EU Cashless Society Steps Up Pace In 2017/18

By Graham Vanbergen –  On the 23rd January 2017 the EU Commission issued the “Commission Initiative Roadmap” for 2018 regarding the step up fight against the financing of terrorism, also known as the EU’s cashless society initiative. This document is an extension of  the communication document dated February 2016 (COM-2016/50) and updated to include new rules.

The policy looks to the “Regulation on the controls of cash entering or leaving the Community  and relevance of potential upper limits to cash payments.” The Action Plan states that “Payments in cash are widely used in the financing of terrorist activities.” In its conclusions on the fight against terrorism, the Economic and Financial Affairs Council of 12 February 2016 called on the Commission “to explore the need for appropriate restrictions on cash payments exceeding certain thresholds. In particular the Proposal for an amendment of the Anti-Money Laundering Directive2 (COM (2016) 450), which introduced stricter transparency rules and other measures targeted specifically at terrorism financing. Furthermore, the initiative should be seen in conjunction with the ECB’s decision of 4 May 20163 to discontinue the production of the EUR 500 banknote and stop the issuance of this denomination by around 2018 to address concerns that these notes could be used in financing illicit activities.”

The report goes on to advise that “any measure restricting cash payments would be complementary to the specific actions addressed by the review” and to include “virtual currencies (such as BitCoin) and prepaid instruments (such as pre-paid credit cards) when they are used anonymously.”

Anti-money laundering rules will also cover high value goods such as works of art, precious stones or auctioneers, which requires that they apply customer due diligence measures, identification of customers and keeping records of transactions when receiving cash payments of €15,000 or more.

The latest document extends the cash payments rule by reducing the €15,000 limit on transactions to €10,000 by June 2017.

Unbelievably, the EU Commission is using the logic of banning cash by stating their “remains the lack of readily available and solid evidence on legitimate vs illegitimate cash transactions.” They maintain that “It is difficult to quantify the legitimate or illegitimate use of cash.”

There is so much evidence on the amount of cash in any given economy and how it is used that many government’s regularly publish the data and there is much in the way of supporting data from studies. For instance, on average, wallets in Germany hold nearly twice as much cash—about $123 worth—as those in Australia, the US, France and Holland, according to a recent Federal Reserve report on how consumers paid for things in seven countries. Roughly 80% of all transactions in Germany are conducted in cash (because of an inherent distrust of their government). In the US, it’s less than 50%. And cash is the dominant form of payment there even for large transactions.

In Britain, cash payments have fallen to 48% of all transactions – but that is still 18 billion individual transactions made up of £250billion annually. Within those numbers, 10% of all payments were direct debits, like paying for rent, mortgages, utilities and loans.

The EU Commission continues its misinformation campaign by stating that “Cash has the important feature of offering anonymity to transactions. 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.”

Whilst that statement is true, it does nothing at all to stop terrorism. It is well known and just as well documented that the 9/11 attackers spent months living in the United States. They rented homes, used bank accounts and credit cards to finance daily living and of course pay for everything required to perpetrate one of the biggest ever terrorist events in history. Most of this was financed by bank transfers, not payments in cash. As the French found out in the terrorist attacks of January 2015, and the Germans did last December, so-called ‘sleeper cells’ were effectively living invisible lives, but still had bank accounts, credit cards and mobile phones.

It also does nothing to stop money-laundering, as by far the biggest launderers of illegal cash globally is the Western banking system itself, the EU included.

For instance – HSBC admitted to openly laundering billions of dollars for Colombian and Mexican drug cartels and in so doing violated a host of banking laws such as the Bank Secrecy Act to the Trading With the Enemy Act. The USA spent $35 billion in 2015 alone fighting a drugs war only to witness over 90% of the proceeds of drug related crimes it was attempting to stop, laundered through Western banks. The fine HSBC received of $1.9 billion, which as one analyst noted is about five weeks of income for the bank is clearly no deterrent. There was so much cash to be laundered that drug dealers specifically designed boxes to fit through the bank’s teller windows – the bank knew where the money was coming from and what accounts to apply it to.

If the EU Commission wants to stop finance terrorism and money laundering – they need not look further than the Western banking system and its network of tax havens that launders trillions of dollars every single year, evidenced by this article; Enemies of the State: How The Financial Services Industry Is Destroying Democracy).

In the meantime, a number of EU countries have already imposed maximum bank withdrawals.  Some larger transactions in cash or moving cash from one EU country to another already require the state to be informed. Cash payments for goods and services in France and Italy have been limited to a maximum of €1,000. In Spain the maximum cash transaction is €2500 but no transactions over €15,000 are allowed.

The EU is now considering the banning of lower denomination notes than the €500. “The ECB has already decided to progressively phase out the €500 banknote. But as long as cash exists, large payments will remain possible even with lower denomination banknotes.” Therefore there is “an option to extend the restrictions to cash payments to all (including crypto) payments.”

The EU Commission is also looking at legal challenges. However, the work-around is explained thus: “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.”

The document ends with the observation that depending on the complexity of the final proposal and the legal instrument used, an implementation plan is not just feasible it might well be established quite quickly. The EU’s war on cash is snowballing without a real open debate with its citizens.

 

 

 

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