EU considers removing €500 note over money laundering fears

EU finance ministers have called for an investigation into the €500 note, amid concern that it is making life easier for money launderers, terrorists, and drug barons.

“The €500 note is more used to conceal then to purchase, more used for easing dishonest transactions than to allow you and I to buy something to feed ourselves,” French finance minister Michel Sapin said during an Ecofin meeting in Brussels on Friday.

At the meeting, the 28 EU finance ministers urged the European Commission “to explore the need for appropriate restrictions on cash payments exceeding certain thresholds”.

They also asked the EC to engage with the European Central Bank to “consider appropriate measures on high denomination notes, in particular the €500 note”.

The January 2015 attacks on the French satirical magazine Charlie Hebdo and a Jewish supermarket that killed 17 people were funded with cash, partially earned from the sale of counterfeit goods.

In response, the French government tightened restrictions on the use of cash and stepped up monitoring of high-value bank withdrawals. Since September, French citizens can only make cash payments of €1,000, down from €3,000, while cash withdrawals or deposits exceeding €10,000 in a month are automatically checked by money-laundering authorities.

Since the 13 November Paris attacks, France has been calling for a common EU approach against terrorism financing. An EU action plan published earlier this month stated that €500 notes “are in high demand among criminal elements ... due to their high value and low volume”.

The €500 note is one of the highest-value banknotes in the world, along with the Swiss 1,000 franc note. However, in an age of electronic payments and concern about the anonymity cash provides, many experts have called for the notes to be scrapped.

Standard Chartered’s former chief executive Peter Dands this week called for the abolition of the €500, the $100, the SFr1,000 and £50 notes, which “play little role in the functioning of the legitimate economy [and] a crucial role in the underground economy”.

According to Europol, the €500 note accounts for a third of all the euro notes in circulation, despite their low public profile.

About a fifth of all euro banknotes, in denominations from €50 to €500, are not held in Europe, raising suspicions that some of them are used by foreign criminals.

European commissioner for the euro Valdis Dombrovskis, who will lead the EC inquiry into the €500 note, pointed out that the ECB was ultimately in charge of issuing notes and coins.

“We must respect the independence of the ECB,” he said.

Law enforcement officials have in the past found the Frankfurt-based ECB unwilling to scrap the note, a stance criticised as “shameless” by former Bank of England policymaker Charles Goodhart.

However, ECB president Mario Draghi told the European parliament this month that the bank is reviewing its policy on the notes.

“We are determined not to make seigniorage [profits earned from printing the notes] a comfort for criminals,” he said.

The EU investigation into cash limits and high-value notes is part of a wider European strategy targeted at terrorist financing and money laundering,

The commission will in June publish a blacklist of countries that have weak controls on money laundering and terrorist financing.

Also on the table are proposals to harmonise the EU’s money-laundering laws. Differences in legal definitions and sentencing “create obstacles in cross border and police co-operation to tackle this crime”, Dombrovskis said.