Methods and Stages

The explosion of money laundering

Macroeconomic Consequences

The Risks to Financial Institutions

The Risk to the Financial System

The Euro and Money Laundering

Money Laundering as Tax Evasion

Social and Political Costs

International Conventions

EU Directives on Money Laundering

The Achilles Heel

Bibliography and some useful links

Previously the U.S. dollar has been the currency of choice for legitimate international traders for many years because of its large domestic market, its ready convertibility, and its high recognition factor worldwide. A sign of the currency's global usage is that more than half of the approximately $350 billion in U.S. dollar bills and coins circulating are held outside the United States. Since money launderers wrap their activities inside those of legitimate traders, it is conventional wisdom that the U.S. dollar, as the most widely used currency in legitimate trade, is also the most widely used currency for illegal transactions. Morris-Cotterill, 2001

The Euro, however, soon will rival the U.S. dollar. It will have a domestic user base of around 300 million people, it will immediately have all the international trade (other than that denominated in U.S. dollars, for instance oil) of its member countries, the largest EU economies excluding the United Kingdom. It will have immediate recognition in all the nations that traditionally trade with European countries in a variety of currencies. Businesses within the Euro zone, and those bordering it, will use the Euro for they will no longer have to risk currency exchange movements at different points in the manufacturing process. By reasons of sheer volume of usage, the Euro will become a currency of choice for launderers who may have been relatively unwilling to use the individual currencies of EU member countries. If criminals are thinking ahead, which is more likely, they will have been using the two-year run-up to the introduction of Euro bills to gather as much cash as they can. Once the money is in banks, it will be converted to Euro by January 1, 2002. At that point, money will become mobile across the entire EU with no control over its records. The banks will have the total responsibility for identifying suspicious transactions, and, at that time, no one will know what is suspicious.

Criminals thrive on uncertainty and will exploit it in order to conduct their business. The Euro poses a significant opportunity for them. Although the U.S. dollar will remain important for money laundering activities, it will no longer be the single, dominant currency for financial outlaws. 

Thus far the EU Member States that use the Euro have not changed their anti-money laundering laws in response to the changeover. Some countries did report increases in suspicious transactions, which may have been owed to the introduction of the Euro.  Problems may also have arisen because there was certain degree of co-ordination at the European level regarding specific measures to be implemented during the changeover, but this co-ordination did not result in a uniform response from all members of the EU.  one can only say that it is too early to comment on changes in money laundering owed to the introduction of the Euro.

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