Italy: The "Monti’s Measure" (Law Decree 6.12.2011 No. 201) Limitations To The Use Of Cash, "Free" Cheques And Bearer Cheque Books - News Under The Conversion Law

1. INTRODUCTION

The Law Decree dated 6.12.2011 no. 201, so called "Monti's measure", reduced the limit for allowed cash payments, for "transferrable" or "free" cheques, and bank bearer cheques books from Euro 2.500,00 to Euro 1.000,00.

In particular:

• It is forbidden to transfer cash between different subjects for an amount exceeding Euro 999,99 (for those transfers subject needs to use banks or credit cards);
• Bank or postal cheques issued for amounts exceeding Euro 999,99 must always include the name of the beneficiary and the "NOT-TRANSFERABLE" clause;
• Circular bank and postal cheques can be issued without the non transferability clause, under client's request, only for amounts lower than Euro 10.000,00;
• The amount of bank or postal bearer cheque books can't exceed Euro 10.000,00;
• Bank or postal bearer cheque books with an amount exceeding Euro 10.000,00 must be closed or their amount has to be reduced to the maximum of Euro 1.000,00 within March 31st 2012.

Effective date

The Law Decree dated 6.12.2011 no. 201 is effective starting from December 6th 2011. Converting the Law Decree it has been clarified that violations incurred from December 6th 2011 to January 31st 2012 are not punishable.

Here below we summarize all limits introduced in the past to cash payments and the actual one.

2. NEWS FOR CASH PAYMENTS

Under effects of the modification introduced by the Law Decree 201/2011 it has been clarified that:

• It is forbidden to transfer cash or bearer bank or postal cash books for any reason to any subject when the value of the transfer is higher than Euro 999,99;
• The transfer is forbidden also when it is made by several payments under the above-mentioned limit but that appear artificially fractioned.

However the transfer can be made through a bank office, a post office or a credit card.

In this case, the authorized intermediary, after having accepted in writings this appointment, delivers to the creditor the cash, registering the transfer, identifying the involved parties and communicating to the Tax Authority all relevant information.

2.1 Value of the transfer and fractioned payments

Always with reference to the new cash payments' limit it is important to remind that it has been specified that:

• The prohibition is referred to the total amount of the transfer;
• The transfer is forbidden even when it is made with different payments under the limit that appear artificially fractioned.

This means that payments into instalments are allowed if they are referred to a commercial policy or use, while are not allowed when the are dissimulating a transfer of cash over the limit.

2.2 Sanctionary profiles

The violation of the above mentioned limits imply the application of an administrative fine from 1% to 40% of the transferred amount, with the involvement of the subject that receive the cash payment.

2.2.1 Minimum penalty

The administrative fine can't in any case be lower than Euro 3.000,00.

Therefore with relation to violations equal or little higher than Euro 1.000,00 the risk is to pay a fine much higher than the amount transferred.

2.2.2 Aggravated hypothesis

In case the cash payment exceeds Euro 50.000,00 the fine is increased of 5 time; therefore:

• from 5% to 40% of transferred amount, always with a minimum of Euro 3.000,00.

3. CHEQUES

The Law Decree 201/2011 has modified also the discipline of :

• bank and postal cheques;
• circular cheques, postal order payments and promissory notes.

3.1 Bank and postal cheques

Regarding bank and postal cheques, we remind that they are released by a bank or a post office with the non-transferable clause. Client, anyway, can ask in writings to be provided with "free form" cheques paying a duty stamp of Euro 1,50.

Those cheques must include the name of the beneficiary and the non-transferability clause if it is issued for amounts exceeding Euro 1.000,00.

Penalties

In case of violation of the above mentioned measure an administrative fine from 1% to 40% of the transferred amount becomes applicable with a minimum of Euro 3.000,00.

In case the transferred amount exceeds Euro 50.000,00 the fine increases from 5% to 40% with a minimum of Euro 3.000,00.

3.2 Circular cheques, postal bank orders and promissory notes

They are released by a bank or a post office with the non-transferable clause. Client, anyway, can ask in writings to be provided with "free form" cheques paying a duty stamp of Euro 1,50.

Those cheques must include the name of the beneficiary and the non-transferability clause if it is issued for amounts exceeding Euro 1.000,00.

Penalties

In case of violation of the above mentioned measure an administrative fine from 1% to 40% of the transferred amount becomes applicable with a minimum of Euro 3.000,00.

In case the transferred amount exceeds Euro 50.000,00 the fine increases from 5% to 40% with a minimum of Euro 3.000,00.

3.3 Self ordered cheques

We'd like to remind you that bank and postal cheques issued by the beneficiary to itself, whatever is the amount, can't be transferred and they can be cashed only by a bank or a post office.

Even the violation of this rule is punished with an administrative fine from 1% to 40% of the transferred amount and:

• the administrative fine can't be lower than Euro 3.000,00;
• in case of amounts exceeding Euro 50.000,00 the penalty is increased from 5% to 40%, always with a minimum of Euro 3.000,00.

4. BEARER CHEQUES BOOKS

The same rules are applicable to bank or postal bearer or deposit cheque books.

4.1 Amounts on the book

First of all their amount can't be higher than Euro 999,99.

Penalties

The violation of this rule implies an administrative fine from 20% to 40% of their amount, with a minimum of Euro 3.000,00.

In case of amounts exceeding Euro 50.000,00 penalties are increased of 50%: therefore the applicable fine will be from 30% to 60%.

4.2 Temporary discipline

Bearer cheque books with amounts exceeding Euro 10.000,00 must be closed or they have to be reduced to an amount lower than Euro 1.000,00 within March 31st 2012.

Penalties

The owner of the above mentioned will be punished with the following administrative fines:

• equal to the amount if the bearer cheque is lower than Euro 3.000,00;
• from 10% to 20% of the amount with a minimum of Euro 3.000,00 euro, in case the cheque books' amount is between Euro 3.000,00 and Euro 50.000,00;
• from 15% to 30% of the amount, in case the book is higher than Euro 50.000,00.

Transfer of bearer cheques books

The above mentioned penalties are applied even when, in case of transfer of bearer and deposit cheque books, the seller doesn't send to the bank or the post office all information regarding the purchaser and the transfer date within 30 days.

5. CASH SETTLEMENT

Under the "cash settlement" institution there's the chance to pay a reduced penalty equal to 1/3 of the maximum amount of the fine set for the violation or, if more favourable and when a minimum amount is foreseen, equal to the double of its amount, in addition to administrative expenses, within 60 days from the violation itself.

This solution has to be taken in serious consideration due to the fact that the minimum penalty of Euro 3.000,00 is not relevant for this institution.

Therefore, i.e. a cash payment for Euro 2.500,00 can be regularized paying Euro 50,00 (2% of the transferred amount, the double of the minimum fine).

Enforcement

This institutions can be applied to violations not exceeding Euro 250.000,00.

The reduced penalty can't be applied in case of a former violation of the same nature during the 365 days preceding the violation under consideration.

6. VIOLATIONS' COMMUNICATION

We'd like to underline that violations related to the use of cash, or "free" cheques or bearer cheque books, must be communicated to the Ministry of Economy by all financial intermediaries and professionals discovering the same within 30 days. The Authority will proceed accordingly, submitting the information to the Tax Agency.

Withdrawals and deposits

The Circular Message dated November 11th 2011 of the Treasury Ministry Department has specified that withdrawals and deposit exceeding the above mentioned limit don't form itself an automatic violation of the law.

Therefor they don't imply to make an automatic communication.

The communication becomes mandatory only if concrete elements form an evidence of violation.

Warning of suspected transactions

Moreover it must be underlined that a suspected transaction is:

• in general frequent or not justified transactions with cash, even if not exceeding the limits;
• in particular withdrawals or deposits for amounts exceeding Euro 15.000,00 euro.

The Circular Message n. 297944 dated October 11th 2011 of the Ministry of Economy has clarified that subjects charged with the obligation of warning suspected transaction must:

• carefully evaluate the assumptions of the above mentioned laws;
• compare them with the subjective profile of the client and the effective beneficiary of the transaction.

Is therefore excluded every automatism.

7. COMMUNICATION TO THE TAX AUTHORITY

We'd like to inform you that Banks and Poste Offices, together with any other financial intermediary, have an additional charge.

Starting from January 1st 2012 they must submit periodically to the Tax Authority:

• the list of all movements registered on Client's account;
• information related to Client's account;
• the amount of every exchange;

7.1 Communication's procedures

The Tax Agency will issue a set of procedures to submit this communication, and it will include all information needed to allow addition tax audits.

The Agency has ensured that the procedures will grant adequate safety measures for submitted information and the timeline for their storage (that, in any case will not exceed the time limit set for tax audits).

7.2 Aim of the communication

Information obtained by the Tax Agency will be used to process centralized procedures in order to form specific lists of taxpayers with a higher risk of evasion to be audited.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.