About The Blog

Debate at the intersection of business, technology and culture in the world of digital money, both commercial and government, a blog born from the Digital Money Forum in London and sponsored by Consult Hyperion

Advertisers

Technorati

  • Add to
Technorati Favorites

License

  • Creative Commons

    Attribution Non-Commercial Share Alike

    This work is licensed under a Creative Commons Attribution - Noncommercial - Share Alike 2.0 UK: England & Wales License.

    Please note that by replying in this Forum you agree to license your comments in the same way. Your comments may be edited and used but will always be attributed.

« Singular issues | Main | A sort-of-mathematician reads the newspapers »

Coin-operated laundry

By davebirch posted Aug 11 2006 at 8:35 AM
[Dave Birch] An article in last month's Financial World (not available online) set me thinking. One of the key issues in designing new electronic payment systems is balancing the privacy of transaction counterparties (which may be a social good, even if neither of the counterparties cares one way or the other) with the legitimate requirements of law enforcement. But the article on Money Laundering says that the biggest recent boost to global money laundering is not hawala or pre-paid mobiles, but the euro. The fact that launderers can stuff 500 euro notes in their underpants, and zoom around Europe spending and depositing, helps them enormously.

Technorati Tags: , ,

I'm not commenting on whether money laundering is good or bad. That's not the issue. But what I am wondering is do we in the e-payment world accept the inevitable costs of tracking, tracing and monitoring when we should be arguing instead to be treated on par with cash? That is, no need track, trace and monitor below a certain level: let's say 500 euros. E-payment mechanisms naturally attract the attention of both criminals and regulators. The Drug Enforcement Administration, Immigration and Customs Enforcement and the Internal Revenue Services Criminal Investigation unit all say they have found pre-paid cards used for large-scale money laundering. And, of course, prepaid cards are also used to fund terrorism. You can see why the panic: drug dealers, to pick an obvious example, load cash onto prepaid cards and then send the cards across borders. But why? Why would they send a card rather than cash? Suppose a bank caps the maximum balance on a pre-paid card at 500 euros in return for no tracking, tracing or monitoring. What's the problem? The card product is now much cheaper to its legitimate users (eg, unbanked migrant workers, children, me) and the bank makes more money. The drug dealers are now worse off, because sending the card by airmail costs more than sending a 500 euro note (which has more acceptance points anyway). Imposing stringent tracking and monitoring requirements on low-value e-payment schemes when no such strictures apply to banknotes is, in effect, another hidden subsidy to cash.

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c4fd753ef00d834e2c12e69e2

Listed below are links to weblogs that reference Coin-operated laundry:

» mobilephone free gift deal from mobilephone free gift deal
Most people don't know they can get a valuable free gift with their next mobile phone... all from a name you can trust... Tesco! Don't go direct to a UK network when free Wii's, HDTV's, Laptops, Playstations and much more. All above board and from Tesco! [Read More]

Comments

In Spain, 500 euro notes are nicknemed "bin-Ladens" - because everybody knows that they exist, but the authorities never seem to be able to catch sight of them out in the wild.

I tried to write a comprehensive response to this, but it is too hard -- that is, long, involved. I suppose that is one point -- it is not possible to separate out the issues of privacy and law enforcement and present them as a balance, not in any cohesive fashion. More over on https://financialcryptography.com/mt/archives/000801.html

The comments to this entry are closed.