Proposal for a European Parliament and Council Directive amending Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering
Date: 1999-07-14
Institutions: European Commission
Subjects: EC Directive, credit institution, financial institution, free movement of capital, money laundering

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Official Journal of the European Communities

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Proposal for a European Parliament and Council Directive amending Council Directive 91/308/EEC
of 10 June 1991 on prevention of the use of the financial system for the purpose of money
laundering

(2000/C 177 E/03)

COM(1999) 352 final (cid:151) 1999/0152(COD)

(Submitted by the Commission on 19 July 1999)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 47 (2), first and third
sentences, and Article 95 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of
Committee,

the Economic and Social

Acting in accordance with the procedure referred to in Article
251 of the Treaty

(1) Whereas Council Directive 91/308/EEC on prevention of
the use of the financial system for the purpose of money
laundering (hereinafter referred to as (cid:145)the Directive(cid:146) was
adopted on 10 June 1991 (1);

(2) Whereas

in two reports presented to the European
to Article 17 of
Parliament and the Council pursuant
the Directive the Commission has
reported on the
implementation of the Directive and on progress in the
fight against money laundering (2);

expressed by the European Parliament and the Member
States; whereas in this way the Directive should not only
reflect best international practice in this area but should
also continue to set a high standard in protecting the
financial sector and other vulnerable activities from the
harmful effects of the proceeds of crime;

(6) Whereas the GATS allows Members to adopt measures
and to adopt
necessary to protect public morals
including for ensuring
measures for prudential reasons,
the
system;
the
stability and integrity of
whereas such measures should not
impose restrictions
beyond what is justified to safeguard those objectives;

financial

(7) Whereas the Directive does not establish clearly which
should receive suspicious
Member State’s authorities
transaction reports from branches of credit and financial
institutions having their head office in another Member
State’s
State
are
authorities
responsible for ensuring that
such branches comply
with Article 11 of the Directive;

nor which Member

(8) Whereas this question has been discussed in the Money
Laundering Contact Committee established by Article 13
of the Directive; whereas the authorities of the Member
States in which the branch is located should receive such
reports and exercise the above responsibilities;

(3) Whereas in its Reports and Resolutions in response to the
Commission’s two reports the European Parliament called
for an updating and extension of the 1991 Directive (3);

(9) Whereas this allocation of responsibilities should be set
out clearly in the Directive by means of an amendment to
the definition of
insti-
tution(cid:146) contained in Article 1 of the Directive;

(cid:145)credit institution(cid:146) and (cid:145)financial

(4) Whereas the Action Plan of the High Level Group on
Organised Crime endorsed by the Amsterdam European
Council on 16-17 June 1997, and in particular recommen-
dation 26, called for additional efforts to combat money
laundering (4);

(5) Whereas it is appropriate that the Directive, as one of the
main international instruments in the fight against money
in line with the
laundering,
the wishes
conclusions

should be updated
of

the Commission

and

(1) OJ L 166, 28.6.1991, p. 77.
(2) COM(95) 54 final and COM(1998) 401 final.
(3) Doc. A4-0187/96 and OJ C 198, 8.7.1996, p. 245; Doc.

A4-0093/99 and OJ C. . ..
(4) OJ C 251, 15.8.1997, p. 1.

(10) Whereas the European Parliament has expressed concerns
that the activities of currency exchange offices ((cid:145)bureaux
de change(cid:146)) and money transmitters (money remittance
offices) are vulnerable to money laundering; whereas
these activities should already fall within the scope of
the Directive; whereas
in this
matter the coverage of these activities should be clearly
confirmed in the Money Laundering Directive;

to dispel any doubt

(11) Whereas to ensure the fullest possible coverage of the
financial sector it should also be made clear that the
Directive applies to the activities of investment firms as
defined in Council Directive 93/22/EEC (the Investment
Services Directive) (5);

(5) OJ L 141, 11.6.1993, p. 27.

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the

laundering of

(12) Whereas the Directive only obliges Member States to
combat
the proceeds of drugs
offences; whereas there has been a trend in recent years
towards a much wider definition of money laundering
based on a broader range of predicate or underlying
offences, as reflected for example in the 1996 revision
the Financial Action
of
Task Force
international body
the
devoted to the fight against money laundering;

the 40 Recommendations of

leading

(FATF),

(13) Whereas a wider range of predicate offences facilitates
suspicious
transaction
international
the
co-operation in this
Directive should be brought up to date in this respect;

area; whereas,

therefore,

reporting

and

(14) Whereas in the Joint Action of 3 December 1998 adopted
by the Council on the basis of Article K.3 of the Treaty on
European Union on money laundering, the identification,
tracing, freezing, seizure and confiscation of instrumen-
talities and the proceeds from crime (1) the Member States
agreed to make all serious offences, as defined in the Joint
Action, predicate offences for the purpose of their crimi-
nalisation of money laundering;

the

suspicious

reporting of

(15) Whereas the Directive imposes obligations regarding in
particular
transactions;
whereas it would be more appropriate and in line with
the philosophy of the Action Plan to Combat Organised
Crime for the prohibition of money laundering under the
Directive to be extended to cover not only drugs offences
but all organised crime activities, as well as
fraud,
corruption and any other illegal activities affecting the
financial interests of the Communities, as referred to in
Article 280 of the Treaty;

in every Member
particularly by the credit institutions,
State; whereas there is evidence that the tightening of
controls in the financial sector has prompted money
launderers to seek alternative methods for concealing
the origin of the proceeds of crime;

(19) Whereas there is a clear trend towards the increased use
by money launderers of non-financial businesses; whereas
this is confirmed by the work of the FATF on money
laundering techniques and typologies;

(20) Whereas Article 12 of the 1991 Directive already provides
for the extension of the obligations of the Directive to
other vulnerable professions and categories of under-
takings outside the financial sector;

(21) Whereas the question of vulnerable non-financial activities
has been discussed on a number of occasions in the
Money Laundering Contact Committee;

the obligations of
identification,

the Directive concerning
(22) Whereas
the
customer
reporting of suspicious transactions should be extended
to a limited number of activities and professions which
have been shown to be vulnerable to money laundering;

keeping

record

and

(23) Whereas notaries and independent

subject

to the provisions of

legal professionals
should be made
the
Directive when performing a limited number of specific
financial or corporate transactions where there is the
greatest risk of the services of those legal professionals
being misused for the purpose of laundering the proceeds
of drugs trafficking or organised crime;

(16) Whereas, in the case of such fraud, corruption and other
illegal activities, the Member States authorities responsible
for combating money laundering and the Commission
should cooperate with each other and exchange relevant
information;

(24) Whereas, however, where an independent lawyer or law
firm is representing a client in formal legal proceedings it
would not be appropriate under the directive to put the
lawyer under an obligation to report suspicions of money
laundering;

(17) Whereas on 21 December 1998 the Council adopted a
Joint Action on the basis of Article K.3 of the Treaty on
European Union on making it a criminal offence to
participate in a criminal organisation in the Member
the European Union (2); Whereas this Joint
States of
Action reflects the Member States’ agreement on the
need for a common approach in this area;

(18) Whereas, as required by the Directive, suspicious trans-
action reports are being made by the financial sector, and

(1) OJ L 333, 9.12.1998, p. 1.
(2) OJ L 351, 29.12.1998, p.1.

(25) Whereas the Directive makes reference to (cid:145)the authorities
responsible for combating money laundering(cid:146) to which
reports of suspicious operations must be made; whereas
in the case of independent lawyers and to take proper
account of the professional duty of discretion owed by
the lawyer to his client Member States should be allowed
to nominate
lawyers’
professional organisation as the responsible authority;
whereas
such
reports and their possible onward transmission to the
police or judicial authorities and in general the appro-
priate forms of cooperation between the bar associations
or professional bodies and the authorities responsible for
combating money laundering shall be determined by the
Member States;

the rules governing the treatment of

the bar association or other

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(26) Whereas there is a growing trend for financial services to
be ordered and provided using means (such as post,
telephone, computer) which limit or avoid direct contact
between the supplier and the purchaser; whereas even in
such cases the rules of the Directive on customer identi-
fication must be respected; whereas the Money Laun-
dering Contact Committee has examined such non-face
to face operations
and
procedures that should govern customer identification;
whereas those principles and procedures should be incor-
porated in the Directive in an annex,

agreed principles

and has

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Directive 91/308/EEC is hereby amended as follows

1. Article 1 shall be replaced by the following:

(cid:145)Article 1

For the purpose of this Directive

A. (cid:147)Credit

institution(cid:148) means a credit

institution, as
defined as in the first indent of Article 1 of Directive
77/780/EEC (1)
and includes branches within the
that Article and
the third indent of
meaning of
institutions
located in the Community, of
credit
having their head offices
the
inside or outside
Community,

B.

(cid:147)Financial institution(cid:148) means

an undertaking other than a credit

institution
1.
whose principal activity is to carry out one or more
of the operations included in numbers 2 to 12 and
number 14 of
to Directive
list
89/646/EEC; these include the activities of currency
exchange offices ((cid:147)bureaux de change(cid:148)) and of money
transmission/remittance offices,

annexed

the

an insurance

2.
in
company
accordance with Directive 79/267/EEC (2), in so far as
it carries out activities covered by that Directive,

authorised

duly

C.

(cid:147)Money laundering(cid:148) means the following conduct when
committed intentionally:

(cid:151) the conversion or transfer of property, knowing
that
such property is derived from criminal
activity or from an act of participation in such
activity, for the purpose of concealing or disguising
the illicit origin of the property or of assisting any
person who is involved in the commission of such
activity to evade the legal consequences of his
action,

(cid:151) the concealment or disguise of

location, disposition, movement,

the true nature,
rights
source,
to, or ownership of property,
with respect
such property is derived from
knowing that
criminal activity or from an act of participation
in such activity,

(cid:151) the acquisition, possession or use of property,
knowing,
such
time of
property was derived from criminal activity or
from an act of participation in such activity,

receipt,

that

the

at

(cid:151) participation in, association to commit, attempts to
commit and aiding, abetting, facilitating and coun-
the actions
selling the commission of any of
mentioned in the foregoing paragraphs.

Knowledge, intent or purpose required as an element
of the above-mentioned activities may be inferred from
objective factual circumstances.

Money laundering shall be regarded as such even
where the activities which generated the property to
be laundered were perpetrated in the territory of
another Member State or in that of a third country.

assets of

every kind, whether
D. (cid:147)Property(cid:148) means
immovable,
corporeal or
and legal documents or
tangible or
instruments evidencing title to or interests in such
assets.

incorporeal, movable or
intangible,

an investment firm as defined in Article 1 of

3.
Directive 93/22/EEC;

E.

(cid:147)Criminal activity(cid:148) means means

of

definition

This
includes
financial
branches located in the Community of financial insti-
tutions whose head offices are inside or outside the
Community,

institution

(1) OJ L 322, 17.12.1977, p. 30.
(2) OJ L 63, 13.3.1979, p. 1.

(cid:151) a crime specified in Article 3(1)(a) of the Vienna

Convention (3),

(3) United Nations Convention Against Illicit Traffic in Narcotic Drugs
and Psychotropic substances adopted on 19 December 1988 in
Vienna.

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(cid:151) participation in activities linked to organised crime,

3. Article 3 shall be replaced by the following:

(cid:151) fraud, corruption or any other
likely to damage

damaging or
Communities’ financial interests and

illegal activity
the European

(cid:145)Article 3

(cid:151) any other criminal activity designated as such for
this Directive by each Member

the purposes of
State.

F.

(cid:147)Competent authorities(cid:148) means the national authorities
empowered by law or regulation to supervise any of
the institutions or persons subject to this Directive.(cid:146)

2. The following Article 2a shall be inserted:

(cid:145)Article 2a

Member States shall ensure that the obligations laid down
in this Directive are imposed on the following institutions:

1.

2.

credit institutions as defined in point A of Article 1;

financial institutions as defined point B of Article 1;

and on the following legal or natural persons acting in the
exercise of their professional activities:

3.

4.

external accountants and auditors;

real estate agents;

notaries and other independent

5.
when assisting or representing clients in respect of the:

legal professionals

(a) buying and selling of real property or business entities

(b) handling of client money, securities or other assets

(c) opening or managing bank,

savings or

securities

accounts

(d) creation, operation or management of companies,

trusts or similar structures

(e) execution of any other financial transactions

1. Member States shall ensure that the institutions and
persons subject to this Directive require identification of
their customers by means of supporting evidence when
in the case
entering into business relations, particularly,
of the institutions, when opening an account or savings
accounts, or when offering safe custody facilities.

The identification requirement shall also apply for
2.
any transaction with customers other than those referred
to in paragraph 1,
involving a sum amounting to Euro
15 000 or more, whether the transaction is carried out
in a single operation or
in several operations which
seem to be linked. Where the sum is not known at the
time when the transaction is undertaken, the institution or
person concerned shall proceed with identification as soon
as it
the
is apprised of
threshold has been reached.

the sum and establishes that

Where an institution establishes business
relations or
enters into a transaction with a customer who has not
identification purposes
been physically
for
present
and
to face operations(cid:148))
((cid:147)non-face
procedures laid down in the Annex shall apply.

the principles

By way of derogation from paragraphs 1 and 2, the
3.
identification requirements with regard to insurance
policies written by insurance undertakings within the
meaning of Directive 79/267/EEC, where they perform
that Directive
activities which fall within the scope of
the periodic premium
shall not be
amount or amounts to be paid in any given year does
or do not exceed Euro 1 000 or where a single premium
is paid amounting to Euro 2 500 or less. If the periodic
premium amount or amounts to be paid in any given year
is or are increased so as to exceed the Euro 1 000
threshold, identification shall be required.

required where

3a.
By way of derogation from paragraph 2 identifi-
cation shall be required of all customers of casinos
purchasing or exchanging gambling chips with a value of
Euro 1 000 or more.

4. Member States may provide that the identification
requirement is not compulsory for insurance policies in
respect of pension schemes taken out by virtue of a
contract of employment or
the insured’s occupation,
provided that such policies contain no surrender clause
and may not be used as collateral for a loan.

dealers in high-value goods, such as precious stones

6.
or metals

7.

8.

transporters of funds

the operators, owners and managers of casinos.(cid:146)

5.
In the event of doubt as to whether the customers
referred to in the above paragraphs are acting on their
own behalf, or where it
they are not
acting on their own behalf, the institutions and persons
subject to this Directive shall take reasonable measures to
obtain information as to the real identity of the persons on
whose behalf those customers are acting.

is certain that

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The institutions and persons subject to this Directive
6.
shall carry out such identification, even where the amount
of the transaction is lower than the threshold laid down,
wherever there is suspicion of money laundering.

The institutions and persons subject to this Directive
7.
shall not be subject
to the identification requirements
provided for in this Article where the customer is a
credit or financial institution covered by this Directive.

regarding

transactions

8. Member States may provide that the identification
requirements
in
paragraphs 3 and 4 are fulfilled when it is established
that
for the transaction is to be debited
from an account opened in the customer’s name with a
credit institution subject to this Directive according to the
requirements of paragraph 1.(cid:146)

the payment

referred

to

4. In Articles 4 and 5 the words (cid:145)credit and financial insti-
tutions(cid:146) shall be replaced by (cid:145)the institutions and persons
subject to this Directive(cid:146).

5. Article 6 shall be replaced by the following:

(cid:145)Article 6

1. Member States shall ensure that the institutions and
persons subject to this Directive and their directors and
employees co-operate fully with the authorities responsible
for combating money laundering:

regard to information they receive from a client in order to
be able to represent him in legal proceedings This dero-
gation from the obligations laid down in paragraph 1 shall
not cover any case in which there are grounds
for
suspecting that advice that advice is being sought for the
purpose of facilitating money laundering.

4.
Information supplied to the authorities in accordance
with paragraph 1 may be used only in connection with the
combating of money laundering. However, Member States
may provide that such information may also be used for
other purposes.(cid:146)

6. Article 7 shall be replaced by the following:

(cid:145)Article 7

suspect

transactions which they know or

shall ensure that
the institutions and
Member States
to this Directive refrain from carrying
persons subject
to be
out
related to money laundering until they have apprised the
authorities referred to in Article 6. Those authorities may,
under conditions determined by their national legislation,
give instructions not to execute the operation. Where such
a transaction is suspected of giving rise to money laun-
dering and where to refrain in such manner is impossible
or is likely to frustrate efforts to pursue the beneficiaries of
a suspected money-laundering operation, the institutions
the authorities
concerned shall apprise
and persons
immediately afterwards.(cid:146)

(a) by informing those authorities, on their own initiative,
of any fact which might be an indication of money
laundering,

7.

In Article 8 the words (cid:145)Credit and financial
institutions(cid:146)
shall be replaced by (cid:145)The institutions and persons subject
to this Directive(cid:146).

(b) by furnishing those authorities, at their request, with all
the

necessary
procedures established by the applicable legislation.

accordance with

information,

in

2.
The information referred to in paragraph 1 shall be
forwarded to the authorities responsible for combating
in whose
money laundering of
territory
the
the
information is situated. The person or persons designated
by the institutions and persons in accordance with the
procedures provided for in Article 11 (1) shall normally
forward the information.

institution or person forwarding

the Member State

In the case of

3.
the independent legal professionals
referred to in point 5 of Article 2a, Member States may
designate as the authority referred to in paragraph 1 of
this Article the bar association or appropriate self-regu-
latory body of the profession concerned and in such case
shall
lay down the appropriate forms of cooperation
between them and the other authorities responsible for
combating money laundering.

8. Article 9 shall be replaced by the following:

(cid:145)Article 9

The disclosure in good faith to the authorities responsible
for combating money laundering by an institution or
person subject to this Directive or by an employee or
director of the information referred to in Articles 6 and
7 shall not constitute a breach of any restriction on
disclosure of information imposed by contract or by any
legislative, regulatory or administrative provision, and shall
not involve the institution or person or its directors or
employees in liability of any kind.(cid:146)

9. In Article 10 the words (cid:145)credit or financial

institutions(cid:146)
shall be replaced by (cid:145)the institutions and persons subject
to this Directive(cid:146).

Member States shall not be obliged to apply the obligations
laid down in paragraph 1 to such legal professionals with

10. In Article 11 the words (cid:145)credit and financial institutions(cid:146)
shall be replaced by (cid:145)the institutions and persons subject to
this Directive(cid:146).

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11. Article 12 shall be replaced by the following:

Article 2

(cid:145)Article 12

1. Member States shall ensure that the provisions of this
Directive are extended in whole or in part to professions
and to categories of undertakings, other than the insti-
tutions and persons referred to in Article 2a, which
engage in activities which are particularly likely to be
used for money-laundering purposes.

In case of fraud, or corruption or any illegal activity
2.
damaging or likely to damage the European Communities’
financial
interests, the anti-money laundering authorities
referred to under article 6 and, within its competences,
the Commission, shall collaborate with each other for
the purpose of preventing and detecting money laun-
dering. To this
relevant
they
information on suspicious transactions. Information thus
exchanged shall be covered by rules of professional secrecy.

exchange

shall

end

3. When independent legal professions are concerned,
Member States may exempt bar associations and self-regu-
latory
under
paragraph 2.(cid:146)

from obligations

professional

bodies

the

after

years

adoption of

this Directive

the
Three
Commission shall carry out a particular examination,
in the
context of the report provided for in Article 17 of Directive
91/308/EEC, of aspects relating to the specific treatment of
independent legal professionals, the identification of clients in
non-face to face transactions and possible implications for elec-
tronic commerce.

Article 3

1. Member States shall bring into force the laws, regulations
and administrative decisions necessary to comply with this
Directive by 31 December 2001 at the latest.

2. Where Member States adopt these measures, they shall
contain a reference to this Directive or shall be accompanied
by such reference on the occasion of their official publication.
The methods of making such a reference shall be laid down by
the Member States.

3. Member States shall communicate to the Commission the
text of the main provisions of national law which they adopt in
the field governed by this Directive.

Article 4

This Directive is addressed to the Member States.

ANNEX

IDENTIFICATION OF CUSTOMERS (PHYSICAL PERSONS) BY CREDIT AND FINANCIAL INSTITUTIONS IN
NON FACE-TO-FACE FINANCIAL OPERATIONS

Within the framework of the Directive, the following principles should apply to the identification procedures for non
face-to-face financial operations:

(i) The procedures should ensure appropriate identification of the customer.

(ii) The procedures may apply provided there are no reasonable grounds to believe that face-to-face contact is being
avoided in order to conceal the true identity of the customer and there is no suspicion of money laundering.

(iii) The procedures should not apply to operations involving the use of cash.

(iv) The internal control procedures stipulated in Article 11(1) of the Directive should take specific account of non-face-

to-face operations.

(v) When the counterpart of the institution undertaking the operation ((cid:145)contracting institution(cid:146)) is a customer, identi-

fication may be carried out by the following procedures:

(a) Using the contracting institution’s branch or representative office which is nearest the customer in order to

carry out a face-to-face identification

(b) If the identification is carried out without a face-to-face contact with the customer:

(cid:151) A copy of the customer’s official

identification document or the official number of the identification
document should be required. Special attention should be paid to the verification of the customer’s
address when this is indicated on the identification document (e.g. documents concerning the operation
to be sent by registered mail with advice of receipt to the customer’s address).

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(cid:151) The first payment of the operation should be carried out through an account opened in the customer’s
name with a credit institution located in the European Union or in the European Economic Area. States
may allow payments carried out through reputable credit institutions established in third countries which
apply equivalent anti money laundering standards.

(cid:151) The contracting institution should carefully verify that the identities of the holder of the account through
which the payment is made and of the customer, as indicated in the identification document (or ascertained
from the identification number) are one and the same. In the case of doubt in this regard, the contracting
institution should contact the credit institution with which the account is opened in order to confirm the
identity of the account holder. If the doubt still remains a certificate from the credit institution should be
required attesting to the identity of the account holder and confirming that the identification was properly
carried out and that the particulars have been registered according to the Directive.

(c) In the case of certain insurance operations, identification requirements may be waived when the payment is (cid:145)to
be debited from an account opened in the customer’s name with a credit institution subject to this Directive(cid:146)
(Article 3(8)).

(vi) When the counterpart of the contracting institution is another institution acting on behalf of a customer:

(a) If the counterpart is located in the European Union or in the European Economic Area, identification of the

customer by the contracting institution is not required. (Article 3(7) of the Directive).

(b) If the counterpart is located outside the European Union and the European Economic Area, the institution
should check the identity of its counterpart (unless it is well known), by consulting a reliable financial directory.
In the case of doubt in this regard, the institution should seek confirmation of its counterpart’s identity from
the third country supervisory authorities. The institution should also take (cid:145)reasonable measures to obtain
(Article 3(5) of the
information(cid:146) on the customer of
the
Directive). These (cid:145)reasonable measures(cid:146) could go from simply requesting the name and address of
customer, when the country applies equivalent
to requesting a counterpart’s
certificate stating that the customer’s identity has been properly verified and registered, when in the country
in question the identification requirements are not equivalent.

its counterpart (beneficial owner of the operation)

identification requirements,

(vii) The above-mentioned procedures do not preclude the use of other ones which, in the opinion of the competent

authorities, may provide equivalent safety for the identification in non-face-to-face financial operations.