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Why Germany's $5,500 Limit On Cash Transactions Is Not A Bad Idea

Germany is mulling whether to introduce a limit on the amount of cash that can be used in a transaction to around $5,500, The Associated Press reports. The main reason for considering this measure is the need to combat terrorism funding and money laundering.

While opposition lawmakers in the Green Party tweeted that the idea is a "fundamental new attack on data protection and privacy," the idea is one worth exploring for the German government.

Money laundering has become a massive problem in the modern world. Terror organizations, drug cartels and other types of criminal syndicates reportedly launder large amounts of money through large banks such as HSBC, Bank of America and JPMorgan Chase & Co. JPMorgan came under fire in 2013 for failing to adequately police money flows, according to Reuters.

Limiting the amount of cash a person can spend at any one time is not a new idea and already exists in many European nations, as well as the U.S. German Deputy finance minister Michael Meister says that when large transactions are conducted anonymously, there exists the "risk of terror financing and we also have the problem of how to clear up money-laundering offenses properly," AP reports.

There are merits and drawbacks to the policy, but Germany has clear reasons to be exploring it at this particular moment in February 2016. Germans use more cash than other Europeans, for one, and Germany is at the center of the refugee crisis currently embroiling the European Union. The country has a clear incentive to make sure terrorists do not enter the country, and if that does happen, the country has an incentive to make sure terrorists' access to banking services is restricted.  

It's unclear if the proposed policy would have that desired effect, but the need to stem terror and criminal financing is one of the key steps to fighting terror and crime in general.  This policy will not solve the problem of crime or terror wholesale, but at the least it will make it more costly and time-consuming for criminals and terrorists to engage in such acts.

Sources: AP, Reuters / Photo credit: Wikimedia Commons

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