Euro Cash Approach Finds Banks Unprepared, Says Misys Survey

BRUSSELS -- Many banks have failed to grasp the urgency of preparing for the changeover to euro notes and coins on January 1, 2002, according to the UK-based banking software provider Misys.

Misys’ warning, based on a survey by the firm, came amid fears that the changeover would provide a major opportunity for money launderers and financial fraudsters.

As Operational Risk went to press, the European Central Bank was about to launch a public campaign to prepare consumers and businesses for the changeover in the 12 countries of the 15-nation European Union that have adopted the euro. On January 1, some 15 billion euro banknotes and 15 billion coins -- worth around E660 billion ($600 billion) -- will be introduced to replace domestic currencies in the 12 countries.

Mysis said banks’ lack of readiness could result in customer services being badly affected (see related article, this issue).

Leading European banks have previously said they are confident their systems and controls can contain any threat of fraud and money laundering.

Regulators believe the degree of risk depends on the extent to which cash is used. The more a country’s banking is based on cheques, credit cards and electronic funds transfer, the less will be the risk from financial crime.

But bank staff in Germany protested against a ban on their taking any time off in the first two months of 2002 -- the period allotted for the changeover. Some employees threatened to stay off sick if holidays were not honoured.

Law enforcement experts believe that the run-up to the changeover is the time when most dirty money will be laundered in a situation that may be seen by criminals as a golden opportunity to turn old black-market cash into clean new euros. The experts believe criminals will be looking to launder their cash by buying high-value items at a time of big cash transactions generally.

Police in many countries began warning retailers of a likely flood of forgeries of the old ‘legacy’ currencies that counterfeiters are expected to produce with the aim of changing the forgeries into euro cash.

In August, German customs authorities warned travellers of possible border delays later this year -- because of efforts to combat money laundering during the changeover -- due to inspections and spot checks from September onwards.

Meanwhile a massive logistical operation began in the eurozone countries as they started moving newly minted coins to regional distribution centres.