Prevention of organised crime: The registration of legal persons and their directors and the international exchange of information a comparative legal study in the EU Member States on the possibilities for the improvement of the international exchange of information on legal persons with the purpose of (transnational) organised crime prevention ______________________________________________________________________ Final Report 1 March 2000 ______________________________________________________________________ T.M.C. Asser Instituut in co-operation with Ministry of Justice of the Netherlands and Europol commissioned by the European Commission (‘Falcone programme’) TABLE OF CONTENTS I. INTRODUCTION 1 1. Background 1 2. Outline of research 4 1. Purpose of research 4 2. Scope 4 3. Method of research 7 4. Partner-organisations 7 5. Advisory Committee 8 6. Structure of the report 8 II. CRIME WITH LEGAL PERSONS: THE EXPERIENCES OF LAW ENFORCEMENT AGENCIES 1. Introduction 9 2. How and in what way are legal persons are involved in crime? 10 3. How can the abuse of legal persons be prevented? 11 4. Crime prevention and the (international) exchange of information 13 5. The use of databases concerning legal persons 14 6. Summary 16 III. GENERAL DATA CONCERNING LEGAL PERSONS 1. Introduction 17 2. European Law with respect to the registration of legal persons 18 1. Directives, case law and infringement procedures 18 2. Data protection 22 3. Country reports 24 • Austria 24 • Belgium 31 • Denmark 37 • Finland 42 • France 50 • Germany 56 • Greece 62 i • Ireland 67 • Italy 73 • Luxembourg 78 • The Netherlands 84 • Portugal 91 • Spain 98 • Sweden 104 • United Kingdom 109 4. Tables 113 5. Summary 116 IV. THE IMPROVEMENT OF THE EXCHANGE OF INFORMATION ON LEGAL PERSONS 1. Introduction 124 2. International conventions 126 3. Suitability of the registration system 127 4. Accessibility of trade and business registers 128 5. Actual use of foreign databases and problems encountered 129 6. Possible improvements of the international exchange of information and recent developments 130 7. Summary 131 V. SUMMARY 1. Conclusions 133 2. Recommendations 137 Bibliography Internet sources Annexes 1. Composition of the Advisory Committee 2. Accompanying letter Europol/Ministry of Justice, The Netherlands 3. General questionnaire 4. Europol questionnaire ii 5. Contact persons and respondents (per country) iii I. INTRODUCTION 1. Background Recommendation No. 8 of the Action plan to combat organised crime, adopted by the Council of the European Union on 28 April 1997, reads as follows: ‘Member States shall, with respect to legal persons registered in their territory, seek to collect information, in compliance with the relevant rules relating to data protection, with respect to the physical persons involved in their creation and direction, as well as their funding, as a means to prevent the penetration of organized crime in the public and legitimate private sector. It should be studied how such data could be systematically compiled and analyzed and be available for exchange with other Member States and, where appropriate, with bodies responsible at Union level for the fight against organized crime, on the basis of appropriate rules to be developed by the Council...’ Within the framework of the Netherlands presidency in the first half of 1997 and during the European Union Conference on Crime Prevention held in Noordwijk, May 1997, attention was paid to the prevention of organised crime, in pursuance of this Recommendation in the Action Plan, and in particular to the role of legal persons - as an instrument or as a front - in all forms of organised crime. The possibilities of preventing organised crime that damages the integrity of business and the government, with the help of criminal audits, was also a main consideration. During the preparation of the European Union Conference on Crime Prevention, the Ministry of Home Affairs of the Netherlands had commissioned a research project on the ‘Prevention of and administrative action against organised crime - a comparative study of the registration of legal persons and criminal audits in eight EU Member States’ (1997). The following year a follow-up study was commissioned by the Ministry of Justice of the Netherlands on ‘The sanction of deprivation of the right to act as director of a legal person - a comparison of criminal and other bans on the exercising of professional activities / bans on the holding of directorships’ (1998). Both research projects were undertaken by the T.M.C. Asser Instituut. The first study was carried out by distributing questionnaires among relevant public and private bodies and experts in the countries to be investigated (Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden and United Kingdom). These bodies and experts were requested to describe the situation with regard to their own country. In addition, relevant literature on the subject was perused. The first study concerned two subjects. Firstly, it was asked whether requirements regarding the establishment, registration and dissolution of legal persons play a part in the prevention of the abuse of those legal persons (attention was also paid to the question whether information from official registers can be used and is actually used when investigating irregularities). Secondly, possibilities that governments have to exclude legal persons, which are known or suspected to be used for, inter alia, criminal purposes in European as well as national tenders were explored. In this latter case, the question of the possible use of ‘criminal audits’ was the main issue. The study has shown that the prevention of the abuse of legal persons is a relatively new issue in many of the countries that were investigated. Little legislation has been developed for the prevention of crime; this situation often leads to applying regulations that were written for other purposes. Requirements regarding the establishment and registration of legal 1 persons, for instance, are traditionally focused on the protection of individual parties concerned and not on the prevention of crime. Governments that wish to exclude criminal organisations from public tender procedures often have to utilise legal means which were not developed especially for that purpose. The same methodology was also used in the follow-up study, in which it was asked whether the countries to be investigated (Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden, United Kingdom, United States of America (federal law, as well as New York and Texas)) have the possibility to deny certain delinquents the authority to be a director of a legal person and, furthermore, whether this possibility can be utilised in practice and whether it is effective, i.e. whether it actually serves as a deterrent. The purpose of the investigation was to enable the Ministry of Justice of the Netherlands to consider the usefulness of explicitly adding this sanction or measure to the existing set of instruments in order to prevent the abuse of legal persons. The study further ascertained whether there are possibilities within the context of the European Union to come to a common policy, uniformity of regulations or other forms of co-operation. The result of the study was that all investigated countries have certain legally arranged possibilities at their disposal to prevent persons from exercising certain professions or activities. The study further established that the competence to impose the sanction of deprivation of the right to act as a director of a legal person belongs to the authorities in all investigated countries. No reliable conclusions could be drawn about the implementation and enforcement of the legislation in question, owing to the fact that only a few countries collect relevant data in a systematic way. Policy implications and further steps In November 1998, the Ministry of Justice of the Netherlands presented the following conclusions to the European Council's Multidisciplinary Group on Organised Crime on the basis of both above-mentioned studies. For nearly all forms of organised crime, especially financial and economic crime, legal persons play an integral role. The ambition towards a higher level of transparency in this area is not only in the interest of the prevention of and combat against organised crime, but it is also of interest for the maintenance of the integrity of business, the government and certain sensitive professional groups in general. The integrity of the decisions regarding (European and national) tender procedures, the granting of subsidies and permits also is at stake. Finally, transparency promotes legal security in international economic relations. It is of great importance that the Member States have adequate information regarding legal persons that operate in their countries, the physical persons who are in charge of the legal persons and the relationships between legal and physical persons. In almost all Member States, the possibility exists to deny persons who have committed serious forms of financial or economic crime, the right to perform as a director of a legal person for a certain period. According to the 1998 follow-up study, there is no structured exchange of information on those sanctions between the Member States. This is an unfortunate state of affairs, if we take into consideration the further internationalisation of organised crime. In February 1999, at the Symposium on the (draft) United Nations Convention against Transnational Organized Crime in