High-denomination currency notes including the $100 bill should be eliminated, as this would help deter tax evasion, financial crime, terrorism and corruption, the former head of Standard Chartered Bank has argued.
Peter Sands, who is now a senior fellow at the Harvard Kennedy School in Massachusetts and an advisor to the Singaporean central bank, said in an academic paper that eliminating high-value notes that are rarely used would help deter tax evasion, financial crime, terrorism financing and corruption.
"Without being able to use high-denomination notes, those engaged in illicit activities — the 'bad guys' of our title — would face higher costs and greater risks of detection. Eliminating high denomination notes would disrupt their 'business models'," Sands' report said.
He argued that high-denomination notes in high-value currencies were little used other than for crime, with people in most parts of the world favoring cash for small payments and electronic alternatives like credit cards or Paypal for bigger ones. As such, Sands called for the elimination of the 500 euro note, £50 bill and 1,000 Swiss franc bill and the $100 note.
"This is a bold, relatively simple-to-implement action that could have significant impact and has limited downside. High denomination notes are arguably an anachronism in a modern economy given the availability and effectiveness of electronic payment alternatives. They play little role in the functioning of the legitimate economy, yet a crucial role in the underground economy," he said.
For criminals, using cash offers anonymity and leaves no tracks. According to Sands, high-denomination notes are far more attractive for criminals as payment methods than Bitcoin, gold, diamonds or bank transactions.
Depending on the country, tax evasion robs the public sector of anywhere between 6 percent and 70 percent of what authorities reckon they should collect, Sands added. He said that global financial crime flows amounted to $2 trillion per year, with corruption accounting for another $1 trillion.
"Only a few countries — largely the most advanced economies — issue high denomination notes. Yet they have corrosive impact almost everywhere. In rich countries, high denomination notes are commonly used for tax evasion, drug trafficking and money laundering more generally. In poorer countries, the high-denomination notes issued by rich countries — most notably the $100 bill and the 500 euro — are the currency of corrupt elites, of crime of all sorts and of tax evasion," he said.
Law-enforcement agencies in the euro zone have raised concerns about the use of 500 euro notes in criminal activity. Last week, European Central Bank Executive Board Member Yves Mersch called on police officers to supply evidence that the notes were facilitating crime, according to media reports.
In 2014, while Sands was head of Standard Chartered, the bank was fined $300 million by U.S. authorities for insufficient money-laundering controls.
Since leaving Standard Chartered in 2015, Sands has been appointed board member for an array of international institutions, including the World Economic Forum, and is a non-executive director of the U.K. Department of Health.
To read the original report, click here.