50% of British banknotes stashed abroad, on black market – BoE

© Chris Ratcliffe
Over 50 percent of all British banknotes in circulation are stashed abroad or on the black market, a Bank of England (BoE) report has said.

The Bank estimates a further £5 billion is stowed away under mattresses by thrifty families determined to build up savings. This means only 25 percent of all British cash can be used in the UK at any one time.

The BoE’s report found that almost 20 percent of British residents keep an average of £345 in a deposit box, under their bed or elsewhere for emergencies. It estimated many other “super hoarders” exist who have hidden considerably larger amounts of cash.

The value of British banknotes in circulation has trebled since 1995 to £62.6 billion, according to the BoE. However, only £15 billion to £19 billion is accessible for everyday use by consumers. The remaining cash is believed to be held in foreign jurisdictions or the black market.

“The evidence suggests that no more than half of Bank of England notes in circulation are likely to be held for use within the domestic economy for legitimate purposes,” the BoE said.

“The remainder is likely to be held overseas or for use in the shadow economy.”

The Bank defines the shadow economy as a broad array of economic pursuits for which the income derived remains beyond the scope of government regulation or taxation. It says these activities can be both illegal and legitimate.

Britain’s lax regulatory architecture makes the UK a particularly alluring destination for global organized crime syndicates looking to launder ill-gotten gains. Because directors of British firms are afforded a high degree of financial secrecy under UK law, the identities of white-collar criminals are extremely difficult to determine.

In the face of lax financial regulation, Britain has become a focal point for money laundering schemes. Front companies can be set up on British soil with little oversight.

Multiple money laundering operations, involving swathes of UK companies, are thought to be used by criminal gangs and corrupt officials from places as far-flung as Syria, Russia, Japan, and South America.

In June, anti-corruption think tank Transparency International (TI) UK said Britain’s mechanisms for preventing dirty money from being laundered in the UK are “not fit for purpose.” The group had previously warned Britain had become “a safe haven for corrupt capital stolen from around the world.”

In March, it emerged Scotland Yard suspected criminals, tax evaders, human traffickers and drug dealers of having laundered billions of pounds worth of dirty money by purchasing British properties through anonymous offshore companies.

Scotland Yard said at the time more than £180 million (US$276 million) worth of British property had been subject to criminal investigation since 2004, suspected of being proceeds from corruption. Detectives added this figure was merely the tip of the iceberg.