NEW White Paper shows how targeting cash will not stop crime and terrorism financing

Sept. 1, 2017 Share Source

In the context of the EU initiative to limit cash payments across Europe, Cash Matters asked Dr. Ursula Dalinghaus – a postdoctoral scholar at the Institute for Money, Technology & Financial Inclusion (IMTFI) at the University of California, Irvine – to broaden the scope of the existing research and evaluation in a new white paper.

This white paper, “Keeping Cash – Assessing the Arguments about Cash and Crime” draws from a wide range of institutional, legal, scholarly, policy, news media and other sources as well as quotes from experts in criminology and terrorist financing, banking, industry, and the social sciences. It is the most comprehensive approach to the issue of cash and criminal or terrorist activities to date. Many of the sources cited in this paper have never been taken into consideration before, enabling fresh insights and new perspectives on the debate.

The key takeaway from this paper:
There is little to no evidence to support the claim that eliminating high-denomination banknotes or restricting cash payments will prevent terrorist attacks. Targeting cash simply misidentifies the issue at hand.

“Curtailing cash will do little when criminals already make use of a diverse portfolio of payment technologies and types.[...] Increasingly, electronic forms of transmitting and converting value are just as essential, if not more so, in supporting criminal as well as terrorist activities.”
" p. 8 and p. 16 Keeping Cash: Assessing the Arguments... Cash Matters White Paper (September 5th, 2017)

Instead, legal tender – in the form of cash – has to be regarded as a public good that guarantees ease of use, accessibility, a certain level of privacy, and many other unique qualities. 

"Restricting cash payments entails the criminalization of legitimate payment activities when reliable data on the full scope of cash usage of any kind is scarce. More research on payments and cash usage is therefore essential.”
" p. 25 Keeping Cash: Assessing the Arguments... Cash Matters White Paper (September 5th, 2017)

Other findings include:

  • digital forms of payment are also subject to abuse and do not necessarily guarantee transparency in accounting that many believe could aid in the tracking of financial crime. In addition, the shift to digital away from cash exposes people to new risks;
  • the importance of the interplay between multiple payment tools and jurisdictions. People use diverse payment methods together, and the movement of value across jurisdictions is subject to different regulatory environments and payment cultures. Targeting cash in isolation does not take into account this interplay and risks displacing criminal activities involving cash to other tools and jurisdictions;
  • researchers studying the impact of demonetization in India and capital controls in Greece have been observing that cash restrictions entail new social and economic burdens and are shifting the costs of making payments onto small businesses and disadvantaged groups in society.
Last Updated: Oct. 25, 2017