France’s effort to intensify the fight against terrorism financing is expected to find a more cautious response from EU institutions and member states at a meeting of EU finance ministers on Friday (15 January).
The Ecofin meeting will hold an initial debate on how to bolster cooperation between member states’ financial intelligence units in their fight against terrorism financing.
Ministers are expected to review the sophisticated ways used by terrorists to obtain financing across Europe and beyond.
These include the transfer of gold and precious metals, and the illicit trade in cultural goods stolen in Iraq or Syria. But, closer to home, they also include the use of electronic payments and digital currencies (such as Bitcoin and mobile phone apps), or pre-paid cards for small payments, which were used during the Paris attacks in November.
This will be the first exchange of views after French Minister of Finance, Michel Sapin, submitted proposals in December to cut off the financial sources of terrorist groups.
European Commission Vice-President for the Euro and Social Dialogue, Valdis Dombrovskis, announced back then that he would present “detailed suggestions” in the coming weeks, labelling the fight against terrorism financing as an “absolute priority”.
There is broad support for French efforts to fight terrorism financing, various sources agreed. However, some national and EU officials were cautious about coming up with new rules as swiftly as Paris wished.
Speaking on condition of anonymity, European sources told EURACTIV that Austria raised concerns regarding some legal aspects of the French proposals. And the United Kingdom has warned of the risk of overregulation in areas like virtual currencies.
London argues that controls should focus on transactions where money is converted into virtual currencies and vice versa, but not daily operations.
A French diplomat explained the intention is to keep the momentum in the fight against terrorism. “We want ambitious and swift responses,” the source said.
The Commission intends to put forward an action plan in February outlining initiatives for the coming months. But officials said “it might be too early” to propose hard legislation for now. A new set of rules “would require striking the right balance” in order to avoid overregulation, said Vanessa Mock, the EU Commission’s spokesperson for Financial Services.
In cases such as the pre-paid cards, the Commission is aware of the concerns triggered by the anonymity of users, but an excess of regulation could penalise this sector, the argument goes.
The Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union sent a questionnaire to the national governments before the Christmas break in order to sound out areas where there is most appetite for regulation. However, only a handful of member states have replied to date and are waiting for the first exchange of views at the Ecofin before formalising their position in writing.
The Commission is also consulting the payment industry on possible technical solutions to address terrorist financing.
Last December, EU leaders urged the Commission and Council to “take rapidly further action against terrorist finance”, in particular as regards to asset freeze “and other restrictive measures”. The leaders prioritised “strengthening and, if need be, extending the existing measures to tackle ISIL/Da’esh-related activity throughout the EU.”
>>Read more: Paris terrorist attacks
After the Madrid attacks of 2004, the European Union strengthened all aspects of its fight against terrorism, including the fight against terrorist financing.
Tracking financial transactions is seen as an effective means of locating terrorists and disrupting their activities.
Regulators have so far applied anti-money-laundering techniques to track down terrorist finances. They are also looking at imposing greater transparency on financial transactions and legal entities in order to make it harder for terrorists to raise money.
The European Commission put forward initiatives aimed at preventing such financing in three ways: improved cooperation on the exchange of information, enhanced traceability of financial transactions, and greater transparency of legal entities.
February: European Commission to present action plan to combat terrorism financing.