Despite the growing prevalence of digital payment systems and tighter financial regulations, cash remains an attractive tool for criminals. Its intractability, portability, and its difficulty to regulate offers a level of anonymity that digital transactions simply cannot match.
While governments and financial institutions have invested heavily in anti-money laundering (AML) frameworks, cash-based laundering continues to pose significant challenges to enforcement efforts. In a report released in 2015 titled « Why is cash still king? », Europol observed that in spite of the steady growth of digital payments, the use and circulation of cash money continues to rise year after year. In Europe, most Suspicious Activity Reports (SAR) are related to cash use or cash smuggling and most seized assets are in the form of cash.
Why do we still use cash in our digital age?
Although we are living in an era dominated by credit cards, mobile wallets, and instant transfers, one may assume that the use of cash is declining. However, despite rapid digital transformation in the financial sector, cash remains embedded in our society, as it offers:
Anonymity and privacy: one of the most compelling reasons for the continued use of cash is its anonymity. Unlike digital transactions, cash payments leave no electronic trail. This privacy appeals not only to those engaged in illicit activities but also to ordinary individuals who are concerned about surveillance, data breaches, or government overreach. For many, using cash is a way to protect personal freedom in an increasingly monitored financial system.
Accessibility and financial inclusion: a significant portion of the global population does not possess a bank account. For these individuals, cash is not a preference, but a necessity. Low-income households may rely on cash due to limited access to banking services, mistrust of financial institutions, or lack of digital literacy. As a result, cash remains the most practical and inclusive form of money.
Cultural and behavioral factors: cultural norms and long-standing habits also contribute to the persistence of cash. In some countries, cash payments are still expected for tips, small purchases, or informal labor. For many small businesses, especially in sectors like hospitality, retail, and personal services, cash is often easier to manage and sometimes preferred for immediate liquidity.
Avoidance of fees and delays: digital transactions can involve processing fees, especially for businesses, credit card companies, payment processors, and banks often take a cut from each transaction. Some vendors and services providers may choose to operate in cash to avoid these costs. Additionally, digital payment can be subject to delays or technical issues, whereas cash offers instant settlement without intermediaries.
Tax evasion and informal economies: In many parts of the world, cash use is tied to the informal economy, where transactions go unrecorded and untaxed. This not only includes small-scale street vendors but also larger operations that intentionally underreport income to reduce tax liability. Cash enables these activities to continue under the radar, creating fertile ground for financial crime, including money laundering.
What are the techniques do criminals use to launder money through cash?
Criminals use a wide range of techniques to disguise the origins of illicit cash, taking advantage of gaps in oversight, weaknesses in regulation, and the flexibility of cash-based transactions.
1. Smurfing: smurfing involves breaking large sums of illicit cash into smaller amounts that fall below the reporting thresholds required by financial institutions. Thes small deposits are then placed into multiple bank accounts, often in different locations or under different names, to avoid detection.
2. The Black Peso exchange: this technique, used mainly by Latin-American drug cartels, involves the movement of illicit cash through a complex system of currency conversion and trade. A drug trafficker in the U.S. sells drugs and receives cash. A broker then buys that cash at a discount and uses it to pay businesses in Latin America that export goods to the U.S. The profits are returned to the cartel, appearing as legitimate business revenue.
3. Use of cash-intensive businesses: legitimate-looking businesses with high volumes of cash transactions, like restaurants, car washes, or laundromats, are ideal for laundering money. Criminals can blend illegal funds with real revenue and then deposit them into business accounts, as if they were earned legitimately.
4. Shell companies and false invoices: shell companies are legal entities that exist only on paper and have no legitimate business activity. Criminals use them to move cash by creating false invoices for nonexistent goods or services. The payments appear legitimate, but they are simply a method to transfer and disguise dirty money.
5. Trade-based money laundering: criminals manipulate international trade to move value across borders. This can include invoicing of goods, multiple invoicing, or falsely describing the nature of traded goods. While this technique may involve digital components, it often begins with or is backed by large volumes of illicit cash.
"Cash in itself is not a method of laundering the proceeds of crime, nor is it an illegal commodity; rather it is an entirely legal facilitator which enables criminals to inject illegal proceeds into the legal economy with far fewer risks of detection rather than other systems."
- Europol, 2015
What is the legal framework in Belgium?
As we said earlier, regulating cash is rather difficult. Yet, to discourage the use of large amounts of cash in potentially illicit transactions, Belgium imposes strict limits on cash payments. Under the Belgian AML law of 18 September 2017, the current limitation of cash payment is set at €3,000. However, this limitation does not apply between consumers.
Violations of cash payment limits can lead to criminal penalties ranging from €250 to €225.000, depending on the severity and nature of the offense. The fine may not, however, exceed 10% of the payment or donation.
Could a cashless society change the game?
As digital payments become more widespread, many countries are moving toward a cashless society, promising greater efficiency and transparency. This shift could significantly disrupt traditional money laundering by reducing anonymity, since every digital transaction leaves a traceable record, making it harder for criminals to move illicit funds undetected. Many conventional laundering techniques rely heavily on cash. A cashless society could raise the cost, complexity, and risk of laundering money. While going cashless has advantages, it won't eliminate money laundering entirely. Criminals are adaptive and may turn to other methods, including:
Thus, while a cashless system may make laundering more difficult, it also necessitates advanced digital regulation and international cooperation to close new loopholes. It's also important to recognize that a fully cashless society raises ethical and social concerns. One key issue is privacy, as not all citizens are comfortable with the idea that every transaction can be traced. This unease often stems from fears of excessive surveillance, government overreach, and a lack of trust in financial institutions. Another major concern is exclusion: vulnerable populations, such as the elderly and those without access to banking services, may find it difficult to adapt to digital-only systems. As a result, they risk being pushed toward informal or unregulated alternatives, increasing their financial insecurity. To be effective and fair, a cashless transition must include strong data protection laws, digital inclusion policies, and accessible financial tools for all segments of society.
Can we truly reduce laundering without addressing broader systemic gaps?
While reducing the use of cash can make money laundering more difficult, it is not a comprehensive solution. Laundering is ultimately a symptom of deeper systemic vulnerabilities, such as weak regulatory enforcement, insufficient international cooperation, and the misuse of legal structures like shell companies and trusts. Criminals often exploit jurisdictional mismatches, under-resourced financial intelligence units, or gaps in corporate transparency, to move illicit funds regardless of the payment method. Without addressing these broader weaknesses, efforts to fight laundering will remain reactive rather than preventive. True progress requires a holistic approach that includes stronger global standards, better data sharing between countries, and reforms in corporate governance, not just a focus on reducing the availability of physical cash.
