 

Now,  following  the  work  done  by  the  EMI  we  need  to  set  out  the  basic  guidelines 
concerning  ways  of  protecting  the  euro.  Combating  counterfeiting  is a key  aspect  of  this 
protection.3 

The  risks  to  be  countered  mainly  derive  from  the  euro's  enormous  circulation  potential, 
both  within  the  Community  and  elsewhere.  The  euro  will  become  a  transaction  and 
reserve currency  world-wide.'4 

The  protection  of  the  euro  will  need  to  be  tailored  to  deal  with  this  new  dimension.  The 
risks  of  counterfeiting  are  always  greater  when  new  banknotes  or  coins  are  issued  and 
clearly  they  will  be  even  greater  when  the  new  single  currency  is  launched.  As  an 
international  reserve  currency,  the  euro  will  have  an  easily  convertible  value  and  will 
attract  all  forms  of  crime,  including  organised  crime.  The  risks  are  increased  by  the 
potential  for  uttering  forgeries  in  a  larger  territory  which  is  beyond  national  jurisdiction; 
the  scope  for  intervention  by  authorities  of  each  Member  State  is  confined  within 

1  OJL  139 of  11.5.1998, p. 2. 

2  This recommendation  will be the subject of detailed examination  by the Commission. 

3  Other  forms  of  crime, particularly  the  laundering  of  major  assets  in  national  currency,  may  occur  in 

the transition  phase, especially when national currencies and euros are both  in circulation. 

This means that it is essential to develop special cooperation between the partners in the Community. 

national  boundaries.  The  availability  of  such  technological  developments  as  colour 
photocopying  and  digital  off-set  printing  both  to  international  organised  crime  and  to 
small-scale criminals  operating  in a single  Member  State and  a small  group of  individuals 
only  increase  the dangers  further. 

The  euro  will  also  need  protecting  in  an  environment  containing  a  series  of  specific 
factors,  such  as: 

- 

that  European  citizens  are  unfamiliar  with 

the  fact 
the  banknotes  and  coins. 
Notwithstanding  awareness-raising  campaigns  it  is  clear  that  users  of  euro  notes  and 
coins  will  take  time  to  become  as  used  to  the  new  coins  and  notes  as they  are to  their 
national  currencies;5 

- 

- 

different  degrees  of  experience  of  the  various  national  departments.  It  is  clear  that 
counterfeiters  work  on  the basis of  risks and  the  possibilities  of selling  the note or coin 
they  have  targeted.  Some  national  currencies  are rarely  counterfeited; 

the  lack  of experience  among  some  staff  and  of detection  methods.  There  is a  need  for 
trained  staff  and  control  and  detection  methods,  particularly  at  certain  financial 
establishments  whose  business  activity  consists  largely  of  collecting,  exchanging, 
transporting  or circulating  currencies;6 

the  number  of  places  where  banknotes  or  coins  are  produced.  In  spite  of  the  uniform 
technical  security  standards  provided  for  by  the  ECB  (notes)  and  national  mints  or 
treasuries  (coins),  Member  States  will  still  be able to use different  production,  printing 
and  minting  techniques; 

the  variety  of  national  sides  of  the  coins.  Euro  coins  have  one  standard  side  and  one 
national  side, which  makes  recognition  more difficult  for  users in other  Member  States 
where the  same coins  may  circulate; 

the  considerable  increase  in  the  number  of  exchange  operations  (when  the  national 
currencies  and  euros  are  both  in  circulation).7  Holders  of  national  notes  and  coins 
(including  large-scale  crime  organisations)  will  need  to  adhere  to  strict  time  limits  to 
be able  to exchange  their  stocks of  national  currency  for euros; 

the  circulation  of  euros  other  than  in  the  participating  Member  States.  The  circulation 
and  use of  the  new  currency  will  not  be  confined  to countries  participating  in  the  third 

5  Experiments  in some Member States revealed that, in some regions, the appearance of counterfeit new 
coins led to a systematic refusal  on the part of users to exchange or effect  payments using the coins. 

The  feasibility  of a simple  and  effective  forgery  detection  scheme will  need to be examined  together 
with  the  professional  sectors  concerned  so  as  to  put  in  place  additional  safeguards  prior  to  police 
investigations. If necessary,  incentives should be drawn  up with this in mind. 

Council  Regulation  (IvC)  No 974/98  of  3 May  1998  on  the  introduction  of  the  euro,  OJ  L  139, 
I 1.5.1998,  stipulates  that  this  period  may  not  be  longer  than  six  months.  It  should  also  be  borne in 
mind that during the peak tourist season  demand  for exchange  is greater, cash  is more widely used and 
these activities tend to be concentrated  at certain  places (airports, stations, ports, tourist areas, etc.). 

stage  of  EMU.  All  the  Member  States  of  the  Union  will  be  affected  as  will  a  large 
number of third  countries, especially  the applicant  counlries;x 

the  limitations  of  the  principle  of  territoriality.  Differences  between  the  legal  systems 
and  the  maintaining  of  criminal  boundaries  would  appear  to  render  the  equivalent 
enforcement  of the  law and  protection  of the currency  more  difficult; 

- 

technological  progress  will  make  reproduction  techniques  using  lasers  and  digital 
technology  more easily  accessible  for  small-scale  counterfeiters. 

In  order  to  counter  these  factors  which  will  appear  in  particular  when  euro  notes  and 
coins  are  introduced,  the  Community  must  be  given  the  means  and  facilities  it  needs  to 
mount  coordinated  preventive and  enforcement  action  against  counterfeiting. 

The  prospect  of  replacing  national  currencies  with  the  single  currency,  together  with  the 
differences  between  the  approaches  and  structures  for  combating  counterfeiting  in  the 
individual  Member  States,  mean  that  the  Community  must  take  the  necessary  measures 
for  effective  coordination  and  cooperation.  We  need  to  arrive  at  a  situation  where 
equivalent  protection  of the  European  currency  can  be guaranteed  throughout  the  Union. 

The  Madrid  European  Council  and  subsequently  the  treaty  of  Amsterdam  considered 
equivalent  protection  to be an objective  assigned  to the  institutions  and  Member  States  as 
far  as  the  money  of  the  European  taxpayer  which  passes  through  the  Community  budget 
is  concerned.  The  European  citizen  has  the  right  to  expect  that  the  institutions  and 
Member  States  use the same  principle  for the protection  of the  European  currency. 

The  need  to  develop  shared  concepts  and  reciprocal  obligations  means  that  we  must 
develop  a  common  method  of  interpretation  and  for  settling  disputes  in  the  case  of 
disagreements. To attain  this  objective  we  must  create  the  proper  instruments  to  protect 
Community  interests  subject  to  judicial  control.  In  so  far  as  the  instruments  come  under 
the  EC  treaty,  the  jurisdiction  of  the  Court  of  Justice  is  established.  Where  Community 
interests  have to be completed  by  instruments  which  come  under  Title VI of the TETJ, the 
precedence  of  Convention  type  instruments  is  important  to  ensure  that  the  Court  of 
Justice  has jurisdiction. 

The  prevention  of  counterfeiting  of  the  euro  is  a  top  priority  and  requires  thorough 
preparation  before  the  single  currency  is  introduced.  Prevention  strategies  must  be 
sufficiently  dissuasive  to  deter  potential  counterfeiters  and  make  their  counterfeiting 
operations  difficult,  risky  and  expensive.  Cooperation  will  need  to  be  sufficiently 
effective  and enforcement  uniform. 

This  overall  policy  of  preventing  and  combating  counterfeiting  requires  all 
the 
Member  States, the  Union  institutions  and  bodies  and  international  organisations  to  work 
together.  The  legal  framework  will  need  to  be  in  place  during  the  year  2000  if we  are  to 
be able  to  establish  appropriate  structures  well  before  the  introduction  of coins and  notes. 

This  will  most  definitely  have  an  impact  on  the  sources  of  forgery  and  counterfeiting.  Figures 
available  on  counterfeit  denominations,  based  on  notifications  to  Interpol,  show  that  certain  national 
currencies  are  counterfeited  internationally,  with  some  unlawful  production  taking  place  outside  the 
country  in  question.  As  an  international  reserve  currency,  the  dollar  most  probably  offers  the  best 
example of the risks faced  by the euro. 

1.2 

The  responsibilities  of the ECB, Europol  and the  Commission 

Under  the  EC1 Treaty  the  protection  of  the euro as a tangible  element  of  EMU  is mainly  a 
Community  matter, although  Title  VI  instruments  may  of course  be employed  to  improve 
the protection  of  the currency. 

The  approach  .envisaged  by  the  Commission  is  based  on  the  approach  used  for  the 
protection  of  the  Communities''  financial  interests.  It  includes  a  prevention  aspect  based 
on  the exchange  of  information  and  cooperation  between  the  competent  authorities.  This 
requires  a Community  legal  framework.  It also  includes  a criminal  law protection  aspect 
which  could  be  based  on the title  VI  instruments  of the TEU. This approach  integrates  all 
the types  of threat  either  from  organised  crime  or  other  forms  of  criminal  counterfeiting 
which  are equally  formidable. 

The  ECB 

The  EMI  has  done  important  work  to  guarantee  the  technical  security  of  the  notes  and 
coins  and  has  taken  the  decision  to  set  up  a  technical  data  base  to  support  the 
counterfeiting  analysis  centre  (CAC)  for  notes.  The coins  which  are  the  responsibility  of 
the  Member  Stales could  also  be  included  in the  EClVs technical  database. 

The data  base  will  contain  information  about  counterfeit  euro notes and  will  be run  under 
the aegis ollhe  ECB.  I he technical  details  will  be  fed  into the data  base by  the CAC. 

I he  ECB  and  the  ESCB  will  be  responsible  for  monetary  policy  and  the  issue  and 
circulation  of  the currency.  This  is why,  since July  1996, the  liMl  has  wanted  its work  to 
be  devolved  to  and  completed  by  other  Community  bodies.  Personal  and  operational 
information  will  need  to  be  treated  separately  and  not  stored  on  the  data  base  developed 
by the  EMI. 

Europol 

The Europol  Convention  which  has now  been  ratified  by all  the  Member  States,  provides 
the  possibility  for  enlarging  the  remit  of  Europol  with  regard  to  international  organized 
crime  as  referred  to  in  article  2  of  the  Convention9.  Such  a  decision  would  be  taken 
unanimously  by the Council  using procedures  laid down  in title  VI of the TEU. 

Part  of  EuropoTs  remit  will  also  be  to  manage  an  information  system  with  a  voluntary 
input  from  the  Member  States"  national  services  and  by  liaison  officers  from  national 
units.  Direct access  by  national  units  to the data (data concerning  offences,  charges,  dates 
and  places,  means  used,  services  in  charge  and  their  file  numbers,  data  concerning  the 
suspicion  of  membership  of  a  criminal  organization  etc.)  is  available  on  request,  by 
means of the liaison officers  as well as for the needs of a specific  investigation  (articles  7 
and  8 of the Convention).Notification  of this information  is subject  to the specific  rules in 
each  Member  State.  Europol  will  be  able  to  transmit  data  to  third  countries  and  bodies 
including  certain  common  bodies  and  Interpol  (cf.  articles  18  and  10.4)  but  only  in 

Extract  from  Article  2  of  the  Convention:  "  ...where  there  are  factual  indications  that  an  organised 
criminal  structure  is  involved  and  two or  more  Member  States are affected  by the  forms  of crime in 
question  in such a manner as to require a common  approach  by the Member States owing to the scale, 
significance  and consequences of the offences  concerned." 

individual  cases  when  this  measure  is  necessary  for  the  prevention  or  combating  of 
offences.  Subject  to a change  in the Convention  these rules apply  for cooperation  with  the 
ECB and  the  Commission. 

he  Commission 

The  role  of  the  Commission  is  complementary  to  the  role  played  by  the  ECB  and  adds 
value 
to  Europol's  activities.  The  Commission  will  propose  the  establishment  of  a 
Community  data  base  and  information  system  (see  below)  accessible  in  real  time  to  the 
competent  authorities  and  Europol  so that  the  latter  can  carry  out  analysis  as  part  of  its 
remit. 

The  system  for  protecting  the  euro  should  be  based  on  a  wide-ranging,  integrated 
approach  which  requires  continuous  and  regular  monitoring  of  events  and  risks. 
Information  will  have  to  be  collected  from  the  various  sources.  Eor  the  most  part,  this 
information  comes  from  issuing  institutes, central  banks,  commercial  banks,  finance  and 
credit  institutes  as  well  as  from  the  customs  and  the  police.  The  use  of  all  this 
information  by the Commission  will  improve the prevention  and  detection  of  illegal  acts. 

Eor  this  reason,  since  July  1996,  the  Commission  has  been  carrying  out  with  experts 
from  the  Member  States  an  assessment  of  the  risks  and  the  need  to  adopt  common 
provisions  to  prevent  and  combat  the  counterfeiting  of  the  euro.  The  resulting 
Commission  document  was  sent  to  the  Council  and  enabled  the  19 May  Ecofin  Council 
to  reach  its  conclusions.  These  conclusions  highlight  the  urgency  of  putting  in  place 
effective  protection  for  the euro, that is before  it is in circulation, 

2.  AREAS  FOR  PRIORITY  ACTION 

Work  carried  out  by 
the  cul  hoc  group  of  the  Advisory  Committee  set  up  by  the 
Commission  to  establish  priority  guidelines  has  pooled  the  experience  acquired  by  the 
Commission  and  by experts  in the Member  States, Europôl, the  EMI  and  Interpol. 

The  group's  work  focused  on  certain  aspects  concerning  "paper  supports"  (banknotes) 
their  attentions  on  the  sorts  of 
and  "metal  supports"  (coins).  They  concentrated 
information  which  could  be  usefully  exchanged,  the  collecting  of  data  and  cooperation 
between  the  relevant  bodies  for  the  purposes  of  prevention,  investigating  cases  and 
effectively  combating  any  form  of  unlawful  activity  which  could  harm  the  euro  .  The 
system  will  need to run  for  a trial period  before  euro notes and  coins begin  to circulate  to 
enable any problems to be  identified. 

On  1 January  2002  when  the  coins  and  notes  are  simultaneously  introduced  in  all  the 
participating  countries  the  necessary  provisions  and  means will  have  to  be  operative  and 
effective. 

Therefore  we  need  to  continue  our  preparation  of  the  regulatory  framework  needed  to 
increase  prevention,  facilitate  and  render  effective  the  cooperation  between  the  national 
authorities 
findings 
compulsory.  With  regard  to  protection  of  the  euro,  the  provisions  adopted  will  have  to 
cover  the  obligations  of  the  participating  countries  and  the  other  Member  Stales  and  will 

the  rate  of  detection  and  make  notifications  of 

improve 

to 

n^cd  to provide  for  the  necessary  cooperation  with  international  bodies and  those  of  third 
countries. 

Protective  measures  must  also  include  a  cooperation  system  which  goes  beyond  the 
possible  action  provided  by  the  traditional  forms  of  international  mutual  aid,  which  has 
hitherto  been  seen  as  cooperation  between  the  authorities  of  sovereign  nation  states  for 
the  protection  of their  national  currencies. 

This approach  demonstrates  the need  for a structure  within  the Commission's services.  A 
Community  structure  such  as  this  must  be  the  counterpart  of  the  body  which  issues 
Europe's  currency  (the  ECB)  for  notes  and  Member  States  for  coins  and  the  other 
partners at the  EU (Europol)  and  international  (Interpol)  levels. 

lor  these  reasons action  must  be taken  on 

training,10 

- 

information  and  communications  systems  and data  bases," 

-  cooperation,  mutual  assistance, technical  and  operational  assistance  in  investigations12 

-  definition  of counterfeiting  activities and deterrent  penalties. 

3. 

TRAINING 

The  introduction  of  the  euro  necessitates  an  approach  to  training  so  as  to  better  protect 
and  combat  counterfeiting.  The  Commission  has  therefore  been  called  on  to  present  a 
reflection  document  on  the  professional  training  policy  at  Community  level.  Such  an 
approach  will  have  to  be  based  on  a  balanced  and  consistent  division  of  labour  between 
levels  (Member  States,  Community,  Union),  taking  account  of  cost-
the  various 
effectiveness  and  respecting  the principles of subsidiarity  and  proportionality. 

On  the  basis  of  the  guidelines  set  out  in  the  meeting  paper  produced  by  the  Commission 
services  at  the  request  of  the  Council  Police  Cooperation  Group,13  the  Commission  will 
examine  the  possibility  of  launching  a  pilot  scheme  which  could  begin  in  1999 and  serve 
as a basis  for a multiannual  action  plan on  professional  training. 

10 

Everyone concerned  must be  involved,  including  financial  institutes and bodies able to play  a part in 
detection  at  as  early  a  stage  as  possible.  Suitable  systems  must  be  set  up  to  make  the  necessary 
resources and techniques readily available (for example, an incentive scheme). 

Conditions  for  access  to  the  data  base,  the  establishment  of  an  operational  and  strategic  police  grid, 
method  of  transmitting  information  (the  creation  of  a  computerised  exchange  mechanism  based  on 
standardised  messages and ensuring that systems are technically compatible). 

12 

Bearing  in  mind  the  increased  need  for  coordination  at  European  level  for  the  protection  of the euro 
and  the  need  to  extend  this  cooperation  to  partners  outside  the  Community,  given  the  international 
nature of counterfeiting. 

As  a  preparatory  item,  a  meeting  paper,  Expert group  on  counterfeiting the  euro:  an  approach to 
training has been presented  to the group "police cooperation". 

In  the  customs  field,  an  extension  of  the  field  of  application  of  the  Community 
MAITIIAEUS  training  programme  which  covers  the  training  aspect  referred  to  in  the 
CUSTOMS  2000  decision,  to  action  to  combat  counterfeiting  of  the  euro  may  be 
envisaged. 

The  Commission  will  also  take  into  account  in  this  context  imperatives  linked  to 
enlargement  so as  to  integrate  the  specific  training  actions  for  protection  of  the euro  into 
its pre-acccssion  strategy. 

Within  the  limits  of  resources  available,  the  private  sector  experts  liable  to  play  a  role  in 
training 
the  detection  of  counterfeit  money  could  be  involved 
activities. 

in  certain  targeted 

4. 

T HE  INFORMATION  SYSTEM 

The  experts  have  focused  on  the  exchange  of  information  and  on  the  standardisation  of 
exchange  procedures  so  as  to  avoid  communications  containing  sorts  of  information 
which  vary  from  one  Member  State  to  another,  are  consequently  difficult  to  use  for  the 
purposes  of  effective  analysis  and  do  not  provide  a  clear  understanding  of  the 
phenomenon  in the Union as a whole. 

Methods  of protecting  the  single  currency  are  largely  based  on  information  and  therefore 
on  the  collection,  compilation  and  evaluation  of  data  on  lorged  notes  and  coins  and 
information  concerning  the production,  holding, transport  and  circulation  of  forgeries. 

The data can  be broken  down  into two  main  categories: 

technical  information  concerning  the  collection  of  data  and  the  processes  involved  in 
the  production  and  technical  characteristics  of  forged  notes.  This  kind  of  information 
will  be processed  by the counterfeiting  analysis  centre  (CAC) which  will  report  to  the 
ECB. The same approach  is being considered  for  coins, 

-  administrative,  customs  and  police 

intelligence,  concerning  the  collection  of  data  -

both strategic and operational- on  counterfeiting 

The  systematic  and  methodical  use  of  information  provides  an  overall  picture  and  helps 
in  identifying  counterfeiting  circuits  or  networks.  It  is  important  to  collect  and  organise 
all  the  details,  from  the  investigation,  the  information  or  the  reporting  to  the  closure  of 
the  investigation,  the  submission  of  the case  to the court  and  sentencing.  This  will  make 
it  possible  to  pursue  an  effective  prevention  policy  on  the  basis  of  information  updated 
on a continuous  basis. 

It  is  necessary 
to  define  common  standards  of  exchange  and  fixed  periods  for 
communications  via an e-mail  network.  The technology  of the AFIS mail  network  which 
has  been  used  successfully  for  more  than  a  decade  with  regard  to  SCENT  (Secure 
Enforcement  Network)  by  the  authorities  in  the  Member  States  and  the  services  in  the 
Commission  responsible  for  the  fight  against  fraud  in the  customs  and  agricultural  areas, 
constitutes  in this regard  an interesting  method  for the rapid  exchange of  information. 

The  database  must  be  user-friendly  offering  direct  access  to  updated  material  for 
operations. 

The system  must,  as  far  as  possible,  be  compatible  with  existing  systems  in  the  Member 
States  and  the  Europol  system.  The  Commission  system  must  also  be  adapted  to  the 
kr.hiiiques  and  working  practices  of  national  investigation  services.  Rules  governing 
access  need  to  be  drawn  up.  The system  will  be  continuously  fed  with  information  and 
updated  for  technical,  operational  and  strategic  purposes.  It  will  make  it  easy  to  bring 
together  information  from  various  sources  and  provide  an  overview.  It  will  also  enable 
effective  operations  to  be  conducted 
throughout  the 
investigation  services 
Community, 
unwittingly  duplicating  their  inquiries. 

in  real  time  and  coordinated 

thereby  eliminating 

in  particular 

the  risk  of 

Organising  the  various  components  of a reporting  system  will, over  and  above the  use  of 
the  national  frameworks,  require  an  appropriate  legal  framework  to  be  established  at  the 
Community  level. The  requirements  have  been  clearly  identified  through  the  work  of  the 
expert  groups.  There  will  have  to  be  a  set  of  Community  rules  creating  the  legal 
framework  needed  for  the  compiling  and  exchange  of  information  between  authorities 
responsible  for  protecting  the  single currency  against  counterfeiting. 

The  existing  body  of  Community  law  and  practice  in  relation  to  protecting  financial 
interests,  which  lays  down  a  series  of  rules  for  defining  concepts  and  compiling  and 
exchanging  information,  constitutes  a  useful  framework  of  reference.11  There  is  already 
an  information  system  covering  all  areas  of  the  budget.  It  includes  on  the  one  hand  the 
Community's  Irene  data  base,  which  contains  sensitive  data  about  cases  of  fraud  and 
irregularity  notified  by  the  Member  States.  The  Member  States  do  not  have  access  to  it 
at  this  stage. 
In  the  area  of  mutual  assistance  between  the  customs  authorities  in  the 
member  States  and  the  Commission  (EC  reg.  no.  515/97),  on  the  other  hand,  there  is  the 
customs  information  system,  CIS,  a  user-friendly  data  base  which  is  constantly  being 
updated  and  to  which  the  Member  States  and  the  Commission  have  access.  Run  by  the 
Commission,  it also contains  sensitive  data covered  by the rules on the protection  of  such 
data. 

In  the  same  context,  it will  be  noted  that  title  V  of  EC  Council  Regulation  no.  515/97  of 
13  March  1997  concerning  mutual  assistance  between  the  administrative  authorities  of 
the  member  States  and  cooperation  between  the  latter  and  the  Commission  to  ensure  the 
sound  application  of customs  and  agricultural  regulations, offers  the  possibility  of  storing 
lor  the  purposes  of  prevention,  detection  and  prosecution  of  irregularities  in  the  customs 
field  including  those  linked  to  counterfeiting  of  the  euro,  useful  information  in  the  CIS 
(Customs  Information  System)  central  database.  The  CIS  offers  moreover  the  advantage 
of  being  able  to  integrate  electronic  imagery  which  is  indispensable  in  combating 
counterfeiting. 

14  Existing regulations for the various budgetary  fields: Council  Regulation (EEQ Euratom) No  1552/89 
(OJ  L 155,  7,6.1989),  as  amended  by  Council  Regulation  (EEC,  Euratom)  No  1355/96  (OJ L 175, 
13.7.1996),  for  own  resources;  Council  Regulation  (EEC)  No 729/70  (OJ L 94, 28.4.1970),  Council 
Regulation  (EEC)  No 4045/89  (OJ L 388,  31.12.1989),  Council  Regulation  (EEC)  No 595/91 
(OJ L 67,  14.3.1991), for  EAGGF-Guarantee;  Regulation  (EEC) No 4253/88 (OJ L 374, 31.12.1988), 
Commission  Regulations  (EC) No  1681/94 (Structural  Funds, OJ L 178,  12.7.1994)  and  No 1831/94 
(Cohesion  Fund,  OJ  191,  27.7.1994);  Council  Regulation  (EC)  No 515/97  (mutual  assistance,  OJ 
L 82, 22.3.1997, previously Council  Regulation (EEC) No  1468/81 (OJ L  144, 2.6.1981)). 

Provisions can  also be  invoked  to oblige  the central  bank  and  financial  institutions  to block  and then 
seize counterfeit  money and notify  the p  lice and, where appropriate, the central bank. 

These are models which have stood the test of time and should serve as the basis for the 
Community rules, which should cover all the following areas: 

they  should  define  all  the  activities  which  go  together  to  make  up  currency 
counterfeiting  and falsification  to allow for a homogenous exchange of information;15 

the  Member  States  must  be  required  to  pass  on  all  relevant  information  concerning 
counterfeiting  and  forgery  of the euro; 

a  computerised  system  comprising  an  e-mail  network  and  a  central  data  base,  with 
direct access for the national  authorities, should be set up.  The purpose of the system, 
which would be updated  regularly, would  be to prevent, detect and prosecute currency 
counterfeiting;  it should  therefore  contain  strategic, operational  and  appropriate  legal 
data.  It  will  have  to  be  a  user-friendly,  interactive  system  with  direct  access  for  the 
authorities empowered  to use it; 

there  must  be  rules  governing  the  arrangements  for  exchanges  of  information  (and 
access  to  data  bases)  with  Community  or  Union  bodies,  international  organisations 
(Interpol)  and  non-member  countries.  Different  terms  of  access  may  be  laid  down 
depending on what the various authorities are there to do.  It is useful  to recall  that by 
virtue  of  article  29,  paragraph  3 of  EC  Council  Regulation  no.  515/97  of  13 March 
1997, it may be decided, on a proposal  from  the Commission, to allow international or 
regional organizations (e.g. Buropol) access to the CIS data bases as long as a protocol 
has been concluded  in parallel with these organizations. 

there must be rules governing  protection  for personal data, which may be based on the 
arrangements  laid  down  in  Council  Regulation  (Euratom,  EC)  No 2185/96  on 
protecting the Communities'  financial  interests against fraud  and other irregularities.16 
The Treaty of Amsterdam  (particularly  Article 286 EC) enshrines these principles and 
entrenches  the  application  of  the  Community  rules  on  data  protection  in  the 
Commission; 

-  commercial  banks and  financial  institutions  should  be obliged  to report any  instances 
of  fraud  they  detect  to  the  competent  authorities,  on  pain  of  administrative  penalties 
where appropriate;17 

15  Mow  necessary  and  useful  such  an  approach  is  has  been  proved  in  relation  to  the  protection  of 
financial  interests,  where  the  information,  communication  on  administrative  cooperation  and  mutual 
assistance  system  relies  on  the  concept  of  irregularity  as  defined  in  Article  1 of Council  Regulation 
(EEC) No 2988/95 (OJ L 312, 23.12.95).  The  Member States assign  responsibility  for  implementing 
the  information  system,  administrative  cooperation  and  mutual  assistance  to the  appropriate  national 
authorities. 

See also Council  Regulation  (EC) No 3295/94  laying  down  measures to  prohibit the  release  for  free 
circulation,  export,  re-export  or  entry  for  a  suspensive  procedure  of  counterfeit  and  pirated  goods 
(OJ L 341,  22.12.94), which  gives  a definition  of  counterfeit  or pirated  goods,  inter alia to  facilitate 
the  exchange  of  information  and 
co-operation  between  national  customs  authorities  and  the 
Commission. 

16  OJL 292,  15.11.1996.  See also Council  Regulation  (EC) No 515/97 cited above. 

17  Taking  more  effective  measures  at  this  level  will  make  it  easier  to  detect  forgery  at  an  early  stage. 
Although  preventative,  such  measures  make  enforcement  more  effective  in  that  they  can  be  very 

9 

5. 

('OOPKKATU)N 

The change  from  protecting  national  interests  to protecting  a Community  interest  requires 
national  bodies  to  cooperate  and  coordinate  their  activities  with  the  help  of  Union 
institutions and  bodies. 

In  all  countries  the  production  of  counterfeit  money  has  always  been  considered  a 
criminal  act  that  strikes  at  the  very  heart  of  a  State.  An  International  Convention  for  the 
Suppression  of  Counterfeiting  Currency  of  1929,  advocates  the  setting  up  of  specialised 
centralised  structures  to  prevent  and  combat  this  form  of  unlawful  activity.18  These 
specialised  structures  are  supposed  to  contact  each  other  directly  and  notify  information 
concerning  counterfeiting. 

them.  An  essential  element  would  be 

(iiven  the  introduction  of  the  curt),  it  is  important  to  develop  the  existing  networks  by 
to  offer  administrative  and 
strengthening 
operational  support  at  Commission  level.  Such  a  Community  structure  would  ensure 
communication  and  cooperation  with  liaison  offices 
in  the  Member  States  and  the 
authorities  responsible  for  issuing  the  notes and  coins, as  well  as  with  Europol  and  ICPO 
Interpol. 

This  cooperation  will  improve  the  level  of  strategic  and  operational  analysis  and  will 
strengthen  the means of combating  counterfeiting,  particularly  with common  strategies. 

The  effectiveness  of  ground  operations  generally  depends  on 
the  reliability  of 
information,  the  speed  with  which  those  responsible  can  exchange  information  and  the 
quality  of cooperation  between  the authorities. 

There  is  no  denying  the  need  to  extend  cooperation,  building  on  the  loyalty  and  trust  of 
the services. 

The  Member  States  already  have  structures  in  place.  All  that  remains  is  to  draw  up  the 
legal  framework  to  enable  the  necessary  organisational  adjustments  to  be  made  at  Union 
level  and  to create  the conditions  for  close, effective  and  regular cooperation  between  the 
various  national  Ibices themselves and  the  relevant  Union  institutions and  bodies. 

The regulatory  provisions  will  have to  include 

- 

- 

the  relevant  national  authorities,  the  Commission,  Europol  and  the  ECB  must  be 
required to cooperate with and assist each other;19 

there  must  be  rules  governing  cooperation  and  mutual  administrative  assistance 
between  the  Community  and  non-member  countries  (special  clauses  in  association, 

useful  instruments  for  fast  and  effective  enforcement  by enabling  information  to be passed on  rapidly 
to  the  competent  authorities  as  far  upstream  as  possible  or  closer  to  the  original  offence.  Regular 
returns of  information  to the agencies concerned'might  encourage  them  lo improve and develop their 
early warning systems. 

18  Convention  signed  in  Geneva  on  20 April  1929.  League  of  Nations,  Compendium  of  treaties, 

Vol.CXIlNo2623,p.371. 

19  On the basis of the existing regulations; see footnote  14. 

10 

cooperation  or  partnership  agreements  between  the  Community  and  non-member 
countries); 

a special  forum  should  be set  up  for  effective  joint  consultations  involving  the  national 
authorities  and  the  European  institutions  and  bodies; 

a  clarification  of  the  operational  assistance  role  of  the  Commission  based  on  article  7 
of  protocol  no  2  on  protection  of  financial  interests  as  well  as  the  role  ol" Europol  on 
the  basis  of  the  new  provisions  of  title  VI,  article  30,  ed  al,  of  the  Treaty  of 
Amsterdam. 

6. 

PROTECTION  UNDER  CRIMINAL  LAW/APPROXIMATION  OF  NATIONAL  LAWS: 

CRIMINAL  LIABILITY,  PENALTIES,  MUTUAL  ASSISTANCE  IN  LEGAL  MATTERS 

In parallel  with  the drafting  of  the  whole  regulatory  apparatus  (defining  terms,  compiling 
information,  exchange  of  information,  cooperation,  etc.),  the  question  of  a  criminal  law 
aspect  relating  to  the  definition  of  offences,  penalties20  and  mutual  assistance  in  legal 
matters  will  also  be  worked  out  with  a  view  to  achieving  the  target  of  equivalent 
protection  throughout  the  Union. 

The'questions  of  the  definition  of  the  victim,  victims'  rights  and  the  representation  of 
victims  in  legal  proceedings  under  criminal  law,  which  at  present  are  regulated  by  each 
body  of  national 
law  separately,  must  be  given  consideration  so  that  a  solution 
appropriate  to the monetary  interests of the Communities  can be  found. 

Definition  of  offences 

As  there  are  different  legal  systems,  particularly  as  regards  substantive  criminal  law, 
what  must  be  done  first  is  to  bring  the  definitions  of  specific  offences  of  money-
counterfeiting  more closely  into  line with each  other. 

This  question  has  already  arisen  in  the  same  terms  in  relation  to  defining  money-
laundering  when  the  Community  directive  was  being  drafted,21  defining  irregularity  for 
the  purposes  of  the  regulation  on  protecting  the  Community's  financial  interests  and,  in 
particular,  defining  fraud  for  the  convention  on  protection  under  criminal  law  for  the 
Community's  financial  interests. 

The  reason  for  pursuing  this  objective  is  that  the  Member  States  on  their  own,  when 
confronted  with  criminal  activities  which  damage  the Community's  interests, are not  able 
to  provide  a  consistent  level  of  protection  throughout  the  Community.  Establishing 
generally  accepted  definitions  will  make  it  easier  to  process  information,  establish 
international  cooperation  in matters under the criminal  law and apply  penalties. 

It should  be stressed  that there needs  to be a generally  accepted  definition  of the  criminal 
to  currency  counterfeiting 
offences  associated  with  all  the  activities  contributing 

20  Council  Regulation  (EC) No 974/98 on the introduction  of the euro merely stipulates that the Member 

States will lay down appropriate penalties against money counterfeiting  and  forgery. 

21  Council  Directive  91/308/EEC  of  10  June  1991;  Council  Regulation  (EC)  No 2988/95  of 
18 December  1995, OJ L 312, 23.12.1995; Convention  of 26 July  1995, OJ C 316, 27.11.1995. 

11 

involving  banknotes  and  coins.  Acts committed  in the fabrication  of counterfeit  currency 
or  those  which  lead  up  to  it,  take  place  in  tandem  with  it  or  follow  on  from  it  must  be 
described  uniformly,  with  due  regard  for  technical  advances  in  photocopying  and  digital 
reproduction.  The effectiveness  and  consistency  of  a  system  of  protection  which  should 
be al  the  same  level  throughout  the  Community  will  depend  on  accurate  identification  of 
the  elements  which  make  up  an  offence.  The  definition  in  the  Geneva  Convention  of 
20  April  1929 makes a useful  starting-point. 

Deterrent  penalties 

A  preliminary  survey  by  the  EMI  found  that  maximum  penalties  varied  considerably 
from  one  Member  State  to  another,  which  does  nothing  to  further  the  objective  of 
ensuring  equivalent  protection  throughout  the  EMU  area.  The  situation  needs to be given 
thought  so that  there can  be a uniform  level of deterrence 

Experience  in  the  field  of  protecting  the  Community's  financial  interests,  and  the  results 
obtained,  could  be  a  basis.  A  specific  offence  concerning  currency  counterfeiting 
activities  based  on  the  generally  accepted  definition  of counterfeiting  of the euro  referred 
to  above  could  be  established  as  a  first  stage,  followed  at  the  Union  level  by  the  laying 
down  of  a  minimum  penalty  threshold;  this  would  obviously  reduce  the  risks  associated 
with  there being areas  where  penalties are  less  strict. 

Mutual  assistance  injudicial  matters 

There  must  be  provision  for  mutual  assistance  injudicial  matters, to ensure  that  offences 
are  prosecuted  effectively  and  uniformly  throughout  the  European  Union.  Here  again, 
the  Geneva  Convention  guidelines  on  judicial  cooperation  in  combating  counterfeiting 
could  be  a  useful  frame  of  reference  for  further  thinking  and  the  launching  of  the 
requisite  initiatives.22 

The  terms  on  which  judicial  cooperation  in  protecting  the  euro  is  to  take  place  must  be 
defined,  going  beyond  the  draft  convention  on  mutual  assistance  in  judicial  matters 
which  is being  negotiated  at present,  particularly  in  relation  to recognition  and  the  seizure 
of evidence,  the  role  of  the  Commission  and  the  ECB  in assisting  the  national  authorities 
and  direct judicial  assistance. 

7. 

SUPPORT  FROM  EXISTING  INSTRUMENTS 

Potential  synergies  and  the  degree  to  which  the  Community  framework,  the  institutions, 
intergovernmental  instruments  and  existing  international  organisations  complement  one 
another  must  be  accurately  assessed.  Work  by  the  experts  has  shown  that  the  existing 
structures  for  international  cooperation  to  combat  counterfeiting  can  play  an  important 
part,  especially  as  regards  relations  with  third  countries  where  the  euro  is  likely  to 
circulate or to act as an  international  transaction  and  reserve  currency. 

22  Extradition  (Articles 8,  9,  10  and  16),  direct  transmission  of  letters  rogatory  between  judicial 

authorities (Article  16). 

12 

There  must,  therefore,  be  further  exchanges  of  information  on  euro  counterfeiting  and 
greater operational  cooperation  with every country  in the world, particularly  through  the 
relevant  international  bodies.  There  will  be  special  clauses  in  cooperation  agreements 
between the Community  and non-member countries supplementing  such cooperation and 
going into greater detail (see above). 

The  Europol  Convention  is  to  come  into  force  in  October  1998.23  The  Council  may 
unanimously  decide to extend  Europol's  mandate to cover money counterfeiting.  In that 
way  it  could  make  its  contribution  to  the  war  on  organised  transnational  crime,  in 
cooperation  with the Commission, the ECB  and the Member States. 

The  protection  of the euro  will  also  have to be based  on the other existing  international 
instruments,  such  as  the  Geneva  Convention,24 
in  order  to  protect  the  Community's 
monetary  interests outside the Union in all parts of the world.25 

Interpol  receives reports of international  counterfeiting  cases via a system of  notification 
from  national  Interpol  units. 
It  uses  them  to  draw  up  annual  statistics  on  the 
counterfeiting  of  currencies  circulating  in  other  countries.  So,  in  the  same  way  as the 
Member States in relation to their national currencies before the introduction of the euro, 
Interpol  should  be  able  to  help  in  the  protection  of  the  euro.  Interpol  will  take  the 
existence  of  EMU  into  account  and  regard  the  Member  States  adopting  the  euro  as  a 
single currency area. 

8. 

THE DEADLINES 

The measures described must be introduced  in phase with the stages of EMU. 

The ECB has decided to set up a technical data base 

The Commission,  in  line with  its customary  approach  and with the Council  conclusions 
of  19 May  1998,  will  prepare  the  establishment  of  the  resources  necessary  for  the 
protection  of  the  euro,  before  euro  banknotes  and  coins  start  circulating  on  1  January 
2002.  For this purpose, the Commission will: 

•  press ahead  together with  the experts to complete its assessment  of the situation  and 
of  the  requirements  in  terms  of  information  and  cooperation  between  the  relevant 
authorities; 

put  forward  initiatives  in the  legislative  sphere  in particular  to supplement  the  ECB's 
work.  The object of these initiatives will be: 

23  OJ C 316, 27.11.1995.  The entry  into force  of the Europol convention  is subject  to the adoption  of a 
number  of  instruments  governing  its  operations.  These  are  referred  to  in  Article 45(4)  of  the 
Convention  and  relate to such  matters as the rules of procedure, staff  regulations, financial  regulation 
and a Protocol on privileges and immunities.  As there is such a wide range of them, it is not possible 
to predict when the European Police Office  will start operating. 

24  Cf.note  19. 

25  Special  clauses  to  step  up  cooperation  can  be  incorporated  into  the  agreements  between  the 

Community and  its non-member partner countries. 

13 

to  set  up  an  arrangement  to  facilitate  exchanges  of  information  and  the 
establishment  of  close  and  regular  cooperation  with  a  view  to  preventing  and 
combating currency  counterfeiting; 

to bring  about  the  requisite  approximation  of  rules  and  tighten  up  mutual  legal 
assistance  in  criminal  matters,  so  as  to  ensure  that  action  to  suppress 
counterfeiting  is equivalent;26 

• 

in the course of  1999,  examine the possibility  of launching a pilot training scheme to 
define  multiannual  policy  guidelines  for  everyone  involved  in  the  system  for 
preventing, detecting  and  suppressing  currency  counterfeiting,  to run  in tandem  with 
national  vocational  training  policies.  This  action  will  allow  guidelines  to  be 
determined for a multiannual training policy. 

The Commission  believes there should  be a sufficiently  long trial  period  to test  whether 
the  technical  resources  and  structures  to  be  put  in  place  are  practicable.  It  therefore 
proposes that a time limit of not later than 2000 be set for the adoption  of the legislative 
the  systems  of 
instruments.  This  will  allow  the  establishment  and  the  running  of 
protection of the euro by 1  January 2001. 

Legislative action  by the Commission on  judicial cooperation  on  the basis of the third  pillar will  first 
require  the  entry  into  force  of  the  Treaty  of  Amsterdam,  which  gives  the  Commission  the  right  of 
initiative. 

14 

ISSN 0254-1475 

COM(98) 474 final 

DOCUMENTS 

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09  10  01  06 

Catalogue  number  :  CB-CO-98-492-EN-C 

ISBN  92-78-38606-5 

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