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The EU keeps making law, but it's still behind the times

It's incredible. The European Union has produced five Money Laundering Directives and still in some respects it is not one but two steps behind some countries that are often subject to criticism. Indeed, it is behind many of its own member states. This week, the Council of the European Union "adopted" a "regulation." Politically, the fact that a Regulation has been made is more important than what it does.

Ask yourself this: what, exactly, must be declared at borders under the cash declaration process? Cash, obviously. But what about travellers' cheques, cashiers' cheques, bearer bonds?

In Taiwan, all but small, personal, amounts of gold must be declared. In Indonesia, landing cards are issued on inbound flights which go even further: in a reflection of Australia's declaration on food, etc., there is a requirement for a positive declaration that no cash above certain limits is being carried.

Cross-border movements of money have long been in forms other than cash. Ask Malaysia's former Prime Minister's wife, Rosmah: she's moved money around the world in the form of hundreds of handbags and expensive jewellery. Or ask the Rabbis who, in the 1990s were arrested at LAX with quantities of diamonds sewn into their clothes.

Thus it is that the EU's Regulation that border declarations must be made in relation to readily convertible goods, including prepaid cards, is an indication of just how poorly the EU understands money laundering.

The EU is crowing: "Terrorist financing, money laundering, tax evasion and other criminal activities need to be tracked and eliminated. The new regulation provides us with the necessary tools to be more efficient in tackling such threats," said Hartwig Löger, Austrian Federal Minister for Finance. That's not the point. The point is how has it taken so long? The world and his dog knows that a restrictive definition of cash is not enough.

What is even more startling is that, after all the fuss about cash couriers some years ago, the new Regulation extends the requirement for a declaration to cover the relevant value sent by post, freight or courier.

Below is the full media release by the EU. It fails in two important respects. First, it refers in one place to "citizens" and in another to "travellers." The two are not the same. The second failure is that it does not include a link to the full text of the Regulation so that the inconsistency can be considered by looking at the source material.

Politically, the adoption of a Regulation is far more interesting: by using Regulations, the EU Commission can impose laws directly on countries without those laws undergoing consideration by national parliaments. This erosion of sovereignty is one of the reasons behind so-called Brexit. It is a reflection of the EU's move to become a country rather than a federation and to do so by presenting what is, in effect, a fait accompli. That it has done so in order to fix shortcomings in Directives is important. That it chose to do so while the Fifth Money Laundering Directive is under consideration shows a failure to plan laws properly and a willingness to use non-democratic means to address those matters which, for whatever reasons, have not been properly addressed in primary legislation.

02/10/2018 10:17 Press release 536/18

The Council today adopted a regulation aimed at improving controls on cash entering or leaving the Union. This follows an agreement reached with the European Parliament in June.

Terrorist financing, money laundering, tax evasion and other criminal activities need to be tracked and eliminated. The new regulation provides us with the necessary tools to be more efficient in tackling such threats.
Hartwig Löger, Austrian Federal Minister for Finance

The regulation will improve the existing system of controls on cash entering or leaving the EU. It means that the latest developments in international standards on combating money laundering and terrorism financing developed by the Financial Action Task Force (FATF) will be reflected in EU legislation.

In practical terms, the new regulation extends the definition of cash to cover not only banknotes but also other instruments or highly liquid commodities such as cheques, traveller's cheques, prepaid cards and gold. The regulation is also extended to cover cash that is sent by post, freight or courier shipment.

The new legislation extends the obligation of any citizen entering or leaving the EU and carrying cash to a value of €10 000 or more to declare it to the customs authorities. The declaration will be required irrespective of whether travelers are carrying the cash in person, in their luggage or means of transport. At the request of the authorities they will have to make it available to be checked.

If the cash is sent by other means (“unaccompanied cash”), the relevant authorities will have the power to ask the sender or the recipient to make a disclosure declaration. The authorities will be able to carry out controls on any consignments, packages or means of transport which may contain unaccompanied cash.

Member states will exchange information where there are indications that cash is related to criminal activity which could adversely affect the financial interests of the EU. This information will also be transmitted to the European Commission.

The new regulation will not prevent member states from providing additional national controls on movements of cash within the Union under their national law, provided that these controls are in accordance with the Union's basic freedoms.

The Council and the European Parliament now need to sign the adopted regulation. The signed text will be published in the EU Official Journal and will enter into force on the twentieth day following that of its publication.

Current rules on the movement of cash in and out of the EU (Cash Controls Regulation -regulation 1889/2005) have applied since 15 June 2007 and are an integral part of the EU's Anti Money Laundering and Terrorist Financing framework. The new regulation updates these rules and complements the EU’s legal framework for the prevention of money laundering and terrorist financing set out in directive 2015/849.

The existing rules require travellers entering or leaving the EU to declare cash amounting to €10 000 or more (or its equivalent) to customs authorities. The new legislation extends these obligations. New rules are needed because terrorists and criminals have managed to find ways to circumvent the rules on cash controls. Criminal organisations whose illicit activities generate large volumes of cash must be prevented from taking advantage of loopholes in the current system to move and launder their money.

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