Former UK Bank Chief Wants To See The End Of High Denomination Paper Currency

Peter Sands, former chief executive of U.K.-based Standard Chartered Bank, thinks that high denomination bills have outlived their usefulness in legitimate transactions and are now functioning as “the currency of corrupt elites.” In a paper published on Sunday (Feb. 7), he advocates for the abolition of the €500 note, $100 bill and £50 note, which could actually have some chance of making life harder for the criminals that want to use them.

According to Sands’ math, $2 trillion a year in illicit funds are flowing worldwide — invisible currency that is robbing governments of as much as 70 percent of their tax income.

And big bills “play little role in the functioning of the legitimate economy yet a crucial role in the underground economy,” said Sands, who is urging the G20 to take up the matter before its next summit in China in September. “The irony is that they are provided to criminals by the state.”

Limiting big bill use has seen some limited adoption worldwide. The U.K. has banned banks from handling €500 notes after a government study showed that they were used mainly by criminals. The European Commission has now seemingly also taken an interest, particularly in connection to terrorism, noting that a crackdown was possible, as such bills were “in high demand … due to their high value and low volume.”

The move, however, has critics, particularly among privacy and individual rights activists that believe such limits move the world closer to a cashless society, wherein governments have too much direct control over citizen funds.

However, advocates note that high dollar bills on offer make it much, much easier for illicit organizations to move their money. A sum of £250,000 in a mix of £10 and £20 notes weighs up to 20 kilograms and can be carried in a gym bag; but the same amount in €500 notes weighs about 600 grams and fits in an A4 envelope.

Dropping high value notes will not solve the problem entirely. Most experts note that when one bill type disappears, the criminal classes just rush to find a substitute — the next highest bill denomination, digital payments with bitcoin, hard valuables, like diamonds or gold. But all of those substitutes have attendant issues: Gold is incredibly heavy; paper money in small bills is bulky (and heavy); and all of them are potentially attention-catching, which makes the odds of being caught higher.

“If you offered traffickers €1,000 notes, they’d switch straight away, so we should actually squeeze it down instead,” said Sands, noting that the FATF (Financial Action Task Force on Money Laundering) and Europol, the European police force, had been flagging concerns over high denomination notes for a while.

“If people who work in the area of crime and antiterrorism think it is a no-brainer, then why aren’t we doing it?”