Dei'ah veDibur - Information & Insight

A Window into the Chareidi World

17 Shevat 5762 - January 30, 2002 | Mordecai Plaut, director Published Weekly









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Shema Yisrael Torah Network

Observations: Euro Use To Pose New Currency Realities

by Yated Ne'eman staff

On January 1, 2002, the currencies of twelve European countries were replaced by Euros. Banks stopped issuing marks, lire, guilders and francs. Stores will also stop accepting the old currencies as legal tender by the end of next spring.

While central banks around Europe will still redeem old currencies for years to come, that is cold comfort to people who have been secretly hoarding cash, whether to evade taxes or conceal profits. They must now change their money or watch it become virtually useless.

But covertly changing suitcases of cash is not simple. Even secretive Swiss banks will report suspicious cash transactions to money-laundering authorities. Banks in most other European countries will automatically report cash transactions bigger than about $15,000.

As a result, European financial officials believe that a lot of cash is now heading back to its country of origin, where it can more easily be spent on jewelry, cars, boats and even real estate.

The volumes of money are substantial for most European countries, but particularly for Germany. Banking experts estimate that as much as 100 billion marks in cash is outside Germany, mostly in central Europe, Turkey and the Balkans. The Bundesbank has estimated that the volume of black money tied to criminal activity could be as high as 30 billion marks, or nearly $14 billion.

The finance minister of Germany has announced a crackdown involving random car searches along all its borders, but particularly those with Switzerland and Luxembourg, which have long been tax havens for Germans.

Officials say they are checking for cash moving in both directions over the border. One big group is organized criminals, who have kept their profits in cash outside of Germany to avoid paper trails. Those people are under pressure to take money back to its home country where it can be readily converted to dollars or goods.

German tax-evaders have been carting cash for years to Switzerland and Luxembourg. People who have foreign bank accounts can simply let their banks convert the money to Euros automatically, but those still sitting on cash in Germany face a deadline to get it to a cooperative and secret bank.

Switzerland is not a member of the European Union so its border with Germany is still lined with customs agents and passport controls, which European Union countries eliminated long ago. The problem is that Swiss officials provide virtually no help to other law enforcement authorities. People are not required to disclose large sums of cash they bring into or out of Switzerland, and border guards who find large sums are not allowed to alert counterparts on the other side of the border. The only exceptions are if the money is counterfeit or if there is evidence of criminal activity.

Luxembourg, with no customs booths on the German border, poses a different problem. German customs agents must rely on mobile squads that roam the countless highways and smaller roads that link the two countries.

Guards say they have found drivers hiding money under floor mats, behind the radio and in clothing.

One beneficiary of all this may have been the American dollar. Partly because of anxieties about the Euro, and partly because Euro currency and coins are not yet available, billions of German marks have been changed into dollars. Much of the conversion may have involved huge sums of German cash held in Central Europe and the Balkans by local mafias. Though the matter is disputed, some economists believe this has contributed to the Euro's weakness.

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