For something that weighs about one gram, it is certainly capable of causing a lot of fuss, particularly now that the undercover team from HMRC has figured out that it is a perfect tool for money launderers.
BBC News reports that jailing the gang was a major breakthrough and that it took eight months of rigorous analysis of currency trading in the UK for the Serious Organised Crime Act (SOCA) to establish that the €500 note is at the heart of money laundering since it is so easy to shift.
It was hailed as a significant breakthrough in the crackdown of money laundering and the unveiling of the latest scheme. But was it, really? Let’s see. In November 2001 someone was arrested at Schiphol airport with 133 notes of 1,000 Dutch Guilder (€454 each) and 145 notes of 1,000 Deutsch Mark (€511 each) hidden in the soles of his shoes. Was he the first one ever then? Equally unlikely.
I would hazard a guess that hiding them in the soles of your shoes is not even necessary. You could probably just keep them in your trouser pockets, something that your average money launderer has figured out a long, long time ago. Just consider the logistics. The average banknote has a thickness of 0.11mm, which means that €500,000 would be 110 mm (or 0.87 4.331 inches if you are that way inclined). Fair enough, that would only be the case with the nice crisp new notes, but let’s face it: €500 notes don’t get out much, so would not get too crumply. Don a pair of baggy trousers and all of a sudden the fact that you’re carrying €500,000 in cash isn’t really noticeable anymore.
But then what? Or, as the FT would say, “How to spend it”? The main challenge is to spend it. As anyone who has ever naively tried to pay for anything other than a second hand car with €500 notes knows, you can’t spend them. There is not a single place where they accept either €500 or even €200 as payment in cash. Not only is the risk for the shopkeeper too high, it also is likely to leave him without any change. The only thing you can do with them is spend them gambling, introduce them in the criminal circuit, or take them to a bank to exchange (the latter obviously resulting in all sorts of questions your average criminal would like to avoid).
So, if it is this difficult to spend, should we just do away with it as SOCA suggests? It obviously has some legitimate advantages. Its ease to ship also means that it is cheaper for banks to move it around the world since it significantly reduces valuables freight charges, for example. It’s also easy for tourists and businessmen alike to take to remote countries where ATMs might still be considered quite fictional. Not having to advertise you have a lot of cash because you are carrying a briefcase full of $20 bills might just be a good thing, and the fact that it is cheap for banks to ship it back to a central bank anywhere in Europe makes it cheaper to exchange.
The UK has made its choice and is banning the €500 note, but seems to pay remarkable little attention to the fact that the criminals were capable of registering their own money service bureau that was instrumental in making the transactions look legitimate. Only time will tell whether this will actually have a big impact on the reduction of money laundering; there are, after all, always the Latvian and Swiss currencies, diamonds, gold, or anything else small, easy to conceal, and with a high value…