“Every move of people will be monitored”: Nairi Sargsyan on the law regarding cashless transactions

The law on cashless transactions, which came into force on July 1, will undoubtedly lead to an increase in shadow economy activities. The Central Bank presented five justifications for the adoption of this law, only one of which pertains to the increase in banking fees, which will not benefit the state in any way. Only a small group of people will benefit, particularly the owners of banks, said Nairi Sargsyan, President of the Auditors' Chamber, in an interview with Factinfo.

“For example, if, say, 5,000 drams out of 100,000 drams goes to the bank as a service fee, in a monopoly situation, banks may raise this fee to 10%. If people lose trust in banks, they may start cashing out their money, and the service fee could rise to 12%, similar to the situation in Russia. Naturally, this will lead to an increase in the shadow economy,” the auditor noted.

The limitation of opportunities for cash transactions, according to Sargsyan, will chain-reactively harm consumers, businesses, and the state. Moreover, the state will suffer doubly; on one hand, the number of shadow transactions will increase, and on the other hand, inflation will be recorded. When purchasing the same product cashless, sellers will raise prices to account for the bank’s service fees.

“Worldwide, businesses generally avoid stringent, strong monitoring and internal agreements are established so that the transaction does not become visible. The same will happen here; cash transactions will take place that will not be visible anywhere, meaning a shadow economy will arise,” Sargsyan is convinced.

According to him, the negative impact of the law will be felt most by small and medium-sized businesses, as they are the most vulnerable and are constantly lacking funds. According to our interlocutor, while large businesses can cover expenses by volume, smaller and medium-sized businesses, that already struggle to attract funds, will not be able to increase investments and grow even when faced with rising costs.

Sargsyan also sees other problematic aspects in the cashless law that concern a wide segment of the public: “If a person conducts a transaction via bank means, it means that any purchase or service they benefit from will be under state scrutiny. In other words, the state will be able to monitor anyone’s actions this way, and those individuals who are of interest for some reason will have every transaction under a microscope. At some point, this could lead to compromising situations. It is also possible that the adoption of this law is the result of certain agreements. If a step is taken that harms a large segment of society but benefits a small group, it does not create value for the state, which raises suspicions that there might be shadow dividend distributions among bank officials, including the authors of the law and senior officials,” Sargsyan stated.

According to him, this law is just the introduction; the monitoring of people’s financial resources will be completed when, in the next step, a universal income declaration for individuals is established. “At that point, all citizens of the Republic of Armenia will become accountable to the state, and every move of people will be monitored. Additionally, the tax burden on the population will increase, making living and repatriation in Armenia, to say the least, unappealing,” concluded Nairi Sargsyan.