The European Union is a bloc built on cooperation and
shared values, and this extends to its commitment to maintaining the integrity
of its financial system. In this pursuit, EU Regulation 2018/1672 stands
as a significant piece of legislation, aiming to bolster the fight against
money laundering and terrorist financing by harmonizing and fortifying the
rules governing the transfer of funds across its borders.
At its core, Regulation 2018/1672, officially
the "Regulation (EU) 2018/1672 of the European Parliament and of
the Council of 23 October 2018 on controls on cash entering or leaving the
Union and on cash intended for circulation within the Union",
addresses a critical vulnerability: the physical movement of cash. While
digital transactions are increasingly prevalent, cash remains a potent tool for
illicit actors seeking to launder money or finance terrorism, often through its
cross-border movement, bypassing traditional financial institutions.
Key Pillars of Regulation
2018/1672:
This regulation builds upon and strengthens existing
frameworks, focusing on several key areas to ensure greater transparency and
control over cash movements:
- Enhanced Declaration
Requirements: The cornerstone of
the regulation lies in its strengthened declaration obligations.
Individuals carrying cash exceeding a certain threshold (€10,000) when
entering or leaving the EU, or when moving cash between EU member states,
are now required to declare this to the competent authorities. This
declaration provides authorities with valuable information, allowing them
to identify and analyze potentially suspicious cash movements.
- Scope Expansion and
Harmonization: The regulation
clarifies and expands the scope of cash that needs to be declared. This
includes not only banknotes and coins but also certain cash equivalents
like bearer negotiable instruments that are unendorsed or otherwise in a
negotiable form, such as cheques, traveller's cheques, promissory notes,
and money orders. This
comprehensive approach aims to prevent loopholes being exploited.
- Focus on "Cash for
Circulation": A significant
addition is the introduction of rules concerning "cash for
circulation." This refers to cash that is intended to be put into
circulation within the Union, for example, by financial institutions or
currency exchange offices. The regulation aims to ensure that even the
movement of large volumes of cash within the EU, for legitimate purposes,
is underpinned by appropriate controls and information gathering to
mitigate the risk of it being diverted for illicit activities.
- Information Gathering and
Risk Assessment: By requiring
declarations, the regulation empowers national authorities to gather
crucial data on cash flows. This information is vital for conducting risk
assessments, identifying patterns of illicit activity, and developing more
targeted and effective counter-measures. The collected data can also be
shared between member states and with Europol, enhancing cross-border
cooperation.
- Enforcement and
Sanctions: The regulation also
specifies the powers of competent authorities to investigate, detain, or
seize undeclared cash. It outlines the potential penalties and sanctions
that can be imposed for non-compliance, serving as a deterrent against
breaches of the rules.
Why is this Regulation
Important?
The fight against money laundering and terrorist
financing is a continuous and evolving battle. Regulation 2018/1672 represents a
proactive step by the EU to:
- Disrupt Illicit Flows: By making cash movements more transparent,
the regulation makes it harder for criminals to move illicit proceeds and
fund their operations.
- Strengthen Financial
Integrity: It contributes to
the overall integrity and stability of the EU's financial system by
reducing the attractiveness of the EU as a destination for laundered
funds.
- Enhance Cross-Border
Cooperation: The harmonized
rules and information-sharing mechanisms fostered by the regulation
improve the ability of member states to cooperate in combating financial
crime effectively.
- Meet International
Standards: The regulation
aligns the EU's approach to cash controls with international standards and
recommendations, particularly those from the Financial Action Task Force
(FATF).
Implications for Individuals
and Businesses:
For individuals, the most direct impact is the
increased awareness and responsibility to declare cash exceeding the €10,000
threshold when traveling across EU borders. Businesses involved in the movement
of significant amounts of cash, such as financial institutions, money
remittance services, and cash-in-transit companies, need to be fully aware of
and compliant with the specific obligations outlined in the regulation. This
may involve implementing robust internal procedures for cash handling and
declaration.
Conclusion:
EU Regulation 2018/1672 is a crucial tool in the EU's
arsenal for protecting its financial system from the scourge of money
laundering and terrorist financing. By tightening controls on the physical
movement of cash and enhancing information gathering, it contributes
significantly to a safer and more secure Europe. As the landscape of financial
crime continues to evolve, the EU's commitment to adapting and strengthening
its regulatory framework remains paramount, and Regulation 2018/1672 stands as
a testament to this ongoing dedication.