Opinion of the Economic and Social Committee on the '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: 2000-01-26
Institutions: European Economic and Social Committee
Subjects: code of conduct, fight against crime, financial institution, financial legislation, law of banking, money laundering

C 75/22

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Official Journal of the European Communities

15.3.2000

Opinion of the Economic and Social Committee on the ‘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 75/10)

On 5 October 1999 the Council decided to consult the Economic and Social Committee, under Article
262 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was
responsible for preparing the Committee’s work on the subject, adopted its opinion on 10 January 2000.
The rapporteur was Mr Pelletier.

At its 369th plenary session (meeting of 26 January 2000), the Economic and Social Committee adopted
the following opinion by 81 votes to 11, with 10 abstentions.

1.

Introduction

1.1.
In its opinion of 19 September 1990 on the First
Directive on prevention of the use of the financial system for
the purpose of money laundering (1), the ESC fully agreed with
stepping up the repression of serious criminal activities
condemned by the international community, and more par-
ticularly those connected with drug trafficking.

Several remarks made in this opinion were finally

1.2.
adopted.

1.3.
The ESC also approved the setting-up of machinery
based on the use of information resulting from compulsory
transit through banking channels and financial institutions in
general.

1.4.
Since 1991, when the First Directive was implemented,
the Council, the Commission and the European Parliament
have constantly called for stiffer action against organised
crime and an overall action programme to bring this about,
containing concrete recommendations (see in particular the
resolutions of the Dublin Council of December 1996 and the
action programme of the Amsterdam Council of June 1997).

recently,

1.5. Most
the Tampere Council of 15 and
16 October 1999 devoted a considerable part of its recommen-
dations to combating crime on an EU scale.

1.6.
In addition to these recommendations aimed at
strengthening co-operation between the authorities in the
Member States, the Council has devoted a chapter to specific
action to combat money laundering, recommending that the
proposed amendment to the directive which is the subject of
this opinion be adopted as soon as possible.

1.7.
The Commission recently published a very important
communication on the 2000-2004 Action Plan to combat
drugs (2), which will be the subject of an ESC opinion.

2. General comments

The sheer scale of money laundering upsets the

2.1.
workings of the world financial system.

2.2.
The origins of the funds concerned are very varied.
Some cases are spectacular, such as the diversion of inter-
national aid from the IMF to countries such as Russia, but it is
more difficult to detect when it comes from complex financial
schemes set up by legal specialists having close links with
offshore havens that are free from the disciplines and controls
that the European Union and some of the western world have
been trying to put into place over the past decade.

2.3.
The strengthening of the means used since the 1991
Directive to combat money laundering is undoubtedly spec-
tacular.

2.4.
Nevertheless, it is still necessary to compare both the
concrete action and declared intentions of the EU in this area
impact on the volume of traffic and the
with the actual
estimated revenue that has resulted from it.

In the ESC opinion of 1990, available information set
2.5.
the amount of drug traffic at between USD 300 and 500 bn.
Instead of declining, this traffic is now said to be running at
8 % of total world trade, according to UN statistics and
information provided by the Financial Action Task Force on
Money Laundering (FATF). Money laundering, for its part, is
said to represent between 2 % and 5 % of world GDP each
year, or more than USD 1 000 bn.

(1) OJ C 332, 31.12.1990, p. 26.

(2) COM(1999) 239 final.

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2.6.
In targeting the laundering of money linked with drug
trafficking, the action taken by the EU and the Member States
has lost sight of the absolute need to combat the problem at
its source, i.e. on the ground, the selling of drugs, when the
whole sequence of laundering operations is based on the retail
selling of drugs to the unfortunate addicts.

The FATF’s work here to establish criteria to identify
2.12.
countries and jurisdictions
that can be considered as
‘non-co-operative’ in the fight against money laundering is a
key part of the action plan. A list of these countries is being
prepared by the FATF, with a view to publication in mid-2000.

2.7.
The fight against money laundering cannot be separ-
ated from the fight against those who collect funds, whether it
be within the framework of organised crime, which implies
the involvement of complex structures, or in the simpler and
more diffuse form of ‘dealers’ collecting a multitude of small
sums representing the price of drug doses sold to the
unfortunate addicts, the accumulation of which is the origin
of the laundering process (1).

2.8. While recognising that police and legal repression is
above all a matter for the Member States and does not fall
within the scope of the present proposal for a directive, the
ESC regrets that the directive does not stress the obvious link
between police and legal repression of trafficking and that of
the laundering of the proceeds from it. This is absolutely
essential. Despite their efforts, financial intermediaries cannot
take the place of the entire police and legal system; that is not
their role.

2.9.
The European Council in Tampere in October 1999
seemed to be moving in this direction when it called for ‘the
establishment of a European Police Chiefs operational Task
Force to exchange, in co-operation with Europol, experience,
best practices and information on current trends in cross-
border crime and contribute to the planning of operative
actions’ (2).

2.10.
The ESC opinion of 1990 noted that ‘it is essential
that the present proposal be backed up by the harmonisation of
laws and practices designed to prevent drug consumption’ (3).

2.11.
The ESC fully shares the Commission’s concern to
see the FATF’s efforts embracing the largest possible number
of countries in order to create a worldwide anti-money
laundering network.

(1) See the Commission communication on a European Union Action
Plan (2000-2004) to combat drugs and the ESC opinion — OJ
C 51, 23.2.2000.

(2) Conclusions of

the European Council of Tampere, 15 and

16 October 1999.

(3) See point 1.5 of the opinion on the Proposal for a Council
Directive on prevention of the use of the financial system for the
purpose of money laundering OJ C 332, 31.12.1990, p. 86.

2.13.
The European Council in Tampere stressed the need
to conclude agreements with offshore centres in non-EU
countries in order to ensure effective and transparent co-opera-
tion, in line with the FATF’s recommendations.

2.14.
The ESC is convinced that the fight against money
laundering must be tackled on a worldwide basis and regrets
that the Council and the Commission are not playing a greater
part in concerted action with the United Nations and the
International Monetary Fund (IMF).

2.15.
At its last annual meeting in September 1999, the
IMF once again reaffirmed its determination to fight organised
crime, drug trafficking and money laundering. The ESC feels
that there must be better consultation between the EU and the
IMF, because the latter is the only institution able to take
measures comparable to those of the EU and apply them on
an international scale.

2.16.
The ESC approves the plan to impose a very high
standard of constraints on the EU, exceeding the updated
40 FATF recommendations, by involving certain professions
more actively in the fight against money laundering. One must
note that the financial professions concerned by the 1991
Directive are under an obligation to provide their staff with a
code of good conduct and a detailed guide to the directive.
There is little doubt that the new professions concerned will
be just as concerned to explain things.

The ESC feels that the countries seeking EU member-
2.17.
ship must be obliged to accept the incorporation into the
acquis communautaire of anti-money laundering rules.
It
would not be enough for the directive to be simply formally
incorporated into the legislation of the candidate countries as
the acquis communautaire unless concrete measures were
taken to ensure it was applied (e.g. beefing up the police and
judiciary, joining the FATF, Interpol and Tracfin).

2.18.
The strengthening of technical assistance in this area
from the Commission to the candidate countries should be an
essential part of partnership agreements.

2.19.
The ESC would particularly draw the Commission’s
attention to the sensitive period of the changeover to the euro,
which may well be favourable to cash transactions resulting
from money laundering. Although a limit of 15 000 euros has
been fixed for declaring sums, it will be very easy to get around

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this rule by submitting requests in several
institutions for
conversions below the threshold. In any case, it will be difficult
to distinguish between hoarded and laundered notes.

5. The prohibition of money laundering

2.20.
Efficient feedback from the investigating authorities
to the banks should improve the motivation of bank staff and
the quality of reports. It should also enable banks to assess
whether their training is adequate. And finally, efficient
feedback should prevent banks from carrying out laundering
transactions inadvertently. All
in all, an efficient feedback
system should lead to better results in the fight against money
laundering.

2.21.
Of course, the national authorities cannot breach the
secrecy of investigation proceedings. Efficient feedback should
at least include general information providing statistical data.
Ideally,
it should also include some specific information
provided on a confidential basis to the reporting institution:
for instance, an acknowledgement of receipt of the disclosure
of a suspicious transaction, information on the decision taken
by the competent authorities subject to compliance with the
secrecy of
investigation proceedings, and a copy of any
judgement referring to a specific case.

3.

Implementation of the 1991 Directive

3.1.
The ESC has noted that the Commission, in its two
reports to the Council and the European Parliament (1), believes
that the 1991 Directive has been well implemented by the
Member States and that the financial sector, and in particular
the banks, have made a real effort to help prevent the entry of
criminal money into the financial system.

Information gathered from FATF representatives and

3.2.
the IMF’s report confirms the Commission’s remark.

3.3.
As controls in the banking sector have been tightened,
launderers have sought other means to disguise the illegal
origin of their funds; this represents a major challenge for the
whole international community, and not just the EU.

4. The Action Plan to combat organised crime

4.1.
The explanatory memorandum to the draft directive
shows that the Council backs up the Commission’s Action
Plan to the hilt.

4.2.
The prohibition of money laundering has now taken a
big step forward since money laundering has been made a
criminal offence in all the Member States.

(1) COM(95) 54 final and COM(1998) 401 final.

5.1.
Following the recommendation of the FATF in 1996,
the Council agreed on 3 December 1998 to the implemen-
tation of Article 6 of the Strasbourg Convention, which deals
with laundering offences and plans to criminalise the proceeds
of all serious offences carrying a maximum sentence of more
than one year or a minimum sentence of more than six
months. This is a big step forward in the repression of
drugs-based crime.

6. The coverage of financial sector activities

6.1.
Following the recommendations of the European Par-
liament, the draft directive tightens up the definition of the
financial institutions concerned by including exchange offices,
money remittance offices and investment firms as defined in
the Investment Services Directive (ISD).

7. The coverage of activities outside the financial sector

7.1.
The European Council of December 1996 in Dublin
and the annual reports of the FATF concluded that laundering
increasingly uses non-banking financial institutions and non-fi-
nancial firms, because banks abide more strictly by anti-laun-
dering measures, so the Commission is proposing, with the
agreement of the European Parliament, to extend the scope of
the directive to cover occupations and types of enterprise
which can be considered to be involved in money launder-
ing-related activities.

7.2.
In its resolution of March 1999 the European Parlia-
ment proposed extending the scope of the directive consider-
ably to include estate agents, art dealers, auctioneers, casinos,
exchange offices, transporters of funds, solicitors, accountants,
lawyers, tax advisers and auditors.

7.3.
The various authorities that have had to deal with
laundering practices, such as the UN Office for Drug Control
and the High Level Group on Organised Crime set up by the
Dublin Council, have all noted the trend towards using
specialists, especially in law, to set up complex schemes
involving shell companies, trust funds etc. to mask the origin
and ownership of tainted funds (2).

(2) Cf.

‘Drug money in a changing world: Economic reform and
criminal finance’ — UN International drug control programme
1996 — which shows the key role of ‘international business
companies’, especially in the Caribbean, used by criminal organis-
ations because of the near-impossibility of unravelling the origin
of the huge amount of funds they manage.

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7.4.
The Commission has included most of the activities
mentioned by the European Parliament, though it has strong
reservations about the inclusion of art dealers and auctioneers
given the problem of defining the exact coverage and definition
of such activities and the problems of monitoring the appli-
cation of any rules, which — it should be remembered —
would make it obligatory to reveal clients’ names and pass on
any suspicions about money laundering to the relevant
authorities in the Member States.

7.5.
The Commission also feels that any extension to art
dealers would also raise the question of applying the same
obligations to any dealer in high value items, including, for
example, luxury car dealers, jewellery shops or stamp and coin
dealers.

7.6.
The draft directive has adopted a prudent attitude
regarding lawyers, bearing in mind their professional duty of
discretion and confidentiality. Lawyers would be exempted
from any requirement in any situation connected with the
representation or defence of a client in legal proceedings.

7.7.
Outside these cases, Member States would be given the
option of allowing lawyers to communicate their suspicions
not to the normal anti-money laundering authorities but to
their bar association or equivalent professional body. It should
be noted that in some EU countries lawyers are authorised to
carry out financial transactions and hold funds. Such activities
complicate application of the directive to the legal profession.

7.8.
Appropriate sanctions should be introduced where a
report to the bar association should have been made but was
not made.

7.9.
The scope of the directive would only be extended to
cover notaries and other independent legal professionals in
respect of financial transactions or activities on behalf of
companies where there was a high risk of money laundering.

8.

Identification of customers in non-face-to-face trans-
actions

8.1.
The draft directive lays down the same recommen-
dations for identifying customers in cases of non-face-to-face
transactions. There is a grey area regarding how the directive
is to apply to Internet transactions.

In its action programme on organised crime,

8.2.
the
European Council of Amsterdam stressed that technological
innovations such as the Internet and e-banking were highly
efficient tools for crime, fraud and corruption. It emphasised
that the means for preventing and stamping out such criminal
activities ‘were almost always lagging behind’ (1).

8.3.
Electronic funds transfer (by the Internet) is instan-
taneous and — with the help of a few simple techniques that
anyone can do — easy to hide without leaving any trace.
Moving funds through a non-co-operative country or using a
shell company is enough to paralyse controls in the EU.

Consequently, it is the actors on the financial markets
8.4.
— rather than the transfers — who must be checked. The ESC
stressed this need in its opinion of 27 January 1999 (2) on the
legislation applicable to electronic money institutions, which
highlighted the danger of allowing on to the market electronic
money institutions who were subject to extremely lax regu-
lations.

8.5.
The ESC shares the view of the Commission that banks
must have adequate procedures to identify customers in
non-face-to-face financial transactions. However, it believes
that the annex to the proposed directive is not the appropriate
tool to achieve this purpose.

8.6.
The absence of face-to-face contact between the bank
and the customer indeed does not prevent a proper identifi-
cation by means of supporting evidence as it
is already
stipulated in Article 3 of the 1991 Directive and effectively
applied by banks. Among other things, this identification can
be entrusted to a proxyholder or a trustworthy third party (for
example, another credit or financial institution, a notary or an
embassy) or can be made through registered mail.

8.7.
The electronic signature should also be considered as
supporting evidence, especially since the recent adoption
of the Directive on a Common Framework for Electronic
the development of non-
Signatures.
face-to-face financial transactions does not justify new rules of
identification.

In the ESC’s view,

8.8.
On the contrary, flexibility is absolutely necessary in
order to encompass rapid developments in distance banking.
This flexibility is guaranteed by the broad wording of ‘support-
ing evidence’. Banks should only be required to have in
place adequate supporting evidence of identification of their
customers
in non-face-to-face financial operations. The
method of identification should be left to them. In general, the
annex as such gives some good examples of possible pro-
cedures for identifying customers in non-face-to-face financial
operations, but it would be quickly out-of-date as and when
new ways of both distance banking and identification are
developed.

8.9.
Should the decision be taken to maintain the annex,
the ESC urges the European authorities to make clear that the
annex has a non-binding character and only serves as a
guideline offering non-exhaustive solutions for the identifi-
cation of customers in non-face-to-face financial transactions.
Spelling out the non-binding character of the annex would
allow the necessary flexibility for such procedures of identifi-
cation.

(1) Introduction to the action programme on organised crime

— Amsterdam, 28 April 1997.

(2) OJ C 101, 12.4.1999, p. 6.

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9. Exchange of information

9.1.
The Commission provides for an exchange of infor-
mation concerning money laundering by proposing such an
exchange in cases of illegal activities related to the European
Communities’ financial interests (this extension is criticised in
the article-by-article assessment).

10. Need for a regular review of the Union’s action in

this area

The Commission intends to continue making regular
10.1.
reports on the implementation of the directive only to the
Council and the European Parliament. The ESC feels that it has
particular expertise on such matters and deplores the fact that
it is not to be consulted on the extension of a directive
submitted to it for an opinion.

11. Comments on the individual articles in the proposed

directive

— Article 1 (replacing Article 1 in Directive 91/308)

1) The extension of the scope of the directive to cover
exchange offices, transporters of funds, insurance firms
(for activities covered by the directive) and investment
firms does not give rise to any objection to the extent
that it is a supplement to the definitions in the basic
directive 77/780/EEC.

5) The concept of damaging the European Communities’
financial interests is likely to cover evasion of VAT or
fraud relating to refunds provided for under the CAP,
use of the structural funds or any of the many subsidies
handed out by the EU.

6) This type of fraud is also the province of specific
institutions (fiscal monitoring by the states and special-
ist EU bodies) (1).

7) Article 280 of the Amsterdam Treaty offers a legal
basis for repressing fraud that jeopardises the financial
interests of the European Union. It allows the Council,
following a proposal from the Commission, to ‘adopt
the necessary measures ... with a view to affording
effective and equivalent protection in the Member
States’.

— Article 2a

1) The ESC doubts the advisability of excluding art dealers
and auctioneers from the list. The goods dealt in by
these middlemen may represent considerable sums,
often paid in cash and without any real check on the
identity of the buyer. It is virtually certain that auctions
in particular are used as a discreet and easy way to
launder money.

Therefore, clients should be identified when cash
transactions exceed 15 000 euros.

2) The inclusion of accountants in paragraph (3) of
the list is too wide-ranging, since it could concern
accountants working as employees of a firm, including
a bank. It would be more justifiable to adopt the term
‘auditor’.

2)

It is necessary to stress the importance of covering
branches located in the EU of financial institutions
with their registered offices inside or outside the EU.

— Article 3(2), second paragraph

3) The ESC feels that the directive should also apply to
branches or subsidiaries of EU financial institutions
located in non-EU countries, especially in countries
that have not adopted equivalent supervisory and
anti-laundering measures (offshore territories, tax hav-
ens, etc.).

1) The second paragraph of Article 3(2) refers to an annex
when defining the exact procedures for identifying
clients in non-face-to-face financial operations.

2) Some of the obligations set out in this annex seem
cumbersome or difficult to fulfil in practice, such as:

4) Paragraph (E) — definition of ‘criminal activity’

The extension of the definition to cover ‘fraud, corruption
or any other illegal activity damaging or likely to damage
the European Communities’ financial interests’ may push
financial
institutions into declaring unreasonable sus-
picions going far beyond the initial aim of combating drug
trafficking and organised crime. It is to be feared that the
staff of such institutions may systematically declare any
transaction that is simply doubtful or seems abnormal, so
as not to leave themselves open to any legal liability.

— the obligation to carry out the first payment of the
operation through an account opened in the
customer’s name with a credit institution located
in the European Union or in the European Econ-
omic Area (point v) b) or in a country covered by
the directive;

(1) See the Commission’s 1998-1999 work programme on the fight
against fraud COM(1998) 278 final and the ESC opinion (R/CES
748/99 rev. 2) currently being prepared on the same subject.

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— the various checks to be carried out when the
counterpart is a credit institution located outside
the European Union and the European Economic
Area (point vi) b).

12.4.
As regards the area of declaration, the ESC shares the
Commission’s view that such an extension may go too far and
‘complicate the active involvement and commitment’ of the
professions concerned. But the area of criminalisation is not
the same as the area of declaration.

3) More generally, the Commission intervenes directly in
the actual organisation of monitoring procedures by
financial institutions, which is unnecessary and unjusti-
fied interference. Generally speaking, the text of the
draft directive and its annex does not set out clearly
the means to be used for identifying transactions
carried out on the Internet.

— Article 7

1) The obligation to give notice of suspect transactions is
the very basis of the draft directive. It should refer to
objective criteria that give guidance on the range of
transactions which give rise to reporting obligations
although, because of the nature of the suspicious
activities, this cannot be definitive.

— Article 12(2)

12.5.
There is no definition of a ‘serious offence’. Each state
is free to draw up its own list. The ESC has noted with interest
that the monitoring authorities (FATF, TRACFIN in France)
prefer the concept of ‘organised crime’, which is more precise
than that adopted by the Commission.

12.6.
There is a real risk that the bodies responsible for
preventing and combating laundering, such as TRACFIN, will
be swamped — and therefore partially neutralised — by too
many reports of suspicions. With experience, and provided
financial
institutions are given adequate feed-back on the
effectiveness of their reports, the number of suspicious actions
reported may decline. However, adequate resources must be
provided by the appropriate authorities to ensure that fol-
low-up actions are speedy and effective.

1)

2)

In the first sentence in this paragraph delete the
words ‘damaging or likely to damage the European
Communities’ financial interests’ (see remarks concern-
ing paragraphs 4 to 6 of the comments on Article 1).

12.7.
Action limited to the EU would be ineffective and
might even lead to distortions of competition that would
benefit financial institutions outside the EU, or even jeopardise
the free movement of capital that is one of the building-blocks
of Europe.

It seems to follow from the new definition of a ‘credit
institution’ (Article 1(A)) and from Recital 8 that a
suspicious transaction of money laundering has only
to be reported in the country in which the reporting
office (head office, dependent branch or subsidiary of
a credit institution) is situated. The ESC welcomes this
rule, but recommends it be clarified in the core of the
directive by adding a paragraph in Article 6 to lift any
ambiguity.

The ESC regrets that the draft directive — which is
12.8.
basically aimed at beefing up Europe’s capacity to fight money
laundering — does not devote enough space to necessary
international co-operation.

12.9.
The aim should be to extend European anti-launder-
ing machinery as much as possible to include countries that
are notorious for their involvement in such criminal activity.

12. Conclusions

Available information from the FATF in particular,
12.1.
but also the banking sector, shows that the 1991 Directive has
achieved its objectives overall as regards neutralising the use
of financial channels for money laundering purposes.

financial

institutions:

International

12.10.
the United
Nations, the IMF, the World Bank, the EIB and the EBRD,
should draw up a charter or a code of good conduct with the
European Commission including the basic recommendations
of the FATF; application of these recommendations would be
one of the conditions for granting any financial aid (1).

12.2.
The amendments to the 1991 Directive fortunately
flesh out the original machinery by bringing into the battle
various actors likely to be involved in laundering.

12.11.
Offshore centres — which lie at the heart of the
trafficking and are the weak link in any repressive action —
that did not abide by the code of good conduct or opposed

12.3.
It is understandable that the successful application of
the machinery provided for in the 1991 Directive is pushing
the European Parliament, the Council and the Commission to
extend the area of repression to include not only non-drugs-rel-
ated organised crime but also all serious offences.

(1) On 10 June 1998 the United Nations General Assembly adopted
a position and an action plan against laundering that very largely
met the European Union’s objectives.

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the openness of transactions (meaning especially the lifting of
banking secrecy) should be cut off from international funds
transfer systems such as SWIFT. The preparation of a list of
non-co-operative countries by the FATF should enable this
procedure to be applied rapidly.

As the IMF is the only body able to impose such
12.12.
discipline, the ESC recommends that the Council and the
Commission contact the IMF with a view to incorporating into

its statutes effective machinery for imposing sanctions against
countries and financial institutions that do not co-operate in
the fight against money laundering.

12.13.
The application of sanctions should be entrusted to
the international authorities responsible for regulating the
financial and banking system: the BIS and the central banks.

12.14.
following up implementation of the directive.

The ESC repeats its wish to be closely involved in

Brussels, 26 January 2000.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

APPENDIX

to the Opinion of the Economic and Social Committee

(in accordance with Rules 47(3) of the Rules of Procedure)

The following amendments were rejected but received more than 25 % of the votes cast:

Paragraph 11, point 4):

Delete the present wording and insert:

‘Paragraph (E) — definition of “criminal activity”

The extension of the definition to include ’fraud, corruption, or any other illegal activity damaging or likely to
damage the European Communities’ financial interests’ is a logical step but needs to recognise that the financial
institutions and other agencies making reports may not be able to go further than to identify unusual transactions
which raise a prima facie suspicion. It is no part of the work of the financial institutions to act as investigating
authorities. Since there is a prospect of a large number of reports, in the early stages at least, a code of practice should
be agreed with the financial institutions to refine the focus of such reports. Also, the national authorities should
develop a form of feed-back to the financial institutions on the outcome of their reports so that their expertise in
assisting the fight against money laundering for criminal purposes can be further developed.’

Result of the vote

For: 30, against: 43, abstentions: 10.

Paragraph 12, point 16:

Add the following point:

‘12.16. The Committee notes the keener emphasis in the Council Directive that money laundering is driven by drug
trafficking. This fails, in so doing, to recognise that laundering activities from criminal and from terrorist related
activities, and from cross border smuggling prompted by differential taxation levels, is for many regions, more
impactive on their economies than drug trafficking and these features deserve increased exposure in the Directive.’

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Reason

The focus on drug trafficking as the leading evil that drives this element of the black economy creates an impression
that the Council document over relies on the emotive abhorrence of the destructive outcomes of drug use, and allows
‘ordinary decent criminal’ money laundering activities to escape lightly. The inclusion of concern for exploitation of
differential taxation will increase post enlargement, when in all probably a majority of Members will be outside
Euroland.

Result of the vote

For: 36, against: 49, abstentions: 10.

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation (EC)
on coordination of social security systems’ (1)

(2000/C 75/11)

On 9 September 1999 the Council decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the
Committee’s work on the subject, adopted its opinion on 16 December 1999. The rapporteur was
Mr Rodrı´guez Garcı´a Caro.

At its 369th plenary session (meeting of 27 January 2000), the Economic and Social Committee adopted
the following opinion by 78 votes to 5 with 20 abstentions.

1.

Introduction

In June 1971, the European Economic Community
1.1.
adopted Regulation (EEC) No 1408/71 on the application of
social security schemes to employed persons, to self-employed
persons, and to members of their families moving within the
Community.

At its 59th plenary session of

1.2.
January 1967, the
Economic and Social Committee adopted its opinion (2) on the
regulation, making a number of comments on the text
submitted to it.

Since they originally came into force, both the regu-
1.3.
lation in question and Regulation (EEC) No 574/72 fixing the
procedure for implementing it have been amended several
times to bring them into line with changes in national
legislation, bilateral agreements between Member States, and
with successive EU enlargements since 1971.

In 1992 the Edinburgh European Council (3) recog-
1.4.
nized the need to carry out a general overhaul of legislation in
order to simplify the coordination rules.

Point 3.1.6 of the Communication from the Commission ‘An
Action Plan for free movement of workers’ (4), presented in
1997, contains an undertaking to submit a proposal to reform
and simplify Regulation (EEC) No 1408/71, as a major and
necessary part of the measures required to remove the obstacles
to free movement and mobility within the European Union.

In its opinion of 28 May 1998 on the communi-
1.5.
cation (5), the Committee welcomed the reform of Regulation
(EEC) No 1408/71, agreeing to simplified and improved
coordination of EU social security systems.

(1) OJ C 38, 12.2.1999, p. 11.
(2) OJ C 64, 5.4.1967.

(3) Edinburgh European Council, 11 and 12.12.1992. Presidency

Conclusions (SN 456/92).

(4) COM(97) 586 final.
(5) OJ C 235, 27.7.1998, p. 82.