Common Position (EC) No 19/2005 of 17 February 2005 adopted by the Council, acting in accordance with the procedure referred to in Article 251 of the Treaty establishing the European Community, with a view to adopting a Regulation of the European Parliament and of the Council on controls of cash entering or leaving the Community
Date: 2005-02-17
Institutions: Council of the European Union
Subjects: capital movement, capital transfer, customs cooperation, customs regulations, exchange of information, financial legislation, form, free movement of capital, money laundering, recycling of capital

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I

(Information)

COUNCIL

COMMON POSITION (EC) No 19/2005

adopted by the Council on 17 February 2005

with a view to the adoption of the Regulation (EC) No …/2005 of the European Parliament and of
the Council of … on controls of cash entering or leaving the Community

(2005/C 144 E/01)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European Com-
munity, and in particular Articles 95 and 135 thereof,

Having regard to the proposal from the Commission (1),

Having regard to the opinion of the European Economic and
Social Committee,

Acting in accordance with the procedure referred to in Article
251 of the Treaty (2),

Whereas:

(1)

and

balanced

sustainable

One of the Community's tasks is to promote harmo-
nious,
of
economic activities throughout the Community by estab-
lishing a common market and an economic and mone-
tary union. To that end the internal market comprises an
area without internal frontiers in which the free move-
ment of goods, persons, services and capital is ensured.

development

(2)

The introduction of the proceeds of illegal activities into
the financial system and their investment after laun-
to sound and sustainable
dering

are detrimental

(1) OJ C 227 E, 24.9.2002, p. 574.
(2) Opinion of the European Parliament of 15 May 2003 (OJ C 67 E,
17.3.2004, p. 259), Council Common Position of 17 February
2005 and Position of
the European Parliament of … (not yet
published in the Official Journal).

economic development. Accordingly, Council Directive
91/308/EEC of 10 June 1991 on prevention of the use
of the financial system for the purpose of money laun-
dering (3)
introduced a Community mechanism to
prevent money laundering by monitoring transactions
through credit and financial
institutions and certain
types of professions. As there is a risk that the applica-
tion of that mechanism will lead to an increase in cash
movements for illicit purposes, Directive 91/308/EEC
should be supplemented by a control system on cash
entering or leaving the Community.

(3)

(4)

At present such control systems are applied by only a
legislation.
few Member States, acting under national
The disparities in legislation are detrimental
to the
proper functioning of the internal market. The basic
elements should therefore be harmonised at Community
level to ensure an equivalent level of control on move-
ments of cash crossing the borders of the Community.
Such harmonisation should not, however, affect
the
in accordance
possibility for Member States to apply,
the Treaty, national
with the existing provisions of
controls on movements of cash within the Community.

Account should also be taken of complementary activ-
ities carried out in other international fora, in particular
of the Financial Action Task Force on Money Laundering
(FATF) which was established by the G7 Summit held in
Paris
in 1989. Special Recommendation IX of 22
October 2004 of the FATF calls on governments to take
measures to detect physical cash movements, including a
declaration system or other disclosure obligation.

(3) OJ L 166, 28.6.1991, p. 77. Directive as amended by Directive
2001/97/EC of the European Parliament and of the Council (OJ
L 344, 28.12.2001, p. 76).

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(5)

(6)

(7)

(8)

(9)

Accordingly, cash carried by any natural person entering
or leaving the Community should be subject to the prin-
ciple of obligatory declaration. This principle would
enable the customs authorities to gather information on
such cash movements and, where appropriate, transmit
that information to other authorities. Customs authori-
ties are present at the borders of the Community, where
controls are most effective, and some have already built
up practical experience in the matter. Use should be
made of Council Regulation (EC) No 515/97 of 13
March 1997 on mutual assistance between the adminis-
trative authorities of the Member States and cooperation
between the latter and the Commission to ensure the
correct application of the law on customs and agri-
cultural matters (1). This mutual assistance should ensure
both the correct application of cash controls and the
transmission of information that might help to achieve
the objectives of Directive 91/308/EEC.

In view of its preventive purpose and deterrent char-
acter, the obligation to declare should be fulfilled upon
entering or leaving the Community. However, in order
to focus the authorities' action on significant movements
of cash, only those movements of EUR 10 000 or more
should be subject to such an obligation. Also, it should
be specified that the obligation to declare applies to the
natural person carrying the cash, regardless of whether
that person is the owner.

Use should be made of a common standard for the
information to be provided. This will enable competent
authorities to exchange information more easily.

It is desirable to establish the definitions needed for a
uniform interpretation of this Regulation.

Information gathered under
this Regulation by the
competent authorities should be passed on to the autho-
rities referred to in Article 6(1) of Directive 91/308/EEC.

(10) Where there are indications that the sums of cash are
related to any illegal activity, associated with the move-
ment of cash, as referred to in Directive 91/308/EEC,
information gathered under
this Regulation by the
competent authorities may be passed on to competent
authorities
to the
Commission. Similarly, provision should be made for
certain information to be transmitted whenever there are
indications of cash movements involving sums lower
than the threshold laid down in this Regulation.

in other Member States and/or

(11)

Competent authorities should be vested with the powers
needed to exercise effective control on movements of
cash.

(1) OJ L 82, 22.3.1997, p. 1. Regulation as amended by Regulation

(EC) No 807/2003 (OJ L 122, 16.5.2003, p. 36).

(12)

(13)

The powers of
the competent authorities should be
supplemented by the Member States' obligation to lay
down penalties. However, penalties
should only be
imposed for failure to make a declaration in accordance
with this Regulation.

Since the objective of this Regulation cannot be suffi-
ciently achieved by the Member States and can therefore,
by reason of the transnational scale of money-laundering
in the internal market, be better achieved at Community
level, the Community may adopt measures, in accord-
ance with the principle of subsidiarity as set out in
Article 5 of the Treaty. In accordance with the principle
of proportionality, as set out in that Article, this Regu-
lation does not go beyond what is necessary in order to
achieve that objective.

(14)

This Regulation respects the fundamental rights and
observes the principles recognised, in particular, by the
Charter of Fundamental Rights of the European Union,

HAVE ADOPTED THIS REGULATION:

Article 1

Objective

1.
This Regulation complements the provisions of Directive
91/308/EEC concerning transactions through financial and
institutions and certain professions by laying down
credit
harmonised rules for the control, by the competent authorities,
of cash entering or leaving the Community.

This Regulation is without prejudice to national measures
2.
to control cash movements within the Community, where such
measures are taken in accordance with Article 58 of the Treaty.

Article 2

Definitions

For the purposes of this Regulation:

1.

‘competent authorities’ means the customs authorities of the
Member States or any other authorities empowered by
Member States to apply this Regulation;

2.

‘cash’ means:

(a) bearer negotiable

including monetary
instruments
instruments in bearer form such as travellers cheques,
negotiable instruments (including cheques, promissory
notes and money orders) that are either in bearer form,
endorsed without restriction, made out to a fictitious
title thereto
payee, or otherwise in such form that
passes upon delivery and incomplete
instruments
(including cheques, promissory notes and money orders)
signed, but with the payee's name omitted;

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(b) currency (banknotes and coins that are in circulation as

a medium of exchange).

Article 3

Obligation to declare

1.
Any natural person entering or leaving the Community
and carrying cash of a value of EUR 10 000 or more shall
declare that sum to the competent authorities of the Member
State through which he is entering or leaving the Community
in accordance with this Regulation. The obligation to declare
shall not have been fulfilled if the information provided is
incorrect or incomplete.

The declaration referred to in paragraph 1 shall contain

2.
details of:

(a) the declarant, including full name, date and place of birth

and nationality;

(b) the owner of the cash;

(c) the intended recipient of the cash;

(d) the amount and nature of the cash;

(e) the provenance and intended use of the cash;

(f) the transport route;

(g) the means of transport.

3.
Information shall be provided in writing, orally or electro-
nically, to be determined by the Member State referred to in
paragraph 1. However, where the declarant so requests, he
shall be entitled to provide the information in writing. Where a
written declaration has been lodged, an endorsed copy shall be
delivered to the declarant upon request.

Article 4

Powers of the competent authorities

1.
In order to check compliance with the obligation to
declare laid down in Article 3, officials of the competent autho-
rities shall be empowered, in accordance with the conditions
laid down under national legislation, to control natural persons,
their baggage and their means of transport.

2.
In the event of failure to comply with the obligation to
declare laid down in Article 3, cash may be detained by admin-
istrative decision in accordance with the conditions laid down
under national legislation.

2. Where it appears from the controls provided for in
Article 4 that a natural person is entering or leaving the Com-
munity with sums of cash lower than the threshold fixed in
Article 3 and where there are indications of illegal activities
associated with the movement of cash, as referred to in Direc-
tive 91/308/EEC, that information, the full name, date and
place of birth and nationality of that person and details of the
means of transport used may also be recorded and processed
by the competent authorities of the Member State referred to in
Article 3(1) and be made available to the authorities referred to
in Article 6(1) of Directive 91/308/EEC of that Member State.

Article 6

Exchange of information

1. Where there are indications that the sums of cash are
related to any illegal activity associated with the movement of
cash, as referred to in Directive 91/308/EEC, the information
obtained through the declaration provided for in Article 3 or
the controls provided for in Article 4 may be transmitted to
competent authorities in other Member States.

Regulation (EC) No 515/97 shall apply mutatis mutandis.

2. Where there are indications that the sums of cash involve
the proceeds of fraud or any other illegal activity adversely
affecting the financial interests of the Community, the informa-
tion shall also be transmitted to the Commission.

Article 7

Exchange of information with third countries

to the consent of

In the framework of mutual administrative assistance, the infor-
mation obtained under this Regulation may be communicated
by Member States or by the Commission to a third country,
subject
the competent authorities which
obtained the information pursuant to Article 3 and/or Article 4
and to compliance with the relevant national and Community
provisions on the transfer of personal data to third countries.
Member States shall notify the Commission of such exchanges
of information where particularly relevant for the implementa-
tion of this Regulation.

Article 8

Penalties

Article 5

Recording and processing of information

1.
The information obtained under Article 3 and/or Article
4 shall be recorded and processed by the competent authorities
of the Member State referred to in Article 3(1) and shall be
made available to the authorities referred to in Article 6(1) of
Directive 91/308/EEC of that Member State.

1.
Each Member State shall introduce penalties to apply in
the event of failure to comply with the obligation to declare
laid down in Article 3. Such penalties must be effective,
proportionate and dissuasive.

2. Member States shall notify the Commission, at the latest
by … (*), of the penalties applicable in the event of failure to
comply with the obligation to declare laid down in Article 3.

(*) 18 months after the entry into force of this Regulation.

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Article 9

Evaluation

Four years after its entry into force, the Commission shall
submit to the European Parliament and the Council a report on
the application of this Regulation.

Article 10

Entry into force

This Regulation shall enter into force on the twentieth day
following that of its publication in the Official Journal of the
European Union.

It shall apply from … (*).

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament

The President

…

For the Council

The President

…

(*) 18 months after the date of entry into force of this Regulation.

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STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

On 25 June 2002, the Commission submitted to the Council its Report on controls on cross-border
cash movements together with a proposal for a Regulation of the European Parliament and the
Council on the prevention of money laundering by means of customs cooperation, based on Article
135 of the Treaty (1) (2).

The European Parliament delivered its opinion at first reading on 15 May 2003 (3), adopting 23
amendments to the proposal.

The Commission presented to the Council on 3 July 2003 an amended proposal on the above
subject (4).

On 17 February 2005, the Council adopted its common position in accordance with Article 251(2) of
the Treaty.

II. OBJECTIVE

The proposal aims to introduce an obligation for natural persons to declare cash movements above a
specific threshold at the EU's external borders. In addition, the proposal aims at enhancing border
controls of cash movements and at improving exchanges of information between the relevant authori-
ties.

III. ANALYSIS OF THE COMMON POSITION

1. General

The Council's common position, in accordance with the Commission proposal, aims to introduce
harmonized border controls of cash movements, thereby supplementing Directive 91/308/EEC (5)
and ensuring the proper functioning of the internal market through the elimination of the current
disparities in national legislation.

2. Position of the Council in detail

The Council took the following positions on the amendments adopted by the European Parliament:

(a) Legal basis

In line with the opinion of the European Parliament (amendment 2) the Council added Article
95 as a legal basis to the proposal. The Council considered that the main feature of the draft
Regulation should not be the prevention of money laundering (for which a different legal basis
would be required) but the introduction of harmonised border controls for cash movements, for
which Article 95 of the Treaty, governing the approximation of laws, regulations and adminis-
trative provisions of the Member States in connection with the functioning of the internal
market, constitutes the appropriate legal basis.

(b) Transformation into a Directive

The Council could not accept the EP amendments linked to the transformation of the proposal
into a Directive (amendments 1, 8, 9, 18, 20, 21, 22 and 23), considering that a sufficient
degree of harmonisation in a relatively short period of time can only be achieved by means of a
Regulation, which is generally applicable, binding in its entirety and directly applicable in all
Member States.

(1) OJ C 227 E, 24.9.2002, p. 574.
(2) COM(2002) 328 final.
(3) OJ C 67 E, 17.3.2004, p. 259.
(4) Doc. 11151/03 UD 67 EF 35 ECOFIN 203 CRIMORG 51 CODEC 948.
(5) Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of

money laundering (OJ L 166, 28.6.1991, p. 77).

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(c) Obligatory declaration

In its common position, the Council supported the Commission's proposal for a system of obli-
gatory declaration. The Council did not favour the idea of allowing Member States to choose
between a declaration or a disclosure system as suggested by the European Parliament (amend-
ments 2, 3, 4, 5, 6, 7, 8, 12, 14, 18 and 19). Such a choice between two systems would be
contrary to the uniform Community-wide application of the measures proposed. However, the
Council introduced a degree of flexibility by leaving the choice to Member States to introduce
an obligation for written, oral or electronic declarations. Consequently, the Council agreed to
delete the declaration form contained in the Annex to the proposal and to insert a provision on
the information to be provided by the written, oral or electronic declarations (see also below
point 3.b)).

(d) Threshold for declaration

The Council opted for a threshold of EUR 10 000 which is lower than the thresholds foreseen
in the Commission proposal and in the European Parliament's Opinion (amendments 3 and 7).
The lower threshold reflects the fact that many Member States' legislation currently foresees
considerably lower thresholds and that the level initially proposed (EUR 15 000) would result
in a severe decrease in the intensity of controls in those Member States.

The lower threshold also sends a clear signal at international level of the Council's willingness
to adopt measures to monitor cash movements by introducing a strict and uniform limit
throughout the Community, which is easy to implement and clearly recognizable by travellers
entering or leaving the Community.

(e) Powers of the competent authorities

Concerning the powers of the competent authorities, the Council agreed with the European
Parliament (amendments 10 and 17) that this provision should be placed in a different context
and therefore moved it to the Article immediately following the provision on the obligation to
declare. As to the content of this provision, the Council considered that the empowerment of
national authorities should be done in accordance with the conditions laid down under national
legislation. In addition, national authorities should also be empowered to control the means of
transport in order to check compliance with the obligation to declare. However, the Council did
not maintain the maximum time period of three days for the detention of cash as foreseen in
the proposal and supported in amendment 11, considering that such a limitation in time would
not allow the necessary flexibility for authorities to carry out controls and subsequent investiga-
tions in order to determine whether a penal procedure needed to be opened in a specific case.

(f) Definition of ‘cash’

The Financial Action Task Force on Money Laundering (FATF) adopted, on 22 October 2004,
its Special Recommendation IX on cash couriers. This Recommendation, agreed at international
level, contains a definition of ‘cash’, which the Council inserted in the present draft Regulation
in order to guarantee the widest possible coherence of rules at Community and international
levels. As requested in amendment 13, the text extends the definition of cash to cover a wider
range of cheques than initially proposed.

(g) Exchange of information

The Council clarified and restructured the provisions on exchange of information between
authorities (amendment 15):

— firstly,

it is clarified that the information obtained by declarations or controls shall be
recorded and processed by the competent authorities of a Member State and, within that
same Member State, be made available to the Financial Intelligence Unit (FIU), the latter
point being also explicitly included in the FATF Special Recommendation IX. In the case of
persons entering or leaving the Community with less than EUR 10 000 but where there are
indications of illegal activities, certain information on this person may also be recorded and
processed by the competent authorities within one Member State and be made available to
that Member State's FIU,

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— secondly,

information obtained by declarations or controls may be exchanged between
Member States. For this exchange of information between Member States, Council Regu-
lation (EC) No 515/97 of 13 March 1997 on mutual assistance between the administrative
authorities of the Member States and cooperation between the latter and the Commission to
ensure the correct application of the law on customs and agricultural matters applies mutatis
mutandis,

— finally, information may be exchanged with third countries, in the framework of a mutual
administrative assistance agreement. However, the communication of information is subject
to the consent of the authority that collected the information initially and to personal data
protection provisions. The Commission should be notified of such exchanges of information
where particularly relevant to the implementation of the Regulation.

(h) Joint database

The Council did not accept the idea of forwarding the information obtained to a database
jointly administered by the Member States and held by the European Police Office (Europol)
(amendment 16). The Council considered that such a provision would not be covered by the
legal basis of the draft Regulation.

(i) Report by the Commission

In its common position, the Council accepted the idea reflected in amendment 22 and intro-
duced a provision requiring the Commission to submit a report to the European Parliament and
the Council four years after the entry into force of the Regulation.

3. New elements introduced by the Council

In addition to the items on which the European Parliament has delivered its opinion and on which
the Council common position is reflected above, the Council inserted the following new elements
into the proposal:

(a) Scope of the Regulation

Intra-Community controls of cash may be maintained where these measures are in conformity
with the Treaty.

In addition, the Council adapted the geographical coverage of the Regulation considering that,
for the sake of transparency for travellers and in order to facilitate the application of the Regu-
lation by the competent authorities, the control of cash movements should be carried out when
a natural person is entering or leaving the Community territory. This solution would also
ensure a parallel geographical application of Directive 91/308/EEC and the present draft Regu-
lation.

(b) Declaration form

The uniform declaration form proposed by the Commission was not accepted by the Council.
Instead, the Council preferred to specify the data to be provided in the declaration. This intends
to limit the administrative burden for the competent authorities to the strict minimum when
collecting the information from travellers whilst ensuring that a minimum of information on
cash movements is collected and, subsequently, is available for exchange with other authorities.

(c) Copy of a written declaration

In the case of a written declaration by the declarant, the Council inserted a provision ensuring
that the declarant shall be entitled to receive an endorsed copy of the declaration upon request.

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(d) Penalties

The Council simplified the provision on penalties aligning it with similar provisions in compar-
able legal acts (1). Member States should therefore introduce penalties of an effective, dissuasive
and proportionate nature for infringements of the obligation to declare cash movements when
crossing the external Community borders. The Council accepted amendment 19 concerning the
extension of the time limit for notification of the applicable penalties to the Commission. It set
a period of 18 months after the entry into force of the Regulation.

IV. CONCLUSION

The objective of the proposed Regulation to introduce harmonized border controls of cash movements
and to strengthen cooperation between competent authorities is supported by the Council's common
position. As there is a risk that the application of tightened controls in the financial sector following
the adoption of Directive 91/308/EEC will lead to an increase in cash movements for illicit purposes,
the Community underlines its commitment to combating the problem of illegal cash movements
through the introduction of an obligation for natural persons to declare cash movements above a
threshold of EUR 10 000 at the Community borders, whilst avoiding possible negative effects on the
functioning of the internal market by applying these measures, by way of a Regulation, in a harmo-
nised way throughout the Community.

(1) See, for example, Article 18 of Council Regulation (EC) No 1383/2003 of 22 July 2003 concerning customs action
against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods
found to have infringed such rights (OJ L 196, 2.8.2003, p. 7).