Communication from the Commission to the Council and the European Parliament on the Prevention of and the Fight against Terrorist Financing through measures to improve the exchange of information, to strengthen transparency and enhance the traceability of financial transactions
Date: 2004-10-21
Institutions: European Commission
Subjects: EU police cooperation, banking supervision, exchange of information, financial legislation, financing, terrorism

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 20.10.2004 
COM(2004) 700 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

on the Prevention of and the Fight against Terrorist Financing 

through measures to improve the exchange of information, to strengthen transparency 
and enhance the traceability of financial transactions 

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TABLE OF CONTENTS 

1. 

2. 

3. 

3.1. 

3.2. 

3.3. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

5. 

5.1. 

5.2. 

6. 

6.1. 

6.2. 

6.3. 

6.4. 

7. 

INTRODUCTION ....................................................................................................... 3 

OVERVIEW OF THE FIGHT AGAINST TERRORIST FINANCING .................... 3 

TERRORIST FINANCING AND THE EXCHANGE AND ANALYSIS OF 
INFORMATION.......................................................................................................... 4 

Information exchange among competent authorities ................................................... 4 

Information exchange between competent authorities and the private sector ............. 5 

Outreach to the Private Sector...................................................................................... 6 

TERRORIST FINANCING AND THE TRACEABILITY OF FINANCIAL 
TRANSACTIONS ....................................................................................................... 6 

Financial Investigation................................................................................................. 6 

Funds Transfers............................................................................................................ 6 

Transactions outside the formal financial system ........................................................ 7 

Customer Identification................................................................................................ 7 

TERRORIST FINANCING AND TRANSPARENCY .............................................. 7 

Legal Entities ............................................................................................................... 7 

Non-Profit/Charitable Sector ....................................................................................... 8 

TERRORIST FINANCING AND HORIZONTAL MEASURES .............................. 8 

Asset Freezing.............................................................................................................. 8 

Effective and Targeted Training .................................................................................. 9 

Security Research......................................................................................................... 9 

External Action .......................................................................................................... 10 

CONCLUSIONS........................................................................................................ 10 

ANNEX 1................................................................................................................................. 12 

ANNEX 2................................................................................................................................. 14 

ANNEX 3................................................................................................................................. 19 

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1. 

INTRODUCTION 

At  its  extraordinary  meeting  of  21st  September  2001,  the  European  Council  called  upon  the 
Council to take all necessary measures to combat the financing of terrorism. In response to the 
11th March 2004 terrorist attacks in Madrid, the European Council adopted the Declaration on 
Combating  Terrorism1.  The  Declaration  committed  the  Union  and  its  members  “…to  do 
everything within their power to combat all forms of terrorism…” and identified a number of 
Strategic Objectives to help achieve this goal. These include a requirement on the Union and 
its members to take all necessary measures “to reduce the access of terrorists to financial and 
other economic resources”. The revised ‘EU Plan of Action on Combating Terrorism’2, sets 
out detailed proposals for developing the fight against terrorist financing.  

This  Communication  considers  what  further  measures  may  be  needed  to  tackle  terrorist 
financing most effectively. Based on considerations set out in this Communication, Annex 1 
constitutes an indication of potential further measures in the fight against terrorism financing 
to be further examined in terms of feasibility and cost/benefit. Annex 2 is a summary of EU 
measures relevant to the fight against terrorist financing adopted since October 2001. Annex 3 
lists relevant measures which are currently under discussion.  

2. 

OVERVIEW OF THE FIGHT AGAINST TERRORIST FINANCING 

Terrorist  financing  covers  two  distinct  aspects  –  the  financing  of  terrorist  attacks  and  of 
terrorist  networks.  The  Madrid  bombings  are  estimated  to  have  cost  a  mere  €8.000.  The 
indications are that transactions to finance terrorist networks, as opposed to a specific attack, 
generally  also  have  a  small  monetary  value.  Since  such  sums  may  be  small  and  unlikely  in 
themselves  to  generate  suspicion  as  they  move  through  the  financial  system,  detection  of 
financial transactions for the purpose of terrorist financing is difficult.  

This  does  not  mean  that  financial  institutions  should  not  attempt  to  apply  anti-money 
laundering  techniques  to  the  detection  of  terrorist  financing.  It  does,  however,  suggest  that 
additional  methods,  centred  on  the  major  risks  identified  by  the  security  services,  must  be 
developed and used to undermine the logistics and operations of terrorist networks, adopting a 
broader approach than purely the drying up of financial flows. Above all, we need to ensure 
that terrorist financiers must operate in a hostile environment where all options are high risk. 

Important EU-level progress has been made in the fight against terrorism and its financing3. If 
these  are  to  be  effective  in  the  fight  against  terrorist  financing,  they  need  to  be  duly 
implemented and applied by the Member States – a number of important gaps remain4.  

Three  principal  areas  can  be  identified  as  relevant  to  the  fight  against  terrorist  financing: 
improved  co-operation  in  the  exchange  of  information,  enhanced  traceability  of  financial 
transactions  and  greater  transparency  of  legal  entities.  By  addressing  these  effectively, 

1 
2 
3 
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Brussels, 29th March 2004, 7906/04 
10586/04 of 15 June 2004 
See Annex 1 
For example, the Commission Report of June 2004 on Member States’ compliance with the Framework 
Decision  on  combating 
level 
(COM(2004)409). 

indicates  a  number  of  shortcomings  at  national 

terrorism 

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significant further benefits are achievable in the preventive disruption of terrorist activity, the 
reduction  of  financial  flows  to  terrorist  groups  and  enhanced  understanding  of  terrorist 
networks. 

The right balance must be found between preventive/disruptive measures on the one hand and 
civil  liberties  on  the  other.  For  example,  care  must  be  taken  to  ensure  that  nationality  or 
religious  affiliation  does  not  become  a  ground  for  placing  a  person  under  suspicion. 
Appropriate  intelligence  or  other  objective  grounds  to  suspect  that  a  person  may  have 
involvement in terrorist activities should be the driving force in all preventive and repressive 
action.  

Data protection issues are central to much of the debate surrounding how to improve the fight 
against terrorist financing. Any exemptions from the Community Data Protection Directives5, 
such as the prevention and detection of crime, have to be necessary, relevant and foreseen by 
law.  To  strengthen  police  and  judicial  cooperation,  while  at  the  same  time  ensuring  robust 
data  protection,  a  coherent  legal  framework  at  the  level  of  the  Union  based  on  common 
standards  regarding  the  processing  of  personal  data  is  envisaged.  Such  a  policy  shall 
encompass appropriate safeguards so that processing of personal data by intelligence, police, 
customs and judicial authorities observes the principles of personal data protection enshrined 
in Article 8 of the Charter of Fundamental Rights.  

3. 

TERRORIST  FINANCING  AND  THE  EXCHANGE  AND  ANALYSIS  OF 
INFORMATION 

3.1. 

Information exchange among competent authorities 

Information  exchange  between  relevant  bodies  at  national  level  is  as  important  as  such 
exchange  at  EU  and  international  levels.  In  both  cases  there  is  a  need  to  implement  co-
operation  and  exchange  structures  encompassing  fiscal  authorities,  financial  oversight 
bodies,  the  Justice  Department,  intelligence  community,  law  enforcement  authorities  and 
authorities  in  charge  of  administrative  freezing6.  Such  a  network  could  be  the  forum  for 
structured exchange of information on persons under investigation by participating bodies. 

The  Communication  on  improving  access  to  information  by  law  enforcement  authorities  of 
June  2004  has  proposed  action  to  enhance  the  exchange  of  information  between  relevant 
actors7.  Its  aim  is  to  establish  a  European  ‘intelligence-led’  law  enforcement  capability 
whereby  available  information  can  be  used  by  the  appropriate  authorities  in  their  fight 
against organised crime and terrorism. 

The  Communication  8  on  the  fight  against  terrorism  contains  in  Annex  a  Proposal  for  a 
Council  Decision  enabling  the  services  involved  as  well  as  Europol  and  Eurojust  to  have 
access  to  the  most  complete  and  up-to-date  information.  The  obligation  to  exchange 

5 

6 

7 
8 

Notably  the  general  Data  Protection  Directive  95/46/EC  and  Directive  2002/58/EC  on  privacy  and 
electronic communications.  
The  Netherlands’  FEC  is  an  example  of  such  collaboration  and  is  a  network  comprising  the  General 
Intelligence and Security Services, the tax services, fiscal and economic law enforcement agency. 
Doc COM(2004)429 of 16.6.2004. 
European Commission Communication on measures to be taken to combat terrorism and other forms of 
serious crime, in particular to improve exchanges of information of 29.03.2004. COM(2004)221. 

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information would apply to all terrorist offences, including participation in the activities of a 
terrorist group through any form of financing.  

The  FIU.NET,  funded  by  the  Member  States  and  the  Commission,  aims  to  establish  a 
computer  network  for  the  exchange  of  intelligence  among  FIUs.  In  line  with  the  revised 
definition of FIUs adopted at the June 2004 Egmont meeting, the FIU.NET will become an 
important element in facilitating the sharing of intelligence related to terrorist financing. The 
Commission  and  Member  States  must  ensure  that  adequate  funding  and  other  appropriate 
resources continue to be provided to the FIU.NET. 

Europol’s “SUSTRANS” project seeks to establish links between transactions and associated 
terrorist activity. Further consideration is needed as to whether suspicious transaction reports 
for SUSTRANS should become part of the Europol Information System or whether a separate 
database of such reports should be established for this purpose. Many Member States are not 
providing adequate data to allow the SUSTRANS project to achieve its potential9. Moreover, 
the  Protocol  to  the  Europol  Convention10,  extending  Europol’s  competence  to  all  money 
laundering offences, would significantly promote SUSTRANS’ effectiveness, but has still not 
come  into  force  due  to  slow  ratification  of  the  Protocol  by  certain  Member  States11.  Those 
Member States who have still not ratified the Protocol should do so as a matter of urgency. 

Joint Investigation Teams must be further promoted in cross-border investigations of terrorist 
financing  and  are  well  suited  to  operating  with  teams  of  law  enforcement,  prosecutors  and 
judges. The sharing of intelligence with criminal prosecutors would enhance the prospects of 
successful prosecutions. 

3.2. 

Information exchange between competent authorities and the private sector 

Real time data exchange between law enforcement/intelligence services and the private sector 
generally  (financial  transactions  but  also  purchase  of  air  line  tickets,  car  hire)  can  play  an 
essential role in both preventive and repressive law enforcement activity in the fight against 
terrorism and its financing. This could allow real time tracking of financial transactions. 

The  financial  sector  does  not  have  the  information  which  FIUs  (and  others)  can  work  with 
when  analysing  suspicious  transactions  and  financial  patterns  of  suspects.  Lack  of  direct 
access  to  information  constrains  the  FIU’s  ability  to  configure  data  from  many  different 
sources. Discussions with the financial community, security services and FIUs should identify 
where the problems lie and the most cost-effective ways to address these. A possible means 
could be to give FIUs full access to dedicated databases located in and under the control of 
the financial community. This might allow linking of subjects, identifying flows of money and 
tracking of sources. To address privacy concerns, financial institutions could give access on 
the basis of “encrypted” data.  

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11 

In July 2004 the European Commission’s Directorate-General Justice and Home Affairs wrote to those 
Member States who have ratified the Europol Convention and who are not providing adequate data for 
the purpose of SUSTRANS. The letter asked to be informed why relevant data were not being provided. 
Replies have been requested by 20 September 2004. 
Council  Act  of  30  November  2000  drawing  up  a  Protocol  amending  Article  2  and  the  Annex  to  the 
Europol Convention (2000/C 358/01). 
Of the former EU 15 the following Member States have ratified the Protocol: Germany, Spain, France, 
Greece, Portugal, Finland, Sweden and the UK. Of the new Member States all but Estonia have ratified 
the Protocol. 

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3.3. 

Outreach to the Private Sector 

To  ensure  that  the  financial  community  and  other  branches  of  the  private  sector  give  the 
highest  priority  to  the  fight  against  terrorism,  high  level  contacts  should  be  established  and 
maintained  between  law  enforcement  agencies  specialised  in  terrorism  and  private  sector 
representatives.  Appropriate  mechanisms  for  co-operation,  information  exchange  and 
feedback between intelligence services and financial institutions must be further developed. 

4. 

TERRORIST  FINANCING  AND  THE  TRACEABILITY  OF  FINANCIAL 
TRANSACTIONS 

4.1. 

Financial Investigation 

Member States must ensure that law enforcement services have resource to develop financial 
investigative skills allowing them to follow  money trails backwards to the person providing 
finance  and  forwards  to  terrorist  cells.  Financial  investigation  must  be  prioritised  in  the 
Member  States  and  should  become  a  routine  part  of  all  law  enforcement  investigations  of 
terrorist suspects.  

Designation  or  establishment  of  national  bodies  dedicated  to  the  identification,  tracing, 
freezing  and  confiscation  of  terrorist  (and  other  criminal)  assets  which  may  combine 
investigative, fiscal and legal skills, should be promoted. Such bodies could also represent the 
point  of  contact  both  for  guidance  to  the  financial  community  on  freezing  and  related 
questions  and  to  competent  authorities  of  third  countries  concerning  designation  of 
individuals or groups.  Implementation of a co-operation network among such bodies should 
be further encouraged12. 

Establishing  adequate  links  between  funding  activities  and  the  pursuit  of  terrorism/terrorist 
attacks,  would  allow  financial  data  to  be  turned  into  intelligence  which  can  be  turned  into 
evidence. As  financial  institutions use  electronic communications channels, work conducted 
in  the  gathering  of  electronic  evidence  is  of  vital  importance.  A  European  funded  project, 
“CTOSE”13,  aims  to  provide  a  common  understanding  of  the  measures  needed  to  present 
electronic  evidence  in  Court.  The  gathering  of  electronic  evidence  must  be  recognised  as  a 
key priority. 

4.2. 

Funds Transfers 

information 
The  European  Commission  will  adopt  a  draft  Regulation  on  payer’s 
accompanying  funds  transfers  in  the  autumn  of  2004.  This  lays  down  rules  on  payer’s 
information  accompanying  funds  transfers,  to  ensure  that  basic  information  is  immediately 
available  to  the  authorities  responsible  for  combating  terrorism.  The  proposal  will  enhance 
the traceability of funds transfers and should be implemented by the financial sector as soon 
as possible, which pleads for a speedy adoption in Council and Parliament.  

12 

13 

Through  its  AGIS  funding  programme  for  2004  the  European  Commission  is  currently  funding  two 
projects  in  this  area,  namely  the  CARIN  network  and  an  assessment  of  multi  agency  alternative 
strategies for targeting the proceeds of criminal activity – a European Union perspective. 
http://www.ctose.org 

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4.3. 

Transactions outside the formal financial system 

Informal  money  remittance  systems,  e.g.  Hawala,  are  an  important  means  of  transferring 
illicit money. The Commission is preparing a draft Directive on a New Legal Framework for 
Payments  in  the  Internal  Market  to  ensure  harmonised  implementation  of  SR  VI  into 
Community law. The planned regulatory regime for money remitters will foresee registration 
of the transmitter by introducing a special licence and will take into account the risk profile of 
providers by establishing tailor-made supervisory requirements.  

A preferred method of moving funds for terrorist financing is via individuals who carry cash 
and other equivalent instruments across borders. Technology for detecting this phenomenon 
should be developed and deployed. There is also a pressing need to ensure that an appropriate 
EU instrument is adopted to address the use of cash couriers. The Commission proposal for a 
Regulation  on  cash  movements14,  negotiations  on  which  have  already  been  unduly  delayed, 
should  be  prioritised  to  ensure  adoption  of  a  Common  Position  during  the  Netherlands 
Presidency. 

Use  of  large  scale  cash  payments  to  transact  business  constitutes  a  vulnerability  to  terrorist 
financing which is largely unaddressed. The proposal for a third Money Laundering Directive 
extends the preventive mechanism of the anti-money laundering system to cash payments for 
goods with a value in excess of €15.000.  

4.4. 

Customer Identification 

Financial  institutions  are  already  under  an  obligation  to  identify  and  know  their  customers. 
This is essential to assist the law enforcement effort against terrorism financing. There may be 
value in common minimum standards for EU financial institutions as regards verification of 
customer identity and recording of identifying data. 

Consideration could be given to establishing an electronic database of sample EU (and other) 
identity documents for law enforcement and the private sector, including examples of forged 
documents.  A  cross-check  of  documents  presented  could  help  authorities  and  businesses 
identify possible forgeries. 

5. 

TERRORIST FINANCING AND TRANSPARENCY 

5.1. 

Legal Entities 

The  absence  of  international  standards  in  key  mechanisms  used  in  global  financial 
transactions, including international business companies, trusts and offshore funding vehicles 
creates  a  degree  of  financial  opacity  of  real  advantage  to  those  financing  terrorism.  The 
European  Commission  intends  to  launch  a  cost  benefit  analysis  of  a  broad  range  of 
transparency measures to contribute to this on-going debate. 

Improving transparency of legal persons is a key element in countering infiltration by terrorist 
organisations and their sympathisers. The Commission Communication of 29 March 2004 on 

14 

European  Commission  proposal  for  a  regulation  of  the  European  Parliament  and  the  Council  on  the 
prevention  of  money  laundering  by  means  of  customs  cooperation  (COM(2002)328-C5-0291/2002-
2002/0132(COD)). 

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the  fight  against  terrorism  highlighted  the  potential  benefits  of  including  in  legislation  on 
formation  and  management  of  legal  persons,  mechanisms  for  the  disqualification  of 
individuals or firms convicted of offences related to terrorism or organised crime. Similarly 
an  effective  mechanism  for  exchanging  information  on  convictions  in  the  EU,  may  help  in 
preventing terrorist groups and/or their financiers from infiltrating legitimate activities. 

5.2. 

Non-Profit/Charitable Sector 

Transparency  is  a  core  issue  as  regards  the  charitable/non-profit  sector.  The  numbers  of 
charitable/non-profit  organisations  and  the  amount  of  aid  they  dispense  have  increased 
considerably  over  recent  years.  Many  such  organisations  raise  money  destined  for  conflict 
zones. Once money arrives in such areas, the ability to rely on international co-operation in 
order  to  trace  its  destination,  is  much  reduced,  particularly  where  funds  are  moved  around 
such territories in the form of cash.  

A minimum EU-wide standard of regulation designed to enhance transparency of the sector 
should be explored further15.This could either take the form of binding regulation or a Code of 
Conduct  for  the  voluntary  sector.  Appropriate  transparency  standards  could  include  annual 
publication of independently audited accounts, corporate governance rules, and a requirement 
to  produce  an  audit  trail  for  disbursements.  Bearing  in  mind  the  large  numbers  of  non-
profit/charitable organisations based outside the EU but with offices in one or more Member 
States, transparency measures would also need to impact beyond the EU. 

In most Member States the charitable sector enjoys special tax status so that fiscal authorities 
have detailed information on revenue and disbursements of most charitable sector bodies. The 
role  of  tax  authorities  in  the  context  of  Special  Recommendation  VIII  should  be  further 
considered. 

The  European  Commission  will  enhance  its  automatic  intelligence  gathering,  information 
extraction and analysis tools to apply to the charitable sector. The Commission will conduct 
a feasibility study, with input from Europol, to map the charitable sector in the EU 25 along a 
number  of  dimensions  that  could  help  to  detect  high  risk  for  terrorist  financing  or  other 
criminal  activity.  The  study  is  also  expected  to  include  a  review  of  national  risk  analysis 
efforts,  if  any,  and  will  try  to  establish  a  methodology  to  arrive  at  vulnerabilities  and  risk 
indicators. 

6. 

TERRORIST FINANCING AND HORIZONTAL MEASURES 

6.1. 

Asset Freezing 

The  EU  mechanism  for  designation  of  terrorists  and  terrorist  organisations  other  than  Al-
Qaeda16, set up in particular to allow the freezing of assets, has not produced a list that can be 
considered  to  be  comprehensive  and  entirely  effective.  Divergent  interpretations  of  the 
conditions for designation and the ensuing delays caused by the unanimity requirement seem 
to be the main cause for this, whereas lack of guidance to third countries that intend to make a 

15 

16 

The European Commission is organising a workshop on 29 October on the question of an EU approach 
to prevent abuse of the charitable sector for the purpose of terrorist financing. 
Common Position 2001/931/CFSP and Regulation (EC) No 2580/2001. 

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request for designation may also have had its impact. A standard interpretation and approach 
on areas of divergence is a key requisite to improve effectiveness, including:  

–  designation of groups or entities that have renamed themselves after designation; 

–  designation of ‘front organisations’; 

–  designation of leaders of groups and entities that have already been designated. 

The  electronic-Consolidated  Targeted  Financial  Sanctions  List  is  a  joint  initiative  of  the 
European  Commission  and  European  banks17.  It  is  a  consolidated  database  of  persons  and 
entities subject to EU financial sanctions. Since financial sanctions are applicable on the date 
of  their  publication  in  the  Official  Journal,  the  Commission  will  strive  to  ensure  that  the 
database  is  updated  on  the  same  day  as  Official  Journal  publication.  Financial  institutions 
have  requested  guidance  on  matching  standards  on  whether  a  given  person  is  a  designated 
person. Such guidance would increase the effectiveness of sanctions and, since it concerns EU 
financial sanctions, should preferably be provided by the Council or the Commission (e.g. in a 
recommendation). 

6.2. 

Effective and Targeted Training 

The  presence  of  suitable  numbers  of  properly  trained  persons  within  competent  authorities 
and the private sector is essential. 

The  case  for  adequate  numbers  of  trained  financial  investigators  must  be  promoted.  The 
European Commission and Europol have begun a joint project to establish common minimum 
standards in the area of financial investigative training in the EU. This will seek to promote 
best practice and a common minimum approach to financial investigative training.  

CEPOL has a key role to play in developing a European culture of financial investigation and 
other training among senior police officers and in spreading best practice in this vital area. 

6.3. 

Security Research 

The  European  Commission  manages  anti-terrorism  research  activities  which  can  support, 
among  other  things,  the  fight  against  terrorist  financing.  The  “Preparatory  Action  on  the 
Enhancement  of  the  European  industrial  potential  in  the  field  of  Security  Research”  has  a 
budget of € 15 million for 2004 and a planned budget of €24 and €26 million for 2005 and 
2006 respectively. A “Group of Personalities” (GoP) was established in 2003 and tasked to 
propose  key  orientations,  principles  and  priorities  for  a  future  European  Security  Research 
Programme (“ESRP”) in line with EU policy objectives. The GoP report18 recommends the 
establishment  of  an  ESRP  from  2007  onwards  with  funding  of  at  least  €1  billion  per  year 
additional  to  currently  existing  resources.  As  a  follow-up,  the  Commission  adopted  on 
7.9.2004  a  Communication  entitled  “Security  Research:  The  Next  Steps”19.  It  has  noted 
the  recommendation  of  the  report,  expressing  the  need  for  the  establishment  of  a  European 

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19 

European Banking Federation, European Savings Banks Group, European Association of Cooperative 
Banks, European Association of Public Banks. 
« Research for a Secure Future », Report of the GoP in the field of Security Research, ISBN 92-894-
6611-1, Luxembourg Office for Official Publications of the European Communities, 2004. 
COM 2004/353 

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Security  Research  Advisory  Board  to  advise  on  the  content  and  the  implementation  of  the 
ESRP and for the submission of a proposal for an ESRP in early 2005, to become part of the 
7th Framework Programme of Community Research from 2007 onwards. Areas where further 
research  should  be  encouraged  include  distributed  problem  solving  among  competent  EU 
authorities  and  social-cognitive  configurations  specific  to  an  effective  co-ordinated  fight 
against terrorist financing. 

6.4. 

External Action 

Combating the financing of terrorism must play an integral part of EU political dialogue and 
technical  assistance  programmes  with  third  countries,  including  the  development  of  ad  hoc 
expert  level  dialogue.  Joint  efforts  to  combat  terrorist  financing  will  also  continue  to  be  an 
important and regular part of EU-US cooperation. 

Financial  havens  which  allow  opaque  banking  and  corporate  structures  provide  refuge  for 
terrorist  money.  The  European  Union  must  promote  greater  transparency  and  exchange  of 
information with third countries and dependent or associated territories. Positive action could 
help cooperative partners overcome difficulties of a regulatory, technical or economic nature 
when introducing more transparency, in the form of reinforced technical assistance, where the 
EU as a whole has considerable experience, or through some form of economic support. The 
annual and mid-term reviews of Country Strategy Papers could also provide for appropriate 
actions.  The  Commission  will  monitor  the  efficiency  and  the  progress  made  by  overseas 
financial havens towards more transparency. 

7. 

CONCLUSIONS  

Making  it  more  difficult  for  terrorists  to  raise  money  is  one  element  of  the  fight  against 
terrorist financing. In addition, tracking financial and other transactions is an effective means 
of  locating  terrorists  and  their  supporters  and  disrupting  terrorist  activity.  This  would  be 
facilitated  through  enhanced  transparency  of  financial  transactions  and  legal  entities, 
including those operating in the non-profit sector. To be really effective and achieve real time 
data exchange in preventive and repressive activity in the fight against terrorist financing, we 
need  to  address  closer  co-operation  and  enhanced  mechanisms  for  information  exchange  at 
national, EU and international levels both among competent authorities and between the latter 
and the private sector. 

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TECHNICAL ANNEXES 

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Possible Future Measures relevant to the fight against terrorist financing 

ANNEX 1 

Information Exchange: 

•  Establish appropriate mechanisms to achieve multilateral co-ordination with all authorities 
and  bodies  involved  in  supervising  and  detecting  irregularities  in  the  financial  sector  (to 
include  fiscal  authorities,  financial  oversight  bodies,  Justice  Department,  intelligence 
community,  law  enforcement  authorities,  authorities  in  charge  of  administrative  freezing 
measures). 

•  Promote  appropriate  information  sharing  mechanisms  between  intelligence  services  and 

prosecutors. 

•  Promote intelligence led law enforcement by ensuring access to private sector information 

to facilitate information gathering on, detection and location of suspects.  

•  Promote outreach and other mechanisms to facilitate real time tracking and data exchange 

by means of the financial and other systems. 

•  Consider  ways  to  improve  communication  between  FIUs  and  the  financial  community 

through enhanced access to relevant databases.  

Traceability of Financial Transactions: 

•  Promote  financial  investigation  as  a  law  enforcement  technique  in  the  Member  States. 
Encourage establishment of common minimum standards in financial investigation training 
standards in the EU via Joint Commission/Europol project).  

•  Promote establishment of national bodies dedicated to identification, tracing, freezing and 
confiscation of terrorist (and other criminal) assets  and  implementation  of  a  co-operation 
network among such bodies to facilitate co-operation in the tracing of fast moving terrorist 
and other criminal funds. 

•  Promote  organisational  and  technical  measures  needed  to  present  electronic  evidence  in 

Court. 

•  Consider need for common minimum EU standards for verification of customer identity.  

•  Consider  case  for  database  with  samples  of  all  identity  documents  issued  in  the  EU  and 
beyond  to  facilitate  detection  of  false  identity  papers  by  financial  institutions  when 
verifying customer identity. 

•  Guidance on matching standards to be applied when checking whether any given person is 
a designated person to improve the effectiveness of financial sanctions (see Section 6.1).  

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Transparency: 

•  Consider  what  further  measures  may  be  needed  to  enhance  transparency  of  legal  entities 
having  regard  in  particular  to  ant  recommendations  to  be  made  in  the  Commission’s 
planned Study on cost benefit assessment of transparency measures. 

•  Consider  further  EU-wide  mechanisms  for  the  disqualification  of  individuals  of  firms 

convicted of offences related to terrorism or organised crime. 

•  In the non-profit/charitable sector assess appropriate EU-wide transparency measures and 
mechanisms  to  ensure  compliance  with  these  together  with  methods  to  identify  high  risk 
for terrorist financing or other criminal activity. 

Asset Freezing: 

•  Promote  standard  interpretation  on  designation  of  groups  or  entities  that  have  renamed 
themselves after designation, designation of ‘front organisations’, designation of leaders of 
groups and entities that have already been designated. 

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ANNEX 2 

1. 

Measures Adopted at EU level relevant to the fight against terrorist financing. 

Since  October  2001  an  important  number  of  actions  have  been  taken  at  EU  level  aimed  at 
countering terrorism as well as preventing the acquisition, retention and use of funds or assets 
by such organisations. Taken together with earlier actions, these constitute powerful measures 
in the Union’s arsenal to fight terrorism and its financing.  

Legislative Actions 

1.1. 

Council  Act  of  16  October  2001  establishing,  in  accordance  with  Article  34  of 
the  Treaty  on  European  Union,  the  Protocol  to  the  Convention  on  Mutual 
Assistance  in  Criminal  Matters  between  the  Member  States  of  the  European 
Union (2001/C 326/01) (OJ C 326 of 21 November 2001 p.1) 

This  Act  provides  for  the  exchange  of  information  between  Member  States 
concerning  bank  accounts  held  by  any  person  who  is  the  subject  of  criminal 
investigations.  It  has  not  yet  been  ratified  and  Member  States  are  encouraged  to 
accelerate this process. 

1.2. 

Directive  2001/97/EC  of  the  European  Parliament  and  of  the  Council  of  4 
December  2001  amending  Council  Directive  91/308/EEC  on  prevention  of  the 
use of the financial system for the purpose of money laundering (OJ L 344 of 28 
December 2001, p. 76) 

The second money laundering Directive, amending the 1991 Directive, was adopted 
in  December  2001.  The  definition  of  criminal  activity  giving  rise  to  money 
laundering  is  widened  to  include  all  organised  crime  and  a  wide  range  of  serious 
crimes, including offences related to terrorism. The professions which are required to 
report money laundering suspicions, in addition to the credit and financial and related 
institutions,  now  include  accountants,  lawyers,  notaries,  real  estate  agents,  casinos 
and dealers in high value goods.  

1.3. 

Council Decision of 6 December 2001 extending Europol’s mandate to deal with 
serious  forms  of  international  crime  listed  in  the  Annex  to  the  Europol 
Convention (2001/C 362/01) (OJ C 362 of 18 December 2001, p.1) 

The  effect  of  this  Council  Decision  was  to enable  Europol  to  deal  with  the  serious 
forms of international crime listed in the Annex to the Europol Convention, such as 
murder,  grievous  bodily  injury,  kidnapping,  hostage-taking,  organised  robbery  and 
illicit arms trafficking. Europol’s mandate now includes support for law enforcement 
against serious international organised crime, including terrorism. 

1.4. 

Council  Common  Position  of  27  December  2001  on  combating  terrorism 
(2001/930/CFSP) (OJ L 344 of 28 December 2001, p. 90) 

The Common Position sets out a number of actions to be taken to combat terrorism. 
The  principal  measures  contained  in  the  Common  Position  are:  criminalising  the 
financing  of  terrorism  within  the  EU,  freezing  of  financial  assets  or  economic 

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resources  of  persons  or  entities  involved  in  terrorism,  prohibiting  the  giving  of 
financial  or  other  assistance  to  such  persons  or  entities,  requiring  measures  to  be 
taken to suppress any form of support for those involved in terrorist acts, taking steps 
to prevent terrorist acts and denying safe haven to those involved in such acts. 

1.5. 

Council  Common  Position  of  27  December  2001  on  the  application  of  specific 
measures  to  combat  terrorism  (2001/931/CFSP)  (OJ  L  344  of  28  December 
2001, p. 93) 

The  Common  Position  establishes  the  primary  list  of  persons,  groups  and  entities 
involved in terrorist acts20. It sets out the criteria to be used to decide who should be 
considered  as  terrorists  for  inclusion  on  the  list  and  the  actions  which  constitute 
terrorist acts. The names on the list are to be reviewed at least once every six months. 
Under  the  Common  Position  the  European  Community  is  required  to  order  the 
freezing  of  the  funds  and  other  financial  assets  or  economic  resources  of,  and  the 
prohibition  on  the  provision  of  financial  services  to,  the  listed  persons,  groups  and 
entities. Member States are required to afford each other assistance in preventing and 
combating terrorist acts.  

1.6. 

Council  Regulation  (EC)  No  2580/2001  of  27  December  2001  on  specific 
restrictive measures directed against certain persons and entities with a view to 
combating terrorism (OJ L 344 of 28 December 2001, p. 70) 

The Regulation provides for the freezing of the funds, financial assets and economic 
resources  of  certain  persons,  groups  and  entities  involved  in  terrorism,  for  a 
prohibition  on  the  making  available  of  funds,  financial  and  economic  resources  to 
such  persons,  groups  and  entities  and  a  prohibition  on  the  provision  of  financial 
services to them. It authorises the Council to establish and maintain a list of persons, 
groups and entities involved in terrorism21. Provision is also made for the granting of 
authority  for  the  use  of  funds  frozen  in  accordance  with  the  Regulation  to  meet 
essential human needs and for certain other payments (e.g. taxes, utility bills etc.). 

1.7. 

Council  Decision  of  27  December  2001  establishing  the  list  provided  for  in 
Article  2(3)  of  Council  Regulation  (EC)  No  2580/2001  on  specific  restrictive 
measures directed against certain persons and entities with a view to combating 
terrorism (2001/927/EC) (OJ L 344 of 28 December 2001, p. 83) 

This  decision  contains  a  list  or  persons,  groups  and  entities  against  whom  specific 
restrictive  measures  are  to  be  applied  in  accordance  with  Council  Regulation  No 
2580/2001.  An  updated  list  of  persons,  groups  and  entities  to  which  the  measures 
imposed  by  the  Regulation  apply  has  been  published  seven  times,  the  latest 
publication being that of Council Decision 2004/306/EC. 

1.8. 

Council  Decision  of  28  February  2002  setting  up  Eurojust  with  a  view  to 
reinforcing  the  fight  against  serious  crime  (2002/187/JHA)  (OJ  L  063  of  6 
March 2002 p. 1) 

20 
21 

The latest version of the list is set out in Common Position 2004/500/CFSP. 
The latest version of the list is set out in Council Decision 2004/306/EC. 

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This Decision establishes Eurojust, to be composed of seconded prosecutors, judges 
or  police  officers  from  each  Member  State.  The  objectives  of  Eurojust  are  to 
stimulate  and  improve  the  co-ordination,  between  the  competent  authorities  of  the 
Member States, of investigations and prosecutions, to improve co-operation between 
the  competent  authorities  of  the  Member  States  and  to  support  the  competent 
authorities  of  the  Member  States  in  order  to  render  their  investigations  and 
prosecutions more effective. 

1.9. 

Council  Common  Position  of  27  May  2002  concerning  restrictive  measures 
against  Usama  bin  Laden,  members  of  the  Al-Qaida  organisation  and  the 
Taliban and other individuals, groups, undertakings and entities associated with 
them  and  repealing  Common  Positions  96/746/CFSP,  1999/727/CFSP, 
2001/154/CFSP and 2001/771/CFSP (2002/402/CFSP) (OJ L 139 of 29 May 2002, 
p. 4) 

It  prohibits  the  supply  of  arms  etc.  to  Usama  bin  Laden,  members  of  the  Al-Qaida 
organisation  and  the  Taliban  and  associated  persons  or  groups  in  accordance  with 
UNSCR 1267(1999) and 1333(2000). It also provides for the freezing of their funds 
and  economic  resources  and  prohibits  the  making  available  to  them  of  funds  and 
economic resources. The Common Position is to be kept under constant review. 

1.10.  Council Regulation (EC) No 881/2002 of 27 May 2002 imposing certain specific 
restrictive  measures  directed  against  certain  persons  and  entities  associated 
with  Usama  bin  Laden,  the  Al-Qaida  network  and  the  Taliban,  and  repealing 
Council  Regulation  (EC)  No  467/2001  prohibiting  the  export  of  certain  goods 
and  services  to  Afghanistan,  strengthening  the  flight  ban  and  extending  the 
freeze  of  funds  and  other  financial  resources  in  respect  of  the  Taliban  of 
Afghanistan (OJ L 139 of 29 May 2002, p. 9) 

The  Regulation  freezes  the  funds  and  economic  resources  of,  and  prohibits  the 
making  available  of  funds  and  economic  resources  to,  a  large  number  of  persons, 
groups and entities which are set out in an Annex. The Commission has amended the 
Regulation  on  36  occasions  for  the  purpose  of  updating  the  list  of  persons,  groups 
and entities which are subject to the restrictions set out in the Regulation, the latest 
publication being that of Commission Regulation (EC) No 1728/2004. Modification 
of the list is an on-going process. 

1.11.  Council  Framework  Decision  of  13  June  2002  on  joint  investigation  teams 

(2002/465/JHA) ( OJ L 162 of 20 June 2002, p. 1) 

The Framework Decision is intended to make the combating of international crime as 
effective  as  possible.  It  considered  it  appropriate  that  a  specific  legally  binding 
instrument  on  joint  investigation  teams  should  be  adopted  to  apply  to  joint 
investigations into drugs/human trafficking and terrorism and that they should be set 
up,  as  a  matter  of  priority,  to  combat  offences  committed  by  terrorists.  The 
Framework  Decision  provides  that  two  or  more  Member  States  may  establish  joint 
investigation  teams  for  a  specific  purpose  and  for  a  limited  period  to  carry  out 
criminal  investigations  in  one  or  more  of  the  States  establishing  the  team.  Member 
States are required to comply with the Framework Decision by 1 January 2003.  

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1.12.  Council  Framework  Decision  of  13  June  2002  on  combating  terrorism 

(2002/475/JHA) (OJ L 164 of 22 June 2002, p. 3) 

The  Framework  Decision  requires  Member  States  to  adopt  a  common  definition  of 
terrorist offence as set out in Article 1. It also obliges Member States to criminalise 
certain  actions  related  to  terrorist  groups  or  terrorism,  such  as  directing  or 
participating in the activities of a terrorist group including by funding its activities in 
any way, as well as inciting, aiding or abetting and attempting to commit a terrorist 
offence.  Member  States  had  to  comply  with  the  Framework  decision  by  31 
December 2002. In June 20041 the Commission produced a report analysing national 
measures  taken  to  comply  with  the  Framework  Decision  (COM  2004  409  of 
8.6.2004).  

1.13.  Council Framework Decision of 13 June 2002 on the European arrest warrant 
and  the  surrender  procedures  between  Member  States  (2002/584/JHA)  (OJ  L 
190 of 18 July 2002, p. 1) 

The  Framework  Decision  provides  for  the  execution  in  any  Member  State  of  a 
judicial  decision  made  in  another  Member  State  for  the  arrest  and  surrender  of  a 
person  for  the  purpose  of  criminal  proceedings  or  the  execution  of  a  custodial 
sentence. The offences covered by the Framework Decision include terrorism. After 
1  January  2004  extradition  between  Member  States  will  be  governed  by  rules 
adopted pursuant to the Framework Decision. Member States were required to take 
the  necessary  measures  to  comply  with  the  Framework  Decision  by  31  December 
2003.  

1.14.  Directive on Insider Trading and Market Manipulation (Market Abuse) (2003/6 

of 28 January 2003) (OJ L 96 of 12 April 2003, p. 16 -25) 

The  Insider  Dealing  and  Market  Manipulation  (Market  Abuse)  Directive  was 
adopted  by  the  Council  and  the  Parliament  on  3  December  2002.  Terrorists  may 
abuse  financial  markets  by  financing  activities  through  insider  dealing  or  market 
manipulation (using clean money in a dirty way) or by laundering ‘dirty’ money on 
financial  markets  through  insider  dealing  and  market  manipulation.  The  Market 
Abuse  Directive  contributes  to  strengthen  the  fight  against  criminal  activities  on 
financial markets. 

1.15.  Council  Decision  of  19  December  2002  on  the  implementation  of  specific 
measures for police and judicial cooperation to combat terrorism in accordance 
with Article 4 of Common Position 2001/931/CFSP (2003/48/JHA) (OJ L 16 of 
22 January 2003, p. 68) 

The Decision relates to access and collection of information concerning and resulting 
from  criminal  investigations  and  proceedings  with  respect  to  terrorist  offences 
involving  any  of  the  persons,  groups  or  entities  listed  in  the  Annex  to  Common 
Position 2001/931/CFSP with a view to its communication to Europol and Eurojust. 
The information in question concerns the identity of the person, group or entity, the 
acts  under  investigation  or  prosecution  and  links  with  related  cases.  In  cases 
involving any of the listed persons, groups or entities the Decision also calls for joint 
investigation  teams  in  appropriate  cases,  urgent  treatment  of  requests  for  mutual 

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legal assistance and recognition and enforcement of judgements in connection with 
terrorist offences and sharing of information. 

1.16.  Ratification of international conventions in accordance with UN SC Resolution 

1373 (2001) 

In accordance with resolution 1373 (2001), Member States have accepted a political 
commitment,  by  means  of  Article  14  of  Common  Position  2001/930/CFSP  to 
become  parties  to  the  UN  Convention  for  the  Suppression  of  the  Financing  of 
terrorism (New York, 9 December 1999) and 12 other conventions on Terrorism. 

1.17.  Council Framework Decision 2003/577/JHA of 22 July 2003 on the execution in 
the European Union of orders freezing property or evidence. (OJ L 196/45 of 2nd 
of August 2003) 

This Framework Decision introduces the principle of mutual recognition of judicial 
orders  freezing  property  and  evidence.  It  establishes  the  rules  pursuant  to  which 
Member  States  must  recognise  and  execute  such  orders  issued  by  the  competent 
judicial authorities of another Member State. It applies to freezing orders issued for 
the  purpose  of  securing  evidence  or  subsequent  confiscation  of  property.  For  this 
purpose terrorism is included among the offences for which no verification of double 
criminality is required. 

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ANNEX 3 

1. 

1.1. 

MEASURES  UNDERWAY  AT  EU  LEVEL  RELEVANT  TO  THE  FIGHT  AGAINST 
TERRORIST FINANCING  

Draft  Framework  Decision  on  Confiscation  of  Crime-related  Proceeds, 
Instrumentalities and Property 

in 

the  Member  States,  notably 

The  draft  Framework  Decision  attempts  to  harmonise  certain  confiscation  related 
provisions 
in  connection  with  “extended 
confiscation”.  According  to  this  concept,  a  Court  shall  have  power  in  certain 
circumstances to order confiscation of a convicted person’s assets where the Court is 
fully  convinced,  inter  alia,  that  the  person’s  assets  derive  from  other  criminal 
activity.  The  Framework  Decision  received  political  agreement  in  December  2002 
but is still subject to Member State scrutiny reserves.  

1.2. 

Draft  Framework  Decision  on  the  application  of  the  principle  of  mutual 
recognition to Confiscation Orders  

The  purpose  of  this  draft  Framework  Decision  is  to  facilitate  co-operation  between 
Member States in the recognition and execution of orders to confiscate property. It 
obliges  Member  States  to  recognise  and  execute  in  its  territory  confiscation  orders 
issued by a court competent in criminal matters in another Member State. The draft 
Framework Decision received political agreement in June 2004 but remains subject 
to a number of scrutiny reserves.  

1.3. 

Control  of  Large  Scale  Cash  Movements  -  Proposal  for  a  Regulation  of  the 
European  Parliament  and  Council  on  the  prevention  of  money  laundering  by 
means of customs co-operation 

On  25  June  2002  the  Commission  adopted  a  report  together  with  a  proposal  for  a 
Regulation to introduce controls on significant cash movements by persons entering 
or  leaving  the  Community.  The  proposed  Regulation  would  complement  the 
Community Money Laundering Directives and oblige persons entering or leaving the 
Community customs territory carrying cash or equivalent instruments with a value of 
€15.000 or more, to make an appropriate declaration.  

1.4. 

Proposal for a third Money Laundering Directive 

The  proposal  for  a  third  Money  Laundering  Directive  was  adopted  by  the 
Commission  on  30th  June  2004.  The  proposal  seeks  to  ensure  a  common  EU-wide 
approach to the FATF 40 Recommendations as revised in June 2003. It proposes to 
extend the scope of the Directive to trust and company service providers, introduces 
more  detailed  requirements  regarding  customer  due  diligence  and  identification  of 
the  beneficial  owner  and  extends  the  anti-money  laundering  preventive  mechanism 
to transactions suspected to be associated with terrorist financing.  

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1.5. 

Proposal  for  a  Council  Decision  on  the  exchange  of  information  and  co-
operation concerning terrorist offences 

The European Commission adopted a Communication on the fight against terrorism, 
including financing of terrorism on 29th March 200422. The Communication contains 
in  annex  a  Proposal  for  a  Council  Decision  enabling  the  services  involved  to  have 
access to the most complete and up-to-date information. The Commission's proposal 
widens the scope of the exchange of information to all terrorist offences within the 
meaning  of  the  Framework  Decision  of  13  June  2002  on  combating  terrorism.  The 
obligation to exchange information would apply to all terrorist offences or offences 
relating to a terrorist group known to the Member States, including participation in 
the  activities  of  a  terrorist  group  through  any  form  of  financing.  The  exchange  of 
information  will  apply  to  all  stages  of  proceedings.  Europol  and  Eurojust  must  be 
sent  information  on  terrorist  offences  at  all  stages  of  proceedings,  including 
convictions. 

1.6. 

Proposal for a Regulation on payer’s information accompanying funds transfers 

The  European  Commission  is  expected  to  adopt  a  proposal  for  a  Regulation  on 
payer’s  information  accompanying  funds  transfers  in  the  course  of  October  or 
November  2004.  The  proposal  for  a  Regulation  aims  at  transposing  Special 
Recommendation  VII  into  Community  law.  It  lays  down  rules  on  payer’s 
information accompanying funds transfers, in order to ensure that basic information 
is  immediately  available  to  the  authorities  responsible  for  combating  terrorism,  to 
assist them in their task. These rules result in a number of obligations applicable to 
all  payment  service  providers  involved  in  the  payment  chain.  The  payer’s  payment 
service  provider  must  ensure  that  funds  transfers  contain  complete,  accurate  and 
meaningful  payer’s  information.  Any  intermediary  payment  service  provider  must 
ensure  that  all  payers’  information  that  accompanies  a  transfer  is  retained  with  the 
transfer  or  that  appropriate  records  are  kept.  The  payee’s  payment  service  provider 
must have effective risk-based procedures in order to identify funds transfers lacking 
complete  payer’s  information  and,  as  appropriate,  report  suspicious  transactions  to 
the authorities responsible for combating terrorism. 

1.7. 

Draft  Directive  on  a  New  Legal  Framework  for  Payments  in  the  Internal 
Market 

The  Commission  is  working  on  the  above  draft  proposal  which  will  ensure  the 
harmonised implementation of Special Recommendation VI of the Financial Action 
Task Force into Community law and thereby guarantee a level playing field for all 
providers. The planned regulatory regime for money remitters will not only foresee 
registration  of  the  transmitter  by  the  introduction  of  a  special  licence  of  a  payment 
service  provider  but  will  also  take  into  account  the  specific  risk  profile  of  these 
providers by the establishment of tailor-made supervisory requirements.  

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