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Harvard paper calls for elimination of high-value bank notes

Phasing out the U.S. $100 bill, the 500 euro note, the British 50 pound note, and the Swiss $1,000 franc note would disrupt criminal activity, the author says.

February 8, 2016

A new working paper published by the Harvard Kennedy School proposes the elimination of high-value currency, including the U.S. $100 bill, the 500 euro ($559) note, the British 50 pound ($72) note, and the Swiss $1,000 franc ($1014) note.

Peter Sands, former group CEO of the multinational banking firm Standard Chartered PLC and author of the paper, "Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes," writes that these banknotes are used principally for purposes of tax evasion and criminal activities such as drug trafficking, human smuggling and terrorist financing, among others.

According to Sands, the scale of illicit money flows is staggering:

Depending on the country, tax evasion robs the public sector of anywhere between 6 percent and 70 percent of what tax authorities estimate they should be collecting.

Global financial crime flows are estimated to amount to over $2 trillion per year. Corruption amounts to another $1 trillion. ... Yet despite huge investments in transaction surveillance systems, intelligence and interdiction, less than 1 percent of illicit financial flows are seized.

Sands writes that high-value American, British, Swiss and European bank notes are preferred by those pursuing illicit activities, "given the anonymity and lack of transaction record they offer, and the relative ease with which they can be transported and moved."

He argues that eliminating these notes would disrupt criminal activities by imposing "higher costs and greater risks of detection."