With the euro currency arriving in Europe on January 1, German tax authorities have been on the lookout for people moving money to avoid taxation. Some of this money finds its way to banks in Luxembourg, which makes the Luxembourg-German border an active place for customs agents.
It's called Schwarzgeld or so-called "black money." These are Deutsche marks that people want to hide from authorities to avoid taxation.
German citizens, seeking to avoid a heafty 30 percent tax on their savings interest, have taken their Deutsche marks over the border into the Grand Duchy of Luxembourg, one of Europe's banking capitals.
Much of the money is transferred by car. Werner Thiel is the head of German customs mobile control in Bitburg, located near the border with Luxembourg. He says roadside checks of German automobiles headed toward Luxembourg often produce a lot of money hidden in odd places.
"The people come with the money they have it in the car," say Mr. Thiel. "They have it under their clothes, in their under-trousers, under the seats, sometimes they have it hidden in the door and we have the screwdriver and take it out of the door."
According to Mr. Thiel, people who take the train between Germany and Luxembourg find it a popular, and sometimes profitable, mode of transportation. "We caught in earlier times, for example in a train, two guys from Bavaria, father and son, they had under their clothes about 680,000 marks ($340,000)," he says.
Since 1998, according to Mr. Thiel, customs checks have uncovered about 400 million marks ($180 million) going into Luxembourg.
With the introduction of the euro, there has been even more pressure on the so-called "black money," as people hiding undeclared Deutsche marks were forced to spend or deposit them rather than risk losing them when the mark goes out of circulation.
Expecting increased activity, Germany stepped up customs checks along the Luxembourg border. But customs official Thiel says that in the last couple of months activity has been low. He speculates that people moved their money earlier.
"I think that most of them have the money in Luxembourg and they are waiting until the euro comes. When the euro is in every country of the EC [European Community], they will bring it [the undeclared money] back," he said. "It's a simple way to change the money."
Border checks for money transfers will continue in the new year.
Germans, by law, are allowed to travel with up to 30,000 Deutsche marks - that's about $14,000. If they have more, customs officials report it to German financial authorities.
Customs officers say they are not only looking for money. If they find banking papers that show money transfers, that is also reported.
German customs officials say their job is to target criminal money income, for example, from drugs, prostitution or weapons trade. But they say almost 98 percent of what they find is money from people trying to avoid German taxes.
Meanwhile, in Luxembourg the money has been piling up. The main reason for the transfer of funds, says the general manager of the Luxembourg Bankers' Association, Lucien Thiel, is that German authorities increased taxes to pay for the reunification of East and West Germany. The result is money pouring into Luxembourg. "In [19]89, we had the reunification of Germany and at that moment the government, promised the people the reunification will not cost you a dime, and then later on they started to screw up the tax burden," he said. "A lot of people were afraid there would be more and more taxation. That's why they tried to put their money outside the country."
A similar story comes from German tax authorities. Dieter Ondracek, of the German Tax Union in Berlin, estimates that since 1992 when the 30 percent tax on interest was introduced, Germans have transferred more than $270 billion overseas.
About two thirds of the "black money" reportedly went to Switzerland and other countries. Meanwhile, customs officials along the German-Luxembourg border have been keeping a watchful eye for the third of the money bound for the Grand Duchy.