Financial Transactions: Better not to lose the leads

We were informed recently that, in the context of investigations about the contents of the safes of the ex-Prime Minister, the police were puzzled about certain foreign currency banknotes found in the safes seized at his residence. It was mentioned that some of the US dollar banknotes found in the safes bore consecutive serial numbers. It was perhaps sought to imply that those banknotes bearing serially consecutive numbers could have been obtained by him under some special reproachable arrangements.

The FBI was called in to look into the matter. The latter would have concluded that the banknotes were from Chicago and New York. Another link was sought to be established therefore between the ex-Prime Minister and those two places in the US. One radio station wanting to exaggerate this “find” expressed the view that Chicago in particular was reputed for certain illegal dealings. Reference was made to Chicago as the historical haunt of Al Capone, with a clear insinuation about illicit transactions. Listeners would have drawn the intended conclusions. If this is not trial by the press, what is?

The matter is much simpler if you understand how banknotes issued by major issuers like the Federal Reserve System flow into the global system. The public may not know it. There are twelve Federal Reserve Banks in the USA situated in so many US states. All of them taken together constitute the US Federal Reserve System. The main one, the key policy-making one, is situated in Washington DC. Each one of the twelve Federal Reserve Banks issues US dollar banknotes in its district. Naturally, the banknotes move around not only in the whole of the US but they are also used in cross border transactions (e.g., by tourists). There are identification marks, such as the serial numbers of the banknotes, to tell you which one of the Federal Reserve Banks – New York, St Louis, Chicago, etc., — issued them in the first place. You don’t need the FBI to tell you which one of them originated the banknotes. Any Federal Reserve Bank of the US can give this information, which doesn’t establish any specific wrongdoing.

A US-based commercial bank or other accredited financial institution will call from time to time in the ordinary course of business at its district’s Federal Reserve Bank (Fed) to withdraw the quantity of US dollar banknotes it needs for its transactions. The Fed may issue previously issued or brand new banknotes to it in the amount requested or some combination of both depending on the denominations of the banknotes requested for. It follows that if the banknotes so delivered are brand new, they will bear consecutive serial numbers. This bank or financial institution may pay to its customers, in the US or outside the US including a banking institution in Mauritius, either previously issued banknotes or brand new ones it has so obtained most lawfully. In the case of brand new banknotes, the serial numbers will be in consecutive order whether for small or large transactions by its customers. One should not therefore jump to unwarranted conclusions by reason only that a person is in possession of US dollar or Euro, Swiss francs or GBP banknotes whose serial numbers are in consecutive order. This is actually the manner in which they were obtained at the commercial bank counter in the first place in a normal business transaction.

It may be worth bearing in mind that foreign exchange dealers do not rely solely on used banknotes already in circulation (e.g., from tourists and travellers) to meet their customers’ demand for foreign currencies. Indeed, there is a regular global trade consisting of wholesale physical import and export of internationally accepted banknotes by authorized financial institutions from/to their correspondents in the banknote issuing countries. Banknotes are imported if the local supply of foreign currencies is insufficient to meet demand on a timely basis. This may include used or new banknotes or both. There is nothing unusual therefore if a Mauritian customer of a financial institution was paid new banknotes with consecutive serial numbers from the wholesale imported stuff when he made a perfectly lawful request to that effect to his bank or financial institution.

The consecutiveness of serial numbers of banknotes or their place of origin do not establish that the foreign currencies were necessarily obtained unlawfully. However, if it is established that the banknotes were derived from tainted sources or from the conduct of unlawful transactions, the investigators establishing the tainted purpose or the illegality will be making their case convincingly to the court. What may puzzle the public will not stand as solid evidence beyond reasonable doubt in front of the courts. One is left wondering whether making public even the consecutiveness of the banknotes in question does not help accomplices, if any, involved in tainted transactions to cover the tracks by disposing of the remains from the original heap. This is for the police to judge and advise itself whether it is safe to make public information that might have led it to come to more decisive conclusions.


* Published in print edition on 13 March  2015

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