Annexes to COM(2016)50 - Action Plan for strengthening the fight against terrorist financing

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dossier COM(2016)50 - Action Plan for strengthening the fight against terrorist financing.
document COM(2016)50 EN
date February  2, 2016
agreement appears to function effectively. Following an impact assessment, a Commission Communication of November 2013 concluded that setting up an EU-based system (referred to as TFTS, Terrorist Finance Tracking System) duplicating the TFTP would not be proportionate or bring added value. However, it would nevertheless be worthwhile to analyse the possible need for complementary mechanisms to the TFTP to fill possible gaps (i.e. transactions which are excluded from the EU-US TFTP agreement – notably intra-EU payments in euro – and may not be possible to track otherwise).

Actions:


The Commission will take forward the following initiatives:


- Legislative proposal harmonising money laundering criminal offences and sanctions: at the latest by 4th quarter 2016;

- Legislative proposal against illicit cash movements: at the latest by 4th quarter 2016;

- An EU regime for the freezing of assets of terrorists under Article 75 TFEU: Conclude an assessment at the latest by 4th quarter 2016;

- Strengthening the mutual recognition of criminal assets' freezing and confiscation orders: at the latest by 4th quarter 2016;

- A possible European system which would complement the existing EU-US TFTP agreement by tracing transactions excluded under the mentioned agreement: Conclude an assessment at the latest by 4th quarter 2016.



2. Targeting the sources of funding


The ways in which terrorism can be financed are very diverse. The funding can come from the abuse of legitimate non-profit organisations 23 , such as charities, of legal businesses, or of collections. They can also be funded from criminal activity, state sponsors and activities in failed states as well as abuse of the international trade system 24 . Whilst not new, the current terrorist threat from Daesh has highlighted some particular issues. According to the Financial Action Task Force, Daesh’s primary sources of revenue are illicit proceeds from its occupation of territory. Sources include bank looting, extortion, control of oil fields and refineries, robbery of economic assets, kidnapping for ransom, cash smuggling and grass-roots funding.


Although the existing framework to combat terrorism financing – as set out in UN Security Council Resolutions and reflected in the proposal for a Directive on combatting terrorism - includes a prohibition to make any economic or financial resource available to the listed individuals and entities, one shortcoming today is that existing EU instruments are not adequate for customs authorities themselves to intervene effectively. Terrorists can gain both from illegal means (e.g. through dissimulation of trade transactions; misrepresentation of the value of goods; fictitious invoicing; or smuggling) and from trade in legal goods. The Commission will consider an explicit legal basis to allow for provisional detention of goods and for the necessary investigations to be undertaken, notably by FIUs.


Images of the destruction of archaeological sites by Daesh are familiar sights in our media, seen by many as war crimes against cultural heritage. But as well as causing huge damage, there is clear evidence that Daesh uses illicit excavations of archaeological sites to obtain cultural goods 25 as a source of income. Cultural goods illicitly removed from Iraq and Syria can be a significant source of terrorist income. Where this income relies on proceeds from European markets, identifying and cutting off the trade could have a real impact on an important source of funding of terrorist activities.


Currently, two Regulations impose trade restrictions on cultural goods illicitly removed from Iraq and Syria 26 , and provide a legal basis for import controls. However, their effectiveness if limited. These trade restrictions depend on the continuation of the specific sanctions regimes and provide only a partial response and the burden of proof required for customs to establish the origin of such goods is high. The Commission will consider a wider response to combatting terrorism financing via illicit trafficking in cultural goods – whatever the country of provenance – to overcome some of these problems. Options that will be considered involve the introduction of a certification system for the import of cultural goods into the EU coupled with guidance to stakeholders such as museums and the art market.


Illegal wildlife trafficking is increasingly recognised as a further source of funding of terrorist and related activities. The Commission will shortly present an EU Action Plan to tackle the illicit financial flows related to wildlife trafficking.

Actions:


The Commission will take forward the following initiatives:

- Legislative proposal reinforcing customs' powers and cooperation and addressing terrorism financing related to trade in goods: at the latest by 2nd quarter 2017;

- Legislative proposal against illicit trade in cultural goods: at the latest by 2nd quarter 2017;

- EU Action Plan on Illegal Wildlife Trafficking: at the latest by 1st quarter 2016.



3. The external dimension


Due to the very nature of the current terrorist threat, the distinction between domestic "home grown" terrorism and terrorism organised by international groups is often blurred, though groups operating exclusively in the EU still exist 27 . In particular, there is often an international dimension to financing as well as to the procurement of weapons.


For this reason, it is essential that the EU is an active player in the fight against terrorist financing on the international scene, notably through the relevant international organisations. The EU actively supports the UN Global Counter Terrorism Strategy, as well as the implementation of relevant UN Security Council Resolutions. The EU is also an active participant of the Global Counter-Terrorism Forum (GCTF), whose work includes activities relating to terrorism funding 28 , and has encouraged the G20's work to underline the importance of cutting off terrorism-related financial flows 29 .


The Commission is a member of the Financial Action Task Force (FATF) and actively contributes to its work as well as to the implementation of its Recommendations in the EU. There is an obvious benefit in Europe speaking with a consistent voice within the FATF. Relevant UN Resolutions and Council of Europe instruments, such as the Council of Europe Convention No. 198 on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism 30 , play an important role in this context; the Commission supports EU States in implementing these. As explained above, enhanced information between EU and UN on asset freezing will also be developed.


In addition to this, there is a strong need for the EU to support our partners, with a specific focus on neighbouring countries, which are facing threats from the same groups that have attacked the EU. The fight against terrorist financing could be part of broader efforts to support governments of third countries in complying with United Nations Security Council resolutions and FATF recommendations in order to enhance their capacity to fight against financing of terrorism, and to cooperate with EU Member States and Agencies 31 . The EU can also help through supporting partners' efforts to tackle serious crime such as drugs or firearms trafficking, as a source of terrorist finance.


In this context, the Commission and the High Representative will deepen cooperation with third countries to list and maintain the listing of terrorist entities when the listings decided by competent national authorities from third countries serves as a basis to list terrorist entities at EU level. In addition, this work will also cover continued liaison with third countries for the alignment with the existing restrictive measures to combat terrorism. Counter-terrorism dialogues with partners provide the most effective framework for discussion on alignment or implementation of restrictive measures.


Third countries could also be helped to combat illicit trade in cultural goods and its use for terrorist financing. This could imply re-prioritising existing support to capacity building (for example in the Middle East and North Africa - MENA) to give specific attention to protecting their cultural heritage and increasing international police cooperation against trafficking of cultural goods.


Finally, action requires a global perspective with security as one of our main external priorities. There is a broad global consensus on the need to act together and the EU should put itself at the head of efforts to ensure that worldwide initiatives to tackle terrorist financing are effective and that EU measures are up-to-date with the latest developments.

The Commission and the High Representative will:


- Launch projects to provide technical assistance to Middle East and North African countries to fight against the trafficking of cultural goods: by 4th quarter 2016 at the latest;

- Strengthen support to third countries in complying with UNSCRs legal requirements and FATF recommendations: ongoing;

- Support countries in the MENA and South East Asia regions to monitor, disrupt and deny the financing of terrorism: by 4th quarter 2016 at the latest.

- Deepen work to exchange information with third country partners to make/sustain listings under EU autonomous measures to combat terrorism: ongoing.



4. The way forward


The European Agenda on Security underlined that delivering a high level of internal security in the EU has to be a joint undertaking by all actors. This includes action by EU institutions, Member States and EU agencies, but also improved cooperation, and in particular exchange of information amongst the relevant authorities. Member States should use all the tools at their disposal and ensure that agreed EU action is swiftly implemented. The Commission also calls on the co-legislators to take forward their work on the forthcoming Commission proposals in a timely manner.


In addition, working together, the EU and Member States need to deepen their engagement with EU financial institutions and economic operators to understand the challenges they face in implementing international standards in the field of counter-terrorist financing, and assess how policies and practices can be re-enforced to address relevant risks in a rapidly evolving environment.


The Commission will monitor progress on the action plan and provide regular updates on progress to the European Parliament and to the Council.

(1)

     COM(2015) 185 final.

(2)

     European Parliament resolution of 9 July 2015 on the European Agenda on Security (2015/2697(RSP))

(3)

     COM(2015) 625 final.

(4)

     The Financial Action Task Force (FATF) is an inter-governmental body established with the objective to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. Several EU Member States are members of the FATF, and the Commission also participates. Key standards include those embodied in the FATF "40 Recommendations on combating money laundering and the financing of terrorism and proliferation":

http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF_Recommendations.pdf

(5)

     Resolution 2178(2014).

(6)

     In the framework of the 4th Anti-Money Laundering Directive (AMLD):  Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73).

(7)

     This will be the object of delegated acts, to be adopted by the Commission on the basis of AMLD.

(8)

     Such an EU blacklist might also be relevant for use in risk management in other policy areas, such as customs.

(9)

     Virtual currency exchange platforms can be considered as 'electronic' currency exchange offices that trade virtual currencies for fiat currencies. Virtual currency wallet providers hold virtual currency accounts on behalf of their customers. In the 'virtual currency' world, they are the equivalent of a bank offering a current account on which fiat money can be deposited. They store virtual currencies and allow for their transfers to other wallets/virtual currency accounts.

(10)

     IHS Consulting – Terrorism Financing Assessment, 15 September 2015; European Banking Authority opinion on virtual currencies, 4 July 2014; FATF guidance for a risk based approach on virtual currencies, June 2015.

(11)

     Which are providers of exchanging services between virtual currencies and "fiat" currencies.

(12)

     Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35–127).

(13)

     A wallet provider is an entity that provides means (software application or other mechanism/medium) for holding, storing and transferring bitcoins or other virtual currency (FATF Report on Virtual Currencies)

(14)

     For example, the terrorists who committed the attacks in Paris on 13 November 2015 reportedly used prepaid cards to pay for hotel rooms.

(15)

     However, many Member States have already put in place such a register or are currently in the process of adopting such centralised mechanisms.

(16)

     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 Afghanistan (OJ L 139 29.5.2002 p. 9-22).

(17)

     The Commission will explore the technical aspects of developing the Financial Services Database to enable better information sharing regarding national asset freezing measures amongst Member States and financial institutions.

(18)

     https://www.europol.europa.eu/content/why-cash-still-king-strategic-report-use-cash-criminal-groups-facilitator-money-laundering

(19)

     Regulation 1889/2005 25.11.05 OJ L 309.

(20)

     Issues with the present regulation and major policy options for a revision have already been identified in an evaluation document and feedback was collected through an open public consultation: http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/customs/cash_survey_summary_report_en.pdf

(21)

     See the Europol report cited above: "The fact that the EUR 500 note is not commonly used as a payment instrument, yet accounts for one third of the value of all banknotes in circulation, raises questions around the purpose for which it is being used."

(22)

     COM(2015) 185 final

(23)

     http://www.fatf-gafi.org/media/fatf/documents/reports/BPP-combating-abuse-non-profit-organisations.pdf

(24)

     http://www.fatf-gafi.org/media/fatf/documents/reports/Trade%20Based%20Money%20Laundering.pdf

(25)

     As defined under Council Regulation (EC) No 116/2009 of 18 December 2008 on the export of cultural goods (OJ L 39 of 10.02.2009 p.1).

(26)

     Council Regulation (EU) No 36/2012 of 18 January 2012 concerning restrictive measures in view of the situation in Syria and repealing Regulation (EU) No 442/2011 (OJ L 16, of 19.01.2011) and Council Regulation (EC) No 1210/2003 of 7 July 2003 concerning specific restrictions on economic and financial relations with Iraq and repealing Regulation (EC) No 2465/96 (OJ L 169 of 08.07.2003 p.6).

(27)

   See notably Europol's European Union Terrorism Situation and Trend Report TE-SAT: https://www.europol.europa.eu/content/european-union-terrorism-situation-and-trend-report-2015

(28)

     https://www.thegctf.org/focus-areas

(29)

     http://www.consilium.europa.eu/en/press/press-releases/2015/11/16-g20-summit-antalya-communique/

(30)

     http://www.coe.int/t/dghl/monitoring/cop198/

(31)

     The assistance could include building the capacity of criminal justice and wider financial sector stakeholders, assisting partner countries in amending and updating legislation in line with international best practices, and promoting regional cooperation. The EU has been implementing this approach in countering the financing of terrorism mainly in the Greater Horn of Africa (Djibouti, Ethiopia, Eritrea, Kenya, Somalia, South Sudan, Sudan, Uganda and Yemen). The EU is now in the process of developing a global programme under the Instrument contributing to Stability and Peace for countering the financing of terrorism and anti-money laundering (with planned allocation of EUR 16 million). The geographical scope of the actions will be the regions of the Middle East and North Africa and countries in South East Asia.