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Ex-bank boss urges scrappage of high-denomination banknotes

Former Standard Chartered Chief, Peter Sands, is urging governments to consider scrapping €500, $100, CHF1,000 and £50 notes to help prevent corrupt payments.

Sands has argued that the elimination of high-denomination banknotes will assistance in combatting financial crime and tax evasion.

Unlawful individuals and groups move more than £1.4tn around the world each year, of which illegitimate payments contribute to around half of this figure, while tax evasion cheats countries of up to 70% of their taxable income, according to a paper published by Sands for the Harvard Kennedy School [1].

In the report, Sands urges the world’s 20 largest economies to take the matter in question up before their next summit meeting in September.

High-value notes issued by developed countries are the “currency of corrupt elites, of crime of all sorts, and of tax evasion,” Sands said. “They play little role in the functioning of the legitimate economy, yet a crucial role in the underground economy,” he added. “The irony is that they are provided to criminals by the state” [2].

Although banning the notes would not stop crime, it would make hiding transactions more costly and more difficult, Sands added further [2].

The report comes a week after the European Commission said it would investigate the use of €500 notes because of concerns surrounding criminal activities, of which it accounts for 90% of the demand [1].

The European Central Bank welcomed the investigation, but senior officials also said they needed further evidence that the notes facilitate criminal activity.

Sands’ views are also likely to meet opposition, predominantly among groups concerned that scrapping the most valuable form of paper currency is one step closer to a cashless society, giving banks and governments a stronger overview of consumer finances [3].

 

[1] The Guardian. ‘Scrap high-denomination banknotes, urges ex-bank boss’. theguardian.com

[2] BBC News. ‘Ban £50 notes to tackle crime, ex-bank chief says’. bbc.co.uk

[3] Financial Times. ‘Bank high-denomination notes to cut crime, says ex-bank chief’. ft.com