The Commission published on 2 February 2016 a Communication to the Council and the Parliament on an Action Plan tofurther step up the fight against the financing of terrorism (COM (2016) 50). The Action Plan builds on existing EU rules to adapt to new threats and aims at updating EU policies in line with international standards. In the context of the Commission's action to extent the scope of the Regulation on the controls of cash entering or leaving the Community, reference is made to the appropriateness to explore the relevance of potential upper limits to cash payments.
Cash has the important feature of offering anonymity to transactions. Such anonymity may be desired for legitimate reason (e.g. protection of privacy). But, such anonymity can also be misused for money laundering and terrorist financing purposes. The possibility to conduct large cash payments facilitates money laundering and terrorist financing activities because of the difficulty to control cash payment transactions.
Restricting large payments in cash, in addition to cash declarations and other AML obligations, would hamper the operation of terrorist networks, and other criminal activities, i.e. have a preventive effect. It would also facilitate further investigations to track financial transactions in the course of terrorist activities. Effective investigations are hindered as cash payments transactions are anonymous. Thus restrictions on cash payments would facilitate investigations. However, as cash transactions are moved to the financial system, it is essential that financial institutions have adequate controls and procedures in place that enable them to know the person with whom they are dealing. Adequate due diligence on new and existing customers is a key part of these controls in, line with the AMLD.
(e.g. transactions for accommodation or transport). While a restriction on payments in cash would certainly be ignored for transactions that are in any case already illegal, the restriction could create a significant hindrance to the conduct of transactions that are ancillary to terrorist activities.
Organised crime and terrorism financing rely on cash for payments for carrying out their illegal activities and benefitting from them. Any such proposal would also aim at harmonising restrictions across the Union, thus creating a level playing field for businesses and removing distortions of competition in the internal market. It would additionally foster the fight against money laundering, tax fraud and organised crime.
While being allowed to pay in cash does not constitute a fundamental right, the objective of the initiative, which is to prevent the anonymity that cash payments allow, might be viewed as an infringement of the right to privacy enshrined in Article 7 of the EU Charter of Fundamental Rights. However, as complemented by article 52 of the Charter, limitations may be made subject to the principle of proportionality if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others. The objectives of potential restrictions to cash payments could fit such description. It should also be observed that national restrictions to cash payments were never successfully challenged based on an infringement to fundamental rights.
Every time we turn around, it seems, there’s another major assault in the War on Cash. India is the most notable recent example– the embarrassing debacle a few weeks ago in which the government, overnight, “demonetized” its two largest denominations of cash, leaving an entire nation in chaos. But there have been so many smaller examples.
In the US city of New Orleans, the local government decided earlier this month to stop accepting cash payments from drivers at the Office of Motor Vehicles. As , several branches of Citibank in Australia have stopped dealing in cash altogether. And former US Treasury Secretary Larry Summers published an article last week stating that “nothing in the Indian experience gives us pause in recommending that no more large notes be created in the United States, Europe, and around the world.” In other words, despite the India chaos, Summers thinks we should still curtail the $100 bill.
The conclave of the high priests of monetary policy almost invariably sings the same chorus: only criminals and terrorists use high denominations of cash. Ken Rogoff, Harvard professor and former official at the International Monetary Fund and Federal Reserve, recently published a book blatantly entitled The Curse of Cash. Ben Bernanke’s called it a “fascinating and important book”.
And, shockingly, a number of reviews on Amazon.com praise “brilliant” Rogoff’s “visionary concepts” in his “excellent book”. Rogoff, like most of his colleagues, contends that large bills like the $100 or 500 euro note are only used in “drug trade, extortion, bribes, human trafficking. . .” In fact they jokingly refer to the 500-euro note as the “Bin Laden” since it’s apparently only used by terrorists.
Give me a break. My team and I did some of research on this and found some rather interesting data.
The research was simple; we looked at the World Economic Forum’s competitive rankings that assesses countries’ levels of organized crime, as well as the direct business costs of dealing with crime and violence.
Switzerland, with its 1,000 Swiss franc note (roughly $1,000 USD) has among the lowest levels of organized crime in the world according to the WEF. Ditto for Singapore, which has a 1,000 Singapore dollar note (about $700 USD). Japan’s highest denomination of currency is 10,000 yen, worth $88 today. Yet Japan also has extremely low crime rates. Same for the United Arab Emirates, whose highest denomination is the 1,000 dirham ($272).
Consider Venezuela, Nigeria, Brazil, South Africa, etc. Organized crime is prevalent. Yet each of these has a currency whose maximum denomination is less than $30.
The same trend holds true when looking at corruption and tax evasion.
, a small country on the Black Sea whose flat tax prompted tax compliance (and tax revenue) to soar. It’s considered one of the most efficient places to do business with very low levels of corruption. And yet the highest denomination note in Georgia is the 500 lari bill, worth about $200. That’s a lot of money in a country where the average wage is a few hundred dollars per month. Compare that to Malaysia or Uzbekistan, two countries where corruption abounds. Malaysia’s top cash note is 50 ringgit, worth about $11. And Uzbekistan’s 5,000 som is worth a paltry $1.57.
And they’re pumping out all sorts of propaganda to do it, trying to get people to equate crime and corruption with high denominations of cash.
It’s just another hoax that will give them more power at the expense of your privacy and freedom.