September 6, 2001

Euro's Entry Is Forcing Europe's Hidden Hoards to Surface

By EDMUND L. ANDREWS

EIL AM RHEIN, Germany, Sept. 3 — The two Dutchmen in the aging Mercedes looked haggard but betrayed no anxiety when German border guards asked if they were carrying large sums of cash.

Driving from Switzerland this morning, they were simply two among the thousands of people who cross the border into Germany here every day. But when guards popped open their trunk in a surprise inspection, they found a black suitcase with three crisp white envelopes containing 100,000 Dutch guilders (about $40,000) and 10,000 British pounds (about $14,400).

The origins and intended use of the cash are still under investigation, but the two men will almost certainly have to sacrifice about 10 percent of it just for violating currency disclosure laws.

Such discoveries have recently become frequent, in part because of the imminent introduction of euro bills and coins. Beginning Jan. 1, German marks and the currencies of 11 other European countries will be replaced by euros. By March, they will no longer be accepted as legal tender by retailers.

People who have been secretly hoarding cash, whether to evade taxes or conceal profits, must change their money soon or watch it become virtually useless.

"Deutsche marks have to be changed into euros, or they will become worthless," said Roland Bähr, head of German customs inspections along this heavily traveled section of the Swiss-German border. "They have to come forward. It is as simple as that."

Markus Stuecklin for The New York Times A customs agent searching for money at Weil am Rhein. With the euro's imminent introduction, cash seizures have increased sharply.

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.

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 be spent on jewelry, cars, boats and even real estate.

According to the Bundesbank, Germany's central bank, the marks in circulation has declined by about 12.5 billion since last November. The number of 500-mark and 1000-mark bills flowing back to the Bundesbank has been especially large.

Most banks will stop issuing marks and other local currencies in January. Stores will stop accepting the currencies by the end of next spring. When euro money begins circulating banks will stop issuing marks, lire, guilders and francs. By the end of next spring, stores will no longer accept them as legal tender. While central banks around Europe will still redeem old currencies for years to come, that is cold comfort to people like tax evaders and drug smuggler who have spent years keeping their money out of sight.

The volumes of money are substantial for most European countries, but particularly for Germany because its trusted currency circulates widely in Europe. 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.

Hoping to capitalize on the pressures created by the euro-changeover, the finance minister of Germany 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.

It is hard to know whether covert cash shipments have increased significantly, or whether the discoveries simply result from more frequent inspections. But the numbers have increased dramatically.

Here in Weil am Rhein, just a few miles south of Basel, customs officials say the volume of cash discovered last year through routine spot- checks quintupled to 13 million marks. In the first six months of 2001, they found eight million marks and the volumes are climbing. Along the Luxembourg border, the German police say they have found 4.8 million marks in undeclared cash so far this year, about 50 percent more than at the same point last year.

"We never see more than the tip of the iceberg," Mr. Bahr said. "Our goal is to have a preventative effect, to hinder people and make them more insecure about what they are doing."

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

A quite separate group is people evading taxes. Germans have been carting cash for years to Switzerland and Luxembourg, which imposes extremely low taxes on interest and capital gains. People who have such 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.

Intercepting money on the Swiss border is easy in some ways because Switzerland is not a member of the European Union and its border with Germany is still lined with customs agents and passport controls, which European Union countries eliminated long ago. Though smugglers can try to sneak through forests along the border, customs agents say most people feel less conspicuous in crowds passing through the main checkpoints.

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 in or out of Switzerland, and border guards who find large sums are not allowed to alert counterparts on the other side of the border.

"Fundamentally, there is no restriction on bringing money into or out of Switzerland," said Rudolf Nebel, head of Swiss customs for the Basel region. The only exceptions are if the money is counterfeit or if there is evidence of criminal activity, as in cases where the police find weapons or drugs with the money.

While Swiss banks are required to report any suspicious transactions to money-laundering authorities, they refuse to report to foreign governments about possible tax evasion in Switzerland. The Swiss view is that tax evasion by foreigners is some other country's problem, according to James Nason, a spokesman for the Swiss Bankers' Association in Basel.

Luxembourg, with no customs booths or checkpoints 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, in underwear and even, in the case of a butcher, in a cooler stuffed between slabs of meat.

But many people have become so accustomed to breezing across borders that they make little effort to hide the money. When guards here stumbled across 300,000 German marks last week, their biggest find this year, they found it in an ordinary overnight bag.

Today, when German guards checked the two Dutch travelers coming from Switzerland, the case they stumbled on was intriguing The two men, who appeared to be in their fifties, hardly looked like wealthy jet- setters. Their Mercedes was 11 years old, their clothes were rumpled and neither looked as though he had shaved. They told border guards that the money belonged to them.

Customs officials released the men after a few hours but kept about 10 percent of the cash while investigators determine if the money is tied to either criminal activity or tax evasion. But even if the money is not tainted, the two are liable for fines of up to 50 percent of the cash simply for refusing to admit they had it before they were searched.

To many Europeans, now accustomed to crossing borders without even showing a passport, the car searches are a shock. Reinhart Illert, a retired German businessman who lives in Brussels, looked on in amazement as border guards spent 20 minutes searching his BMW and his luggage. "I understand why they need to do it," Mr. Illert said. "But the last time something like this happened to me was when I was trying to cross into East Germany."

http://www.nytimes.com/2001/09/06/international/europe/06MONE.html

-- Martin Thompson (mthom1927@aol.com), September 07, 2001

Answers

World: Thieves take nearly $2 million in first euro cash robbery, police say

By TONY CZUCZKA, Associated Press

BERLIN (September 7, 2001 1:53 p.m. EDT) - In what is believed to be the first robbery of Europe's new money, a driver and an accomplice got away with 1.2 million euros - worth $1.8 million - from a German cash transport truck, police said Friday.

Police said all seven denominations, from five to 500 euros, were on the truck robbed Thursday near the western town of Giessen.

"One has to expect that all types of bills fell into their hands," said Reinhard Huebner, a spokesman for Giessen prosecutors.

The figure on the euros stolen came from the cash transport company, Securicor, police said. At least $139,000 in German marks also were missing, police said, revising the original figure of up to $2.7 million worth of marks.

The euro will replace local currencies as legal tender in 12 European Union countries on Jan. 1. To give counterfeiters as little time as possible to unravel the money's security features, transports of the new cash went into high gear only this month.

Although the robbery could give counterfeiters a head start, Germany's finance minister defended precautions for the distribution of euros to banks and businesses.

"Everything that can be done is being done," Hans Eichel said on ZDF television. "You would only create chaos by upsetting the well thought-out plans made long in advance. But there never is 100 percent security."

Police said they had no trace of the two suspects, the truck driver and an accomplice, who overpowered and tied up the second officer of the two-man crew.

Central banks in each euro country have mounted major security operations to protect euro transports, but not every shipment is being guarded by police.

Inside jobs are an obvious problem, accounting for six of nine money truck robberies in Germany this year alone, said Harald Olschok of the secure transport industry's national association

http://www.nandotimes.com/world/story/74786p-1053872c.html

-- Martin Thompson (mthom1927@aol.com), September 07, 2001.