Tag Archives: Economic offence

More cooperation between Member States in recovering assets

More cooperation between Member States in recovering assets

Outline of the Community (European Union) legislation about More cooperation between Member States in recovering assets

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Justice freedom and security > Fight against organised crime

More cooperation between Member States in recovering assets

Document or Iniciative

Council Decision 2007/845/JHA of 6 December 2007 concerning cooperation between Asset Recovery Offices of the Member States in the field of tracing and identification of proceeds from, or other property related to, crime.

Summary

Rapid information exchanges help to combat cross-border organised crime. There is a need for close cooperation and direct communication between the relevant authorities of Member States involved in the tracing and confiscation of illicit proceeds.

To this end, each Member State is to designate at least one national Asset Recovery Office. These offices aim to facilitate the tracing and identification of proceeds of crime and other crime-related property. The freezing, seizure or confiscation of the proceeds is decided in judicial proceedings.

Cooperation between Asset Recovery Offices

Member States are to ensure that their Asset Recovery Offices cooperate with each other, exchanging information rapidly either of their own accord or upon request. These exchanges of information are to follow the procedures established under Framework Decision 2006/960/JHA on simplifying the exchanges of information and intelligence between law enforcement authorities of Member States.

Member States are to ensure that this cooperation is not hampered by the internal status of the Asset Recovery Offices, regardless of whether they form part of an administrative, law enforcement or a judicial authority.

The Asset Recovery Offices are also to exchange best practices, with a view to improving Member States’ effectiveness in the tracing and identifying of crime-related proceeds and other property.

Data protection

Information must be exchanged in conformity with data protection rules. The use of the information exchanged is subject to national data protection provisions of the receiving Member State.

Background

Facilitating the exchange of information implements a commitment made in the Hague Programme.

This decision follows from and completes the CARIN network (Camden Assets Recovery Inter-Agency Network), which is an informal network of asset recovery authorities.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Decision 2007/845/JHA

18.12.2007

18.12.2008

OJ L 332 of 18.12.2007

Corporate and financial malpractice

Corporate and financial malpractice

Outline of the Community (European Union) legislation about Corporate and financial malpractice

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for capital

Corporate and financial malpractice

The aim of this Communication is to provide a holistic approach on how to reduce the risk of financial and corporate malpractice covering also taxation and law enforcement.
There are four lines of “defence” against corporate malpractice: internal control in a company, independent third parties, and supervision and enforcement.

Document or Iniciative

Communication from the Commission to the Council and the European Parliament of 27 September 2004 on preventing and combating corporate and financial malpractice [COM(2004) 611 final – Not published in the Official Journal].

Summary

This Communication is the Commission’s response to the Enron and Parmalat financial scandals that caused immense disruption to capital markets. The Commission is aware that there is an effective EU framework for dealing effectively with most of the financial issues raised, viz. the Financial Services Action Plan (FSAP) and the existing action plans (COM(2003) 284), and it sets out in this Communication a holistic strategy covering financial services, internal issues, justice and tax policy.
The Commission identifies four lines of “defence” against corporate malpractice that focus on a series of measures involving matters ranging from the internal control in a company, through auditors and supervision to measures necessary to comply with the law.

First line of defence – internal control in a company and corporate governance

Boards of companies have fiduciary obligations towards the company itself and its shareholders as well as obligations towards stakeholders at large.
Before the end of 2004 the Commission will take the following measures:

  • enhance transparency of intra-group transactions as well as of transactions with related parties;
  • clarify the responsibilities of board members for financial statements and key non-financial information;
  • oblige all listed companies to make public annually a corporate governance statement.

The Commission will look into:

  • after 2006, criteria for the disqualification of directors and wrongful trading;
  • the use of bearer shares and bonds, which can be used to blur the ultimate beneficial owners;
  • bond market transparency in accordance with the Directive on Markets in Financial Instruments (MiFID), including risk transfer to the retail sector.

Second line of defence – independent third parties

The second line of defence is made up, above all, of the auditors, but accounting firms, banks, investment bankers and lawyers, as well as rating agencies and financial analysts, also have an important role to play. At this control level, transactions must be transparent and conflicts of interest reduced to a minimum.

In this connection, the Commission has presented a proposal for a directive on statutory audit of annual accounts and consolidated accounts (COM(2004) 177 final). The proposal provides for:

  • full group auditor responsibility for consolidated accounts;
  • the establishment of audit committees in public-interest entities;
  • auditor rotation;
  • strengthening of sanction regimes.

In the area of customs cooperation, the EU acquired two important legislative instruments in 2005:

  • a Regulation to prevent money laundering that requires cash control based on a declaration system for amounts exceeding EUR 15 000;
  • an anti-money laundering Directive covering trust and company service providers.

The Commission will look more closely at financial analysts and credit rating agencies as regards:

  • access to inside information from insurers;
  • the way they carry out their credit assessment;
  • entry barriers in the industry;
  • conflicts of interest.

Third line of defence – supervision

Member States play a key role in enforcing EU legislation regarding supervision and public scrutiny.
In October 2005 the EU Council reached a political agreement on the proposal for a directive on statutory audit (COM(2004) 177 final) that requires adequately funded, effective and independent public supervision for all statutory auditors and audit firms.

More than one authority is involved in supervising the institutions operating on financial markets. In the Commission’s view, it is important to develop deeper cooperation between sectors:

  • in the Member States, between the different authorities with the task of supervising institutions operating on their financial markets, and in particular in the securities, banking and insurance sectors;
  • at European level, between the European supervisory authorities. A framework for voluntary cooperation exists here between the members of the Committee of European Securities Regulators (CESR), the European Banking Committee (EBC), the European Insurance and Pension Committee (EIOPS), the Committee of Insurance and Occupational Pension Supervisors (CEIPS) and the Committee of Banking Supervisors (CEBS).

The Commission envisages a clear division of labour between the national level and the European level of supervision, and one that favours the latter in the event of cross-border transactions. As part of more wide-ranging cooperation between these two levels, the Commission would like to see improved transparency of tax systems by facilitating access to, and the exchange of, information. The possibility of using a single direct tax identification number for companies will be looked into.

In order to improve administrative cooperation, the Communication sets out the following practical measures:

  • in the short term, better use of existing EU instruments and the exchange of best practices between Member States;
  • in the medium term, broadening of the scope for joint investigations in direct tax matters both between Member States and, at national level, between the different services involved;
  • in the longer term, possible extension of the automatic exchange of information could be extended to other areas of direct taxation or other types of income by using new technologies.

The Commission and the Member States are developing concrete proposals targeted at cases of tax fraud and avoidance involving complex and opaque structures.

Outside the EU, far greater transparency and exchange of information with third countries as well as with dependent or associated territories should be promoted. For this, better consistency is essential in defining EU policies towards cooperative and non-cooperative tax havens.

The Communication states that:

  • the EU partners should improve transparency and the exchange of tax information;
  • the EU should provide reinforced technical assistance or economic support for a limited period of time;
  • bilateral agreements on the exchange of information on tax havens should be reached between the EU and the individual member countries of the Organisation for Economic Cooperation and Development (OECD).

Fourth line of defence – law enforcement

This line of defence is concerned mainly with police forces and the judicial authorities responsible for investigations and prosecutions that may have both a preventive and a repressive effect. The Commission has attempted to provide the Member States with more effective legal instruments to combat financial crime. These are:

  • the Millennium Strategy published in 2000 by the Commission;
  • the Framework Decision on combating fraud and counterfeiting of non-cash means of payment adopted by the Council in 2001;
  • the Framework Decision on money laundering, the identification, tracing, freezing, seizing and confiscation of instrumentalities and the proceeds of crime adopted in 2001;
  • the 2000 Council Decision concerning arrangements for cooperation between financial intelligence units (FIUs) of the Member States;
  • the 2003 Communication on a comprehensive EU anti corruption policy.

At EU level, the Commission has identified a number of improvements that need to be made:

  • the exchange of information and cooperation between national authorities, Europol and Eurojust regarding investigations and prosecutions. In 2004 Eurpol and Eurojust signed a cooperation agreement (PDF )
  • cooperation between regulatory bodies and law enforcement services;
  • the exchange of information on bank accounts and other bank-related information already provided for in the Protocol to the Convention on Mutual Assistance in Criminal Matters between the Member States of the European Union;
  • cooperation between the financial and other business sectors and law-enforcement authorities as part of a close partnership between the public and the private sector;
  • financial investigation, which must be accompanied by severe penalties for the wilful destruction of documents;
  • the traceability of financial flows, which could be introduced for the recording of electronic payments. The ” Cyber Tools OnLine Search for Evidence ” project (CTOSE) (could enable the gathering of electronic evidence;
  • the effects of certain disqualifications should be enforced throughout the EU and not simply in the country ordering the disqualification.

The Commission would like to see Member States establish specialised national bodies that could cooperate at European level with a view to effective identification, freezing, seizing and confiscation of laundered proceeds.

Context

The Communication fits into the general framework laid down by the Financial Services Action Programme (FSAP) and the Action Plan modernising company law and enhancing corporate governance (COM(2003) 284), which lay down the political foundations at Community level. The Communication stresses that these action plans should not be changed but, instead, should be implemented in a timely manner and by ensuring effective control of the application of legislation.