TÜRKÇE
  Updated: 27/08/2021

Chapter 4- Free Movement of Capital

Content of the Chapter

The freedom of capital movement is one of the four fundamental freedoms alongside free movement of goods, persons and services to assist the operation of the EU internal market. Chapter 4- Free Movement of Capital sets out the principles in order to ensure full liberalisation in the field of capital movements and payments as well as payment systems. In addition, it includes measures to prevent usage of the financial system for the purpose of money laundering and terrorist financing. Free Movement of Capital is crucial for an open, integrated, competitive and effective financial market and financial service structure throughout Europe.

The “Capital and Payments” chapter of the Title 4: Free Movement of Persons, Service and Capital of the TFEU sets out the provisions with regard to capital and payments. It is stated in Article 63 of the TFEU that all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. Although the basic principle in the field of capital movements and payments is the prohibition of restrictions implemented especially in a direct discriminatory manner based on nationality, these restrictions may only be justified with the conditions set down in the Treaty.

Pursuant to Article 65 of the TFEU, the provisions of Article 63 shall be without prejudice to the right of Member States:

  • to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested;
  • 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,
  • to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information
  • to take measures which are justified on grounds of public policy or public security.

However these measures shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments. In this framework, the exceptions on free movement of capital are generally implemented in the area of taxation, prudential control, prevention of money laundering, public policy priorities and sanctions that are defined in accordance with common foreign and security policy.

Chapter 4 on Free Movement on Capital covers three main sub-areas:

  1. Capital movements and payments
  2. Payment systems
  3. Fight against money laundering.

In the field of capital movements and payments, capital is defined as financial operations aiming investment and gaining profit. The operations defined as capital movements are as follows:

  • Direct Investments
  • Investments in Real Estate
  • Operations in Securities Dealt in on the Capital Markets
  • Operations in Securities and Other Instruments Dealt in on the Money Market
  • Operations in Current and Deposit Accounts with Financial Institutions
  • Credits related to Commercial Transactions or to the Provision of Services in Which Resident is Participating
  • Financial Loans and Credits
  • Sureties, Other Guarantees and Rights of Pledge
  • Transfers in Performance of Insurance Contracts
  • Personal Capital Movements
  • Physical Import and Export of Financial Assets
  • Other Capital Movements

With regard to payment systems, the acquis covers the arrangements on payment and securities settlement systems, payment services and electronic money institutions. In 2015 the EU adopted a new directive on payment services (PSD 2) to improve the existing rules and take new digital payment services into account. The directive became applicable in January 2018. The regulation (EC) No 924/2009 on charges for cross-border payments in euro was also adopted. It requires banks to apply the same charges for domestic and cross-border electronic payment transactions in euro.

In the field of fight against money laundering, by including also the provisions on combating financing of terrorism, it is aimed to prevent the use of financial system by criminals for the purpose of money laundering and terrorist financing. To this end, financial institutions especially banks and non-financial entities are subject to obligations such as applying customer due diligence, making risk assessment and reporting suspicious transactions to the Financial Intelligence Units.

Directive 2015/849 on anti-money laundering and combating terrorist financing, which was adopted in 2015 and became applicable in June 2017, was amended by the 5th AML/CFT Directive adopted in 2018 and become applicable in all Member States in January 2020.

The European Commission put forward a comprehensive approach to further strengthen the EU's fight against money laundering and terrorist financing and adopted an “Action Plan for a Comprehensive Union Policy on Preventing Money Laundering and Terrorist Financing” on 7 May 2020.

In this context, the European Commission presented an ambitious package of legislative proposals on 20 July 2021 to strengthen the EU’s anti-money laundering and countering the financing of terrorism (AML/CFT) rules.  The package includes four legislative proposals:

The creation of a new EU authority that will transform AML/CFT supervision in the EU and enhance cooperation among financial intelligence units (FIUs) is at the heart of the new legislative package. The package also includes arrangements for accelerating access to bank account information, limiting the amount of cash withdrawals from banks with 10,000 euros, introducing a monitoring mechanism for transfers of crypto assets, and similar to FATF listing process,  listing of third countries in two separate groups as "black list" and "grey list" by the EU.

Current Stage of the Negotiations on the Chapter

Following the fulfilment of two opening benchmarks, the Chapter was opened to negotiations on 19 December 2008 under the French Presidency. There are four closing benchmarks set for the Chapter.

Opening Benchmarks

  1. Submission of a strategy paper and an action plan to the Commission regarding the adoption of the acquis in the field of capital movements and payments.
  2. Submission of an action plan to the Commission on the prevention of the money laundering.

Closing Benchmarks

  1. With respect to capital movements and payments, Turkey makes significant progress in its legislative alignment with the acquis, as indicated in the Action Plan.
  2. With respect to real estate acquisition by natural and legal persons of the EU Member States, Turkey presents an Action Plan including concrete measures and a timetable for the gradual liberalization of the acquisition of real estate by foreigners in line with the acquis. 
  3. With respect to anti-money laundering, including confiscation, Turkey advances its legislative alignment with the acquis, as well as with the recommendations of the Financial Action Task Force.
  4. Turkey demonstrates through a track record that it has at its disposal an adequate administrative capacity to properly implement and enforce the relevant legislation in all areas related to anti-money laundering including confiscation.

Relevant Subcommittee Meetings

Subcommittee No 4 on Economic and Monetary Issues, Capital Movements and Statistics

Subcommittee N° 8 on Customs, Tax, Drugs Trafficking and Anti-Money Laundering

Screening Process

Presentations at Explanatory Screening Meeting (25 November 2005)  

Presentations at Bilateral Screening Meeting (22 December 2005)

Screening Report

Useful Links

For more information on capital movements and payment systems in the EU:

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-markets/capital-movements_en

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/consumer-finance-and-payments/payment-services/payment-services_en

For more information on anti-money laundering and combating financing of terrorism in the EU:

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-supervision-and-risk-management/anti-money-laundering-and-countering-financing-terrorism_en

https://ec.europa.eu/info/publications/210720-anti-money-laundering-countering-financing-terrorism_en


Updated: 27/08/2021 / Hit: 54,723