Select Committee on European Scrutiny Thirty-Seventh Report





COM(02) 328

Commission Report on controls on cross-border cash movements and draft Regulation of the European Parliament and the Council on the Prevention of money laundering by means of customs co-operation.

Legal base:

Article 135 EC co-decision; qualified majority voting


Document originated:

25 June 2002

Deposited in Parliament:

2 July 2002


HM Treasury

Basis of consideration:

EM of 9 July 2002

Previous Committee Report:


To be discussed in Council:

No date set

Committee's assessment:

Legally and politically important

Committee's decision:

Not cleared; further information requested



    1. On 17 October 2000 the Council (JHA/ECOFIN) concluded that cross-border movements of cash presented a potential risk to Community and national interests and that the current very diverse approaches to control by the Member States suggested that greater consistency, supported by a new information exchange provision, was required. The draft Regulation is proposed by the Commission in response to the Council's request for a proposal aimed at rendering existing national provisions more consistent and to provide for the exchange of information.
    2. The document

    3. Article 1 lays down the principal provision of the draft Regulation, which requires everyone leaving or entering the EU to make a written declaration to the customs authorities of the export of, or import from, third countries of any sum of _15,000 or more in cash. The requirement would apply to every natural person, irrespective of nationality, crossing the border of the EU but not to cross-border cash movement within the EU. In order to check compliance with the obligation under Article 1 to declare, Article 4 grants customs authorities certain investigatory powers, including the power to search persons and baggage and to detain any cash for up to three days.
    4. Article 3 governs the exchange of information and would grant competent authorities an automatic right to transmit information in the course of controls to customs services of other Member States and to authorities concerned with money laundering.
    5. Article 5 makes provision for the imposition of civil penalties for failure to make a declaration or for making an inaccurate or incomplete declaration. These penalties would be in addition to any criminal penalties for any money laundering offences. The text also provides for a cap on penalties which, for the purposes of this Regulation, are restricted to a maximum of 25% of the sum carried.
    6. Article 6 specifically addresses cash movements in connection with terrorism, and provides that, in such cases, information about cash transactions may be provided to non-Member States.
    7. The Government's view

    8. In her Explanatory Memorandum of 9 July 2002 the Paymaster-General (Dawn Primarolo), helpfully summarises the present state of the law. She says that the Drug Trafficking Act 1994:

"enables customs and police officers to seize and detain cash at import or export if it amounts to 10,000 or more in any currency and is reasonably suspected of being the proceeds of, or intended for use in, drug trafficking. The Proceeds of Crime Bill — which will have its third reading in the House of Lords on 11 July — extends these provisions to cover cash related to any criminal activity and to a range of monetary instruments. It also makes the seizure power available throughout the jurisdiction, not just at the border.

"The Anti-terrorism, Crime and Security Act 2001 enables police, customs and immigration officers to seize and detain cash of any amount which is reasonably suspected of being related to terrorism. This provision applies to cash found at any place in the UK.

"UK law does not require any declaration of cash to be made, but relies on intelligence-led law enforcement intervention to detect and seize crime-related money with a view to forfeiture in civil proceedings.

"The Commission's report makes clear that the mandatory declaration procedure would replace existing national declaration arrangements, but is less clear how systems which do not involve declarations would be affected. This point will require further clarification.

"The proposal goes beyond current and prospective UK law in three areas, in all of which new primary law may be needed. These are:

    • a search of person power to assist in checking that travellers are complying with the obligation to declare.

    • a power to detain cash for up to three working days to enable enquiries to be made as to its provenance or other doubts to be resolved; and

    • provision for the application of administrative or criminal sanctions in respect of non-declaration or mis-declaration, with fines being capped at 25% of the sum carried."

    1. The Minister states that the Government opposes the proposal for a number of reasons. First, the Government questions whether the proposed legislation is in line with the mandate agreed by the Council on 17 October 2000. In particular, the Government expresses its doubt whether the proposal would have any appreciable impact on criminal activity, action against which was the stated aim of the conclusions reached by the Council.
    2. Secondly, the Government questions the proposed legal base for the measure and believes the use of qualified majority voting to be inappropriate for the adoption of a measure which is concerned with the fight against crime. The Minister states that Article 135 EC deals with measures intended to improve the level of co-operation within the customs union in the fight against crime, whereas improved co-operation is only an incidental effect of the proposal, whose principal purpose is the creation of a mandatory cash declaration.
    3. Thirdly, the Minister states that:
    4. "the requirement to cap fines for non-declaration or mis-declaration at 25% of the sum carried involves an unacceptable fetter on Member States when introducing enforcement provisions in national law to deal with such conduct. Furthermore, a requirement which harmonises maximum limits on fines throughout the European Community does not appear appropriate to a first pillar instrument; the Government will wish to consider this point carefully."

    5. Fourth, the Minister questions whether the permission under the proposal for cash to be detained for up to three working days pending further enquiries is compatible either with the civil nature of the mandatory declaration scheme or with the protection of human rights.
    6. The Minister also emphasises the potentially significant costs involved in changing the law and administering the proposed measure.
    7. Finally, the Minister suggests as an alternative proposal
    8. "a binding Third Pillar[11] instrument which would require all Member States to have in place powers to search for, detect and seize cash and monetary instruments which are believed to be the proceeds of, or intended for use in, crime. Such powers should be available both at the external border and at any place throughout the European Union. The powers, which would be civil in nature, should be exercisable — without the need for criminal action — by any relevant enforcement agency. This approach would be demonstrably based on the real need for law enforcement agencies to make a significantly greater impact on money laundering, including the movement of terrorist funds, and thereby damage and deter serious criminal activity."


    9. We share the Government's objections to the proposed measure and look forward in particular to receiving, in due course, the Government's conclusions as to the legality of both the three day cash detention provision and the 25% cap on fines proposed under the draft Regulation.
    10. Article 4 of the draft Regulation grants customs authorities search and investigatory powers which appear significantly to exceed those presently available under UK law. We ask the Minister whether the Government shares our view that the proposed search powers would constitute a potentially unacceptable intrusion into privacy and the right to peaceful possession of property.
    11. We share the Government's concern in relation to the proposed legal base for the measure, and we ask if the Minister agrees that the proposal exceeds the power available under Article 135 EC, given that it appears to affect the application of national criminal law and the national administration of justice.
    12. We shall hold the document under scrutiny until we receive the Minister's reply.


11  The third pillar is the inter-governmental part of the EU relating to police and judicial co-operation in criminal matters. Back

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