€500 banknotes could be eliminated as experts warn that the currency note – one of the most valuable worldwide – could be used to launder money and finance terrorism.
The President of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem, this week called on the European Central Bank to make proposals on how to reduce security risks linked to the banknote, which can be used for the financing of terrorism.
ECB data shows that almost 30 per cent of the more than €1-trillion of cash in circulation last year was hoarded in 500 euro notes. “We are going to ask the ECB to look at cash money and the accessibility of the 500 euro note,” Dutch Finance Minister Jeroen Dijsselbloem told reporters ahead of a meeting of EU finance ministers in Brussels. “There are risks that large notes and large cash amounts can be easily used for terrorism financing,” Dijsselbloem said.
The Head of the EU’s anti-fraud agency, Giovanni Kessler, said last month that the European Union should eliminate the €500 note, which represents just 3% of euro banknotes in circulation but around 28% of the value. Much of it is thought to be held outside the Eurozone, in areas where cash is more desirable than a bank account.
The OLAF chief said the high-denomination note makes illegal activity much easier and that smaller denominations and a more widespread use of electronic money would help fight corruption and fraud. Britain, a country outside the euro zone, has prohibited the distribution of the €500 note by banks and currency exchanges since 2010.
The €500 notes are a popular way of hiding cash which is why they aren't in general circulation. They're known as "Bin Ladens" because everyone knows what they look like but no one ever sees one.
The request for a probe on the 500 euro note comes amid an EU clampdown on all means of payment that may be used to finance terrorist acts. It was triggered by the attacks in Paris last November by Islamic State militants that killed 130 people. Last week the European Commission proposed to increase controls on prepaid payment cards, virtual currencies such as bitcoin and other possible source of financing for terrorist organisations. It also warned about the risks of 500 euro notes, mulling possible ceilings on cash payments.
The European Central Bank is in charge of making decisions on the euro banknotes in circulation.
As expected, the proposals have been met with criticism. Supporters of the high denomination say its elmimination would not reduce illegal transactions but merely make them bulkier. It has already been pointed out that other high value banknotes, such as the Swiss 1,000 franc note, could also replace the €500. And according to Merrill Lynch, the wealth management division of Bank of America, the euro will slide if the €500 note is abolished.
In the meantime, Malta is one of just seven EU countries that do not have a cash transaction limit. No transaction limits make money laundering and black market transactions easier.
Countries like Italy, France and Belgium have set their cash transaction limits at €3,000 for consumers. Larger amounts would have to be paid by bank transfer, cheque or credit card, making the transaction visible and trackable. Greece has one of the lowest transaction limits - €1,500 – while other countries like Poland and the Czech Republic have set their limits at €15,000 and €14,000 respectively. Om the UK there is no limit for consumers but traders would have to register themselves as ‘High Value Dealers’ if accepting cash payments of more than €15,000.
According to media reports, Germany intends to introduce a €5,000 cash transaction limit, also with the purpose of better combat terrorist financing and money laundering. According to some repots around €100 billion are laundered annually in Germany.