A question for our European readers. How many of you have ever spent or even seen a 500 Euro note?
No, neither have we.
Which is may seem odd, given that there are some 300 billion Euros’ worth of these things out there, in circulation.
Which raises the question: where are they all?
Well, one clue was provided by U.S. economist Ken Rogoff in the Financial Times recently:
“In arresting Joaquín “El Chapo” Guzmán, the Mexican drug lord, two months ago, authorities found a room containing more than $200m.”
Now, from The American Interest, a fascinating and important new article by TJN Senior Adviser James S. Henry entitled Big Bills: How Western central bankers and Treasury Secretaries cater to illicit drug syndicates, money-launderers, racketeers, and kleptocrats.
To quote just one part of this wide-ranging piece:
“Even though big bills serve no purpose for ordinary retail transactions back home, for decades the world’s key central banks have behaved as if the international criminal class were a kind of premium customer segment whose special money-diet needs they had studied in detail. Accordingly, they happen to have issued notes in just precisely the denominations that are most convenient for international transport, safe storage, bulk payments, and anonymous, untraceable exchanges of value.”
It is no coincidence that Switzerland, the granddaddy of unsubtle, screw-you tax havens, has the biggest of these creatures: the 1,000 Swiss Franc note – worth roughly US$1,000. Today’s blogger lived in Switzerland for five years and never saw one once. Yet according to Swissinfo, they make up nearly 60 percent of Swiss banknotes by value.
Nearly half of all big Euro bills, Henry note, were issued by just three central banks: Austria’s, Luxembourg’s, and Spain’s. The first two are notorious dirty-money centres, and Spain is, well, intimately connected to the Mexican and Columbian drugs trades. Britain, for once, has been doing the right thing: its highest denomination note is for fifty pounds, and, notes Swissinfo:
“an investigation by the Serious Organised Crime Agency (SOCA) in Britain found that nine out of ten of the pink notes were used by criminals for illegal activities such as bribes, tax evasion, money laundering and terrorism.”
Given how astonishingly infrequently we see these big bills, that ninety percent may well be a serious underestimate. The American Interest story, which we’d urge you to read in full (and we’ll store permanently in our ‘reports’ section) comes complete with a simple policy recommendation:
“There’s no reason to provide the convenience, anonymity, and value of these big bills to the criminal community, tax evaders, payers and takers of bribes, do-it-yourself currency speculators, and any number of other ne’er-do-wells. So we should just stop printing them.”
Goodness knows: big bills certainly aren’t the only vehicles for financial crime; TJN has spent a lot of time and resources highlighting the shenanigans associated with electronic cash. But this story is a crucial, and oft-forgotten accompaniment to the offshore story, of which it is substantially a part.
Now read on.