CELEX: 52005PC0343
Language: en
Date: 2005-07-26
Title: Proposal for a Regulation of the European Parliament and of the Council on information on the payer accompanying transfers of funds

COMMISSION OF THE EUROPEAN COMMUNITIES
                                              Brussels, 26.7.2005
                                              COM(2005) 343 final
                                              2005/0138 (COD)
                                 Proposal for a
   REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
         on information on the payer accompanying transfers of funds
                        (presented by the Commission)
EN                                                                   EN
 ---pagebreak---                                   EXPLANATORY MEMORANDUM
       1) CONTEXT OF THE PROPOSAL
          •
   110
               Grounds for and objectives of the proposal
          The present proposal for a Regulation aims to transpose Special Recommendation VII
          on “wire transfers” (SR VII) of the Financial Action Task Force (FATF) into
          Community legislation.1
          The proposal lays down rules on information on the payer accompanying transfers of
          funds, in order to ensure that basic information is immediately available to the
          authorities responsible for combating money laundering and terrorist financing, to
          assist them in their task.
          According to its revised interpretative note, which was adopted on 10 June 2005,
          SR VII should be transposed by December 2006.
          •
   120
               General context
          The worldwide escalation of acts of terrorism in the last decade has mobilised the
          international community to develop appropriate measures to combat this phenomenon.
          Following the terrorist attacks of 11 September 2001 in the United States, combating
          terrorism has become a key political priority worldwide. At its extraordinary meeting
          on 21 September 2001, the European Council decided that the fight against terrorism
          will, more than ever, be a key objective of the European Union, and adopted a Plan of
          Action to Combat Terrorism.
          Following the attacks in Madrid of 11 March 2004, the European Council adopted, on
          25 March 2004, a Declaration on combating terrorism and revised its Plan of Action to
          Combat Terrorism. 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" acknowledges that the legislative framework created by the
          Union for the purpose of combating terrorism and improving judicial cooperation has a
          decisive role to play in combating terrorist activities and sets out detailed proposals for
          developing the fight against terrorist financing. One of these measures consists in close
          co-operation with the FATF and the adaptation of the EU legislative framework to the
          nine Special Recommendations on terrorist financing adopted by the FATF.
          In combination with the FATF Forty Recommendations on money laundering adopted
          in 1990 and revised in 2003, Special Recommendations I to IX set out the basic
          framework to detect, prevent and suppress the financing of terrorism and terrorist acts
          at international level. FATF rules are generally accepted as the international standard in
          the fight against money laundering and terrorist financing.
   1
          FATF is the international body established by the Paris G7 summit in 1989, and which is considered as
          the world standard in the fight against money laundering and terrorist financing.
EN                                                       2                                                      EN
 ---pagebreak---        EU Member States are committed to the implementation of FATF standards. Most of
       the measures set out in the nine Special Recommendations of the FATF have been or
       are in the process of being implemented either through Community legislation, or
       through the procedures established under Titles V and VI of the Treaty of the European
       Union.
       •
   130
            Existing provisions in the area of the proposal
       Council Regulations (EC) No 2580/2001 of 27 December 20012 and (EC) No 881/2002
       of 27 May 20023 relate to the freezing of terrorists’ assets. The provisions of these
       Regulations however only apply to targeted individuals or groups which are considered
       as terrorists by the United Nations Security Council.
       On the other hand, Directive 2005/…/EC of the European Parliament and of the
       Council of ….2005 on prevention of the use of the financial system for the purpose of
       money laundering and terrorist financing contains a number of measures aimed at
       combating the misuse of the financial system for the purposes of money laundering and
       terrorist financing.
       However, the measures described above do not fully prevent terrorists and other
       criminals from having access to payment systems to move their funds. The proposal
       complements those measures by ensuring that basic information on the payer of
       transfers of funds is immediately available to appropriate law enforcement and/or
       prosecutorial authorities to assist them in detecting, investigating, prosecuting terrorists
       or other criminals and tracing the assets of terrorists.
       •
   140
            Consistency with the other policies and objectives of the Union
       The proposal is consistent with the objectives of the European Council's Plan of Action
       to Combat Terrorism, which specifically addresses the need to ensure that the
       legislative framework created by the Community for the purpose of combating
       terrorism and improving judicial cooperation is adapted to the nine Special
       Recommendations of the Financial Action Task Force on Money Laundering and
       Terrorist Financing.
   2
       On specific restricted measures directed against certain persons and entities with a view to combating
       terrorism. OJ L 344, 28.12.2001, p. 70. Regulation as amended by Commission Regulation
       (EC) No 745/2003 (OJ L 106, 29.4.2003, p. 22).
   3
       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 exports 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, 29.5.2002, p. 9. Regulation as last amended by Commission Regulation
       (EC) No 2034/2004 (OJ L 353, 27.11.2004, p. 11).
EN                                                     3                                                           EN
 ---pagebreak---        2) CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT
          •   Consultation of interested parties
   211
          Consultation methods, main sectors targeted and general profile of respondents
          In its Communication to the Council and the European Parliament concerning a "New
          legal framework for payments in the Internal Market", the Commission consulted
          interested parties on issues raised by the transposition of SR VII into Community
          legislation. In addition, The Commission extensively consulted major stakeholders by
          means of targeted meetings of consultative Committees (Payment Systems
          Government expert Group, Payment Systems Market Group and Money Laundering
          Contact Committee).
   212
          Summary of responses and how they have been taken into account
          The main issues addressed in the Communication on a "New legal framework for
          payments in the Internal Market" were: (1) the transposition of SR VII by Community
          legislation versus national legislation; (2) the information regime applicable within the
          EU; (3) the need for derogation from the principle of complete information on the
          payer as regards batch transfers between jurisdictions and (4) the need for exemptions
          or thresholds.
          (1) The transposition of SR VII through Community legislation versus national
          legislation
          The results of the consultation have shown overwhelming support from all stakeholders
          (the banking community, national central banks, the European Central Bank and
          Member States) to transpose SR VII through Community legislation rather than
          national legislation.
          (2) The information regime applicable within the EU: the contents of information on
          the payer as regards transfers of funds within and between Member States
          According to SR VII, information on the payer accompanying transfers of funds inside
          a jurisdiction can be limited to the account number of the payer, provided complete
          information on the payer (name, address and account number) can be delivered within
          three working days, upon request, by the PSP of the payer to the PSP of the payee. As
          this rule is enforceable within the Community by way of Community legislation, it is
          sufficient to require transfers of funds within the EU to be accompanied by the account
          number of the payer. In cases where either the PSP of the payer or of the payee are
          situated outside the EU, complete information on the payer should be transmitted.
          The present proposal therefore establishes that simplified information (the account
          number of the payer or a unique identifier) has to be applied to transfers of funds
          within the EU, whereas complete information on the payer has to be applied to
          transfers of funds between the EU and other jurisdictions. This is fully in line with the
          results of the public consultation.
          (3) The need for derogation from the principle of complete information on the payer as
          regards batch transfers between jurisdictions
EN                                                 4                                                EN
 ---pagebreak---        The FATF's original interpretative note on SR VII (INSR VII) exempted batch
       transfers between jurisdictions (except those sent by money remitters) from carrying
       complete information on the payer. By derogation from the complete information
       regime that applies between jurisdictions, batch transfers needed only carry the account
       number of the payer or a unique identifier. However, the term "batch" was not defined
       in the original FATF's INSR VII. This absence of definition made the scope of the
       derogation unclear. In the context of payment systems, the term "batch transfers" can
       have very different meanings. Without a harmonised definition, a common
       understanding of the derogation by PSPs was unlikely, and maybe not even possible.
       The banking community and the majority of Member States recognise the need for this
       derogation as regards individual transfers from a single payer that are contained in a
       batch file for transmission to payees outside the Community. This process specifically
       refers to bundling together groupings of individual transfers from a single payer to
       several payees (typically certain type of routine transfers, like social security
       payments), which does not allow, for cost/efficiency reasons, to include complete
       information on the payer with each individual transfer, but only on the batch file which
       contains them. The same understanding now applies in the FATF, after a revision of
       the original INSR VII. The present proposal therefore contains a specific provision
       allowing for transfers of funds from a single payer which are contained in a batch file
       for transmission to payees outside the Community, to only carry the account number of
       the payer, provided the batch file contains complete information on the payer.
       (4) The need for exemptions or thresholds
       The initial interpretative note on SR VII established that jurisdictions could have a de
       minimis threshold (no higher than USD 3 000). This exemption was nevertheless
       meant to be temporary and subject to review by the FATF in 2004. This review took
       place between February 2004 and June 2005 and materialised in a revised INSR VII,
       which was approved on 10 June 2005. Such review gave rise to an extensive
       consultation of the payments industry as well as of the Member States. The results of
       the consultation show that the payments industry is in general opposed to the
       application of thresholds, as this would necessitate putting in place dual systems for
       dealing with transfers of funds below and above thresholds. Other stakeholders
       (Member States, national central banks and the European Central Bank) are generally
       not supportive either. In addition, a study by the FATF shows that even small amounts
       can be used to finance terrorism. On the other hand, there are concerns that too strict
       identification requirements may drive transactions underground, where the ability of
       authorities to obtain any information is considerably compromised. Consequently, the
       present proposal does not retain any threshold either for outgoing transfers from the EU
       or incoming transfers in the EU, as regards the collection and transmittal of
       information on the payer. It therefore provides for incoming anonymous transfers in the
       EU to be subject to special vigilance and to appropriate measures destined to get
       missing information on the payer. It also establishes that outgoing transfers of funds
       from the EU shall be accompanied by complete information on the payer, but in order
       to take into account the risk of driving transactions underground, flexibility is however
       allowed as regards the extent of verification of information on the payer, on a risk-
       sensitive basis.
   213
       An open consultation was conducted over the internet from 02/12/2003 to 15/02/2004.
       The Commission received 103 response(s). The results are available on
EN                                              5                                                EN
 ---pagebreak---           http://europa.eu.int/comm/internal_market/payments/framework/2004-
          contributions_en.htm.
          •    Collection and use of expertise
   229
          There was no need for external expertise.
          •
   230
               Impact assessment
          The proposal was not submitted for impact assessment as it derives from international
          obligations and has no significant cross-cutting impact. In addition, it was submitted to
          extensive consultation by all stakeholders.
          It transposes SR VII of the FATF in a way that minimises costs for the payments
          industry while at the same time ensuring a high standard in the fight against money
          laundering and terrorist financing.
       3) LEGAL ELEMENTS OF THE PROPOSAL
          •
   305
               Summary of the proposed action
          The proposal establishes rules aimed at establishing the traceability of transfers of
          funds, which are applicable to all the PSPs involved in the payment chain. The PSP of
          the payer must ensure that transfers of funds contain complete, accurate and
          meaningful information on the payer. Any intermediary PSP must ensure that all
          information on the payer that accompanies a transfer is retained with the transfer or
          that appropriate records are kept. The PSP of the payee must be able to detect a lack of
          presence of information on the payer when receiving transfers and take appropriate
          steps in order to correct this situation, so that received transfers of funds do not remain
          anonymous. While doing so, it must exert a special vigilance regarding such transfers
          and, on a risk sensitive basis, taking into account other pertinent factors, report
          suspicious transactions to the authorities responsible for combating money laundering
          and terrorist financing. PSPs should also keep appropriate records and respond fully
          and rapidly to enquiries by the authorities responsible for combating money laundering
          and terrorist financing of the Member State where they are situated.
          •
   310
               Legal basis
          Aricle 95 of the Treaty establishing the European Community.
          •
   320
               Subsidiarity principle
          The subsidiarity principle applies insofar as the proposal does not fall under the
          exclusive competence of the Community.
          The objectives of the proposal cannot be sufficiently achieved by the Member States
          for the following reason(s).
   323
          Non-coordinated action by Member States alone in the field of cross-border transfers
          of funds could significantly impact on the smooth functioning of payment systems at
          EU level, and therefore damage the Internal Market in the field of financial services.
EN                                                  6                                                 EN
 ---pagebreak---           Community action will better achieve the objectives of the proposal for the following
          reason(s):
   324
          By the scale of its action, Community action shall guarantee a uniform transposition of
          SR VII throughout the EU, and in particular, that there is no discrimination between
          national payments within a Member State and cross-border payments between Member
          States. This principle was established by Regulation (EC) No 2560/2001 on cross-
          border payments in euro, which was the first significant step towards the establishment
          of a Single Payment Area in the EU.
   325
          There is a general consensus, emanating from all stakeholders (in particular Member
          States and the payments industry), that the objectives of the action can be better
          achieved by the Union.
   327
          The scope of the proposal, which coincides with the measures foreseen in SR VII
          cannot, by its nature, and in order to avoid inconsistencies, be divided into Community
          action and action by Member States.
          The proposal therefore complies with the subsidiarity principle.
          •   Proportionality principle
          The proposal complies with the proportionality principle for the following reason(s).
   331
          In conformity with the results of the consultation process, the proposal transposes
          SR VII in the simplest way, by providing a simplified regime within the EU and a cost-
          effective system in order to ensure the traceability of transfers of funds to and from
          third countries. It does not go beyond what is necessary to achieve its objectives.
   332
          By establishing obligations applicable to payment service providers, which minimise
          the cost for the payments industry, the proposal therefore minimises the financial
          burden for national governments, economic operators and citizens.
          •   Choice of instruments
   341
          Proposed instrument: regulation.
   342
          Other means would not be adequate for the following reason(s):
          Payment systems in the EU are in the process of being integrated into a Single Payment
          Area and, consequently, SR VII should be implemented in a harmonised manner
          throughout the EU. All stakeholders called for the use of a regulation, which would be
          the most effective way of guaranteeing uniform implementation and thus a level
          playing field.
       4) BUDGETARY IMPLICATION
   401
          Meetings of the Committee on the Prevention of Money Laundering and Terrorist
          Financing.
EN                                                 7                                              EN
 ---pagebreak---        5) ADDITIONAL INFORMATION
          •
   560
             European Economic Area
          The proposed act concerns an EEA matter and should therefore extend to the European
          Economic Area.
EN                                           8                                                EN
 ---pagebreak---                                                           2005/0138 (COD)
                                             Proposal for a
       REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
                    on information on the payer accompanying transfers of funds
                                      (Text with EEA relevance)
   THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty establishing the European Community, and in particular
   Article 95 thereof,
   Having regard to the proposal from the Commission4
   Having regard to the opinion of the European Economic and Social Committee5
   Having regard to the opinion of the Committee of the Regions6
   Having regard to the opinion of the European Central Bank7
   Acting in accordance with the procedure laid down in Article 251 of the Treaty8,
   Whereas:
   (1)     In the wake of the terrorist attacks in the USA on 11 September 2001, the
           extraordinary European Council on 21 September 2001 reiterated that the fight against
           terrorism is a key objective of the European Union. The European Council approved a
           plan of action dealing with enhanced police and judicial co-operation, developing
           international legal instruments against terrorism, preventing terrorist funding,
           strengthening air security and greater consistency between all relevant policies. This
           plan of action was revised by the European Council following the terrorist attacks of
           11 March 2004 in Madrid, and now specifically addresses the need to ensure that the
           legislative framework created by the Community for the purpose of combating
           terrorism and improving judicial cooperation is adapted to the nine Special
           Recommendations against Terrorist Financing adopted by the Financial Action Task
           Force on Money Laundering and Terrorist Financing (FATF).
   4
           OJ C , , p. .
   5
           OJ C , , p. .
   6
           OJ C , , p. .
   7
           OJ C , , p. .
   8
           OJ C , , p. .
EN                                                 9                                              EN
 ---pagebreak---    (2) In order to prevent terrorist funding, measures aimed at the freezing of funds and
       economic resources of certain persons, groups and entities have been taken, including
       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
       terrorism9, and 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
       Afghanistan10. To that same end, measures aimed at protecting the financial system
       against the channelling of funds and economic resources for terrorist purposes have
       been taken. Directive 2005/…/EC of the European Parliament and of the Council of
       … 2005 on prevention of the use of the financial system for the purposes of money
       laundering and terrorist financing11 contains a number of measures aimed at combating
       the misuse of the financial system for the purpose of money laundering and terrorist
       financing. All those measures do not, however, fully prevent terrorists and other
       criminals from having access to payment systems for moving their funds.
   (3) In order to foster a coherent approach in the international context in the field of
       combating money laundering and terrorist financing, further Community action should
       take account of developments at that level, namely the nine Special Recommendations
       against Terrorist Financing adopted by the FATF and in particular Special
       Recommendation VII (SR VII) on wire transfers, and the revised interpretative note
       for its implementation.
   (4) The full traceability of transfers of funds can be a particularly important and valuable
       tool in the prevention, investigation, detection and prosecution of money laundering
       and the financing of terrorism. It is therefore appropriate, in order to ensure the
       transmission of information on the payer throughout the payment chain, to provide for
       a system imposing the obligation on payment service providers to have transfers of
       funds accompanied by accurate and meaningful information on the payer.
   (5) The provisions of this Regulation apply without prejudice to Directive 95/46/EC of the
       European Parliament and of the Council of 24 October 1995 on the protection of
       individuals with regard to the processing of personal data and on the free movement of
       such data12.
   (6) Due to the lower risk of money laundering or terrorist financing associated with
       transfers of funds that flow from a commercial transaction or where the payer and the
       payee are payment service providers acting on their own behalf, it is appropriate to
       exempt such transfers from the scope of this Regulation, under the condition that it is
       always possible to trace them back to the payer.
   9
       OJ L 344, 28.12.2001, p. 70. Regulation as amended by Commission Regulation (EC) No 745/2003
       (OJ L 106, 29.4.2003, p. 22).
   10
       OJ L 139, 29.5.2002, p. 9. Regulation as last amended by Commission Regulation (EC) No 2034/2004
       (OJ L 353, 27.11.2004, p. 11).
   11
       OJ L …, ……2005, p. .. (to be published, 2004/0137/COD).
   12
       OJ L 281, 23.11.1995, p. 31
EN                                                   10                                                 EN
 ---pagebreak---    (7)  In order to balance the risk of driving transactions underground by applying too strict
        identification requirements against the potential terrorist threat posed by small
        transfers, the obligation to verify that the information on the payer is accurate should
        be able to be applied on a risk-sensitive basis, as regards transfers of funds to payees
        outside the Community up to EUR 1 000.
   (8)  Against the background of Regulation (EC) No 2560/2001 of the European Parliament
        and of the Council of 19 December 2001 on cross-border payments in euro13 and the
        Commission Communication “A New Legal Framework for Payments in the Internal
        Market”14, it is sufficient to provide for simplified information on the payer to
        accompany transfers of funds within the Community.
   (9)  In order to allow the authorities responsible for combating money laundering or
        terrorist financing in third countries to trace the source of funds used for money
        laundering or the financing of terrorism, transfers of funds from the Community to
        third countries should carry complete information on the payer. Access, by those
        authorities, to complete information on the payer should only be granted for the
        purposes of preventing, investigating, detecting and prosecuting money laundering or
        terrorist financing.
   (10) For transfers of funds from a single payer to several payees to be sent in an
        inexpensive way in batch files containing individual transfers, such individual
        transfers should be able to carry only the account number of the payer, provided that
        the batch file contains complete information on the payer.
   (11) In order to check whether the required information on the payer accompanies transfers
        of funds, and to help to identify suspicious transactions, the payment service provider
        of the payee should have effective procedures in order to detect a lack of presence of
        information on the payer.
   (12) Due to the potential terrorist financing threat posed by anonymous transfers, it is
        appropriate to enable the payment service provider of the payee to avoid or correct
        such situations when becoming aware of a lack of presence or incompleteness of
        information on the payer. In this regard, flexibility should be allowed as regards the
        extent of information on the payer on a risk-sensitive basis. In addition, the accuracy
        and completeness of information on the payer should remain in the responsibility of
        the payment service provider of the payer. In the case where the payment service
        provider of the payer is situated outside the Community, enhanced customer due
        diligence should be applied, in accordance with Article [11] of Directive 2005/…/EC,
        in respect of cross-frontier correspondent banking relationships with that payment
        service provider.
   (13) In any event, the payment service provider of the payee should exert special vigilance,
        on a risk-based assessment, when becoming aware of a lack of presence or
        incompleteness of information on the payer, and should report suspicious transactions
        to the competent authorities.
   13
        OJ L 344, 28.12.2001, p. 13.
   14
        COM (2003) 718 final.
EN                                               11                                              EN
 ---pagebreak---    (14) Until technical limitations that may prevent intermediary payment service providers
        from satisfying the obligation of transmitting all the received information on the payer,
        are removed, those intermediary payment service providers should keep records of that
        information. Such technical limitations should be removed as soon as payment
        systems are upgraded.
   (15) Since, in criminal investigations, it may not be possible to identify the data required or
        the individuals involved until many months or even years after the original transfer of
        funds, it is appropriate to require payment service providers to keep records of
        information on the payer for the purposes of preventing, investigating, detecting and
        prosecuting money laundering or terrorist financing. In a democratic society, this
        period should be limited. It is appropriate that this period be set to five years.
   (16) To make for rapid action in the framework of combating terrorism, payment service
        providers should respond rapidly to requests for information on the payer from the
        authorities responsible for combating money laundering or terrorist financing in the
        Member State where they are established.
   (17) Given the importance of the combat against money laundering and terrorist financing,
        Member States should lay down effective, proportionate and dissuasive penalties in
        national law for failure to comply with the provisions of this Regulation.
   (18) The measures necessary for the implementation of this Regulation should be adopted
        in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the
        procedures for the exercise of implementing powers conferred on the Commission15.
   (19) A number of countries and territories which do not form part of the territory of the
        Community share a monetary union or form part of the currency area of a Member
        State and have established membership of the payment and clearing systems of that
        Member State. In order to avoid a significant negative effect on the economies of those
        countries or territories which could result from the application of this Regulation to
        transfers of funds between the Member States concerned and those countries or
        territories, it is appropriate to provide for the possibility for such transfers of funds to
        be treated as transfers of funds within that Member State.
   (20) In order not to discourage donations for charitable purposes, it is appropriate to
        authorise Member States to exempt payment services providers situated in their
        territory from collecting, verifying, recording, or sending information on the payer for
        transfers of funds up to a maximum amount of EUR 150. It is also appropriate to make
        this option conditional upon requirements to be met by the charitable organisations in
        order to allow Member States to ensure that this exemption does not give rise to abuse
        by terrorists as a cover for or a means of facilitating the financing of their activities.
   (21) Since the objectives of the action to be taken cannot be sufficiently achieved by the
        Member States and can therefore, by reason of the scale or effects of the action, be
        better achieved at Community level, the Community may adopt measures, in
        accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In
   15
        OJ L 184, 17.7.1999, p. 23.
EN                                                12                                                 EN
 ---pagebreak---           accordance with the principle of proportionality, as set out in that Article, this
          Regulation does not go beyond what is necessary in order to achieve those objectives.
   (22)   In order to establish a coherent approach in the field of combating money laundering
          and terrorist financing, the main provisions of this regulation should apply from the
          same date as the relevant provisions adopted at international level,
   HAVE ADOPTED THIS REGULATION:
                                            Chapter I
                                   Scope and definitions
                                               Article 1
                                            Subject matter
   This Regulation lays down rules on information to accompany transfers of funds, concerning
   the payers of those funds, for the purposes of the prevention, investigation, detection and
   prosecution of money laundering and terrorist financing.
                                               Article 2
                                                 Scope
   1.       This Regulation shall apply to transfers of funds in any currency which are sent or
            received by a payment service provider established in the Community.
   2.       This Regulation shall not apply to transfers of funds which flow from a commercial
            transaction carried out using a credit or debit card or any other similar payment
            instrument, provided that a unique identifier, allowing the transaction to be traced
            back to the payer, accompanies all transfers of funds flowing from that commercial
            transaction.
            This Regulation shall not apply to transfers of funds where both the payer and the
            payee are payment service providers acting on their own behalf.
                                               Article 3
                                              Definitions
   For the purposes of this Regulation, the following definitions shall apply:
   1.       “terrorist financing” means any of the offences within the meaning of Article [1(3)]
            of Directive 2005/…/EC;
   2.       “money laundering” means any of the offences within the meaning of Article [1(2)]
            of Directive 2005/…/EC;
   3.       “payer” means a natural or legal person who has the right of disposal of funds and
            who allows them to be transferred to a payee;
EN                                                13                                             EN
 ---pagebreak---    4.       “payee” means a natural or legal person who is the intended final recipient of
            transferred funds;
   5.       “payment service provider” means a natural or legal person whose business includes
            the provision of payment services to payment service users;
   6.       “intermediary payment service provider” means a payment service provider which is
            neither that of the payer nor that of the payee and which participates in the execution
            of transfers of funds;
   7.       “transfer of funds” means any transaction carried out on behalf of a payer through a
            payment service provider by electronic means with a view to making funds available
            to a payee at another payment service provider, irrespective of whether the payer and
            the payee are the same person;
   8.       “payment service user” means a natural or legal person who makes use of a payment
            service, in the capacity of payer or payee;
   9.       “batch file transfer” means several individual transfers of funds which are bundled
            together for transmission.
                                            Chapter II
          Obligations for the payment service provider of the payer
                                                Article 4
                                  Complete information on the payer
   Complete information on the payer shall consist of his name, address and account number.
   The address may be substituted with the date and place of birth of the payer, his customer
   identification number or national identity number.
   Where the account number of the payer does not exist, the payment service provider of the
   payer may substitute it by a unique identifier, which allows the transaction to be traced back
   to the payer.
                                                Article 5
                  Information accompanying transfers of funds and record keeping
   1.       Payment service providers shall ensure that transfers of funds are accompanied by
            the complete information on the payer.
   2.       The payment service provider of the payer shall, before transferring the funds, verify
            the complete information on the payer on the basis of documents, data or information
            obtained from a reliable and independent source.
            However, for transfers of funds to payees outside the Community up to an amount of
            EUR 1 000, payment service providers may determine the extent of such verification
            in view of the risks of money laundering and terrorist financing.
EN                                                 14                                               EN
 ---pagebreak---    3.        The payment service provider of the payer shall keep records for five years of
             complete information on the payer which accompanies transfers of funds.
                                                Article 6
                                Transfers of funds within the Community
   By way of derogation from Article 5, transfers of funds, where both the payment service
   provider of the payer and the payment service provider of the payee are situated in the
   Community, shall only be required to be accompanied by the account number of the payer or
   a unique identifier allowing the transaction to be traced back to the payer.
   However, if so requested by the payment service provider of the payee, the payment service
   provider of the payer shall make available to the payment service provider of the payee,
   complete information on the payer, within three working days of receiving that request.
                                                Article 7
               Transfers of funds from the Community to payees outside the Community
   1.        Transfers of funds from the Community to payees outside the Community shall be
             accompanied by complete information on the payer.
   2.        In the case of batch file transfers from a single payer to payees outside the
             Community, paragraph 1 shall not apply to the individual transfers bundled together
             therein, provided that the batch file contains that information and that the individual
             transfers carry the account number of the payer or a unique identifier.
                                            Chapter III
          Obligations for the payment service provider of the payee
                                                Article 8
                       Detection of lack of presence of information on the payer
   The payment service provider of the payee shall have effective procedures in place in order to
   detect a lack of presence of the following information on the payer:
   (1)     For transfers of funds where the payment service provider of the payer is situated in
           the Community, the information required under Article 6.
   (2)     For transfers of funds where the payment service provider of the payer is situated
           outside the Community, complete information on the payer as referred to in Article 4,
           or, where applicable, the information required under Article 13.
                                                Article 9
                          Transfers of funds lacking information on the payer
   1.        If the payment service provider of the payee becomes aware that information on the
             payer required under this Regulation is missing or incomplete when receiving
EN                                                 15                                                EN
 ---pagebreak---              transfers of funds, it may either reject the transfer, or ask for complete information
             on the payer. In the latter case, the payment service provider of the payee may either
             hold the funds pending enquiry or make the funds available to the payee. In all cases,
             the payment service provider of the payee shall comply with any applicable law or
             administrative provisions relating to money laundering and terrorist financing, in
             particular, Regulations (EC) No 2580/2001 and (EC) No 881/2002 and Directive
             2005/…/EC, as well as national implementing measures.
   2.        Where a payment service provider repeatedly fails to supply the required information
             on the payer, the payment service provider of the payee shall reject any transfers of
             funds from that payment service provider or terminate its business relationship with
             that payment service provider either with respect to transfer of funds services or with
             respect to any mutual supply of services.
             The payment service provider of the payee shall report that fact to the authorities
             responsible for combating money laundering or terrorist financing.
                                                 Article 10
                                          Risk-based assessment
   The payment service provider of the payee shall consider incomplete information on the payer
   as a factor in assessing whether the transfer of funds, or any related transaction, is suspicious,
   and whether it must be reported, in accordance with the obligations set out in Chapter III of
   Directive 2005/…/EC, to the authorities responsible for combating money laundering or
   terrorist financing.
                                                 Article 11
                                             Record keeping
   The payment service provider of the payee shall keep records for five years, of any
   information received on the payer.
                                             Chapter IV
           Obligations for intermediary payment service providers
                                                 Article 12
                          Retaining information on the payer with the transfer
   Intermediary payment service providers shall ensure that all received information on the payer
   that accompanies a transfer of funds is retained with the transfer.
                                                 Article 13
                                           Technical limitations
   1.        Where the payment service provider of the payer is situated outside the Community
             and technical limitations at the level of an intermediary payment service provider
             situated in the Community prevent the information on the payer from accompanying
EN                                                   16                                               EN
 ---pagebreak---             the transfer of funds, that intermediary payment service provider shall keep records
            for five years of all the information received, irrespective of whether that information
            is complete or not.
   2.       If, in the case referred to in paragraph 1, an intermediary payment service provider
            does not receive complete information on the payer, it shall inform the payment
            service provider of the payee accordingly, when transferring the funds.
   3.       Where paragraph 1 applies, the intermediary payment service provider shall, upon
            request from the payment service provider of the payee, make available to that
            payment service provider, complete information on the payer, within three working
            days of receiving that request.
                                            Chapter V
          General obligations, implementing and amending powers
                                               Article 14
                                        Co-operation obligations
   Payment service providers shall respond fully and without delay to enquiries from the
   authorities responsible for combating money laundering or terrorist financing of the Member
   State in which the payment service provider is situated, concerning the information on the
   payer accompanying transfers of funds and corresponding records, in accordance with the
   time-limits and procedural requirements established in the national law of that Member State.
   Those authorities may use that information only for the purposes of preventing, investigating,
   detecting or prosecuting money laundering or terrorist financing.
                                               Article 15
                                                Penalties
   The Member States shall lay down the rules on penalties applicable to infringements of the
   provisions of this Regulation and shall take all measures necessary to ensure that they are
   implemented. The penalties provided for must be effective, proportionate and dissuasive. The
   Member States shall notify those rules, as well as the authorities responsible for their
   application, to the Commission by 31 December 2006 at the latest, and shall notify it without
   delay of any subsequent amendment affecting them.
                                               Article 16
                                  Implementing and amending powers
   1.       The Commission may, in accordance with the procedure referred to in Article 17(2)
            and taking into account any developments in the field of money laundering and
            terrorist financing, and corresponding changes in international standards, notably
            those agreed in the Financial Action Task Force on money laundering and terrorist
            financing (FATF), adopt measures concerning the clarification of the definitions set
            out in Article 3(5) and (7).
EN                                                 17                                                EN
 ---pagebreak---    2. The Commission may, in accordance with the procedure referred to in Article 17(2)
      and taking into account any developments in the field of money laundering and
      terrorist financing, and corresponding changes in international standards, notably
      those agreed in the FATF, adopt measures concerning the updating of the monetary
      thresholds established for the obligations laid down in Articles 5 and 19.
                                         Article 17
                                         Committee
   1. The Commission shall be assisted by the Committee on the Prevention of Money
      Laundering and Terrorist Financing established by Directive 2005/…/EC, hereinafter
      “the Committee”.
   2. Where reference is made to this paragraph, Articles 5 and 7 of Decision
      1999/468/EC shall apply, having regard to the provisions of Article 8 thereof.
      The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three
      months.
                                      Chapter VI
                                      Derogations
                                         Article 18
              Agreements with territories or countries outside the Community
   1. The Commission may authorise any Member State to conclude agreements with a
      country or territory which does not form part of the territory of the Community as
      determined in accordance with Article 299 of the Treaty, which contain derogations
      from this Regulation in order to allow for transfers of funds between that country or
      territory and the Member State concerned to be treated as transfers of funds within
      that Member State.
      Such agreements may be authorised only if the country or territory concerned fulfils
      all the following conditions:
      a)     it shares a monetary union with the Member State concerned or forms part of
             the currency area of the Member State concerned;
      b)     it is a member of the payment and clearing systems of the Member State
             concerned;
      c)     it requires payment service providers under its jurisdiction to apply the same
             rules as those established under this Regulation.
   2. A Member State wishing to conclude an agreement as referred to in paragraph 1 shall
      send an application to the Commission and provide it with all the necessary
      information.
EN                                           18                                             EN
 ---pagebreak---              On receipt, by the Commission, of an application from a Member State, transfers of
             funds between that Member State and the country or territory concerned shall be
             provisionally treated as transfers of funds within that Member State until a decision
             is reached in accordance with the procedure set out in this Article.
             If the Commission considers that it does not have all the necessary information, it
             shall contact the Member State concerned within two months of receipt of the
             application and specify the additional information required.
             Once the Commission has all the information it considers necessary for appraisal of
             the request, it shall within one month notify the requesting Member State accordingly
             and shall transmit the request to the other Member States.
   3.        Within three months of the notification referred to in the fourth sub-paragraph of
             paragraph 2 of this Article, the Commission shall decide, in accordance with the
             procedure referred to in Article 17(2), whether to authorise the Member State
             concerned to conclude the agreement referred to in paragraph 1.
             In any event, a decision as referred to in the first subparagraph shall be adopted
             within eighteen months of receipt of the application by the Commission.
                                                 Article 19
                  Transfers of funds to charitable organisations within a Member State
   Member States may exempt payment service providers situated in their territory from the
   obligations set out in Article 5, as regards transfers of funds to organisations carrying out
   activities for charitable, religious, cultural, educational, social, or fraternal purposes, provided
   these organisations are subject to reporting and external audit requirements or supervision by
   a public authority, and that those transfers of funds are limited to a maximum amount of
   EUR 150 per transfer and take place exclusively within the territory of that Member State.
   Member States shall communicate to the Commission the measures that they have adopted for
   applying the option provided in the first paragraph.
                                             Chapter VII
                                          Final provisions
                                                 Article 20
                                              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.
   However, Articles 4 to 14 and 19 shall apply from 1 January 2007.
   This Regulation shall be binding in its entirety and is directly applicable in all Member States.
EN                                                   19                                                 EN
 ---pagebreak---    Done at Brussels,
   For the European Parliament For the Council
   The President               The President
EN                              20             EN
 ---pagebreak---                            LEGISLATIVE FINANCIAL STATEMENT
   Policy area(s): Internal Market
   Activit(y/ies): Internal Market for goods and services
   TITLE   OF ACTION: PROPOSAL FOR A REGULATION ON INFORMATION ON THE PAYER
            ACCOMPANYING TRANSFERS OF FUNDS
   1.       BUDGET LINE(S) + HEADING(S)
            12.010211.01.03 – Committee meetings
   2.       OVERALL FIGURES
   2.1.     Total allocation for action (Part B): € million for commitment
            n.a.
   2.2.     Period of application:
            2005–2010
   2.3.     Overall multiannual estimate of expenditure:
   (a)      Schedule of commitment appropriations/payment             appropriations   (financial
            intervention) (see point 6.1.1)
            n.a.
   (b)      Technical and administrative assistance and support expenditure(see point 6.1.2)
            n.a.
   (c)      Overall financial impact of human resources and other administrative expenditure
            (see points 7.2 and 7.3)
          Commitments/         0.224    0.224   0.224    0.224   0.224
            payments
         TOTAL a+b+c
       Commitments             0.224    0.224   0.224    0.224   0.224
       Payments                0.224    0.224   0.224    0.224   0.224
   2.4.     Compatibility with financial programming and financial perspective
            [X] Proposal is compatible with existing financial programming.
EN                                               21                                               EN
 ---pagebreak---                    Proposal will entail reprogramming of the relevant heading in the financial
                   perspective.
                   Proposal may require application of the provisions of the Interinstitutional
                   Agreement.
   2.5.    Financial impact on revenue:16
           [X] Proposal has no financial implications (involves technical aspects regarding
                   implementation of a measure)
           OR
                   Proposal has financial impact – the effect on revenue is as follows:
           n.a.
   3.      BUDGET CHARACTERISTICS
      Type of expenditure             New            EFTA          Contributions   Heading in
                                                 contribution     from applicant    financial
                                                                     countries     perspective
    Non-comp         Non-diff          NO             YES              YES            No [5]
   4.      LEGAL BASIS
           The action only concerns administrative expenditure.
   5.      DESCRIPTION AND GROUNDS
   5.1.    Need for Community intervention17
   5.1.1.  Objectives pursued
           The present proposal for a regulation aims to transpose Special Recommendation VII
           (SR VII) of the Financial Action Task Force (the international body established by
           the Paris G7 summit in 1989 which objective is to fight against financial crime) into
           Community law in a way that is fully compatible with Internal Market principles. 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 money laundering and terrorism, to assist them in their task.
   5.1.2.  Measures taken in connection with ex ante evaluation
           In its Communication to the Council and the European Parliament concerning a
           “New legal framework for payments in the Internal Market” (COM (2003) 718 final)
   16
          For further information, see separate explanatory note.
   17
          For further information, see separate explanatory note.
EN                                                      22                                       EN
 ---pagebreak---           the Commission consulted interested parties on issues raised by the transposition of
          SR VII into Community legislation.
          The results of the consultation have shown overwhelming support from all
          stakeholders (the banking community, Central Banks, the European Central Bank
          and Member States) to transpose SR VII through Community legislation rather than
          national legislation. Payment systems in the EU are in the process of being integrated
          into a Single Payment Area and, consequently, SR VII should be transposed in a
          harmonised manner throughout the EU. All stakeholders called for the use of a
          regulation, which would be the most effective way of guaranteeing uniform
          implementation and thus a level playing field.
          The results of the consultation are available at:
          http://europa.eu.int/comm/internal_market/payments/framework/2004-
          contributions_en.htm.
   5.1.3. Measures taken following ex post evaluation
          n.a.
   5.2.   Action envisaged and budget intervention arrangements
          The rules on payer’s information accompanying funds transfers provided for in the
          proposal for a regulation result in a number of obligations applicable to all payment
          service providers (PSPs) involved in the payment chain. The payer’s payment service
          provider must ensure that funds transfers contain complete, accurate and meaningful
          payer’s information (name, address and account number). Any intermediary payment
          service provider must ensure that all payer’s 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 money
          laundering and terrorism.
   5.3.   Methods of implementation
          The negotiation of the Regulation in the Council and in the European Parliament will
          be carried out by DG MARKT staff within existing resources. Furthermore,
          Article 12 of the Regulation specifies that the Commission will be assisted by a
          committee consisting of Member States’ representatives on certain specific issues.
   6.     FINANCIAL IMPACT
          n.a.
EN                                              23                                               EN
 ---pagebreak---    7.        IMPACT ON STAFF AND ADMINISTRATIVE EXPENDITURE
             Human and administrative resource requirements will be covered from within the
             budget allocated to the managing DG in the framework of the annual allocation
             procedure.
   7.1.      Impact on human resources
                                  Staff to be assigned to
                                                                            Description of tasks deriving from the
                              management of the action using
                                                                                            action
                                          existing
        Types of post                                                Total
                               Number of         Number of
                               permanent          temporary
                                  posts             posts
                       A     1                                     1         Negotiation of the Regulation in the
                                                                                 Council and in the European
                                                                            Parliament and participation in FATF
   Officials       or  B                                                                     work
   temporary staff     C     0.5                                   0.5         Organisation of meetings of the
                                                                           regulatory Committee on the prevention
                                                                              of money laundering and terrorist
                                                                                          financing
   Other human resources
   Total                     1.5                                   1.5
   7.2.      Overall financial impact of human resources
             Type of human resources                      Amount (€)                Method of calculation *
   Officials                                         EUR 162 000           EUR 108 000 x 1.5
   Temporary staff
   Other human resources
                             (specify budget line)
                                             Total   EUR 162 000
   The amounts are total expenditure for twelve months.
   7.3.      Other administrative expenditure deriving from the action
   Budget line
                                                           Amount €                  Method of calculation
   (number and heading)
   Overall allocation (Title A7)
   Copy updated budget linesA0701 – Missions
   12 01 02 11 01 – Missions
   12 01 02 11 02 – Meetings, conferences
   12 01 02 11 03 – Committees (consultative         EUR 62 400            EUR 15 600 (reimbursement of 24
   committee)                                        (Regulatory           experts) x 4 meetings
                                                     Committee on the
   12 01 02 11 04 – Studies and consultations
                                                     prevention of money
                                                     laundering and
                                                     terrorist financing)
EN                                                         24                                                      EN
 ---pagebreak---    Information systems (A-5001/A-4300)         n.a.
   Other expenditure - Part A (specify)        n.a.
                                         Total EUR 62 400
   The amounts are total expenditure for twelve months.
   Les besoins en ressources humaines et administratives seront couverts à l’intérieur de la
   dotation allouée à la DG gestionnaire dans le cadre de la procédure d’allocation annuelle.
   1
      Specify the type of committee and the group to which it belongs.
   I.      Annual total (7.2 + 7.3)                          EUR 224 400
   II.     Duration of action                                5 years
   III.    Total cost of action (I x II)                     EUR 1 122 000
   8.        FOLLOW-UP AND EVALUATION
   8.1.      Follow-up arrangements
             n.a
   8.2.      Arrangements and schedule for the planned evaluation
             n.a
   9.        ANTI-FRAUD MEASURES
             n.a
EN                                                  25                                        EN