"The new rules will make it more difficult for terrorists to enter or leave the Community with the cash required to finance their illegal actions," said European Taxation and Customs Commissioner Laszlo Kovacs.

"At the same time it will not put disproportionate administrative formalities on the majority of travellers and traders given that the 10,000 euro threshold is high enough," he added.

The single uncomplicated system "will also be fairer to legitimate travellers who will no longer be faced with control measures that vary depending on where they enter or leave the Community".

Under the new rules customs authorities are empowered to search people and their luggage.

They will take action against anyone failing to declare cash of an amount of 10,000 euros or more. Penalties will be up to member states to decide but should have "a deterrent effect".

The legislation will run in tandem with the EU's Money Laundering Directive which has already introduced a monitoring of transactions made through credit and financial institutions.

The new rules were set up following a 2002 Commission report which revealed a considerable amount of cash plus other assets such as cheques, securities, gems and precious metals moving in and out of the EU.

An operation carried out between September 1999 and February 2000 revealed 1.35 billion euros in such movement in values greater than 10,000 euros.

The amount which went through undetected is, of course, impossible to gauge but "the volume of cash being transported is such that it presents a potential risk to EU and national interests," according to the EU's executive arm.