EUROPEAN COMMISSION EUROSTAT Directorate C National accounts, prices and key indicators Unit C5 Integrated global accounts and Balance of Payments 14 April 2016 BP/16/08 BALANCE OF PAYMENTS WORKING GROUP 20-21 APRIL 2016 Deutsche Bundesbank Regional Office in Bavaria Munich Branch Leopoldstrasse 234 80807 München Starting: Wednesday, 20 April 2016 at 09.30 Ending: Thursday, 21 April 2016 at 13.00 Way forward on the treatment of illegal economic activities (IEAs) in Balance of Payments (BOP) and National Accounts (NA) Item 8 of the Agenda Documents are available on CIRCABC at the following address: CIRCABC - Working Group 2016, April 20-21
EUROPEAN COMMISSION EUROSTAT Directorate C: National accounts, prices and key indicators Unit C5: Integrated Global Accounts and Balance of payments April 14, 2016 Final ILLEGAL ECONOMIC ACTIVITIES TASK FORCE 2 ND MEETING MARCH 18, 2016 Bech Building: B2/404 Kirchberg, Luxembourg Documents are available on CIRCABC at the following address: https://circabc.europa.eu
A. Introduction 1. The second Meeting of the Task Force on Illegal Economic Activities (IEAs TF) was hosted by Eurostat at its headquarters in Luxembourg during March 18, 2016. This document includes the action points agreed during the meeting and the forward work program of the IEAs TF. 2. Opening remarks were provided by Mr. Matthias Ludwig, Team Leader of the Integrated Global Accounts and Balance of Payments Unit, Directorate C: National Accounts; Prices and Key Indicators, Eurostat. Mr. Ludwig also chaired the meeting. He underlined the challenging agenda prepared for the meeting and noted the importance of reaching agreements in the areas related to the preparation of the IEAs handbook such as the current work, further work, and compilation issues identified: country cases of IEAs. He also mentioned that the drafting of the IEAs Handbook has been started and a preliminary version of the Part I of the handbook will be presented to the member states for comments during the Balance of Payments Working Group (BOP WG) Meeting in October 2016. During the BOP WG in April 2016, a request on the extension of the mandate of the IEAs TF will be presented. 3. Since the last IEAs TF meeting on October 20, 2015, several actions were taken into account for the IEAs Handbook work following the recommendation of member states provided during the last BOPWG. These are: The IEAs handbook will comprise two parts. Part I follows closely GNI committee recommendations for IEAs data in National Accounts (NA) and Balance of Payments (BOP), and Part II discusses possible extensions of the scope of IEAs current work. The IEAs Handbook will be produced for guidance to the EU member states in their work of collecting, compiling, and disseminating of IEAs with no legal binding for them when producing these data. The IEAs handbook should be developed in a way of achieving an increased consistency between NA and BOP statistics. 4. The list of participants and the final agenda are attached to this document. B. Part I IEAs Current Work a. State of Play on the IEAs Handbook Issue discussed: Eurostat presented to the IEAS TF members the state of the play on the Part I of the IEAs Handbook. Part I includes Chapters 1-3. Chapter 1 includes an introduction to the handbook and Chapter 2 provides a definition, scope and reasons of compiling IEAs, consequences of not recording IEAs, and accounting principles required for the measurement of IEAs. This chapter also presents the methodological frameworks recommended for the compilation of IEAs based on the international statistical standards, and it identifies difficult compilation issues such as double counting. Chapter 3 discusses the IEAs currently compiled in NA and BOP, i.e., illegal drugs, prostitution services, and smuggling of tobacco and alcohol. 2
The IEAs TF members agreed to include a section on "Reconciliation of IEAs transactions in the Current and Financial Accounts" only if some relevant issues in this regard arise during the preparation and discussions of the IEAs Handbook. The IEAs TF members agreed to the structure and contents of the Part I of the IEAs Handbook. The IEAs TF members agreed that Eurostat will circulate the structure of Part II among the IEAs TF members for additional comments. The deadline for receiving comments, if any, to the Part II of IEAs is April 15, 2016. Also, the next IEAs TF meeting will put emphasis on the discussion of the items included in Chapter 5, Part II, of the IEAs Handbook, "Data Sources for the Identification of Illicit Earnings." This chapter includes the following sub-items: Acquisition/Disposal of Cross Border Property, Trade Misinvoicing, Non-Traditional Financial Intermediary Systems, and Related Transactions of IEAs Recorded in the Financial Account of BOP. The IEAs members agreed to explore ways of improving coordination between institutions involved in collecting information on illegal activities and institutions producing and compiling IEAs statistics. Directorate General for Home Affairs of the European Commission (DG-HOME) and United Nations Office of Drugs and Crime (UNODC) will provide to the IEAs TF members a list of crime activities used in their respective work on illegal activities. The IEAs TF members agreed to provide comments to the draft on IEAs Handbook Part I that Eurostat will circulate at the beginning of May 10, 2016. The deadline for providing comments will be June 10, 2016. The comments will be provided using track changes for an easy identification of the comments. The IEAs TF members also agreed to the timeline presented for the rest of the work on the handbook. The IEAs TF members agreed to request to the member states an extension of the mandate of the IEAs WG. This extension will be for six additional months. Currently, the IEAs TF mandate is to finish in December 2016. b. References in International Standards regarding Methodology for IEAs and National Accounts (NA) Compilation Methods Issue discussed: The international standards (SNA 2008, ESA 2010, and BPM6) used in the preparation of the IEAs handbook are fully harmonized and recommend that IEAs, as defined in the handbook, should be included in the NA and BOP statistics. Eurostat presented the statistical and accounting references for the compilation of IEAs in Chapter 2 by grouping them into five aspects: (1) inclusion in the production boundary of illegal activities with mutual agreement, (2) kind of illegal activities, (3) rationale for the inclusion of illegal activities, (4) borderline between non-observed and illegal production, and (5) adjustments to international merchandise trade statistics (IMTS). Eurostat's presentation also included a section regarding general methods for compilation/estimation in NA. The IEAs TF members agreed to the inclusion of the international standards references in the IEAs handbook by grouping them into five aspects as indicated above. The specific references i.e., those indicated by highlighting paragraphs numbers and contents could be included in boxes or annexes in the handbook while brief explanations to these references should be included in the body of the handbook. The members also agreed to include a general introduction on the NA compilation/estimation methods in this chapter. 3
c. Estimating, Compiling, and Reporting IEAs in NA Issues agreed: Eurostat presented a background on IEAs in NA, the GNI Committee recommendations for compiling IEAs, and initial thoughts about the geographical breakdown for IEAs imports and exports in the BOP statistics (main contents of Chapter 3 of the IEAs handbook). The IEAs TF members welcomed this presentation. The IEAs TF members agreed to assess possibilities for improving current methodologies for the estimation of IEAs in drugs. UNODC and DG-HOME may provide some insights for areas of improvements. The IEAs TF members agreed to inform the GNI Committee during its next meeting about the IEAs Handbook work and agreements and forward work program of the IEAs TF. Eurostat will update the GNI Committee on this work and get back to the IEAs TF with any comment or questions regarding this work. Due time constraints, the estimation of the geographical breakdown of imports and exports of IEAs, and the classification of IEAs: institutional units and economic transactions were not discussed during the meeting. Slides on these issues are included in the presentation circulated among IEAs TF members. Eurostat encouraged IEAs TF members to provide comments/questions about these issues by email. This issue will be included in the agenda of the next IEAs TF meeting. C. Part II IEAs Further Work d. International cooperation Issues discussed: Eurostat presented to the IEAs TF: (1) current collaboration of experts and institutions in the IEAs work; and (2) future IEAs reach-out activities. Eurostat also presented for discussion a consideration for an extension of the IEAs TF mandate and two issues related to the IEAs handbook: (1) the reconciliation of current account and financial account data for improvement of the IEAs statistics, and (2) further scope of IEAs should address issues about allocation and coverage in the data. The members considered an extension until June 2017 to adequately complete the preparation of the IEAs handbook. Agreements on extension of IEAs TF mandate and reconciliation issues were presented above, in B.a. The IEAs TF members agreed to share contacts and relevant information for the preparation of the IEAs Handbook. A dedicated website is available under the following link: CIRCABC - Task Force on the recording of illegal economic activities in BOP During Eurostat internal meetings for the preparation of the IEAs TF meeting, particularly for Money Laundering (ML) section of the handbook, allocation and coverage issues arose as ways to guide the further work of IEAs. Allocation is related to the consideration that data on IEAs have been already recorded but misclassified while coverage is related to data not recorded. The IEAs TF members agreed to continue assessing these issues and Eurostat will report them during the next IEAs TF meeting. 4
e. Fencing Issues discussed: The Central Statistics Office of Ireland made a presentation on the "Proposed Treatment of Fencing in the National Accounts and Balance of Payments." The IEAs TF members were asked to agree to the contents of this presentation for the preparation of "fencing" section in the IEAs Handbook. Bank of Greece also shared with the taskforce a draft with some insights on the activity of fencing. Bank of Greece made comments to this presentation by a conference call. The IEAs TF members agreed to the work done on fencing by the Central Statistics Office of Ireland and Bank of Greece. Both efforts will be a good baseline for the corresponding section in the IEAs Handbook. f. IEAs related to migrants: Trafficking Human/Refugees and Guns Issues discussed: UNODC made a presentation on "Building the Evidence to Produce Estimates on Forms of Illegal Trafficking." The presentation included a case study of illicit opiates on the Balkan route where: (1) national and international data sources were used, (2) demand-side and supply-side data were cross-checked, (3) design of the trafficking network was determined through origin-destination information of seizures, and (4) estimation of quantity trafficked in each connection was made on the basis of consumption and seizure data and margins earned during the transaction chain ("margin approach"). UNODC indicated that similar approaches could be used for the trafficking of persons, smuggling of migrants, and illicit trade of firearms. Finally, following the 2030 Agenda of Sustainable Development with a target of "reducing significantly illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime," UNODC has started a debate on the definition of illicit financial flows and invited the IEAS TF to collaborate in this work Eurostat will set up bilateral meeting with UNODC/DG-HOME for a better exchange of relevant information on data needs of IEAs. The outcomes of these bilateral meetings will be presented during the next IEAs TF meeting. During these meetings, it will be discussed the possibility that UNOCD/DG-HOME will prepare annexes or boxes for the IEAs handbook with relevant information about trafficking in drugs, human and guns. The IEAs TF members agreed to collaborate with UNODC in its work on illicit financial flows. Next meeting of UNODC on illicit financial flows will be in Mexico. g. Financial Action Task Force Issues discussed: DG-HOME indicated that the Guidance on Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) related to data and statistics includes two pages (pages 28 and 29) with useful information about ML. It was also mentioned the close collaboration between DG-HOME and UNDOC in efforts to produce data on illegal activities. DG-HOME will share data on ML when they become available with IEAs TF. Eurostat will organise a meeting with the Financial Action Task Force (FATF) in Paris to discuss the data work done and statistical needs in the area of ML by these two institutions. 5
h. Money Laundering Issues discussed: Europol made a presentation on ML. This presentation generated an intense discussion about circulation issues of Euro-banknotes and its relation to illegal activities. Europol requested the collaboration of IEAs TF in its work on ML with specific request to the European Central Bank (ECB) in providing assistance in its work of determining amounts of Euro-banknotes involved in illegal activities. Europol indicated that the margin paid for money laundering services is around 10%. In practice also cases were observed, where the margin was implicitly paid using financing techniques applied to layer and integrate incriminated money. The IEAs TF members welcome the presentation on ML. From the discussion, it became evident that a closer collaboration should be performed to determine the use of Euro-Banknotes in illegal activities. The IEAs members agreed to assess "margins" generated in ML activities and explore possibilities of their collection and recording in NA and BOP statistics. The IEAs members agreed to prepare a "wish" list of ML indicators. D. Part III IEAs Compilation Issues Identified: Country Cases i. Luxembourg Issues discussed: The Institut National de la Statistique et des Etudes de Grand-Duche de Luxembourg (STATEC) made a presentation on "Issues Identified When Compiling IEAs for NA/BOP: The Luxembourg Experience." The IEAs TF members were asked to agree to the contents of this presentation for the preparation of IEAs country cases section in the IEAs Handbook. The IEAs TF members agreed to include Luxembourg's country case on IEAs in the handbook. STATEC will provide the version authorized to be published. j. Ireland Issues discussed: The Central Statistics Office of Ireland made a presentation on "Ireland and the Treatment of Illegal Activities in the BOP and NA." The IEAs TF members were asked to agree to the contents of this presentation for the preparation of IEAs country cases section in the IEAs Handbook. The IEAs TF members agreed to include Ireland's country case on IEAs in the handbook. E. Forward Work Program of the IEAs TF The IEAs Chair presented a tentative work program until the next meeting and requested IEAs TF members to suggest any additional issues when reviewing these action points. The work program includes: 6
To provide comments to the contents of Part II of the IEAs Handbook. Eurostat will circulate again the structure of Part II for comments with a deadline on April 15, 2016 (IEAs TF members). To share a list of crime activities used by DG-HOME and UNODC (DG-HOME and UNODC). To provide comments to the first draft of Part I of the IEAs Handbook with a deadline on June 10, 2016. Eurostat will circulate the draft version of Part I on May 10, 2016 (IEAs TF members). To request an extension of the IEAs TF mandate during the 2016 April BOP WG meeting. The extension will be for six additional months (Eurostat). To explore possibilities of improving the methodologies for the estimation of IEAs in drugs. UNODC and DG-HOME will provide some insights for areas of improvements (UNODC and DG-HOME). To inform GNI Committee about the IEAs TF work and handbook (Eurostat). To share contacts and relevant information for the work of IEAs (IEAs TF members). To assess allocation and coverage issues as ways to guide IEAs further work (Eurostat). To set up bilateral meetings between UNODC/DG-HOME and Eurostat for a better exchange of relevant information on data needs of IEAs. The outcomes of these meetings will be presented during the next IEAs TF meeting (UNODC/DG-HOME and Eurostat). To collaborate with UNODC work on illicit financial flows (IEAs TF members). To organise a bilateral meeting with FATF to discuss the data work done and statistical needs in the area of ML. The outcomes of this meeting will be presented during the next IEAs TF meeting (Eurostat). To prepare a "wish" list of ML indicators (IEAs TF members). To inform the Working Party on International Trade in Goods and Trade in Services Statistics (WPTGS) during its meeting on 21-23 March 2016 in Paris, France on the work of the TF IEA, in order to attract further participants (OECD). F. Next IEAs TF Meeting The next meeting will be held on September 22, 2016 at Eurostat Headquarters in Luxembourg. It will be a one-day meeting. 7
Task Force Meeting (TF) on the recording of illegal Economic Activities (IEAs) in National Accounts (NA) and Balance of Payments (BOP) - Eurostat Headquarters, Room BECH B2/404 Luxembourg - March 18, 2016 Time Items Presenter Doc 9:30am 1. Opening Remarks Eurostat: Mr Matthias Ludwig Part I IEAs Current Work 9:40am 2. State of play on the IEAs Handbook Eurostat: Ms Diana Cucu Drafting the IEAs Handbook 10:00am 10:20am 11:00am References in International Standards Eurostat: Mr Christian Ravets regarding Methodology for IEAs 3. Estimating, compiling and reporting IEAs Eurostat: Mr Robert Dunn in NA: GNI committee recommendations Drugs, alcohol/tobacco, and prostitution: current compilation methods and further improvements Classification shortcomings Coffee break Part II IEAs Further Work 11:15am 4. International cooperation Eurostat: Ms Diana Cucu/ Ms Rita Mesias 11:20am 5. Fencing Central Statistics Office of Ireland: Mr Brian Ramsbottom 11:45am 6. Building the evidence to produce estimates on UNODC: Mr Enrico Bisogno forms of illegal trafficking 12:30pm Lunch 1:30pm 7. 4 AML and Financial Action Task Force FATF Directorate General Home Affairs: Mr Richard Caine 2:15pm 8. Money Laundering Europol: Ms Jennifer MacLeod, Financial Intelligence Group Operations Department; Eurostat: Mr Matthias Ludwig, Mr Stephen Clarke Part III IEAs Compilation Issues identified: Country Cases 3:00pm 9. Luxembourg Statec: Mr Robert Michaux 3:30 pm Coffee Break 3:45pm 10. Ireland Central Statistics Office of Ireland: Mr Brian Ramsbottom 4:15pm 4:30pm 11. Wrap-up, key agreements, forward IEAs TF Work and review of action points, and Others, next meeting 12. End of meeting Eurostat: Ms Rita Mesias, Mr Matthias Ludwig 8
2016 IEAs TF Meeting: List of Participants Institution/Organization Participant Contact Information (email) 1 Bank of Greece Marios Papaspyrou, Statistics Department, Balance of Payment Division (attended by Conference call) mpapaspyrou@bankofgreece.gr 2 Central Statistics Office of Ireland Brian Ramsbottom, HEO, Balance of Payments& Financial Sector, Central Statistics Office of Ireland Brian.Ramsbottom@cso.ie 3 Bank of Italy Miriam Tagliavia, Statistics Collection Directorate, External Statistics Division (not attended) miriam.tagliavia@bancaditalia.it 4 Directorate General Home Affairs (DG-HOME) 5 European Central Bank (ECB) Richard Caine, Policy Officer, DG Home Affairs: Unit D2-Organised Crime Pedro Polvora, Economist/Statistician, Balance of Payments, External Statistics Division Richard.CAINE@ec.europa.eu Pedro.Polvora@ecb.europa.eu 6 Eurostat Ales Capek, Head, C5 Unit-Integrated Global Accounts and Balance of Payments, Directorate C Diana Cucu, Statistical Officer-National Expert, C5 Unit-Integrated Global Accounts and Balance of Payments, Directorate C Robert Dunn, Statistical Officer, GNI Desk Officer: Luxembourg, Romania, Spain, and VAT Desk Officer, C3 Unit-Statistics for Administrative Purposes, Directorate C Matthias Ludwig, Team Leader, C5 Unit- Integrated Global Accounts and Balance of Payments, Directorate C Rita Mesias, Statistical Officer-National Expert, C5 Unit-Integrated Global Accounts and Balance of Payments, Directorate C Henk Nijmeijer, Statistical Officer, ESA/SNA; Financial Services; Distributive Transactions Unit C1-National Accounts Methodology. Indicators, Directorate C Christian Ravets, Team Leader, ESA/SNA; Financial Services; Distributive Transactions; Unit C1-National Accounts Methodology. Indicators, Directorate C Stephen Clarke, Team Leader, Crime and Criminal Justice Statistics, F1 Unit-Social Indicators: Methodology and Development; Relations with Users, Directorate F Ales.CAPEK@ec.europa.eu Iona-Diana.CUCU@ec.europa.eu Robert.DUNN@ec.europa.eu Matthias.LUDWIG@ec.europa.eu Rita.MESIAS- CAMARGO@ec.europa.eu Henk.NIJMEIJER@ec.europa.eu Christian.RAVETS@ec.europa.eu Steve.CLARKE@ec.europa.eu 7 Europol, Financial Intelligence Group Operations Department Jennifer Macleod, Financial Intelligence Unit Jennifer.MacLeod@europol.europa.eu 9
8 OECD David Brackfield, Trade Statistics Section, Statistics Directorate david.brackfield@oecd.org 9 STATEC, Institut National de la statistique et des Etudes Economiques du Grand- Duche de Luxembourg 10 United Nation Office on Drugs and Crime Robert Michaux, Economiste, Balance des Paiments Enrico Bisogno, Chief, Data Development and Dissemination Unit robert.michaux@statec.etat.lu enrico.bisogno@unodc.org 10