Former Chief Executive of Standard Chartered Bank, Peter Sands, has called on Central Banks to stop issuing high value banknotes in order to tackle crime.
A report by Mr Sands produced for the Harvard Kennedy School, has highlighted the use of such banknotes by “terrorists, drug lords and tax evaders”,
“The scale of such illicit money flows is staggering. Depending on the country, tax evasion robs the public sector of anywhere between 6% and 70% of what tax authorities estimate they should be collecting. Global financial crime flows are estimated to amount to over US$2tr per year. Corruption amounts to another US$1tr.”
According to the report, most efforts to combat such activities has focused on the perpetrators, the underlying criminal activities or on detecting illicit transactions through the banking system, but despite huge investment in surveillance and intelligence systems, less than 1% of illicit financial flows are seized.
Mr Sands has suggested that the removal of high value banknotes from circulation will have a bigger impact on reducing such activities by making “life harder for those pursuing tax evasion, financial crime, terrorist finance and corruption.” by facing higher costs and greater detection risks. Cash offers users anonymity by not leaving any trace of personal details, and is universally accepted world-wide.
The report specifically targets the EUR €500, US $100, CHF 1,000 and UK £50 banknotes, suggesting that they are little used in the legitimate economy but are the preferred choice of banknotes for illegal payments.
“To get a sense of why this might matter to criminals, tax evaders or terrorists, consider what it would take to transport US$1m in cash. In US$20 bills, US$1m in cash weighs roughly 110lbs and would fill 4 normal briefcases. One courier could not do this. In US$100 bills, the same amount would weigh roughly 22lbs and take only one briefcase. A single person could certainly do this, but it would not be that discrete. In €500 notes, US$1m equivalent weighs about 5lbs and would fit in a small bag.”
Mr Sands urged the world’s 20 largest economies to take up the matter before their next summit in China in September.
To read the report in full click the link below: