Report on the debate regarding EU cash payment limitations
| Date | 02 January 2018 |
| Published date | 02 January 2018 |
| Pages | 5-27 |
| DOI | https://doi.org/10.1108/JFC-06-2017-0058 |
| Author | Nikos Passas |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Report on the debate regarding EU
cash payment limitations
Nikos Passas
Northeastern University School of Criminology and Criminal Justice, Boston,
Massachusetts, USA
Abstract
Purpose –Response to suggestion that EU-wide cash payment limits would assist in the control of
terrorismfinance and money laundering.
Design/methodology/approach –Desk reviewand interviews
Findings –The inception impact assessment(IIA) is ill-conceived, not grounded on firm empirical evidence
and harmful to both crime controland the legitimate interestsand rights of the EU citizens. The action under
discussion is presentedas a measure against terrorism finance, serious crime and tax evasion. The problem is
that these criminal acts correspond to very different methods, volumes, perpetrators, causes and control
challenges. Cash payment limitations (CPLs) are nowhere near a panacea that can address all of them and
cannot make any of them go away magically. Even when each of thesecrime challenges are considered on
their own, the empirical linkage of CPLs to effective controls is not there. The evidence from EU countries
with CPLs in placeshows higher levels of informal economy, corruption,tax evasion and terrorism risks than
those without.There is substantialevidence of non-cash, very serious and organized crime, while the amounts
needed andused by terrorists in Europe are usually verysmall in cash transactions, way below the thresholds
under consideration.In fact, determined offenders will shift to other methodsand become more sophisticated,
posing new problems to controllers. Displacement and incentivesfor better-organized crime may well be the
main productsof such measures.
Originality/value –It counters the argumentthat the cash payment limits can help reduce serious crime,
while pointingto several adverse consequences on legitimateinterests and human rights.
Keywords EU policy, Human rights, Organized crime, Money laundering, Cash limits,
Terrorism finance
Paper type Research paper
Introduction
The European Commission announced a public consultation on the March 1, 2017 with
respect to cash payment limitations (CPLs) following the adoption of the action plan of the
February 2, 2016 “against the financing of terrorism”. This action plan suggests that
because “payments in cash are widely used in the financing of terrorist activities”,we
should explore “therelevance of potential upper limits to cash payments”.
© Nikos Passas. Published by Emerald Publishing Limited. This article is published under the
Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and
create derivative works of this article (for both commercial and non-commercial purposes), subject to
full attribution to the original 43 publication and authors. The full terms of this licence may be seen at
http://creativecommons.org/licences/by/4.0/legalcode
The author is grateful for the research contributions of Dr Hildrun J. Passas and Dr Nicolas
Giannakopoulos. The paper was originally produced as a submission of the Organized Crime
Observatory, Geneva, to the European Commission.
EU cash
payment
limitations
5
Journalof Financial Crime
Vol.25 No. 1, 2018
pp. 5-27
EmeraldPublishing Limited
1359-0790
DOI 10.1108/JFC-06-2017-0058
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
The goal of detecting, monitoring and investigating serious crime is beyond dispute, but
there are serious doubts as to whether CPL would advance this cause substantially or that any
incremental benefit would be without considerable negative effects. Cash is popular, safer and
serves a long list of legitimate social and economic values that CPL would undermine.
Arguments for a “cashless”or “less cash”society are also made for convenience and
facilitation of payments, shorter remittance timelines and better control for monetary and
tax policies. Cashless is a buzzword for commercial and internet giants such as Amazon,
Google and Facebook and telco companiessuch as Apple and Vodafone[1].
While traceability is a worthwhile goal for law enforcement, one cannot sacrifice
economic interests and livelihoods, freedoms, privacy, subsidiarity, proportionality and
indeed the cash preferencesof the people for what is likely to be incomplete and ill-balanced
transparency and,in some respects, more challenging policingwork.
This report critically examines first the articulation and presentation of the CPL case; it
then turns to an assessmentof serious crime control issues and CPL and ends with a review
of legitimate intereststhat may be harmed by CPL.
The conclusion is that CPL would not pass a cost-benefit analysis. The stated goals
would not be as well served, the negative effectsand risks are legion and popular support by
the population is lacking. Attempts to introduce CPL, therefore, are out of proportion with
the intended target and interfere with strong legitimate interests. Given the preferences
inside and outside the EU, centrallyimposed rules in this respect are ill-advised.
The presentation of the European Union initiative
Inception impact assessment
The IIA suggests that cash payment limitations (CPLs) can be effective measures in the
control of serious crime, such as terrorismfinance, serious organized crime and tax evasion.
However, these criminal acts correspond to very different methods, volumes, perpetrators
and causes and control challenges. Mixing them and moving from one topic to the other is
unhelpful for crime controlstrategies.
Terrorism finance, as practiced recently in Europe, 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-costattacks (see more
below). They are motivated by political and religious causes or grievances, and they are
either inspired by or have some association with local or overseas groups (e.g. Daesh), in
some instances, involvingcross-border interactions.
Serious crime includes criminal enterprisespopularly described as “organized crime”as
well as offences with substantial social cost committed by corporations and white-collar
professionals. All of them are motivatedby profit and power, many of them commit offences
of transnational nature and the amounts involved can be staggering. Criminal enterprises
are a mix of national and ethnic groups regularly committing offences ranging from
drugs and human trafficking to smuggling of goods, property crimes, counterfeiting, etc.
Cash is used but not declared. Corporate and white-collar offenders come predominantly
from the more respectable and wealthy social strata, often use very sophisticated methods
and transact both nationally and globally, and their misconduct can have devastating
economic, social, environmental, health or security effects (Barak, 2017; van Erp and
Huisman, 2015).Cash is very often not involved at all.
Tax evasion includingsome lawful but awful (Passas, 2005a) tax avoidance schemesthat
equally affect societyby shifting the burden of social contributions to lower-income and less
privileged members of society (Brooks, 2013;Johnston, 2003;Levi, 2010) can be committed
by anyone. The amount can vary and involve accounting frauds, offshore and tax haven
JFC
25,1
6
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