REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL under Article 12(5) of Regulation (EU) No 1210/2010 of the European Parliament and of the Council of 15 December 2010 concerning authentication of euro coins and handling of euro coins unfit for circulation
Date: 2014-09-03
Institutions: European Commission
Subjects: EU control, counterfeiting, euro, exchange of information, fraud, technical regulations













EUR-Lex - 52014DC0551 - EN











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52014DC0551

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL under Article 12(5) of Regulation (EU) No 1210/2010 of the European Parliament and of the Council of 15 December 2010 concerning authentication of euro coins and handling of euro coins unfit for circulation /* COM/2014/0551 final */









REPORT FROM THE COMMISSION
TO THE EUROPEAN PARLIAMENT AND TO
THE COUNCIL
under Article 12(5) of Regulation
(EU) No 1210/2010 of the European Parliament and of the Council of 15 December
2010 concerning authentication of euro coins and handling of euro coins unfit
for circulation[1]

1.                      
Introduction

The Commission shall present a report to
the European Parliament and to the Council by 30 June 2014 according to Article
12(5) of Regulation (EU) No 1210/2010 of the European Parliament and of the
Council of 15 December 2010 concerning authentication of euro coins and
handling of euro coins unfit for circulation (hereinafter the Regulation).
This report contains an overview of the
assessment of the implementation of the provisions of the Regulation based on
annual reports submitted by the Member States in order to evaluate the “operation
and effects” of the Regulation. 

2.                      
Objective of the Regulation (EU) No 1210/2010

2.1  General
In order to improve the protection of the euro against counterfeiting Council Regulation
(EC) No 1338/2001[2]
requires credit institutions and, within the limits of their payment activity,
other payment service providers, as well as any other institutions engaged in
the processing and distribution to the public of notes and coins (hereinafter
"institutions"), to ensure that euro notes and coins which they have
received and which they intend to put back into circulation are checked for
authenticity, and that counterfeits which they detect are withdrawn from
circulation. 
For coins this obligation is further
detailed in Regulation (EU) No 1210/2010[3].
The objective of the Regulation is to ensure effective and uniform
authentication of euro coins throughout the euro area by providing binding
rules for the implementation of common procedures for the authentication of
euro coins in circulation and for the implementation of control mechanisms of
the authentication procedures by the national authorities. An authentication
procedure is designed to verify that euro coins are genuine and fit for
circulation.
The Regulation stipulates that the
authentication obligation shall be implemented by means of coin-processing
machines or by trained personnel. Following the authentication procedure all
suspected counterfeit coins and coins unfit for circulation are to be submitted
to the Coin National Analysis Centre (CNAC)[4]
or another authority designated by the Member State concerned. The Regulation
sets out the testing requirements for the coin-processing machines, rules for
handling coins unfit for circulation, as well as control mechanisms to be put
in place by Member States to ensure the institutions are fulfilling their
authentication obligation. 
Furthermore, the Regulation contains rules
on the obligation to withdraw unfit coins from circulation. 
The European Technical and Scientific
Centre (ETSC), established by Commission Decision 2005/37/EC[5],
defines the Guidelines on implementation of the Regulation (hereinafter the
"ETSC Guidelines"), in order to ensure a uniform technical
implementation in line with Article 7 of the Regulation. 
2.2  Reports under Regulation (EU) 1210/2010
Member States shall submit annually reports
to the Commission on their activities as regards authentication of euro coins
in line with Article 12(1). The information provided in these reports shall include
the numbers of controls carried out and of coin-processing machines checked by
Member States, the test results, the volume of coins processed by those
machines, the number of suspected counterfeit coins analysed and the number of
euro coins unfit for circulation reimbursed as well as details of any
derogations implemented by Member States under the Regulation.
The Commission shall present an annual
report to the Economic and Financial Committee (EFC) under Article 12(4) on the
developments and results concerning the authentication of euro coins and euro
coins unfit for circulation based on the analysis of the annual reports
submitted by the Member States. In June 2014 the Commission (OLAF) presented
its first report to the EFC for the year 2012[6].

This report is presented to the European
Parliament and to the Council under Article 12(5), focusing on the operation
and effects of the Regulation, accompanied, if appropriate, by legislative
proposals. 

3.                      
Operation and effects of
Regulation (EU) No 1210/2010
3.1                  
Assessment method 

The Commission (OLAF) has based this report
on the following sources of information:

 The annual reports received from the
     Member States for the years 2012 and 2013;
 The annual Commission’s report presented to
     the EFC referring to the year 2012;
 A questionnaire sent to all Member States
     in order to clarify the level of implementation of the Regulation[7].

The key provisions of the Regulation on
authentication have been applicable as from 1 January 2012. Given the limited
experience with the implementation of the Regulation, the Commission considers
this report as a preliminary assessment in the framework of the annual reports
and the questionnaire. 
The main aspects of the assessment are
summarized in the following section. 

3.2                  
 Analysis of Member
States’ contributions

The majority of the Member States has
implemented the Regulation since its entry into force in January 2012 although Finland, Luxembourg and Ireland are still in the process of fully implementing the Regulation. Italy has indicated that only Chapter III of the Regulation has been effectively
implemented, whereas a national decree is in preparation enabling the full
implementation of the Regulation. 
Based on the Commission’s report to the EFC
for the year 2012 and on the contributions from the Member States for the year
2013, the following tendencies may be observed.
An increasing number of coins is being
authenticated (in 2013 over 10 billion coins were authenticated[8]). The
number of coins processed for the three highest denominations increased in 2013
by 6%[9]. 
The number of controls carried out by the Member States increased as well as
the number of coin-processing machines checked[10].
In addition, the number of the machines deemed to be compliant (successfully passing
the detection test as stipulated in Article 4(1)) has also increased; hence,
the number of the non-compliant machines has decreased. 

3.2.1       
Article 3 on authentication of euro coins

Article 3 contains the basic obligation of
the “institutions” to authenticate either by means of coin-processing machines
or trained personnel. 
Most of the Member States reported that the
“institutions” perform the authentication process mostly using coin-processing
machines, and to a lesser extent, trained personnel. In Slovakia, the Netherlands, Portugal, Malta, Ireland and Austria this process is performed
exclusively by coin-processing machines[11].
The majority of the Member States confirmed that suspected counterfeit coins
are sent to the CNACs. 

3.2.2       
Article 4 and 5 on testing requirements
and adjustment of coin-processing machines

Article 4 contains the requirements for
testing of coin-processing machines used for authentication. 
The ETSC[12]
plays an important role in securing that only machines capable of detecting
euro counterfeits are eligible to be used in the euro area for authentication.
The ETSC publishes a list of machines
passing the detection test on the Commission’s (OLAF) website referred to in
Article 5(2) of the Regulation. In all Member States - with the exception of Greece[13] - the
machines used by the “institutions” are listed on the Commission’s (OLAF)
website.
According to Article 5 the testing of
coin-processing machines must be carried out by designated national
authorities. 
Most of the Member States have designated
CNACs to perform detection tests. In order to detect new classes of
counterfeits the machines have to be adjusted. The test pack used to maintain
the detection capabilities of the coin-processing machines is therefore reviewed
on a regular basis by the ETSC in cooperation with the relevant stakeholders. 

3.2.3       
Article 6 on controls by Member States 

Article 6 requires annual
on-the-spot-controls by the Member States in the “institutions” and specifies
how they should be conducted. 
The majority of Member States reported that
the on-the-spot controls are performed in conformity with Article 6 of the
Regulation whilst Italy, Luxembourg, Greece, Malta and Finland[14] have
reported to have not yet carried out any controls. On the basis of the information
received, the percentage of coin-processing machines to be checked, as specified
in Article 6(3), seems to be feasible for the Member States. Based on the
on-the-spot-controls, most of the Member States have replied that one of the
main reasons for non-compliance with the Regulation is a failure of the
detection test[15].
For example, it has occurred that known types of counterfeit euro coins and
euro coins unfit for circulation are not rejected by coin-processing machines. Other
reasons for non-compliance cited by Member States include a lack of internal
control procedures[16]
and trained personnel[17].


3.2.4       
Article 8 on withdrawal and reimbursement
of euro coins unfit for circulation 

Article 8 of the Regulation requires that
euro coins unfit for circulation are withdrawn from circulation and destroyed
by physical and permanent deformation.
All Member States reported that detected
unfit coins are withdrawn from circulation in conformity with Article 8(1) and
are reimbursed in line with Article 8(2). A majority of Member States, with the
exception of Slovenia and Estonia[18],
has indicated that the coins unfit for circulation are destroyed.  
The Commission requested the Mint
Directors’ Working Group (MDWG)[19]
to conduct a study on best practices in relation to demonetisation of unfit
coins[20]
in order to assist Member States with an efficient enforcement of the
provisions of the Regulation on the destruction of the withdrawn unfit coins. 

3.2.5       
Article 9 on handling fees and Article 10
on packaging of euro coins unfit for circulation 

Article 9 of the Regulation provides for a
flexible system of handling fees related to the reimbursement and replacement
of euro coins unfit for circulation.
A majority of Member States have no
handling fees for the reimbursement or replacement of unfit coins, while others
choose to deduct a handling fee from reimbursement of unfit coins in line with
Article 9(1)[21].
Article 10(1) of the Regulation stipulates
the packaging requirements of coins unfit for circulation submitted for
reimbursement or replacement.
Most of the Member States report that standardised
packaging requirements are used when submitting coins unfit for circulation for
reimbursement[22].
Some Member States reported to use the derogation referred to in Article 10(2)
applying different packaging as per national rules[23].

3.2.6       
Article 11 on checks of euro coins unfit
for circulation 

Article 11 provides for guidelines related
to checks of submitted euro coins unfit for circulation and gives the
possibility to Member States to adopt further measures.
Most of the Member States have mentioned
that a national procedure for checks of euro coins unfit for circulation in
line with Article 11(1) of the Regulation is in place[24]. However,
few Member States have adopted further measures for the submission of coins as
referred to in Article 11(3)[25],
so as to safeguard the health of the employees of the “institutions” involved
in checking unfit coins.

3.2.7       
Article 12 on reporting, communication
and evaluation 

Article 12 contains rules on reporting by
the “institutions”, by the Member States and by the Commission. 
The Member States do not fully comply with
their reporting obligation as stipulated in Article 12(1) of the Regulation and
in the “ETSC Guidelines”.
The Commission concluded in its report to
the EFC for the year 2012 that a further fine-tuning of the reporting
obligation by Member States is necessary to allow the Commission to draw up a
comprehensive picture of the authentication procedures put in place in Member
States. The reports from Member States have not yet reached the desired level of
timeliness, completeness or homogeneity.
The majority of Member States reported,
with the exception of Estonia and Italy[26]
that the “institutions” comply in a satisfactory way with the requirement of
Article 12(2). A majority of Member States reported their compliance with the
requirement of Article 12(3) to make available the information concerning the
authorities designated for reimbursement or replacement of euro coins on
websites or in other appropriate publications[27].


3.2.8       
Article 13 on penalties

Article 13 requires Member States to lay
down rules on effective, proportionate and dissuasive measures necessary for
the implementation of the Regulation. 
A majority of Member States have indicated that
administrative sanctions have been implemented for infringements of the Regulation
including fines or other administrative measures, such as withdrawal of
licences to process coins[28]. 


4.                      
Conclusion 
4.1  General

Based on the information reported by the
Member States the authentication procedure in the “institutions” is in place in
the majority of the euro area Member States. The Designated National
Authorities as referred to in Article 2(c) and Article 3(2) are identified in
each Member State. Coin-processing machines play an essential role in the
authentication process and their adjustment is carried out as the Regulation
stipulates. Most of the Member States of the euro area carry out controls on
the correct implementation of the authentication obligation by the
"institutions". All Member States of the euro area comply with the requirement
to withdraw coins unfit for circulation. Some improvements could be considered
in relation to the treatment of unfit coins withdrawn from circulation by
Member States.

4.2  Evaluation
of a possible modification of Regulation (EU) 1210/2010

Given that a limited level of experience
has been gained so far with the implementation of the Regulation, it is too
early to envisage a legislative proposal at this stage[29].
A further fine-tuning of the reporting
obligation by Member States is necessary to allow the Commission to draw up a
comprehensive picture of the authentication procedures put in place in Member
States. 
Therefore, the Commission (OLAF) will need
to further assess the appropriateness of a possible modification of the
Regulation. Some Member States, however, have already identified some areas for
improvement which are summarised below[30]:
Article 3
It has been suggested to modify Article
3(1) of the Regulation and to introduce an extra category of machines which could
be used to comply with the authentication obligation in addition to Article
3(1a) and (1b)[31].
Article 6
It has been suggested that the number of
coins processed by national authorities in the premises of Central Banks, which
are currently not considered “institutions”, should be taken into account when
assessing the compliance with the 25% referred to in Article 6(3). It has also
been suggested that the annual compliance should be linked to the number of
institutions checked rather than the number of coin-processing machines checked[32]. On
the other hand, it has been suggested to have less detailed rules for planning
and conducting annual on-the-spot controls.
Article 8 
It has been suggested to look into a
further alignment of the conditions for reimbursement of unfit coins as
stipulated in Article 8(2) of the Regulation given the diverging national
practices.  

4.3  Way
forward

Taking into account the above, the
Commission (OLAF) will carry out a further assessment. Based on its evaluation,
it will discuss the way forward with its stakeholders. Options available could
include a modification of the Regulation or a clarification of the “ETSC
Guidelines”. This assessment will be based on discussions, for instance, in the
framework of the Commission’s expert group (CCEG[33]). The
Commission will use future annual reports under Article 12(4) to communicate
progress made.
[1]OJ L339, 22.12.2010, p. 5.
[2]OJ L 181, 4.7.2001, p. 6.
[3]On the other hand for euro banknotes it is further detailed in the Decision
of the European Central Bank ECB/2010/14, OJ L 267, 9.10.2010, p.1.
[4]According to Article 5(1) of Council Regulation (EC) No 1338/2001,
CNACs are established or designated by the Member States.
[5]Commission Decision of 29 October 2004 establishing the European
Technical and Scientific Centre (ETSC) and providing for coordination of
technical actions to protect euro coins against counterfeiting, OJ L 19
21.1.2005, p. 73.
[6]COM (2014) 277.
[7]Annex I.
[8]Annex II – Chart 1.
[9]However there was a decrease in the volume of coins processed by the
coin processing machines checked by the Member States which can be explained by
applying the rotation principle when deciding which coin-processing machines
should be checked as stipulated in Article 6(3).
[10] Annex II – Chart 2.
[11]Based on the Member States’ replies to the questionnaire. Italy, France and Finland did not provide any feedback to this particular point.
[12]The ETSC is established within the Commission in Brussels, attached
to OLAF (Article 1 of the Commission Decision 2005/37/EC, OJ L 19, 21/01/2005,
p. 73). 
[13]Greece reported that none of the machines in use
are listed on the Commission’s (OLAF) website since a specific derogation has
been granted in line with Article 4(2).
[14]Finland did not report for the year 2012 as
Article 12(1) stipulates.
[15]DE, CY, EE, NL, PT, BE, FR and IE.
[16]NL, FR, SP and IE.
[17]CY.
[18]Slovenia and Estonia replied to the
questionnaire that they keep the number of coins unfit for circulation. This is
done because the number of coins unfit for circulation in both Member States is
relatively small. 
[19]The Mint Directors Working Group (MDWG) is a non-formal gathering of
the Mint Masters from the EU Member States which works on a mandate of the Euro
Coin Sub-Committee (the latter belonging to the Economic and Financial
Committee).
[20]The results of the study were endorsed by MDWG including a
recommendation of best practices identified.  
[21]CY, SK, HR, BE, LU, MT, IE and AT apply a handling fee which is
deducted from the reimbursement of unfit coins. 
[22]With the exception of FI, DK, SK, EE and FR.
[23]DE, CY, NL and SP have mentioned that there are derogations in place
as for Article 10(2) of the Regulation. 
[24]DK, NL, FR, LU and MT have mentioned that there is not a procedure
for checks of euro coins unfit for circulation. 
[25]DE, BE, IT and LU. 
[26]In Italy a national decree is under preparation which will establish
binding rules for reporting and communication for the “institutions”. 
[27]With the exception of EE, LV and FI.
[28]With the exception of FI, DK, EE, IE and LU. 
[29]The report may be accompanied, if appropriate, by legislative
proposals implementing in further detail, or amending, the Regulation, in
particular with respect to Articles 6 and 8 as stipulated in Article 12(5) of
the Regulation.
[30]These suggestions were made in the framework of the questionnaire
submitted by the CNACs. 
[31]The suggested text is the following: “(c) with coin-changing and
coin-pay-in machines which withdraw counterfeited, suspected and unfit coins
and do not give them back to the user”. 
[32]The suggested text is the following “the number of coin-processing
sites to be checked annually in each Member State shall be such that the volume
of euro coins processed mechanically in those sites during that year
representing at least 25 % of the total cumulated net volume of coins issued by
that Member State from the introduction of euro coins until the end of the
previous year; the volume of euro coins processed used to calculate the annual
compliance of 25% may be the real data from the previous year, or an estimation
based on the data declared by institutions for the first half of the year”.
[33]The Counterfeit Coin Experts Group (CCEG) usually meets twice a year
to discuss technical issues related to counterfeiting of euro coins. Other
items of the agenda concern the euro coin counterfeiting situation and the activities
of the Coin National Analysis Centres (CNACs) in the Member States, the
similarity of medals or tokens to euro coins and the implementation of coin
authentication procedures.
 Chart 1 
 Chart 2 
Questionnaire on implementation of Regulation (EU) No
1210/2010 of the European
Parliament and of the Council
of
15 December 2010.
Fields marked with * are mandatory.
The following questionnaire is aimed at monitoring and evaluating the implementation of Regulation (EU) 1210/2010 of the European
Parliament and of the Council of 15 December
2010 concerning authentication of euro coins and handling of euro
coins unfit for circulation.
Identification fields
Country*
Organisation*
Contact details (e-mail address and phone number)*
Questionnaire
Has
Regulation (EU) 1210/2010 been implemented in your Country?*
   Yes
   No
When? Please specify national legislation source (if existing)*
If
not, when Regulation (EU) 1210/2010 will be implemented?*
What
percentage of the authentication process is performed by means of
Coin-Processing Machines and which by personnel trained? (Art. 3(1))*
Are
suspect counterfeit coins sent to the Designated National Authorities? (Art.
3(2)*
   Yes
   No
Are
the machines used by institutions listed on the website referred to in Article
5(2)?  (Art. 4)*
   Yes
   No
If
not, what percentage is not listed?*
What
percentage of the machines will be not conform as of 01/01/2015 because the
derogation will expire? (Art.4(2))*
Concerning
the adjusting of coin-processing machine, where does the detection test take
place? (Art. 5)*
   At CNAC premises
   At manufacturer’s premises
   Other places
Please
specify.*
Are
on-the-spot controls performed in your Country? (Art. 6)*
   Yes
   No
If
not, which are the main reasons for not performing on-the-spot controls? (Art.
6(2))*
Are
there any issues/problems related to the number of coin processing machines to
be checked in relation with the volume of euro  coins  processed by these
machines? (Art. 6(3)).*
Concerning
the results of the on-the-spot controls, which are the main reasons of
non-compliance? (Art. 6(6))*
   Missing written policy providing instructions
   Not appropriate human resources allocation
   Missing written policy for counterfeits/unfit coins
submission
   Missing of internal control procedures
   Detection test failure
   Other reasons  
Please
specify*
Are
unfit coins withdrawn from circulation? (Art. 8)*
   Yes
   No
How?  Which procedures are in place? (Art. 8 (2))*
How many unfit coins have been withdrawn in 2013? Please provide
figures.*
Are unfit coins reimbursed?*
   Yes
   No
Please
provide figures.*
Are
unfit coins destroyed?*
   Yes
   No
Please
provide information on the destruction process and methodology. (Art. 8(3)).*
Are
handling fees withheld from the reimbursement of unfit coins? (Art. 9)*
   Yes
   No
How
the process is implemented?*
Are
there any exemptions? Please specify.*
What
is the maximum fee (if exists) for reimbursement?*
Are standardized requirements for packaging used when submitting
for reimbursement coins unfit for circulation? (Art. 10(1))*
   Yes
   No
What
packaging procedures are in place for unfit coin reimbursement? Please specify.*
Are
derogations in place as for Art. 10(2)?*
Is
there a procedure for checking coins unfit for circulation? (Art. 11(1))*
   Yes
   No
What
requirements does it stipulate?*
Have
measures been adopted in case of submission of coins as referred to in Art.
11(3)?*
Which
authority is responsible for reporting to the European Commission? (Art. 12)*
Are
institutions complying in a satisfactory way with this requirement? (Art.
12(2)).
Have
penalties for Regulation (EU) 1210/2010 infringements been implemented? (Art.
13)*
   Yes
   No
Which authorities are in charge for application?*
What kinds of penalties are in place?*