How many of you have seen a €500 note? I haven’t - it’s not usually something usually offered when changing money at the travel desk, most shops won’t even accept them as payment.
A EUROPOL report published last year asked “Why is Cash Still King?” and looked at high denomination notes. It stated that €500 note accounts for one third of the value of all banknotes in circulation, regardless of the fact that most people they questioned, much like me, haven’t actually see one.
The Financial Times reported earlier this week that the EU Commission will pledge to investigate the number of these notes in circulation as part of their wider work on combating terrorist financing. This was followed swiftly of news reports that the German Social Democrats have put forward proposals to limit cash transactions to €5,000 and eliminate the €500 note.
Could the status of cash as king be about to change?
Why €500 notes?
Criminals need to transport their money, the BBC reported on the preference of criminals to use €500 notes to transport money back in 2010. This coincided with the time that the UK withdrew the notes from wholesale circulation due to concerns that they were being used almost exclusively by criminal gangs.
Put simply, if you wanted to transport €1 million in €50 notes, this would weigh 22kg; if you transported the money in €500 notes, it would only weigh 2.2kg. Using large denomination notes simplifies the movement and management of large sums of money.
Criminals want to transport cash across borders and they do not want Law Enforcement to find out, they have been known to disguise the money in a variety of ways, including swallowing pellets of notes and hiding them in packets of food. The less space the cash takes up, the less risk of getting caught. High denomination notes make perfect sense.
Whilst the aims of the money launderer and terrorist financer are very different, the techniques used by both to disguise and move money can be very similar. So we shouldn’t be surprised when concerns are raised that terrorists may be utilising large denomination notes as part of their financing activities.
What else are they used for?
The EUROPOL report called for further review of the legitimate use of these notes, as quite simply nobody really knows what else they are used for.
It has been suggested that people, not just criminals, may use them to hoard their wealth. People still find comfort in physical cash, especially in times of financial turbulence. But with the highly documented use of these notes by criminals, questions are being raised over the future of large denomination notes.
So what next?
Unfortunately I don’t have a crystal ball; cash transactions will always be inherently high risk from a money laundering perspective, simply due to the challenges in understanding where the cash came from. Are these proposals the dawn of a cashless world? Not quite yet.
But one thing is for sure, with these proposed changes around the €500 note, it’s even less likely that I will be seeing one anytime soon.
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