Finnish Police Want €500 Banknotes to be Taken Out of Circulation

[Bimat]

Police want 500 euro banknotes taken out of circulation

14.10.2014 14:22 | updated 14.10.2014 17:11

The Finnish Police have called for all 500 euro banknotes to be taken out of circulation, saying their existence enables under-the-table grey economy activities and money laundering. The Bank of Finland maintains that the use of larger bank notes in Finland is minimal in normal payment transactions and benefits outweigh the perceived disadvantages.

The Finnish Police are concerned that larger banknotes, like the 200 euro and 500 euro banknotes, encourage criminal activity and should therefore be removed from the Finnish market.

"In practice they enable and fortify the grey economy and money laundering. For this reason, we believe their circulation should be phased out," says National Bureau of Investigation's Markku Ranta-aho, head of the Money Laundering Clearing House of Finland. 

"Criminal activity almost exclusively deals in cash. Criminals do not pay out from one bank account to another; they use cash. Larger bills make it easier to carry large quantities of money in a small space across borders, both within and outside Europe," he says.

Chief Inspector Ranta-aho says criminals prefer cash because it is harder for police to trace its movements. A record of all electronic money transfers always remains in the banking system, which makes the police's job considerably easier.

Ranta-aho says that 200 and 500 euro banknotes should also be removed because Finnish residents no longer use them to pay for their purchases now that bankcards have become more common. In his opinion, no one needs a banknote higher than one hundred for everyday use anymore today.

Bank of Finland says no

The Bank of Finland admits that the use of larger banknotes as a form of payment has diminished in recent years in Finland and the euro zone.

"The demand and need for 500 and 200 euro banknotes in Finland's circulation is small and their use in normal payment traffic is very minimal," says the Bank's advisor Kari Takala.

The Bank of Finland is sceptical about the ability of a ban on 500 euro banknotes to eliminate underground labour and trade in Finland, however.

"Removing larger banknotes could make things more difficult for the grey economy, but it would certainly not do away with it or even affect it much. They would just switch to smaller bills," says Takala.

"There must be other ways to prevent people being paid under the table than by taking larger banknotes out of circulation. It seems they play a pretty negligible role in the parallel market overall. More illegal transactions take place via bank transfers," he says.

The Bank of Finland's Takala says the larger banknotes will remain in circulation for the time being because the benefits are still seen to outweigh the perceived disadvantages.

Source: YLE

[Bimat]

EU to probe €500 notes' links to terrorism

Jim Brunsden and Peter Spiegel in Brussels
February 1, 2016 6:48 pm

More details here.

(Note that I did not copy-paste the article content here to comply with Financial Times' copyright policies)

Aditya

[Figleaf]

The arguments are largely spurious.

First, tax evasion is not a police responsibility, but that of the tax authorities. That leaves crime and terrorism. It is difficult to spend a 100 note and practically impossible to spend a 500 note in Northern Euroland. A criminal or terrorist would attract much attention trying to spend one note, let alone several. You can't walk into a bank and deposit some 500 notes without attracting attention either. At best, you will be asked to identify yourself and leave your contact details. Those will most likely be passed on at least to the tax authorities. At worst, you will find yourself filling out central bank forms. So what use are these notes to criminals and terrorists if only other criminals and terrorists will accept them safely?

Peter

[Bimat]

If the logic is so simple, then why is EU (ECB) doing this monkey business of investigating the terrorist links?

Also, how often do you receive €500 banknote in change? If they are so uncommon and (usually) not preferred by public, then why print them?

Aditya

[FosseWay]

If the logic is so simple, then why is EU (ECB) doing this monkey business of investigating the terrorist links?

Also, how often do you receive €500 banknote in change? If they are so uncommon and (usually) not preferred by public, then why print them?

Aditya

Technically it is impossible to receive a 500 EUR note in change - what would it be change for? 

As to rarity in use, there is as Figleaf alludes to, a wide variation in the use of large denominations, or large quantities of cash in general, across the Union. At one end of the spectrum are the Finns (and outside the euro, the rest of Scandinavia), for whom electronic transactions are the norm in general and certainly for anything costing 500 EUR, never mind multiples thereof. At the other extreme are the twin circumstances of being in a country with a less well-developed electronic payment system (or one which isn't necessarily trusted, like Greece), or of being German. AFAIK there is nothing undeveloped about Germany's electronic payment system, yet cash use for large transactions is notably higher there, as is circulation of banknotes such as 100 EUR for which I can see no conceivable use. In the UK I was perfectly happy with the highest denomination in practical use being £20; that was comfortably above the point at which I would choose to pay electronically for something.

[Figleaf]

I have never seen a 500 (or, for that matter) a 200 in circulation. I have seen two males with a small stack of 100 notes in a large French supermarket last year. The matter was dealt with by the store manager and two security men. They wanted contact details from the clients and in the end, the manager accepted two notes, after checking them in handheld machines. The clients were pretty conspicuous.

FosseWay is quite right that the further South you go, the higher the chance of running into high value banknotes. I haven't been in Greece for some time, but I never saw notes over 50 being used in Italy, Cyprus or Monaco. Don't forget the article above deals with Finland, though.

Why print them? I believe there was a proposal at some time to stop that and the Mediterranean countries blocked it.

Peter

[Bimat]

ECB to decide soon on fate of 500-euro banknotes: Board member

First Published: Thursday, February 11, 2016 - 18:48
Last Updated: Thursday, February 11, 2016 - 18:48

Berlin: The European Central Bank will take a decision soon on whether to keep printing 500-euro banknotes, with the arguments for doing so becoming "less and less convincing", a top-ranking official said Thursday.

"We`re actively considering the question and will take a decision shortly," executive board member Benoit Coeure told the French daily Le Parisien in an interview, when asked about the future of the euro area`s largest denomination banknote.

Authorities increasingly suspect that the notes are being used for illicit purposes, "an argument we cannot ignore given the importance of fighting money laundering and the financing of terrorism," Coeure said.

Large denomination notes enable criminals to transport large sums of money in small volumes.

The EU Commission said earlier this month that it planned to consult with the ECB and other parties concerned to decide whether action needed to be taken regarding the 500-euro note.

"From my point of view, the arguments in favour of keeping it are less and less convincing," Coeure said, but acknowledged that some people, "notably in Germany" were concerned about the disappearance of payments in cash.

The 500-euro bills account for just three percent of the total number of banknotes in circulation, but 28 percent of the total value, according to ECB statistics.

Any decision regarding their possible withdrawal would be taken by the ECB`s governing council, the 25-member board comprising six executive board members and the 19 central bank governors of the member states.

But a number of experts have suggested that doing away with the 500-euro note would not be particularly effective in fighting crime.

"Organised crime isn`t stupid. Most money is laundered without cash via bogus companies," said Friedrich Schneider, an expert on the shadow economy at the University of Linz in Austria in interviews to a number of German media recently.

Another possible beneficial effect would be that it would become more inconvenient to hoard cash, another encouragement to spend and help push up the chronically low level of inflation, commentators argued.

But Coeure rejected such arguments.

"This decision has nothing to do with monetary policy," he told Le Parisien.

Resistance to the plans appears to be particularly high in Germany, where most people still prefer to make payments in cash. And when the euro was created, it was Germany that had been keen to have a 500-euro bill because it was of a similar size denomination as its 1,000-deutschemark banknote.

AFP

Source: AFP

[EWC]

I seem to be somewhat in the contrary camp here.  What is going on in Finland happened in the UK in 1943, and was much discussed in the 1960's in the USA (abolishing the $100).

The other side of the coin is the talk coming now out of the Bank of England concerning the abolition of physical cash altogether, so that negative interest rates can be easily applied to all electric cash holdings across the board.............

Personally, well, I will just point out that history well records that when Wittgenstein abandoned the philosophy of Russell to become The Very Great Modern Philosophical Saint, he got the prompt from Sraffa.  History forget to mention that it was at a small group, gathered by Keynes, to discuss the book on probability, written by Keynes, who was Wittgenstein's life long patron.

And I have a sneaky feeling these young chaps at the Bank of England might not be entirely on top of either the history of money, or the history the deep philosophy of economics

[Globetrotter]

Hi,

in Germany they didn't really like checks (in France people still use them a lot) and it used to be difficult to find restaurants accepting plastic. So the Germans used to be a people using a lot of CASH, they even had the 1.000 DM banknote, and they were used a lot. I haven't lived in Germany for a while, but when I pass throu, I often see 200 euro bills used in gas stations.

In France the highways, which you have to pay for, never accepted the 500 E bills, and since a couple of years the 200 E bill isn't accepted either. I still see German tourists at the pay boots having problems because of that.

I have ssen 100 E bills being accepted in some super markets, but that's years ago, so the highest note circulating in France is the 50 E. Normally a 50 E note is verified in the shop by an electronic scanner.....

In my opinion all E notes bigger than 50 E can just disappear and nobody will have any problems with that. Of course you have to give people a certain time to go to the banks to exchange their higher denominated bills, where they certainly will have to declare, where they got those bills from. In France that's the way the things are done!!! But if you go to different banks each day with only one bill at a time, I suppose nobody will ask you anything! Logic is ruling the market, non?

Ole

Ole

[chrisild]

In France the highways, which you have to pay for, never accepted the 500 E bills, and since a couple of years the 200 E bill isn't accepted either. I still see German tourists at the pay boots having problems because of that.

Had no idea that the autoroutes in France are now so expensive that you would need a €200 note to pay.   But those Germans are apparently different from pretty much everybody I know; why would they get such denominations when withdrawing money? Keep in mind that the ATMs here do not have €200 notes (at least I have never seen any), so the people you come across on the autoroute must have gone to a bank teller and withdrawn the money in some F2F type transaction.

Today's Handelsblatt reports that the €500 note is likely to come to an end. The ECB would like take it out of circulation: http://www.handelsblatt.com/my/finanzen/steuern-recht/recht/ezb-und-das-bargeld-500-euro-schein-vor-dem-aus/12965104.html (premium content, text in German). The only NCBs that are against the plan are the ones in Austria, Germany and Luxembourg.

Christian

[FosseWay]

Christian's point about what denominations come out of cash machines is a good one.

I have seen Sweden's highest denomination, 1000 kronor or roughly €100, I think twice (one of each kind - the old one and the one introduced a couple of months ago). I have never had one out of an ATM, even on those rare occasions when I've withdrawn more than 1000 kr at a time - cash machines invariably give 500s, or 200s/100s if you're lucky. Given that it's easier for a camel to pass through the eye of a needle than it is to get cash out of a bank other than via an ATM in Sweden, I wonder where on earth all these 1000s come from.

The people with the bona fide reasons to have them (shopkeepers and so on) don't need them, as they aren't of any use for giving change, and the people who are most likely to want them for nefarious reasons are less likely to be able to justify to the bank why they want them, to the limited extent that *any* private individual can simply withdraw cash from a counter in a bank.

[Bimat]

In India, there has been a demand to discontinue issuing the ₹1000 and ₹500 banknotes for quite a few years now. If I withdraw ₹500 from an ATM, I will get 5 x ₹100 notes, if I withdraw ₹1000, I'll get 5 x ₹100 + 1 x ₹500. If I withdraw ₹2000, I'll get 1 x ₹1000 + 1 x ₹500 + 5 x ₹100. I think there's a RBI guideline to banks that any ATM transaction above ₹500 shall have at-least 5 ₹100 banknotes. This is quite annoying at times though. No wonder many ATMs run out of ₹100 banknotes quickly...(ATMs are programmed to handle only ₹100, ₹500 and ₹1000 notes. No lower denominations!)

Aditya

[Pabitra]

ATMs are designed to handle 3 denominations.
In smaller towns, sometimes it is only 100/- and 50/- notes.
In big cities too, the stocking is as per location.

[Bimat]

In smaller towns, sometimes it is only 100/- and 50/- notes.

Have been to rural Maharashtra many times but have never seen an ATM having ₹50 notes...But you may be right as I haven't seen many ₹500 or ₹1000 notes in circulation either! Even in metro cities, seller would check the ₹1000 note twice before accepting it. Many sellers just refuse to accept them!

Aditya

[Bimat]

Peter Sands, former head of Standard Chartered Bank has demanded global ban on high denomination banknotes for the same reason.

Dirty Secrets of NZ$ 100 Banknotes

Aditya