Travellers may face tighter rules and closer inspections when carrying cash across borders as the Group of Seven fights what it calls a growing terror threat from couriers moving funds for extremist groups.

But some experts are highly sceptical of such efforts, given the relatively small sums required to mount deadly attacks like last month's Madrid train bombings.

Officials from the G7 - the United States, Canada, Japan, Germany, France, Britain and Italy - and representatives from a dozen other countries closely involved in the "war on terror" agreed in Washington last week to strengthen control of cross-border cash movements.

Officials contacted by Reuters in Europe said there was clear evidence from intelligence as well as actual seizures that physical movements of cash were on the increase.

They said this may partly stem from more stringent controls imposed since the September 11 attacks in 2001 to identify and seize "dirty money" being transferred within the banking system.

"When you achieve results in the area that you target, the funds flow other ways," Claes Norgren, head of the Financial Action Task Force (FATF) which combats money laundering and terror finance, told Reuters on Monday.

A US investigator in Europe said: "If we're stopping a lot more people carrying money, either we're getting a lot better or they're just doing it more. My guess is they're probably doing it more."

The FATF, in a set of 40 recommendations issued last year, said countries should consider implementing "feasible measures" to detect or monitor physical cross-border movements of cash.

Norgren said this could include making travellers file currency declarations, on which there is currently no standard international requirement.

The United States, for example, makes passengers declare currency over $10,000 on entering or leaving the country.

In the past, travellers who were caught failing to do so were merely fined. Under the Patriot Act, passed in the wake of 9/11, this has been upgraded to a major smuggling violation.

"Now it's gone from 'we can take the money' to 'we can put you in jail for a long time'," the US investigator said.

He said efforts to intercept cash couriers were likely to involve both a standardising of such rules and closer inspection of luggage by customs and security officials.

"Whereas before they were looking for weapons, now they're looking for weapons and currency, and it shows up on the X-ray scans," the investigator said.

He said the tell-tell sign was a "square gap" in the X-ray picture: "Anyone that knows what they're looking for and has been trained on a machine will recognise it." Sniffer dogs, trained to detect banknotes from the smell of the ink and paper, are also likely to be used more widely.

Criminals generally shun very high denominations like the 500-euro note and go instead for values like the US $100 bills, which arouses less suspicion. "You can get quite a bit of money in stacks of hundred dollar bills - especially new bills, because they compress so well," the US official said.

The problem for counter-terrorist agencies is that the cost of mounting attacks is relatively low.

By some estimates, the September 11 attacks cost somewhere between $200,000 and $500,000 to commit, including living expenses and flight training for the suicide hijackers.

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