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.
