EU Finance Ministers backed measures on 6 May that will reinforce the protection of the euro and other currencies through criminal law measures. These will include tougher sanctions for criminals and improved tools for cross-border investigation. The directive was backed by the European Parliament on 16 April and is expected to enter into force in June 2014.
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Why do we need to protect the euro and other currencies?
Counterfeiting of the euro and other currencies remains a concern throughout the European Union. The euro is particularly susceptible to counterfeiting on a transnational scale.
In total, around 913 billion worth of euro notes and 16 billion worth of euro coins are in circulation around the world.
Counterfeiting of the euro has led to a financial damage amounting to at least EUR 500 million since the introduction of the euro in 2002.
The euro and other currencies continue to be a target of organised crime groups active in the money forgery. Europol considers that there is a long-term trend towards an increase in the crime level and notes that the criminal threat remains serious. This is illustrated by the seizures of large amounts of counterfeit euro notes and coins and the continuous dismantling of illegal print-shops and mints each year within and outside the European Union.
These developments show that the current measures against counterfeiting are insufficient and, therefore, that an improved protection of the euro is needed at European level. 353,000 counterfeit euro banknotes were withdrawn from circulation in the second semester of 2013. This represents an increase of 11.4% as regards the quantity recovered in the second half of 2013 compared with the previous months. Recent Annual Reports of the European Technical and Scientific Centre point to a continuous discovery of new types of counterfeit euro coins and an increase in the number of sophisticated counterfeit coins.
According to the latest figures from the European Central Bank, the 20 and 50 denomination banknotes are the most counterfeited, accounting together for 78%. Meanwhile, for euro coins, recent figures published by the Commission show that a total of 175 900 fake euro coins were withdrawn from circulation last year. The 2-euro denomination remains by far the most affected by this criminal activity.
The aim of the Directive is to increase the protection of the euro and other currencies through criminal law measures to achieve an adequate and efficient level of protection across the European Union.
Why does the existing legal framework need to be strengthened?
The EU already has instruments specifically designed to protect the euro, such as the legal framework on authentication of euro notes and coins set in Regulation No 1338/2001 [link] and further implementation rules and an EU programme for awareness raising and training (“Pericles 2020” programme). The International Convention for the Suppression of Counterfeiting Currency of 1929 (Geneva Convention) lays down rules to ensure that severe criminal penalties and other sanctions can be imposed for counterfeiting offences. In particular Council Framework Decision 2000/383/JHA of 29 May 2000 on increasing protection by criminal penalties and other sanctions against counterfeiting in connection with the introduction of the euro. requires Member Sates to ensure that counterfeiting offences are punished and penalties imposed.
However, Member States have adopted very diverging rules resulting in diverging levels of protection and practices. The current rules therefore need to be strengthened to improve the prevention, investigation and sanctioning of euro counterfeiting throughout the EU.
The following weaknesses in the legal framework on the protection by criminal law measures of the European single currency against counterfeiting were identified:
a. Insufficient sanctions
The level of penalties for currency counterfeiting is not sufficiently dissuasive and effective. There are important differences between the sanctions foreseen in Member States, which is one of the reasons for insufficient deterrence and uneven protection of the euro and other currencies across the European Union.
b. Cross-border investigations hampered
Cross-border investigations and prosecutions may be unsuccessful due to cooperation problems resulting from differences in availability of efficient investigative tools, such as interception of communications, the monitoring of bank accounts and other financial investigations. In some Member States, those responsible for investigating and prosecuting currency counterfeiting do not have the possibility to make use of such investigative tools typically used for combatting organised crime or other serious crime.
c. Insufficient prevention
If during judicial proceedings seized counterfeits are not transmitted in a timely manner to the competent authorities for analysis, the detection of the source of production of counterfeits in an on-going investigation or prosecution can be delayed or hampered. Such types of counterfeits risk continuing circulation because delays in the adjustment of machines for detecting counterfeits will occur.
Currently there is no obligation in EU-law to transmit seized counterfeits during judicial proceedings. In practice, the judicial authorities refuse sometimes transferring samples of counterfeit euro notes and coins for analysis prior to the end of the criminal proceedings even if such transfer would be possible taking into account the quantity of seized counterfeits. The transfer of such counterfeits after the end of the criminal proceedings is only of limited value. There are often considerable delays before the note-handling and coin-processing machines used by financial institutions can be adjusted to detect the counterfeits and prevent such types of counterfeits from further circulating.
What are the new provisions that the Directive contains?
The new Directive on the protection of the euro and other currencies against counterfeiting (adopted today by the European Parliament) provides added value to the current framework with respect to the following issues:
a. sets a minimum level of the maximum penalty of five years applicable to the distribution offences and maintains the existing eight years for production increasing deterrence against the main counterfeiting offences.
If a citizen receives counterfeit currency without the knowledge that it is counterfeit, but passes it on with the knowledge, this is clearly criminalised, but Member States may decide to set, as the maximum penalty, a penalty of less than five years of imprisonment or a fine.
b. obliges Member States to ensure that effective investigative tools are available to facilitate cross-border investigations of currency counterfeiting offences, such as those used in other serious crimes.
c. obliges to ensure a timely transmission of seized counterfeits for technical analysis and detection during judicial proceedings to increase the possibility of detecting counterfeit notes and coins in circulation;
d. requires Member States to collect data on the number of counterfeiting offences, of the persons prosecuted and those convicted, and transmit these data to the Commission.
What investigative tools does this Directive cover?
Police officers and prosecutors working on currency counterfeiting cases should have the possibility to make use of effective investigative tools such as those which are used in combating organised or other serious crimes. Such tools could include the interception of communications, covert surveillance and the monitoring of bank accounts, whilst taking into account the principle of proportionality and the nature and seriousness of the offences.
What offences and levels of sanctions does this Directive cover?
As the single currency shared by the Member States of the euro area, the euro should be protected in a consistent manner across the Union, by setting minimum unles on criminal offences and criminal sanctions for the euro counterfeiting. This will reinforce deterrence and judicial cooperation.
Offences include the production of counterfeit notes and coins and their distribution, the production of counterfeiting instruments and components, misuse of legal facilities or material and counterfeiting of currency not yet issued but designated for circulation as legal tender.
The Directive requires Member States to ensure that the criminal offences defined in the Directive are punishable by criminal sanctions which are effective, proportionate and dissuasive. For this purpose, the Directive provides for a minimum maximum sanction of eight years for production of counterfeits and five years for distribution offences, including where they relate to banknotes and coins which are not yet issued but are designated for circulation as legal tender, such as the future new series of euro banknotes. For offences of currency counterfeiting by use of legal facilities or material, a minimum maximum sanction of imprisonment without a specified length must be foreseen. For preparatory offences, such as the fraudulent making of holograms, also where such conduct relates to future banknotes and coins, a minimum maximum sanction of imprisonment without a specified length must be foreseen.
Legal persons will also be punishable by effective proportionate and dissuasive criminal or non-criminal fines, which may include other sanctions such as exclusion from entitlement to public benefits or aid, temporary or permanent disqualification from carrying out of commercial activities, placing under judicial supervision, judicial winding up or temporary or permanent closure of establishments which have been used for committing the offence.
Member States could nevertheless impose more stringent provisions than those laid down in the Directive.
The Directive does not introduce minimum penalties, i.e. imprisonment and in serious cases imprisonment of at least six months, for production and distribution of counterfeits, which the Commission proposed.
A review clause requires the Commission to report to the European Parliament and Council, within five years of the Directive’s entry into force, on its application and, if necessary, on the need to amend it. If appropriate, the report shall be accompanied by a legislative proposal.
How many euros are counterfeit?
The euro continues to be targeted by organised crime groups active in money forgery. Since its introduction in 2002, counterfeiting of the euro has led to financial damage amounting to at least 500 million. According to the latest figures from the European Central Bank, in the second half of 2013 a total of 353,000 counterfeit euro banknotes were withdrawn from circulation which is an increase of 11.4% compared to the figure for the first half-year. The 20 and 50 denomination banknotes are the most counterfeited, accounting together for 78%. Meanwhile, for euro coins, recent figures published by the Commission showed that a total of 175 900 fake euro coins were withdrawn from circulation last year. The 2 euro denomination remains by far the most affected by this criminal activity.
What is the legal basis for this proposal?
The Lisbon Treaty equips the EU with strengthened tools to tackle this problem of counterfeited currencies through criminal law measures. Under Article 83 of the Treaty on the Functioning of the European Union the EU can adopt directives with minimum rules concerning EU criminal law for particularly serious crimes with a cross-border dimension.
Are there Member States which do not participate in the Directive?
Denmark and the United Kingdom do not participate in the Directive, whereas Ireland has decided to opt in. For Denmark, the current Council Framework Decision of 29 May 2000 on increasing protection by criminal penalties and other sanctions against counterfeiting in connection with the introduction of the euro will stay in force. The UK has made use of a general opt out under Protocol 36 from the former third-pillar-acquis, which includes this Framework Decision.
What other measures are foreseen to protect the euro?
The Directive is part of a comprehensive legal framework consisting also of administrative and training measures, such as:
Council Regulation (EC) No 1338/2001 regulates how euro notes and coins can be uttered in such a manner as to protect them against counterfeiting. It also addresses issues such as gathering and accessing technical and statistical data relating to counterfeit notes and coins, the examination of counterfeit notes and coins by the National Analysis Centres, obligations of credit institutions and the centralisation of information at national level.
Decision of the European Central Bank (ECB/2010/14) on the authenticity, fitness checking and recirculation of euro notes.
Regulation (EU) No 1210/2010 of the European Parliament and of the Council concerning authentication of euro coins and handling of euro coins unfit for circulation.
Council Decision 2005/511/JHA on protecting the euro against counterfeiting, by designating Europol as the Central Office for combating euro counterfeiting.
Council Decision 2002/187/JHA setting up Eurojust with a view to reinforcing the fight against serious crime by stimulating and improving coordination and cooperation between competent judicial authorities of the Member States also in the field of counterfeiting of the euro.
Targeted actions for exchange, assistance and training of law enforcement agents with the aim of establishing closer professional ties, are financed by the Union through the “Pericles 2020” programme.
What are the next steps in the adoption of the proposal for a Directive?
Member States will have two years after the entry into force of the Directive to transpose the Directive into national law.
Further information:
