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Army going cashless in war zones
http://www.armytimes.com/news/2009/08/army_cashless_082609w/

The American cash cow is being put out to pasture in Iraq and Afghanistan.

Starting Oct. 1, the Army will go cashless in the war zones when writing
up contracts with local vendors, according to an Army news release.

The approximately $42 million in cash brought into theater each month is
down from the $192 million in cash that was brought into theater each
month last year. And it pales in comparison to the approximately $400
million in cold, hard U.S. cash that flowed into the combat zones in 2003.

Brig. Gen. Phillip E. McGhee, director of Resource Management for U.S.
Army Forces, U.S. Central Command, said in the news release that by the
beginning of the fiscal year, Oct. 1, the Army will go cashless in
theater when writing up contracts with local vendors.

Instead of paying those it does business with in U.S. currency, the Army
will pay the vendors via electronic funds transfer through the banks of
Afghanistan or Iraq.

“What we are going to do effective Oct. 1 is we will write the contracts
in U.S. dollars and they will be paid through the Iraqi and Afghan
banking system in local currency — that’s huge,” McGhee said.

The American cash has been used in Iraq and Afghanistan because those
countries didn’t have banking systems from which money could be
extracted or transferred. So cash on the battlefield was a must, McGhee
said.

Those millions of dollars in currency were loaded onto pallets in the
United States and flown into Kuwait, where they were broken down for
distribution into theater. At the lowest levels, money was handed out
from the back of mine resistant ambush protected vehicles to the
contractors doing business with the Defense Department, the release said.

“We actually outfitted MRAPs as Wells Fargo/Brinks trucks and moved cash
around the battlefield like that, because it is dangerous out there,”
McGhee said.

But as banking systems in Iraq and Afghanistan have matured, some banks
in theater are now approved for business with the Army. And that means
instead of bringing cash into theater, the Army can now deposit money
into banks electronically and pay contractors via electronic funds transfer.

The contractors can then pay their own workers via transfers as well,
the release said.

Less U.S. currency floating around, and more money moving through the
banking systems to fill accounts, means less cost for the Army to do
business in theater, reduced risk of providing cash to facilitate
insurgent operations, and increased confidence in the local currency and
banking system, McGhee said.

“When you’re using U.S. dollars on the battlefield, there’s George
Washington, Hamilton, and Lincoln. That’s not an Afghan face, that’s a
U.S. face on it,” McGhee said. “Instead you have an Afghani and Dinar —
and now you start to build confidence in their currency and in their
systems. That is what we are attempting to do.”

Conducting business electronically also saves the Army money, McGhee said.

Bringing cash into theater is expensive because of the security risks
involved and the cost of transportation. Spread out over the number of
payments the Army currently makes, the cost of dealing in cash is about
$32 per payment, the release said.

“An electronic funds transfer costs us about $2.50,” McGhee said, saying
the move to EFT will save the Army about $20 million a year.

Electronic payments are also about safety. Insurgents like to work with
paper money, McGhee said, especially American currency.

“You see on the news where they kick down doors, they pull weapons out,
pull explosives out, and they pull U.S. currency out,” McGhee said.
“U.S. currency is the currency of choice for al-Qaida and insurgents
because you can use those U.S. dollars anywhere in the world. We are
reducing that source of funds for al-Qaida.”


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