Freedom of capital movement is another essential element for the proper functioning of the large European internal market. The liberalisation of payment transactions is a vital complement to the free movement of goods, persons and services. Borrowers - individuals and companies notably SMEs - must be able to obtain capital where it is cheapest and best tailored to their needs, while investors and suppliers of capital must be able to offer their resources on the market where there is the greatest interest. That is why it is important that the member states of a common market free capital movements and allow payments to be made in the currency of the member state in which the creditor or beneficiary is established. Obviously, all these conditions must pre-exist before the passage to the stage of an economic and monetary union, involving the circulation of a single currency.
To this end, a 1988 Directive ensures the full liberalisation of capital movements [Directive 88/361 and EEA Agreement]. Under this Directive, all restrictions on capital movements between persons (natural or legal) resident in Member States were removed in the beginning of the nineties. Monetary and quasi-monetary operations (financial loans and credits, operations in current and deposit accounts and operations in securities and other instruments normally dealt in on the money market) in particular were liberalised.
However, the provisions of the new European treaties go even further than the 1988 Directive in the liberalisation of capital movements. The principle of the free movement of capital and payments is now expressly laid down in the Treaty on the functioning of the EU. Article 63 of the TFEU (ex Article 56 TEC) declares, in fact, that all restrictions on the movement of capital between Member States and on payments between Member States and third countries are prohibited. It thus extends the liberalisation of capital movements to and from third countries. Article 66 of the TFEU (ex Article 59 TEC), however, authorises temporary safeguard measures to be taken where, in exceptional circumstances, movements of capital to or from third countries cause, or threaten to cause, serious difficulties for the operation of economic and monetary union. In addition, Article 65 of the TFEU (ex Article 58 TEC) authorises Member States to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions.
On the basis of these provisions and of those liberalising banking, stock-exchange and insurance services [see sections 6.6.1, 6.6.2 and 6.6.3], the EC/EU financial market has been completely liberalised since January 1, 1993. European businesses and individuals have access to the full range of options available in the Member States as regards banking services, mortgage loans, securities and insurance. They are able to choose what is best suited to their specific needs or requirements for their daily lives and for their professional activities in the large market.
Directive 2007/64 harmonises the legal frame of payment services in the EU, including the conditions of information as well as the rights and obligations of the parts. By removing existing legal obstacles, it enables the payments sector to develop the infrastructures, procedures, common rules and standards needed for a pan-European payment system, where improved economies of scale and competition will help to reduce the cost of payments and enhance safety and efficiency, as compared with the different national systems. The Directive provides for a registration system based on a licence granted by the competent authority of the Member State of origin. This registration should enable payment service providers to operate in other Member States, either by free provision of services or by setting up a branch. The Directive applies, under certain conditions, to six categories of payment service providers: credit institutions, electronic money institutions, post office giro institutions, payment institutions within the meaning of the Directive, the European Central Bank and national central banks and Member States or their regional or local authorities.
The European financial area must not, however, be exploited for the purposes of laundering money generated by criminal activities. This is the aim of a Directive on prevention of the use of the financial system for the purpose of money laundering and terrorist financing [Directive 2005/60, last amended by Directive 2010/78]. Taking stock of the events of 11 September 2001 [see section 8.1.3], this directive establishes a new international standard on combating serious crime, organised crime and the financing of terrorism. It requires Member States to combat the laundering of the proceeds of serious crime, as defined in Framework Decision 2001/500 on money laundering, the identification, tracing, freezing, seizing and confiscation of instrumentalities and the proceeds of crime [see section 8.1.4]. Consequently, the requirements in terms of identifying clients, retaining documents and declaring suspect transactions also apply to external auditors, real estate agents, notaries, lawyers, dealers in high-value goods such as precious stones or metals or works of art, auctioneers, money transporters and casinos. The Member States must take measures such as identification of customers and economic beneficiaries, the conservation of supporting documents and registrations of the transactions, the informing of the relevant authorities of suspected laundering operations and the determination of applicable sanctions [see also section 8.1.2]. A Regulation lays down rules on information on the payer to accompany transfers of funds for the purposes of the prevention, investigation and detection of money laundering and terrorist financing [Regulation 1781/2006].
In a 1997 communication the Commission expressed the view that the special powers reserved to Member States in the management of privatised undertakings, such as prior authorisations and rights of veto, could constitute an obstacle to the exercise of the fundamental freedoms enshrined in the Treaty, in particular the free movement of capital, although it accepted that they could be justified under exceptional circumstances and on strict conditions. In three rulings on actions brought by the Commission against Member States for failure to fulfil their obligations, the Court of Justice fully upheld the communication of the Commission [Cases C-367/98, C-483/99 and C-503/99].
According to the Court of Justice, the free movement of capital is a fundamental principle of the Treaty, which may be restricted only by national rules which are justified by overriding public-interest grounds and that national rules guarantee the attainment of the objective pursued and satisfy the criterion of proportionality [Case C-174/04]. Therefore, the free movement of capital and loans should not be restrained by national provisions that are likely to deter the parties concerned from approaching banks established in another Member State [Case C-484/93]. However, the export of important amounts of money may be subjected to a prior declaration, so that the national authorities may exercise effective supervision in order to prevent infringements of their laws and regulations [Cases C-358/93 and C-163/94].