A COMMUNITY STRATEGY TO PROTECT THE EURO. The Maltese Legislative Scenario

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1 Central Bank of Malta Bernadette Muscat A COMMUNITY STRATEGY TO PROTECT THE EURO Implementation of Legislation on Authentication And Suggestions for the Future The Maltese Legislative Scenario Delivered by Bernadette Muscat Central Bank of Malta 1 December 2009 Ministry of Economy and Finance, Italy - Rome / PERICLES PROGRAMME - Central Means of Payment Antifraud Office (UCAMP)

2 Principal legislative sources on authentication: Central Bank of Malta Act, 1968 establishes counterfeiting as a criminal offence CBM Directive No 10 of 27 October 2008 on the Banknote Recycling Framework Council Regulation 1338/2001 on the protection of the euro against counterfeiting Commission Recommendation of 27 May 2005 concerning authentication of euro coins and handling of euro coins unfit for circulation

3 A. Central Bank of Malta Act Establishes a number of criminal offences punishable by imprisonment and/or penalties: Counterfeiting or possession of counterfeit currency or being in possession of material used for the production of counterfeit currency Making illegal use of legal materials to produce currency Mutilation/defacement of notes and debasement/melting of coins Importation or distribution of medals and tokens similar to euro coins not in conformity with legal requisites

4 CBM Act Other Provisions Any person in possession of suspected counterfeit currency must deliver it immediately to the Bank During criminal proceedings a court cannot order the destruction of counterfeit currency without consulting the Bank Establishes the Counterfeit Surveillance Unit within the Bank to perform functions of NAC and CNAC under Reg. 1338

5 B. CBM Directive No 10 implementing the ECB s Banknote Recycling Framework Binding legal act issued under enabling powers granted by CBM Act Scope: to ensure the integrity and preservation of euro banknotes in circulation Addressees: credit institutions and professional cash handlers Professional cash handlers include: Establishments whose professional activity consists in exchanging notes and coins of different currencies, & Retailers and other economic agents engaged in the sorting and distribution of notes to the public by ATMs

6 CBM Directive No 10 Main Principles Requirement of authenticity and fitness checks of banknotes put into circulation by customer-operated machines tested in accordance with the Eurosystem s common test procedures. Banknotes suspected of being counterfeit or which have not been checked (either mechanically or manually by trained staff) must be delivered to the Bank.

7 CBM Directive No 10 Other Provisions Notification of banknote recycling machines prior to installation Addressees are responsible for cash handling activities carried out via service companies Bank s right to request information Bank s right to carry out system cheques Force majeure exception

8 Effective Dates From 1 January 2009 Notification of machines prior to installation Bank s right to request information From 1 January 2010 All other rights and obligations CBM Act proposed to be amended to provide for sanctions (penalties) Imminent publication of Handbook on manual sorting for professional cash handlers.

9 SUGGESTIONS FOR THE FUTURE A. The ECB s Banknote Recycling Framework Adopted by the ECB s Governing Council, required to be implemented by central banks by end 2006 Not a legal act in terms of the ESCB/ECB Statute hence, no clear legal principles and is not an act of legal harmonisation Given some legal force by the amended Article 6 of Reg. 1338

10 The ECB s Banknote Recycling Framework Competence of ECB to take measures to protect the integrity of euro banknotes is a necessary corollary of its exclusive competence to issue euro banknotes (Art. 106(1) Treaty, Art. 16 ESCB/ECB Statute) ECB proposal to issue a Decision binding on the addressees of Art. 6, Reg. 1338, laying down procedures for authenticity checks It is not foreseen to have binding effect on manufacturers & resellers who are not covered by Art. 6 Expected to update the current BRF which has, or is being, implemented in the euro area

11 B. Proposal for a Council Regulation on authentication and handling of euro coins To apply to the higher denominations of euro coins (2 euro, 1 euro, 50 cent) Once a machine has passed a detection test, no need to have it tested again when used by other institutions Introduce alternate test for checking machines either 10% of total number of machines or ⅓ of volume of coins Transition period of 2 years from date of adoption

12 Thank you.