04 January 2006

The Web
Business Today

Euro changeover makes bad money obsolete

Matthew Vella

The black economy in Europe is a feature of life, but undeclared earnings and revenue from criminality in Maltese lira will now become obsolete once the national currency will make way for the euro in 2008.
So what does one do? Wads of cash hidden under the mattress or hidden away from the officials have to be either sneaked out of the island to safe havens where banks don’t ask embarrassing questions, or spent on luxury goods or even more probable, property.
In Germany the changeover to the euro resulted in increased searches by customs officials on people carrying unregistered money. Using both intuition and experience, German customs officials targeted “typical tax evaders” who came in the form of tradesmen and small businessmen, usually aged between 50 and 55, and with a middle-class car. They also travel with their family. Some USD18.42 million is believed to have been flushed out of Germany in the run-up to the euro changeover, according to reports in the German press.
But the monitoring of money laundering and other verification measures will continue to be applied as usual ahead of the changeover from the Maltese lira to the euro, the Central Bank told Business Today.
Several foreign exchange bureaus also said they could not foresee whether they could expect an increase in currency exchange for undeclared cash held in Malta, which will have to be transferred to euro once the changeover finally comes into effect.
Monies already held in banks will be automatically transferred into euros.
“The rules of money laundering will be applied as always. The banks will also apply the usual measures of verification on certain large amounts of cash,” the Central Bank said. “But we don’t foresee anything unusual happening. People will be asked to deposit their money beforehand, but purely to cut down on the load so we won’t need to take on a bigger load later on.”
Foreign exchange bureaus speaking to this newspaper said they had witnessed no abnormal increases in volumes of currency exchanged from lira into euros since Malta joined the Exchange Rate Mechanism II in 2005.
FEXCO manager Tonio Farrugia said any increase in business could be expected by the end of the year, claiming people still had not realised that the Maltese lira will eventually finish.
Ray Coppini, manager at W & J Coppini said it would certainly make sense for people to think ahead of the changeover. “The question however is, how many people still keep their money stashed under the bed? They would probably invest it abroad. Those with money abroad will still end up paying a final withholding tax. I wouldn’t expect a great volume really of exchange.”
Equally in agreement were Joe Laganà from Eurochange Financial Services and Andrea Aquilina, from Medarea, who said no abnormal increases in lira being exchanged for the euro had been registered.
“I cannot even really quantify what could be expected,” Aquilina said. “I don’t think it has actually dawned on people that the lira will be changing. But I wouldn’t know whether this would lead to an increase in lira being exchanged for euros and to what extent, if these were undeclared cash.”


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