Restriction of the use of cash: Comments and recommendations by the NBB
The issues surrounding the use of cash have been given particular attention by the legislator, who has grouped all provisions laying down restrictions in this matter in a specific section of the Anti-Money Laundering Law (Articles 66 and 67). This section has a broad scope as it applies, in principle, to “any natural person or legal person making payments or donations” (see Article 6 of the Anti-Money Laundering Law).
The NBB expects financial institutions to take into account the provisions of the aforementioned section when performing their obligation to identify occasional customers and their ongoing due diligence obligation. Regulation (EU) 2018/1672 of the European Parliament and of the Council of 23 October 2018 on controls on cash entering or leaving the Union and repealing Regulation (EC) No 1889/2005 should also be complied with.
The main rules on the subject are summarised below.
1. General rule for restricting the use of cash
In accordance with Article 67, § 2, first paragraph, of the Anti-Money Laundering Law, “regardless of the total amount, no payment or donation may be made or received in cash for an amount above EUR 3 000, or its equivalent in another currency, as part of one or several transactions that seem to be related”.
1.1.1. ratione materiae
The scope ratione materiae of the former provisions of the Law of 11 January 1993 has been expanded since, according to Article 67 of the Anti-Money Laundering Law, this restriction applies to all payments regardless of the nature of the underlying obligation, and no longer only to payments made in the context of a sale or the provision of services. The underlying obligation may now therefore be of a contractual or extra-contractual nature.
The restriction also applies to donations other than those between natural persons acting outside their professional capacity and, in particular, to donations made to non-profit associations or foundations.
1.1.2. ratione personae
The scope ratione personae of the restriction has also been expanded as Article 67 of the Anti-Money Laundering Law applies to all natural or legal persons, and no longer only to merchants and service providers.
1.2. Scope of the restriction
The limit of EUR 3 000 no longer applies to the amount of a price to be paid but rather to the amount of the sum that has been paid or donated in cash. For instance, a payment or donation of EUR 5 000 may be made and received in cash up to EUR 3 000 and the payment or donation of the remaining amount should be made and received otherwise.
However, the limit of EUR 3 000 remains applicable for “several transactions that seem to be related”. Related transactions are, for example, transactions presenting each of the following characteristics:
- they are carried out between the same parties;
- they have the same purpose or linked purposes (e.g. several works conducted by the same company for the same site, various consecutive donations to a non-profit association by the same person or by that person’s family members);
- they are close to each other in time.
Furthermore, transactions with the same characteristics that are split up for no reason should certainly also be considered as linked transactions. As in the past, splitting transactions may not lead to the restriction not being applied.
Finally, pursuant to Article 67, § 3, third paragraph, of the Anti-Money Laundering Law, “the set of amounts mentioned in an official or unofficial accounting, that do not relate to one or more specific debts” should be irrefutably presumed to be carried out or received as part of linked transactions. This refers to the situation where an accounting is so non-transparent that it is impossible to attribute amounts, which are often less than EUR 3 000, to specific debt payments; in that case, these payments are considered as a single payment and are subject as a whole to the cash limit of EUR 3 000.
2.1 Exemption for obliged entities for which cash transactions are considered inherent to their activities
The restriction provided for in Article 67, § 2, first paragraph, of the Law does not apply to:
- the sale of real property as referred to in Article 66 of the Anti-Money Laundering Law (see point 1 above);
- “transactions between consumers”;
- the obliged entities referred to in Article 5, § 1, 1°, 3°, 4°, 6°, 7°, 10° and 16° [of the Anti-Money Laundering Law], nor to their customers when they carry out transactions with these entities”. These entities are financial institutions for which cash transactions are considered inherent to their activities.
Without prejudice to the specific rules for transactions relating to the purchase of precious materials, particularly gold (see below), the above-mentioned general rule for restricting the use of cash therefore does not apply to cash transactions carried out by customers of:
- credit institutions governed by Belgian law, Belgian branches of European or non-European credit institutions, credit institutions governed by the law of another EEA Member State which rely on a tied agent established in Belgium to provide investment services and/or perform investment activities there, and credit institutions governed by the law of another EEA Member State which rely on an agent established in Belgium to provide services there consisting of receiving deposits or other repayable funds;
- payment or electronic money institutions governed by Belgian law, Belgian branches of European or non-European payment or electronic money institutions, and payment or electronic money institutions governed by the law of another EEA Member State that carry out their activities in Belgium through agents or distributors; and
- stockbroking firms governed by Belgian law, Belgian branches of European or non-European stockbroking firms, and stockbroking firms governed by the law of another EEA Member State which rely on a tied agent established in Belgium to provide investment services and/or perform investment activities there.
Conversely, the restriction on cash transactions applies in particular to:
- life insurance companies governed by Belgian Law and Belgian branches of European or non-European life insurance companies;
- central securities depositories, and
- mutual guarantee societies.
2.2 Purchase of real property
As was the case under the Law of 11 January 1993, the sales price of real property may only be paid “by means of a bank transfer or cheque”, thus excluding any cash payment (see Article 66, § 2, first paragraph, of the Anti-Money Laundering Law). Real estate agents and notaries who find that a payment has been made by other means than a bank transfer or cheque are required to notify CTIF-CFI of this fact, “whether the payment was made in their presence or otherwise”. In this case, the reporting to CTIF-CFI is “objective”, meaning that it must not be assessed whether the transaction is suspected of being linked to money laundering or terrorist financing.
However, the Anti-Money Laundering Law introduced two new elements:
- the agreement and deed of sale must henceforth specify the number(s) of the financial account(s) from which the amount was or will be debited, as well as the identity of the account holders;
- the Anti-Money Laundering Law now specifies what is meant by “the sales price of real property”, namely “the total amount that the buyer must pay and that relates to the purchase and financing of this property, including the resulting associated costs”.
It should be noted that financial institutions are not subject to the obligation described above to submit an "objective” reporting to CTIF-CFI in case of cash payments of real property sales prices. However, where a financial institution is asked to perform a cash transaction for which it has reason to suspect that it is linked to the cash payment of all or part of the sales price of real property, the NBB recommends that the financial institution notify CTIF-CFI by submitting a reporting of suspicions.
2.3 Specific rules for the sale of gold, copper cables, old metals and precious materials
The Anti-Money Laundering Law simplified and coordinated all provisions relating to the purchase of precious metals, copper cables or old metals. Apart from the exceptions provided for in the Law (particularly public auctions or sales/purchases of old jewels, for which payment or receipt in cash is still authorised up to EUR 3 000), Article 67, § 2, second paragraph, of the Anti-Money Laundering Law prohibits any payment carried out or received in cash of:
- the purchase/sales price of copper cables, when the buyer is a professional;
- the purchase/sales price of old or precious metals, when both seller and buyer are professionals; however, when the seller is a consumer and the buyer is a professional, the payment or receipt, in cash, of the purchase/sales price of the same goods is allowed, but subject to a maximum limit of EUR 500 (and to an obligation for the professional buyer to identify the selling consumer).
It should be noted that all financial institutions falling under the supervisory powers of the NBB are subject to the specific prohibition described in Article 67, § 2, second paragraph, of the Anti-Money Laundering Law when acting as the purchaser of gold or precious metals in particular. When acting as the seller of these same goods, the general limit of EUR 3 000 for cash payments applies if the financial institution does not belong to a category exempted from this restriction (see above).
For more information on this subject, please refer to the Explanatory Memorandum of the Anti-Money Laundering Law (see the page “Main reference documents”).
3. Extension of the rule to postal deposits
In order to prevent the misuse of postal deposits for the purpose of circumventing the maximum limit of EUR 3 000 on cash payments and donations, the Anti-Money Laundering Law extends this restriction to postal deposits made on bank accounts held by financial institutions established in Belgium (a restriction which is generally already applied in practice) or on postal current accounts. Furthermore, these deposits may only be made by consumers (see Article 67, § 4, of the Anti-Money Laundering Law). For more information on this subject, please refer to the Explanatory Memorandum of the Anti-Money Laundering Law (see the page “Main reference documents”).
The Anti-Money Laundering Law significantly changed the rules of evidence for cash payments. In short, it reversed the burden of proof in the matter by stipulating that, when the submitted accounting documents, including bank statements, cannot be used to determine how payments or donations have been made or received, they are presumed to have been carried out or received in cash. Furthermore, the burden of proof for tracing the payment was revised. For more information on this subject, please refer to the Explanatory Memorandum of the Anti-Money Laundering Law (see the page “Main reference documents”).
The Anti-Money Laundering Law provides for a system of criminal sanctions and administrative settlements which can respectively be imposed or proposed by the FPS Economy in case of a breach of the provisions of the Law relating to the restriction of the use of cash. For more information on this subject, please refer to the Explanatory Memorandum of the Anti-Money Laundering Law (see the page “Main reference documents”).
6. Internal procedures and control
Where relevant for the activities performed and without prejudice to the fact that the risk-based approach requires taking into account the ML/FT risks specifically associated with transactions involving large amounts of cash, the internal procedures of financial institutions should be established in such a manner as to guarantee compliance with the aforementioned rules restricting the use of cash. In particular:
- the internal procedures of a financial institution not benefiting from the exemption described in Article 67, § 2, third paragraph, 3°, of the Anti-Money Laundering Law should prevent customers from making cash payments exceeding the limit of EUR 3 000;
- the internal procedures of a financial institution purchasing/selling precious metals should prevent the purchase price of these precious metals being paid in cash, except in the extraordinary cases provided for in the Anti-Money Laundering Law.
The NBB moreover recommends having financial institutions’ internal audit function verify whether they properly take into account the aforementioned rules relating to the restriction of the use of cash in the context of their customer and transaction due diligence obligation.