Europe Proposes "Restrictions On Payments In Cash"
by Tyler Durden
Having discontinued its production of EUR500 banknotes, it appears Europe is charging towards
the utopian dream of a cashless society. Just days after Davos' elites discussed why the
world needs to "get rid of currency," the European Commission has introduced a proposal
enforcing "restrictions on payments in cash."
With Rogoff, Stiglitz, Summers et al. all calling for the end of cash - because only
terrorists and drug-dealers need cash (nothing at all to do with totalitarian control over
a nation's wealth) - we are not surprised that this proposal from the European Commission
(sanctuary of statism) would appear...
The Commission published on 2 February 2016 a Communication to the Council and the Parliament
on an Action Plan to further 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. The Action Plan states that "Payments in cash
are widely used in the financing of terrorist activities� In this context, the relevance
of potential upper limits to cash payments could also be explored. Several Member States
have in place prohibitions for cash payments above a specific threshold."
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.
Potential restrictions to cash payments would be a mean to fight criminal activities entailing
large payment transactions in cash by organised criminal networks. 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.
Terrorists use cash to sustain their illegal activities, not only for illegal transactions
(e.g. the acquisition of explosives) but also for payments which are in appearance legal
(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. By restricting the possibilities to use cash,
the proposal would contribute to disrupt the financing of terrorism, as the need to use
non anonymous means of payment would either deter the activity or contribute to its easier
detection and investigation. 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.
And then right at the end, they mention "fundamental rights"...
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.
Below are some recent thoughts on the matter from SovereignMan's Simon Black, who detailed
previously that the war on cash is happening faster than we could have ever imagined, and
predictably, is based on lies.
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 I wrote to you recently,
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.It turns out that countries with higher denominations of cash actually have much lower
crime rates, including rates of organized crime.
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).
If you examine countries with very low denominations of cash, the opposite holds true: crime rates,
and in particular organized crime rates, are extremely high. 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.
Yesterday we wrote to you about Georgia, 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.
Bottom line, the political and financial establishments want you to willingly get on board with the
idea of abolishing, or at least reducing, cash.
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.
Simply put, the data doesn�t support their assertion. It�s just another hoax that will
give them more power at the expense of your privacy and freedom.
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