A clean currency for criminals

SUN JOURNAL

Euro: International law enforcement agencies and international crooks are preparing for the unprecedented opportunity presented by Europe's changeover to a single money.

November 05, 1999|By Jeff Israely | Jeff Israely,SPECIAL TO THE SUN

ROME -- Everyone, it seems, is preparing for the arrival of the new European single currency -- bankers, businesses, consumers and, yes, also international criminals.

Mafia men and white-collar crooks are among European big spenders anxious to exchange their outgoing currencies before they lose their value with the debut of euro cash and coins in 2002.

Authorities say the coming of European single-currency bank notes will create an unprecedented make-or-break phase in the billion-dollar battle to curb money laundering -- with both criminals and police looking to capitalize on the rush to turn in the outgoing 11 euro-zone currencies.

Rob Tjalkens, a money-laundering expert for Europol, the continent-wide financial crime investigation unit, says that it is unclear who will have the upper hand during the frenetic changeover to euro cash.

"It will be an enormous load of work," he says by telephone from The Hague. "A lot of money will be transferred. It's not clear what policy the financial institutions will take, but there could be a possibility to catch more illegal operations."

On Jan. 1 of this year, 11 European countries fixed their outgoing currencies to the new value. (Currently one euro equals about $1.06). While banking, credit and payment activities in the new single currency have been both permitted and encouraged since the beginning of the year, euro cash will not be circulated until Jan. 1, 2002.

At that point, like everyone else, holders of "dirty" marks, francs, lire and other outgoing European currencies will have just six months to get rid of their old bank notes. During that span, both the new and old money will be valid.

In practical financial terms, the crunch is coming sooner than it may seem. Law enforcement officials hope the narrow time window will help capture criminals who would rather risk being caught than be left with a pile of worthless money.

But at the same time, so many legitimate financial transactions will be executed by businesses and individuals exchanging their money that criminals might be able to bury their laundering operations in the shuffle of mass numbers.

Vigilance has already been stepped up. In the spring, France's then-finance minister, Dominique Strauss-Kahn, called on his European Union partners to suspend national banking secrets in cases involving possible prosecution of money-laundering suspects.

Though no evidence of increased laundering operations has been tracked since the January introduction of the euro in bank and credit exchanges, Tjalkens says authorities are keeping their eye on art and jewelry purchases and other high-end cash activities that have long been used by criminals to clean their dirty money.

During the current transition period in which euro cash is not yet available, criminals are also expected to try to convert their outgoing currencies into dollars, British pounds, Swiss francs and other standard currencies that will not be part of the euro.

For Britain's National Criminal Intelligence Service, that country's financial crime investigative agency, an official who insisted on anonymity says the battle has already begun.

"Not all criminals are going to wait until 2002," he explains. "Criminals read the Financial Times and Wall Street Journal as much as any legitimate businessman does. They're aware of the issues and they know how the banking system works."

The Financial Action Task Force, formed by the Group of Seven economic powers, laid out recommendations for combating money laundering to its 26 member nations and the European Union in 1989. The provisions include requirements for individual banks to report suspicious cash operations to law enforcement authorities.

Anti-money-laundering experts say the 10-year-old system has generally been effective in zeroing in on suspects, but the coming of the euro will present new difficulties in tracking money made in drug deals, prostitution and other illegal activities.

To begin with, the elimination of the national currencies will make it more difficult to track the origins of the dirty money to a specific country.

Second, the decision to print 500-euro notes could make it easier to transport large sums of cash.

The math is simple: A bank note weighs about one-25th of an ounce. Someone carrying a pound of 500-euro bills would have more than $200,000 worth of cash, compared with $40,000 for a pound of the criminal's current preferred denomination, the $100 bill.

"The euro could become the preferred currency for use by criminals," says one official at Financial Action Task Force, which recently released a report, "Money Laundering Typologies," focusing on the impact of the single currency on the fight against criminal cash exchanges.

Estimates for the amount of money laundered each year throughout the world range as high as $300 billion to $500 billion, with as much as one-third of that in the United States.

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