C-290/98

OPINION OF MR SAGGIO — CASE C-290/98

O P I N I O N OF ADVOCATE GENERAL SAGGIO delivered o n 18 May 2000 *

1. By an application lodged at the Court ments introduced by the Treaty on Euro- Registry on 28 July 1998, the Commission pean Union, Article 57(2), second and third is claiming that the Republic of Austria has sentences, and Article 100a of the EC failed properly to fulfil a number of obliga- Treaty and, now, following the amend- tions arising out of Council Directive ments introduced by the Treaty of Amster- 91/308/EEC of 10 June 1991 on prevention dam, Article 47(2) EC, first and second of the use of the financial system for the sentences, and Article 95 EC). Those pro- purpose of money laundering 1(hereinafter: visions basically lay down that the Council, 'the Directive'). The obligations in question acting by a qualified majority, on a Com- concern the need to ensure that money mission proposal and in cooperation with laundering is prohibited and to guarantee the European Parliament, shall issue 'direc- that credit or financial institutions under- tives for the coordination of the provisions take customer identification. laid down by law, regulation or adminis- trative action in the Member States con- cerning the taking-up and pursuit of activ- ities as self-employed persons' as well as 'measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their objective the establish- The relevant Community law ment and functioning of the internal mar- ket.'

Scope and substance of the money launder- ing directive

trust of the public'; 2 on the other, it seeks 8 November 1990 in Strasbourg'. 6 The to guarantee the proper functioning of the definition, contained in Article 1, third internal market, on the ground that 'lack of indent, of the directive, includes four types Community action against money launder- of 'conduct when committed intentionally': ing could lead the Member States, for the (a) 'the conversion or transfer of property, purpose of protecting their financial sys- knowing that such property is derived from tems, to take measures which could be criminal activity or from an act of partici- inconsistent with the completion of the pation in such activity, for the purpose of single market'. 3That is the reason why the concealing or disguising the illicit origin of directive was adopted using two separate the property or of assisting any person who legal bases. More generally, the directive is is involved in the commission of such designed to prevent circumstances in which activity, to evade the legal consequences 'in order to facilitate their criminal activ- of his action'; (b) 'the concealment or ities, launderers could try to take advantage disguise of the true nature, source, location, of the freedom of capital movement and disposition, movement, rights with respect freedom to supply financial services which to, or ownership of property, knowing that the integrated financial area involves, if such property is derived from criminal certain coordinating measures are not activity or from an act of participation in adopted at Community level.' 4 such activity'; (c) 'the acquisition, posses- sion or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity'; (d) 'participation in, association to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions mentioned in the foregoing paragraphs.' In regard to such criminal activity, knowledge, intent or purpose may be inferred from objective 4. In that context, the directive's definition factual circumstances. Furthermore, of money laundering — perceived as a according to the directive, money launder- 'criminal activity, which constitutes a par- ing also includes cases in which 'the ticular threat to Member States' socie- activities which generated the property to ties' 5 — is taken word for word from the be laundered were perpetrated in the terri- 'United Nations Convention Against Illicit tory of another Member State or in that of Traffic in Narcotic Drugs and Psychotropic a third country'. Substances, adopted on 19 December 1998 in Vienna... and [extended] more generally [in relation] to all criminal activities, by the Council of Europe Convention on launder- ing, tracing, seizure and confiscation of proceeds of crime, opened for signature on 5. Having made those preliminary points of a general nature, I shall consider briefly the 2 — See the first recital. 3 — See the first part of the second recital. 4 — See the second part of the second recital. 5 — See the second part of the third recital. 6 — See the fourth and ninth recitals.

8. Article 3(5) and (6) contain two provi- sions designed to boost the effectiveness of the Directive. Article 3(5) provides that, in the event of doubt as to whether customers are acting on their own behalf, or where it is certain that they are not acting on their own behalf, 'the credit or financial institu- 7. Article 3 of the Directive meantime tions shall take reasonable measures to requires credit and financial institutions to obtain information as to the real identity of require identification of their customers 'to the persons on whose behalf those custo- avoid launderers' taking advantage of mers are acting'. Article 3(6) requires the anonymity to carry out their criminal credit and financial institutions to identify activities'. 8More especially, Article 3 lays the client, even where the amount of the down different requirements for regular transaction is lower than the threshold laid and occasional customers of the credit and down, 'wherever there is suspicion of financial institutions. In the case of regular money laundering'. customers, Article 3(1) requires the Mem- ber States to ensure that the credit and financial institutions establish identifica- tion of such customers 'by means of supporting evidence when entering into business relations, particularly when open- ing an account or savings account, or when offering safe custody facilities'. In the case of occasional customers, Article 3(2) 9. In connection with the latter provision, requires identification 'for any transac- it should also be pointed out that Articles 5 and 6 of the Directive lay down a general requirement for the Member States to 7 — See the 10th recital. ensure that 'credit and financial institutions 8 — See the 11th recital. examine with special attention any transac-

9— The 13th recital specifies that the credit or financial 10 —OJ 1994 L 1,p. 1. institutions 'should pay special attention to transactions with third countries which do not apply comparable 11 — Ibidem, p. 571. standards against money laundering to those established 12 — See the information on the date of the entry into force of by the Community or to other equivalent standards set out the European Economic Area and the adjusting Protocol by international fora and endorsed by the Community'. (OJ 1994 L 1, p. 606).

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14 — OJ 1994 C 241, p. 21. 13 — OJ 1994 L 344, p. 1. 15 _ OJ 1994 C 241, p. 21, and OJ 1995, p. 1.

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with Article 168 of the Act of Accession: The relevant national legislation 'The new Member States shall put into effect the measures necessary for them to comply, from the date of accession, with the provisions of directives... within the meaning of Article 189 of the EC Treaty... unless a time-limit is laid down in the list of Preliminary remarks Annex XIX or in any other provisions of this Act'. The money laundering directive is not mentioned in Annex XIX nor does it form the subject-matter of specific provi- sions of the Act of Accession. 18. I shall confine myself here to furnishing the relevant information on the national legislation applicable to this case. That legislation basically includes certain provi- sions of the Austrian Penal Code 16 (here- inafter: the 'StGB'), of the Austrian Bank Law 17 (hereinafter: the 'BWG') and of the Austrian Deposit Law 18 (hereinafter: the 'DG'), as well as a number of official communications of the Austrian National Bank. 19

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activity perpetrated by others or disguising which, although they do not form part of its provenance by providing false informa- permanent business relations, are of a value tion as to the origin, nature or ownership of at least ATS 200 000, regardless of of, power of disposal over, transfer or whether a single transaction or a series of location of the property. 20 Until 1998, that transactions is involved, provided that, if provision made money laundering a pun- the value of the transaction is unknown, ishable offence provided that the property identification of the customer is undertaken that had been concealed or had its origin when the value of the transaction is estab- changed, was 'of a value in excess of ATS lished or it is ascertained that the afore- 100 000'. After 1 October 1998, that mentioned threshold has been reached; (c) condition was removed when the definition there is good reason to suspect that the of the offence was amended to make it customer is involved in money laundering. easier to prosecute money laundering. The The credit and financial institutions have aggravating circumstance provided for in also to ask their customers whether they cases where the money that has been intend maintaining business relations on laundered is 'in excess of ATS 500 000', their own behalf or on behalf of a third or the perpetrator of the offence is the party and, if so, the identity of their member of a criminal organisation, 21 con- principal. tinue to apply, as well as the extenuating circumstance introduced 22 where the per- petrator of the offence acts voluntarily to hinder its completion.

23 — See, in that connection, paragraphs 8.2.2 and 8.2.3 of the 20 — Moreover, Austrian criminal law also penalises the offence official communication ('Kundmachung') DL 2/91 of the of handling stolen goods, provided for in Paragraph 164 of Austrian National Bank, as amended by official commu- the StGB; the constituent elements of that offence differ nication DL 1/99. According to paragraphs 2.2.1 and 2.2.2 from those of money laundering in the sense that the of official communication DL 1/91, 'foreigners' ('Auslän- handling of stolen goods requires the offender to have der') basically means persons not resident in Austrian assisted the perpetrator of a crime against property for the territory. purpose of concealing or using the proceeds of the crime. 24 — They fall within the scope of Article 11 of the DG which 21 — As provided for in Paragraph 278a of the StGB. places a number of specific obligations on credit institu- 22 — By Paragraph 165a of the StGB. tions with which they are opened.

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to the acceptance and acquisition of secu- The stages in the infringement proceedings rities. 25 However, the derogation concern- ing the opening of savings accounts has continued to apply, and also applies to the transactions relating to them.

The procedure before the EFTA Surveil- lance Authority

25. Austria acceded to the European Union 25 — See Paragraph 40(5) of the BWG. 26 — Paragraph 32(5) of the BWG. Moreover, savings accounts on 1 January 1995. In accordance with may nave to be opened for a specific period. Article 172(6) of the Act of Accession, the

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EFTA Surveillance Authority transmitted to 28. Considering therefore that Austria was the Commission, responsible for such still failing to fulfil its obligations under the issues, the whole of its correspondence directive, the Commission decided to bring with the Austrian Government. the present action, in accordance with the second paragraph of Article 169 of the EC Treaty, lodged at the Court Registry on 28 July 1998.

The procedure before the Commission

26. On 20 December 1995, the Commis- sion decided to resume the infringement Submissions of the parties proceedings and invited the Austrian Gov- ernment to submit its own observations on a number of complaints concerning failure to fulfil the obligations laid down in the Directive. The Commission therefore sent 29. In its application in this case, the to the Austrian Government on 14 Febru- Commission is essentially claiming that ary 1996 a letter of formal notice within the Court should: the meaning of the first paragraph of Article 169 of the EC Treaty. The Austrian Government submitted its own observa- tions by letter of its permanent representa- tive of 12 April 1997, but the Commission did not regard those observations as ade- — declare that the Republic of Austria has quate. failed to fulfil its obligations under the EC Treaty and Articles 2 and 3(1), (5) and (6) of the Directive by:

not as of 1 January 1994 (the date 30. In its reply, 27 the Commission amen- on which the EEA Agreement ded the first of the complaints addressed to entered into force) but only as of the Austrian Government, and asked the 1 August 1996; Court to declare that 'the Republic of Austria has failed to fulfil its obligations under the Treaty and Article 2 of the Directive... in so far as it extended the prohibition on money laundering laid down by Paragraph 165 of the StGB to assets with a value of less than ATS 100 000 only as of 1 October 1998'. The Commis- — not requiring customer identifica- sion is also asking the Court to 'declare tion for all transactions into or out inadmissible the objection set out in Section of an existing securities account, IV of the rejoinder', 28 that is to say the plea but only, as provided under Para- of illegality entered by the Austrian graph 40(5) of the BWG, in the Government in relation to Article 3 of the case of deposits and purchases of Directive. securities for such accounts;

31. For its part, the Austrian Government — not requiring customer identifica- is essentially claiming that the Court tion whenever a savings account is should: opened on or after 1 January 1994;

— reject the application in full; — not requiring customer identifica- tion for all transactions relating to a savings account opened before or after 1 January 1994;

— order the Commission to pay the costs.

27 — Reply, paragraph 1.4. Clearly as a result of the failure to make the consequent changes, that amendment is not reflected in the conclusions set out at the end of the reply — order the Republic of Austria to pay (paragraph 4.1.1). the costs. 28 — Reply, at paragraph 4.2.

35. I would point out in that connection that, according to the abovementioned 33. Although, during the written proce- Article 166 of the Act of Accession, the dure, the Austrian Government did not new Member States — including Aus- specifically challenge the Commission's tria — are deemed to be addressees of pre-existing Community directives upon 29 — See paragraph 17 of the application which refers to statements contained in the letter of formal notice of 14 February 1996 and the reasoned opinion of 21 Febru- 31 —See section B.4 of the statement of defence which deals ary 1997. with the problem of retroactive transposition of the 30 — The Commission restates this argument in paragraph 31 of directive, but does not raise the issue of the date of the reply without expanding on it. transposition.

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But from the date of their accession, unless that requirement has to be seen in the other time-limits have been set for the context of the special legal arrangements transposition of such directives. According set in place between the Community and to those provisions, the Austrian Govern- the EFTA States in the wake of the EEA ment was not required to comply with the Agreement, on the basis of which only the provisions of the money laundering direc- EFTA Court was and is competent to hear tive until 1 January 1995, the date on disputes concerning the EFTA States.

1 January 1995. 33 party to the EEA Agreement, had yet to accede to the European Union, would be to accord the Court of Justice authority to rule on disputes over which it has no jurisdic- tion ratione materiae. That finding is confirmed by the Court's recent decisions in two cases for a preliminary ruling 32 — Case C-328/96 Commission v Austria [1999] ECR I-7479. concerning Sweden 34 and Austria 35 This judgment concerns Community law on public con- respectively, and relating to the Member tracts, with reference to the procedure for the award of contracts for the new Sankt Pölten administrative and cultural centre. State's liability for harm caused by the 33 — In the abovementioned Case C-328/96, the Court ruled as failure properly to transpose certain direc- follows, at paragraph 63: 'The Commission observes first tives. In the first of those cases, the Court of all that, as from the time of its accession to the European Union on 1 January 1995, the Republic of established, among other things, that it did Austria was bound to observe Community legislation, which includes the directives relating to the award of not have the authority to rule on the public contracts'. (My emphasis.) Subsequently, when setting out the grounds for its judgment in that case interpretation of the EEA Agreement in (paragraphs 74-79), the Court makes no further mention relation to its application within the EFTA of the date from which the obligation to comply with the relevant directives arose, but this is only — in my view — States, either on the basis of the EC Treaty because this seems irrelevant to the judgment in the case, or on the basis of the EEA Agreement itself, which specifically concerns 'contracts which were con- cluded before 6 February 1996 but which on 7 March and that: 'The fact that the EFTA State in 1996 had still not been performed or could reasonably have been cancelled' (paragraph 79), that is to say activities which wholly take effect only after Austria has acceded to the European Union. For nis part, Advocate General Alber decided, in his Opinion, to leave aside the question of the date from which the Austrian Government 34 — Case C-321/97 Andersson and Wåkerås-Andersson v

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40 — Case C-43/95 Data Delecta and Forsberg [1996] ECR I-4661 and Case C-122/96 Saldanha and MTS [1997] ECR I-5325. Both judgments relate to the compatibility with Article 6 of the EC. Treaty (now, after amendment, Article 12 EC) of Swedish and Austrian legislation on security for costs and compliance with the judgment. 41 — Case C-122/96, cited above, paragraph 14. 42 — In both the abovementioned cases, Advocate General 36 — Case C-321/97, paragraph 30. La Pergola stresses in his Opinion that issues relating to events prior to the accession of another Member State fall 37 — Ibidem, paragraph 31 (my emphasis). outside the temporal scope of the EC Treaty. See in 38 — Case C-140/97, cited in footnote 35 above, paragraph 38. particular, points 11 and 12 of the Opinion in Saldanha 39 — Ibidem, paragraph 40. But see also paragraph 44 in which and MTS (I-5327). the Court explicitly refers to 'the Republic of Austria's 43 — The Court in fact pointed out that 'the main proceedings obligation under Community law to implement the relate to the exercise of the fundamental freedoms Directive after its accession to the European Union on guaranteed by Community law' (Saldanha and MTS, 1 January 1995.' paragraph 17).

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38. On the basis of the foregoing, I there- 39. In its application in this case, the fore consider that the Court should Commission first of all asks the Court to declare 45that it has no jurisdiction to rule declare that the Austrian Government has on the complaints the Commission failed to observe the obligation arising out addresses to the Austrian Government with of Article 2 of the Directive, which requires that the Member States are to ensure that money laundering is prohibited, in that it 44 — That solution is unsatisfactory because it neither allows the limited the scope of the offence of money Commission to verify nor the Court to judge actions of a new Member State that are incompatible with Community laundering — provided for and made pun- law — of which the EEA Agreement is an integral part — ishable under Paragraph 165 of the which took place when the latter Agreement was in force but before the State in question acceded to the European StGB — solely to assets having a value in Union. This is a limited period during which a Member State is, so to speak, guaranteed a kind of immunity in excess of ATS 100 000. In other words, the respect of the past. It is true that, in theory, illegal actions Commission criticises Austria for having by a Member State which take place during that period could be verified by the EFTA Surveillance Authority and set a quantitative threshold above which the EFTA Court, but once the new Member States have acceded, that possibility is more or less ruled out by the money laundering is a punishable offence, extremely restrictive provisions of Article 5 of the Agree- in contrast to the Directive, under which ment on the transitional provisions for the period subse- quent to the accession of some EFTA Member States to the the Member States are required to prohibit European Union. money laundering in all cases and without 45 — On the basis of the principle arising out of Article 92(1) of the Rules of Procedure. restriction.

40. By letter of the Federal Minister for Opinion of the Advocate General on the Justice of 28 August 1998 addressed to the admissibility of amending the complaint Commission and, subsequently, in its state- after the application had been made ment of defence 4 6 submitted on 9 October 1998, the Austrian Government informed the Commission that Paragraph 165 of the StGB had been appropriately amended by a federal law passed by the Nationalrat in 43. As I mentioned above, in its reply, the July 1998 and published in August 1998. 47 Austrian Government did not raise any That amendment abolished the quantitative objection to the Commission's amendment threshold of ATS 100 000 with effect from to the original complaint. However, in 1 October 1998. accordance with Article 92(2) of the Rules of Procedure, the Court may at any time of its own motion consider whether there exists any absolute bar to proceeding with a case. In this case, the Commission's amendment affects the delimitation of the subject-matter of the dispute and calls into 41. Once it had taken formal note of the question the procedural guarantees provi- amendment to the national legislation in ded for under the Treaty, with the result issue, the Commission, in its reply, 48 that the admissibility of that amendment changed the original wording of its com- may be analysed on the basis of the above- plaint against the Austrian Government mentioned rule. 4 9 and asked the Court: 'to declare that the Republic of Austria had failed to fulfil its obligations under the Treaty and Article 2 of the directive... by failing to extend the prohibition on money laundering, provided for under Paragraph 165 of the StGB, to assets of less than ATS 100 000 in value, 44. I would make the preliminary point until 1 October 1998.' However, the con- that, in accordance with settled case-law: clusion to the reply makes no mention of 'The letter of formal notice from the that amendment, clearly as a result of a Commission to the Member State, and lack of coordination. then the reasoned opinion issued by the Commission, delimit the subject-matter of the dispute, so that it cannot thereafter be extended', 50 since the opportunity for a Member State to defend itself constitutes an essential guarantee of the legality of the procedure for establishing that a Member 42. In its rejoinder, the Austrian Govern- State has failed to fulfil an obligation. 51 In ment took note of the amendment to the this case, it is common ground that the Commission's complaint but did not express a view on its admissibility. 49 — Settled case-law. See, among many, Case C-225/91 Matra v Commission [1993] ECR I-3203, paragraph 13. 50 — Case C-365/97 Commission v Italy [1999] ECR I-7773, 46 — Defence, at paragraph II. 1. paragraph 23. 47 — BGBl. No 153/1998. 51 — See, among many, Case C-289/94 Commission v Italy 48 — Reply, at paragraph 1.4. [1996] ECR I-4405, paragraph 15.

complaint originally set out in the applica- introduce a substantial change or extend tion is the same as the complaint addressed the subject-matter of the dispute, introdu- to Austria by the Commission in both the cing new complaints or aggravating the letter of formal notice of 14 February 1996 existing complaints. 53 In this case, how- and the reasoned opinion of 21 February ever, once it had taken formal note of the 1997. In that regard, the Commission fact that the national legislation in issue has fully complied with the rules of the had been amended in accordance with its infringement procedure. The problem that wishes, the Commission could either have arises relates solely to the stage after the upheld its application unamended and application was lodged: at issue is whether sought a declaration of failure to fulfil an the relevant amendment to the complaint, obligation at the time when the reasoned made by the Commission, can be deemed opinion was issued or withdrawn its action to be admissible. in part in relation to that head of claim. However, the Commission chose a third way, one fraught with negative conse- quences which it had clearly failed to appreciate: it amended the ground of application and asked the Court to declare that Austria had failed to fulfil its obliga- tions under the Directive in so far as it abolished the quantitative threshold under Paragraph 165 of the StGB only as of 1 October 1998, leaving the period prior to that date uncovered. In that way, the Commission amended the substance of its own complaint, changing it from criticism

The Court Not permitted, however — since they held to be inadmissible the way in which, in its reply, the Commission added to the complaint, with reference to the would infringe the right of defence of the information supplied by the Danish Government in its Member State in question — are amend- statement of defence. In Case C-274/93 Commission v Luxembourg [1996] ECR I-2019, paragraphs 11 to 13), ments to the form of order sought which the Court — taking, in my view, an excessively formalistic approach — held to be inadmissible an application seeking a declaration of the failure, on the part of the Luxembourg Government, to fulfil its obligation to transpose the provisions of a directive because, having referred in the 52 — See, simply by way of illustration, Case C-257/94 Com- application to 'certain provisions not implemented by the mission v Italy [1995] ECR I-3041, paragraph 4 and Case Luxembourg Law', the Commission subsequently asked C-17/95 Commission v France [1995] ECR I-4895, the Court 'to declare that Luxembourg has not adopted all

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founded 54 — constitutes a new head of occasional customers, in order to prevent claim, obviously not preceded by the requi- anonymity benefiting persons engaged in site pre-litigation procedure that ought to money laundering. The Commission inter- have been initiated in accordance with the prets this provision as the expression of a rules laid down by the EC Treaty. general principle — introduced by the Directive as part of a gradual process of increasing awareness, at an international level, of the risks and dangers of money laundering — inimical to any form of banking or financial anonymity, based on 46. On those grounds, I propose that the the assumption that anonymity objectively Court declare inadmissible the new head of encourages the emergence of criminal activ- claim set out by the Commission in its reply ity geared to laundering the proceeds of in place of the original complaint. illegal activity. In that context, the Com- mission refers explicitly 55 to the initiatives undertaken in the main international for- ums (the United Nations and Council of Europe, for instance) and, more particu- larly, the recommendations of the Financial Action Task Force on Money Laundering, set up in June 1989 by the Paris summit of The obligation to ensure that credit or the seven most developed countries. 56 Of financial institutions undertake customer particular importance from that point of identification view then are the provisions of Article 6(5) and (6) of the Directive, according to which, in the event of doubt as to whether customers are acting on their own behalf or where it is certain that they are not acting on their own behalf, the credit or financial The position of the Commission institutions are to obtain information as to the real identity of the persons on whose behalf those customers are acting and, wherever there is suspicion of money 47. As we saw above, Article 3 of the laundering, they are always to identify the Directive provides that the Member States customer. are to ensure that the credit or financial institutions require identification of their regular and — in the case of transactions amounting to ECU 15 000 or more —

mentioned Article 3 of the Directive applies on the basis of which the Council adopted to all cases in which a customer establishes the Directive, namely Article 57(2), first regular business relations with a credit or and second sentences, and Article 100a of financial institution, or an occasional cus- the EEC Treaty, the former concerning the tomer carries out transactions with such an pursuit of activities as a self-employed institution. In particular, no account is to person in the context of the right of be taken of the nature of the business establishment, and the latter the approx- relations or occasional transactions, as imation of national legislation concerning their purpose, special features or character- the internal market. Therefore, the obliga- istics are held to have no bearing on the tion to require customer identification identification requirement established provided for and governed by Article 3 of under the Directive. To that end, Arti- the Directive relates solely to 'transactions cle 3(1) of the Directive specifically refers which jeopardise the free movement of to the opening of accounts or savings capital within the internal market by mak- accounts and the offering of safe custody ing it possible to launder capital'. 58 Any facilities, but that list is not exhaustive: the other interpretation would have the effect Directive in fact refers to all transactions of removing the Directive from within the that involve the movement of capital, 57 so limits of the authority by virtue of which as to guarantee its effectiveness in combat- the Council adopted the Directive and, ing money laundering. therefore, render illegal the provisions of Article 3 on the general obligation to require identification of the customers of credit or financial institutions. 59

annulment, the legal basis of the provision of the Treaty, would be impossible to at issue. 60 Moreover, the Austrian Govern- reconcile with the principles governing the ment intimates that the Court could, of its legal remedies established by the Treaty own motion, assess the legality of that and would jeopardise the stability of that provision. 61 system and the principle of legal certainty on which it is based' 62and that 'the system of remedies set up by the Treaty distin- guishes between the remedies provided for in Articles 169 and 170, which permit a declaration that a Member State has failed to fulfil its obligations, and those contained in Articles 173 and 175, which permit Opinion of the Advocate General on the judicial review of the lawfulness of mea- plea of illegality sures adopted by the Community institu- tions, or the failure to adopt such measures. These remedies have different objectives and are subject to different rules. In the absence of a provision of the Treaty 51. Let me straight away make the point expressly permitting it to do so, a Member that, in my view, in the context of proceed- State cannot therefore plead the unlawful- ings to establish whether it has been in ness of an action for a declaration that it breach of Community law, a Member State has failed to fulfil its obligations arising out cannot enter a plea of illegality in relation of its failure to implement that decision', 63 to a directive — or an individual provision it being understood that an objection of of a directive — with which it is accused of that kind 'could be upheld only if the failing to comply. measure at issue contained such particu- larly serious and manifest defects that it could be deemed non-existent.' 64 In rela- tion to regulations, specifically mentioned in Article 184 of the EC Treaty, the Court has emphasised that the latter provision 52. The Court has had occasion to state, 'gives expression to a general principle with reference to its case-law, that 'to conferring upon any party to proceedings permit a Member State to whom a decision the right to challenge, for the purpose of adopted under the first subparagraph of obtaining the annulment of a decision of Article 93(2) has been addressed to call in direct and individual concern to that party, issue the validity of that decision when an the validity of previous acts of the institu- application referred to in the second sub- tions which form the legal basis of the paragraph of Article 93(2) has been lodged, decision which is being attacked, if that in spite of the expiry of the period laid party was not entitled under Article 173 of down in the third paragraph of Article 173 the Treaty to bring a direct action challen-

ging those acts by which it was thus could be deemed non-existent', 69 a plea affected without having been in a position which was not, however, entered by the to ask that they be declared void.' 65 It German Government in that case. seems to me to be superfluous to dwell further on the abovementioned decisions which speak for themselves and bar a Member State from availing itself of the 5 3 . In accordance with the abovemen- procedural mechanism of a plea of illegality tioned developments in case-law, I am in the context of infringement proceed- convinced that, in this case, the Austrian

invalid. The Court referred explicitly to that does not change the incontestable fact paragraph 14 of the judgment in Commis- that the plea entered by the Austrian sion v Greece, cited above, and added that Government calls into question the legal a Member State cannot 'plead the unlaw- basis of the provision with which it is fulness of a directive which the Commis- accused of failing to comply, and that is sion criticises it for not having implemen- precluded for the reasons set out above. ted', 6 8 and further pointed out — as it had Moreover, the Austrian Government does already done in paragraph 16 of its judg- not advance arguments designed to show ment in Commission v Greece — that the that the Directive, and in particular Arti- position could be different 'only if the cle 3 thereof, contains such particularly measure at issue contained such particu- serious and manifest defects that it could larly serious and manifest defects that it be deemed non-existent, the only circum- stance able to justify resorting to a plea of

For instance, in Case 116/82 Commission v Germany [1986] cle 230 EC), but does not appear to view ECR 2519, paragraph 8, Germany was allowed to challenge the legality of the regulation with which it was that provision in terms of an 'inexistent accusedof failing to comply. act'. 66 — Although that exclusion is open to criticism in terms of respect of the principle of the legality of Community action; see, in that context, the Opinion of Advocate General Darmon in Case C-258/89 Commission v Spain [1991] ECR I-3977, points 13 to 3 1 , and the legal 69 — ibidem, paragraph 11. literature cited therein. 70 — I expressed similar views at point 27 of my recent Opinion 67 — See Case C-74/91 Commission v Germany [1992] ECR of 20 January 2000 in Case C-206/98 Commission v

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74 — This is the same methodological approach the Court adopted in Case C-258/89, cited in footnote 66 above, in 72 — Case C-313/89 Commission v Spain [1991] ECR I-5231, which it examined the interpretation — and not the paragraph 10. legitimacy — of the regulation with which the Commis- 73 — Reply, at paragraph 50. sion accused Spain of failing to comply.

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Opinion of the Advocate General on the effective pursuit of the objectives the interpretation of Article 3 of the Directive Directive itself legitimately pursues. It fol- lows that the provisions of the Directive have, if they are to fulfil their objectives, to be applied across the board, with no possibility of exemptions, gaps, or worse still, special treatment for certain Member States. In other words, I consider that if the 56. I am persuaded that the money laun- system of customer identification provided dering directive is fully consonant with the for in Article 3 of the Directive is to be basic substance of the provisions of the truly effective, it must be deemed to be an EEC Treaty — Articles 57 and 100a — on hermetic system and, therefore, apply with- the basis of which the Council adopted the out distinction to all business relations and directive. I base that view on the following all transactions to which the provisions of considerations. Article 3 refer, regardless of their nature, their legal or financial features and, above all, their actual or presumed purpose. 7 5

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59. However, I consider that Article 3(1) of mers — whether regular or occasional — the Directive does not extend to individual who act as fronts is properly carried out: transactions carried out as part of a bank's knowledge of the 'real identity of the credit or financial activity, whether those persons on whose behalf those customers transactions are carried out by a regular are acting' is in fact essential if the provi- customer of the bank, who has already sions of Article 3(1) and (2) are not to be been identified for that very reason, or are deprived of effectiveness. For its part, carried out with the bank by an occasional Article 3(6) — which requires identifica- customer, in which case Article 3(2) tion in every case wherever there is 'suspi- applies, together with the quantitative cion of money laundering' — provides threshold it contains. That interpretation added coherence to the whole system of seems to me to follow from logical cri- customer identification, by eliminating all teria, 76 as well as the actual wording of gaps within the range of transactions Article 3(2), which refers to 'any transac- subject to verification of the operator's tion with customers other than those re- identity. ferred to in paragraph 1'. It would in fact be utterly superfluous for a bank to under- take formal identification of one of its own regular customers every time that customer carried out a financial transaction. How- ever, in order to ensure that the aim of the directive is pursued, it is necessary, and reasonable, for the bank to identify an occasional customer who undertakes a The alleged infringement of the identifica- transaction without entering into a regular tion requirement in relation to the Austrian relationship with the bank. In that connec- legislation on savings accounts tion, Article 3(2) is of specific assistance because it sets an upper limit — ECU 15 000 — which triggers the requirement for credit or financial institutions to under- take formal identification.

63. The Commission further contends that the system of anonymity that applies in Austria to savings accounts and the trans- actions relating to them undermines the 62. According to the Commission, Arti- effectiveness of Article 3(5) and (6) of the cle 3(1) of the Directive requires the credit Directive, according to which, in the event or financial institutions to undertake iden- of doubt as to whether the customers are tification of their customers 'when entering acting on their own behalf, or where it is into business relations', that is to say when certain that they are not acting on their they establish lasting links with the institu- own behalf, the credit or financial institu- tion, without it being possible to make a tions must always obtain information as to distinction based on the nature of the the real identity of the persons on whose business relations. Savings accounts are behalf they are acting and, wherever there therefore included without exception in is suspicion of money laundering, always the scope of the Directive. However, Aus- carry out customer identification even trian banking legislation, and in particular where the amount of the transaction is Paragraph 40 of the BWG, continues to lower than the threshold laid down in exempt savings accounts from the identifi- Article 3(2). In the first example, the cation requirement, on spurious grounds. national legislation is patently incompati- Article 3(2) meantime provides for a gen- ble with the Directive, since the rule on eral identification requirement covering all anonymity prevents the bank from setting credit and financial transactions 'involving in motion the procedure for establishing the a sum amounting to ECU 15 000 or more' real identity of the principal. 79 In the entered into with occasional customers. second, it would be difficult to confirm Regardless of the date on which they were suspicions that transactions relating to opened, transactions relating to savings anonymous savings accounts involve accounts fall within the scope of that money laundering because 'verifying the provision from the time it was put into effect by Austria. However, Paragraph 40 of the BWG does not lay down the 77 — Identification is required if 'foreigners' are opening savings identification requirement for transactions accounts and where funds received from 'foreigners' are being paid into such accounts. See paragraphs 8.2.2 and relating to savings accounts. The sole — 8.2.3 of official communication DL 2/91 of the Austrian National Bank. albeit limited — exceptions to the system 78 — Reply, at paragraph 14. of anonymity relate to 'foreigners', that is 79 — Application, at paragraph 39.

64. The Austrian Government acknowl- edges that Paragraph 40 of the BWG provides for a derogation from the custo- mer identification requirement for savings 66. The Austrian Government advances accounts and related transactions, but con- other arguments to demonstrate that the tends that this derogation is offset by the arrangements for savings accounts are provisions of official communication DL compatible with the Directive. 2/91 of the Austrian National Bank which require verification of the customer's place of residence, 81 and that this is equivalent to a kind of personal identification. In any event, identification always takes place where a savings account is being opened for a non-resident, where residents are 67. In the first place, according to the opening accounts in foreign currency, and Austrian Government, the savings accounts where deposits are being paid into savings cannot be used for money laundering. The accounts from funds received from non- only anonymous transactions that are pos- residents for the purpose of administering sible, once the account has been opened, or maintaining those accounts. are in fact cash payments and withdrawals, carried out on presentation of a passbook, in which they are recorded. Moreover, even 80 — Application, at patagraph 40. In paragtaph 4 1 , the for those transactions, Austrian banking Commission adds that the carrying out of transactions 'on an anonymous account ought, per se, to cause the law requires identification of the person credit or financial institution to entertain justified suspi- cions of money laundering.' making the deposit or withdrawal wherever 81 — T o be more precise, paragraph 8.2.2 of official commu- nication DL 2/91 refers to 'status in telation to foteign exchange arrangements' ('devisenrechtliche Status'), con- cerning whether or not the customer is a 'foreignet' 82 — Defence, at paragraph III.A. 1.4; rejoinder, at paragraph ('Ausländer'), that is to say not resident in Austria. See 2.1.4. The Austrian Government cites an opinion by paragraph III.A. 1.3 of the statement of defence. Professor Markus Achatz.

70. At the hearing of 15 March 2000, the agents for the Austrian Government 68. In the second place, anonymous savings announced that, following a decision by accounts — about 95% of all savings the Austrian Council of Ministers, the accounts 86 —are widely distributed Austrian Government would soon be among all groups within Austrian society tabling, in the Nationalrat, a draft law and traditionally meet the 'psychological need for security and discretion', a need felt 87 — Defence, at paragraph III.A.1.1(e), and rejoinder, at paragraph 2.1.3. The agents for the Austrian Government devoted some time to explaining these psychological 83 — Defence, at paragraph III.A.1.1.(b). reasons at the hearing of 15 March 2000, and also maintained that the existence of anonymous savings 84 — Rejoinder, at paragraph 2.1.1. accounts helps protect family requirements in the broad 85 — Rejoinder, at paragraph 2.1.3. sense, by enabling one partner to conceal from the other the extent of their own savings. 86 — According to data supplied by the Commission (applica- tion, at paragraph 72), in 1996, there were about 26 88 — This argument in defence is, moreover, closely linked t o the million anonymous savings accounts in Austria for a plea of illegality entered by the Austrian Government and population of approximately 7.5 million. analysed above.

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abolishing anonymous savings accounts. As 73. According to the Commission, the of 1 November 2000, it will no longer be actions it criticises commenced on 1 Janu- possible to open anonymous savings ary 1994, that is to say the date of entry accounts or make anonymous payments into force of the EEA Agreement. I have into existing accounts and the question of already expressed the view that the obliga- anonymous accounts opened before tion to comply with the money laundering 1 November 2000 will have been finally directive took effect for the Republic of resolved by 2002. Austria from 1 January 1995, the date on which Austria acceded to the European Union. It is not therefore possible to address to the Austrian Government com- plaints which refer, albeit in part only, to periods before that date.

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92 — Defence, at paragraph III.A.1.1.(a). 93 — Rejoinder, at paragraphs 2.1.1 and 2.1.3. 94 — Defence, at paragraph III.A.1.1.(b).

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they were opening a savings account in business relations. 95 It should also be noted ATS; (b) cash payments and withdrawals that Paragraph 30(1.1) of the BWG equates were being made into and out of a savings savings accounts with the other business account. It is therefore necessary to exam- relations established between bank and ine what foundation these accusations customer, and then provides, in relation to have, once reformulated. such accounts, a specific derogation from the requirement that the bank undertake customer identification. That provision is patently inconsistent with the Austrian Government's submissions concerning the claim that the savings accounts are in the nature of stocks and shares. In fact, even — Validity of the complaints concerning though the passbooks payable to bearer can savings accounts be used to move funds deposited in savings accounts, what matters, for the purposes of applying the Directive, is the element of business relations which are being estab- lished between the customer, even if that person is anonymous, and the credit or financial institution which holds and pays 79. The first of the Commission's two interest on the funds deposited, as a result complaints, as reworded in accordance of, first, the opening, and then, the admin- with the above considerations, is, in my istration, of these accounts. Those business view, well founded, given that, by retain- relations are long-term and have all the ing, after accession, the system of anonym- features of accounts or savings accounts to ity whenever savings accounts are opened, which — by way of illustration — Arti- the Republic of Austria has failed to fulfil cle 3(1) of the Directive refers. Therefore its obligations under Article 3(1) and (5) of the customer identification requirement the money laundering directive. I base that must also apply to savings accounts, since, analysis on the following considerations. otherwise, the whole system set in place by the Directive to combat money laundering could be seriously undermined.

The Austrian Government's argument in established as regards the retention, after defence, based on the criterion of verifying 1 January 1995, of the possibility for residence laid down in official communica- customers resident in Austria to open tion DL 2/91 of the Austrian National anonymous savings accounts in ATS. Bank, does not, in my view, carry convic- tion. In point of fact, verification of a customer's status in relation to the foreign exchange system ('devisenrechtlicher Sta- tus') is used by the bank solely to establish whether or not the customer is a 'foreigner' ('Ausländer'), that is to say is not resident 83. I do not, however, consider to be well in Austria, in order to apply to that founded, in the light of Article 3(1) of the customer, if necessary, the requisite system Directive, the second of the Commission's of compulsory identification. But if the complaints concerning the system of trans- customer somehow proves he is resident, actions relating to savings accounts. the credit or financial institution is not required to check his identity because of the derogation provided for in Paragraph 40(1.1) of the BWG.

transactions. The Commission is not, how- ever, seeking a declaration that Article 3(2) of the Directive has been infringed, since neither the reasoned opinion nor the appli- 82. Therefore, the infringement of Arti- cation refer to that provision. In fact, for cle 3(1) of the Directive seems to me to be the reasons set out above, Article 3(1) can refer only to the opening of savings accounts — interpreted as a means of 96 — Though it would have been in their interest to do so. establishing business relations — and not 97 — Particularly in view of the settled case-law according to which a directive has, as a rule, to be transposed by means of national provisions of a binding nature which are not subject to amendment and which have the same legal force as all other national provisions to be amended or 98 — Paragraph 32(2) of the BWG appears to permit payments

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the individual 'transactions' which are — The justification advanced by the Aus- covered by Article 3(2). Therefore, the trian Government Commission's second complaint must be rejected, as being without proper legal basis.

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possible grounds for justification based on provisions of the Directive itself, and — as Article 36 of the EC Treaty (now, after I pointed out above — the defendant amendment, Article 30 EC) — which do Government is not permitted to do that, not, in any event, have anything to do with in the current circumstances. I cannot the grounds for justification advanced by overemphasise that, according to case-law, the Austrian Government in this case — a Member State cannot raise the objection would be incompatible with case-law that failure to comply with a directive 'has which recognises neither the relevance nor had no adverse consequences for the func- the validity of such grounds. 99 tioning of the internal market or of that directive'. 101

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The alleged infringement of the customer and retroactive identification, 102 and, on identification requirement in relation to the the other, the identification requirement Austrian legislation on securities accounts should cover every transaction relating to an anonymous account'. 103 It must be pointed out that, as of 1 August 1996 — that is to say after the Commission dis- patched the letter of formal notice and before the reasoned opinion was issued — Austrian legislation on securities accounts was amended, with effect from that date, to require customer identification whenever The Commission's complaints securities accounts are opened and when- ever transactions involving the acceptance and acquisition of securities are carried out.

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The Austrian Government's arguments in ishing anonymity had the advantage of defence avoiding over-abrupt changes to the system of securities accounts and allowing custo- mers to take their time in selecting different forms of investment.

94. The Austrian Government acknowl- edges that it required customer identifica- tion where securities accounts are opened 96. In setting out the second reason, the only with effect from 1 August 1996. It Austrian Government highlights the serious basically gives two reasons to justify this: risks that would result for the Austrian and, the need to protect the legitimate expecta- more generally, the European Union's econ- tions of economic operators who had omy if there were an 'uncontrolled with- opened securities accounts before that date drawal' ('ungeordneter Aussteigen') 105 and the need to prevent substantial capital from Austria's credit and financial markets flows deposited in such accounts being of a substantial volume of capital, which transferred to third countries. could be diverted to other tax havens if anonymity were suddenly abolished. It is, in particular, possible that an exodus of that nature might trigger an excessive rise in interest rates, with serious repercussions for Austria's budgetary stability and — in the longer term — the whole of the Euro- pean financial system.

Opinion of the Advocate General — Admissibility and validity of the com- plaints concerning securities accounts 98. The method of analysis employed in relation to the earlier complaints can also be applied to this new series of complaints. It is necessary, in this context, to ascertain the scope of the complaints the Commis- sion addresses to Austria, whether they are well founded and whether, and to what extent, the justification put forward by the 100. I consider that both these complaints defendant government can be upheld. by the Commission are admissible. It is true that they were explicitly set out for the first time in the reasoned opinion and that, therefore, formally speaking at least, they do not appear to mirror the complaints contained in the letter of formal notice of — Scope of the complaints relating to 14 February 1996, which simply called for securities accounts the abolition of anonymous securities accounts and the transactions relating to them; but it is also true that, in the letter of formal notice, the Commission made the point that securities accounts should 'be subject to automatic and retroactive iden- 99. For the reasons set out above, I con- tification', thereby clearly implying that the sider that the criticisms the Commission Austrian authorities ought to have trans- directs at Austria apply only as of 1 Jan- posed that element of the Directive from uary 1995, and cannot relate to the failure the date — 1 January 1995 — they were to comply with Article 3(1) and (5) of the obliged to comply with the requirements of Directive. In terms of the substance, the the Directive. However, although the Aus- situation is clear: the Commission is basi- trian Government did transpose that ele- ment of the Directive, it did so belatedly and, moreover, with effect only from 106 — Defence, at paragraph III.B.3. Rejoinder, at paragraph 1 January 1996. In those circumstances, 2.4.1. 107 — Rejoinder, at paragraph 2.4.1, p. 15: by rewording the complaints in the rea-

101. That being so, I consider to be well founded — with reference to Article 3(1) and (5) of the Directive — the first of the two complaints, concerning the date from which the obligation to identify customers when securities accounts are opened 103. The Austrian Government basically applies. In that connection, it is sufficient advances two arguments to justify its to record that, at the date set in the belated introduction of the customer iden- reasoned opinion, Austria had not abol- tification requirement in relation to secu- ished the system of anonymity for securities rities accounts: the protection of legitimate accounts with effect from 1 January 1995, expectations and the danger of an exodus but only from a later date, thereby creating, of capital to third countries. to its own advantage, an exemption not provided for in the Directive for the period between 1 January 1995 and 1 August 1996. The Court, moreover, has long since ruled that: 'Although the provisions of a directive are no less binding on the Member States to which they are addressed than the 104. Neither of those grounds for justifica- provisions of any other rule of Community tion is among the grounds permitted by the law, such an effect attaches a fortiori to the EC Treaty as possible restrictions on the provisions relating to the periods allowed right of establishment or — in terms of the for implementing the measures prescribed, internal market — the free movement of in particular since the existence of differ- goods. In reality, the reasons the Austrian ences in the rules applied in the Member Government cites in defence of its decision States after these periods have expired not to abolish anonymous securities might result in discrimination.' 108 accounts before 1 August 1996 relate to domestic difficulties — respect for the needs of savers — which would make it 108—Case 52/75 Commission v Italy [1976] ECR 277, paragraph 10. See also Case 79/72 Commission v Italy difficult to apply the new rules on securities [1973] ECR 667, paragraph 7. accounts retroactively. But these problems

105. In particular, I find the Austrian Government's argument in defence con- cerning the protection of legitimate expec- tations to be inconsistent. In the first place, according to case-law, 110 the principle may be relied on by economic operators whose interests are damaged by Community acts, but, as a rule at least, not by Member States criticised for failing to fulfil obligations arising out of such acts, with the sole exception of the quite specific case of the recovery of unduly paid aid, 1 1 1which does not arise in this case. Secondly, the decision in Tögel, 112 to which Austria refers in the rejoinder, does not actually run counter to the abovementioned case-law since it 106. I consider to be particularly unaccep- emphasises that where a directive has not table the position the Austrian Government been transposed by the requisite time-limit, takes up in relation to the possible exodus the national court must, as far as possible, of capital to hypothetical tax havens that could be triggered as a result of the retro- active abolition of securities accounts. As 109 — Case 52/84 Commission v Belgium [1986] ECR 89, the Commission points out, 1 1 5without paragraph 16. See also Case 213/85 Commission v Netherlands [1988] ECR 2 8 1 , paragraph 22. contradiction, it is hard to understand what 110 — See, among many, Case 120/86 Mulder [1988] ECR economic reasons honest savers could have 2 3 2 1 , paragraph 27, Joined Cases C-133/93, C-300/93 for channelling their capital out of Austria and C-362/93 Crispoltini and Others [1994] ECR I-4863, paragraph 5 7 and Case C-68/95 T. Fort [1996] ECR to other destinations, if the system of I-6065, paragraph 40. 111 — See, among many, Joined Cases 205/82 to 215/82 Deutsche Milchkontor and Others [1983] ECR 2 6 3 3 , aragraph 33 and Case C-24/95 Alcan Deutschland P[1997] ECR I-1591, paragraph 38. 112 — Case C-76/97 [1998] ECR I-5357. The sector in Question 113 — Ibidem, paragraph 28. 114 — See, in particular, Case C-106/89 Marleasing [1990] ECR concerns appeals procedures for public works and supply I-4135, paragraph 8. contracts. 115 — Reply, at paragraph 42.

(2) The plea of illegality entered by the Austrian Government is inadmissible.

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(3) The Republic of Austria has railed to fulfil its obligations under Article 3(1) and (5) of Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering by:

— failing to provide, with effect from 1 January 1995, for the identification of customers resident in Austria whenever savings accounts are opened in ATS;

— providing for customer identification whenever securities accounts are opened only with effect from 1 August 1996.