Publishing in the Journal of Financial Crime, Professor of Criminology and Criminal Justice Nikos Passas analyzes in his “Report on the debate regarding EU cash payment limitations” whether the desire to limit cashMoney in physical form such as banknotes and coins. More payments will indeed result in crippling terrorism financing and money launderingThe operation of attempting to disguise a set of fraudulently or criminally obtained funds as legal, in operations undeclared to tax authorities, and therefore not subjected to taxation. Money laundering activities are strongly pursued by authorities and in most countries, there are strict rules for credit institutions to cooperate in the fight against money laundering operations, to declare and report any transactions that could be considered suspicious. More activities in the EU.
In repose to the Inception Impact Assessment (IIA) initiative, Passas argues that the IIA has failed at many levels starting from its questionnaire, which was constructed in a way that can only result in confused and biased responses. Passas also expresses his alarm at the way such diverse types of crime like terrorism financing, organized crime and tax evasion are all grouped together when, in reality, they involve very different needs, methods and volumes.
For example, he differentiates criminal enterprises from corporate and white-collar offenders, the former including human trafficking, smuggling of goods, property crimes and so forth. These offenders do use cash but do not declare it. On the contrary, white-collar and corporate offenders seldom use cash but their activities can often have devastating consequences on the economy.
For the third type of crime, terrorism, he says it “involves extremists who use overwhelmingly legal funds, sometimes commit petty offences, engage in very small-amount cash transactions, occasionally use fake IDs and commit low-cost attacks” [p.6]. In fact, Passas cites Nesser et al as “73% of the plots in Europe in 2014-16, the terrorists generated at least part of their income from legal sources such as salaries, welfare benefits, sale of property and loans” [p.8] and the rest come from “cash, moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More services providers and formal bank transfers” [p.8].
Passas argues that the implementation of Cash PaymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More Limitations (CPL) will not only fail to affect terrorism financing as these criminals already manage many of their transactions in closed circuits (and therefore don’t declare what they own), through threats and barter; but that there is surprisingly a higher risk of terrorism in countries that have already introduced CPL (France, Sweden, Belgium, UK and The Netherlands).
Interestingly, countries with greater cash limitations or with reduced access to cash (like Sweden) are actually victim to a larger shadow economy and a significant increase in card fraud rates than countries that have applied no such measures. Some are advocating for the elimination of larger denominationEach individual value in a series of banknotes or coins. More banknotes (i.e. Kenneth Rogoff), but interestingly enough, argues Passes, “countries with high denomination notes are low on crime and organized crime (e.g. Japan, Singapore, Switzerland or UAE), while crimes with very low denominations are high on crime (e.g. Brazil, Nigeria, South Africa or Venezuela)” [p.10].
And finally, Passas warns that a push to greater digitization of payments will only:
To read Nikos Passas’ full report, download it here below.