KPMG warns of Euro 'laundering'

Huge transaction and money laundering risks are likely to accompany the introduction of Euro notes and coins on 1 January 2002. That is the stark warning issued to security managers by Alex Plavsic, fraud investigation partner at KPMG.

Although Prime Minister Tony Blair has yet to set a date for Britain's entry into the single currency, the changeover will nonetheless affect 300,000,000 people. Due to the variety in design, there will be seven different notes and up to 96 types of coin in circulation.

OLAF, the Brussels body set up to monitor problems that the new currency presents, is already predicting that millions of forged notes will appear in Europe and Britain in the first few months of the New Year.

Plavsic told SMT: "The risks are particularly relevant to security managers in the retail arena. They'll need to be especially vigilant when dealing with the new currency. In the UK, people will attempt to exchange Euros for pounds, so there's a very real risk of forged or counterfeit money being introduced."

There will be two major sources of money held in local national currency which there will be attempts to legitimise: money generated by organised crime (predominantly as a result of drug smuggling) and the reintroduction of cash held as a result of tax evasion. The latter will often involve money held in safe deposit boxes.

Criminals and launderers are using various devices to circumvent money laundering regulations already in place. "They're buying gold bars, coins and other assets like cars and houses," added Plavsic. "They're also dividing up cash amounts into small transactions to cover up the size of fund re-entries, and setting up new businesses to provide a cover for the cash flow generated by legitimate earnings."

Plavsic is adamant that, once the Euro has been introduced, there will be an unofficial 'secondary' market for the conversion of 'dirty' national currency into the Euro.

"It looks very much like the introduction of the 500 Euro note will allow money launderers to operate on an ongoing basis," stressed Plavsic. "This is a decision that's been heavily criticised by the UK Government," added Plavsic.

Security firms transporting money will have to abide by the EU Money Laundering Directive's commitments on record keeping and notifying of suspicious transactions – if amendments to the proposed EU Money Laundering Directive are backed by EU ministers, writes Keith Nuthall.

The changes were approved by the European Parliament in its second reading of the proposed law, and represent the latest attempt by Members of the Parliament to widen the scope of the Directive to encompass those professions who, until now, have been exempt from its responsibilities.

The proposed changes also reflect the growing view that restricting the law to lawyers and accountants would ignore the widespread knowledge about money laundering in a host of other professions.

The amendments are due to be presented to the EU's Council of Ministers.