The €500 note: a glamorous instrument for criminals

Known as ‘the bin Laden’ by British intelligence, the note aids crime

The UK Financial Intelligence Unit banned the sale and exchange of €500 banknotes in Britain in 2010. The unit’s study showed more than 90 per cent of €500 notes in the UK were used by criminals. Photograph: Adrian Dennis/AFP/Getty Images

The UK Financial Intelligence Unit banned the sale and exchange of €500 banknotes in Britain in 2010. The unit’s study showed more than 90 per cent of €500 notes in the UK were used by criminals. Photograph: Adrian Dennis/AFP/Getty Images

Mon, Nov 4, 2013, 11:09

Boris Boillon was arrested as he boarded a Brussels-bound train at the Gare du Nord on July 31st. The French diplomat turned businessman wore blue jeans and a sports shirt and carried €350,000 plus $40,000 in cash, but no identity papers and no telephone.

A youthful Boillon (43), who displayed his body-builder’s physique on a social website, he was former president Nicolas Sarkozy’s adviser for north Africa and the Middle East before being appointed ambassador to Tunis. In Tunis, he posed in a dinner suit for an article titled James Bond Diplomacy.

Transporting more than $10,000 in cash to another EU country is punishable by a fine equal to one fourth the sum under French law. Boillon claimed the inadequacy of the Iraqi banking system had forced Iraqi clients of his consulting group Spartago to pay him in cash.

Examples of politicians and business leaders using cash for all manner of dubious practices are legion in France. The Boillon incident elicited little more than raised eyebrows, but it also illustrated the explosion of the underground economy, which is greatly facilitated by the €500 banknote, as shown in a new book, Cache Cash; Investigation into Illegal Money Circulating in France.


Six-fold increase
In the first three months of this year, €103 million in cash was seized on the borders of France, a six-fold increase from the same period the previous year. Taking the €500 note out of circulation would impede tax fraud, corruption, drug trafficking and prostitution, argue Mathieu Delahousse and Thierry Lévêque, members of the French judiciary press and the authors of Cache Cash.

British intelligence nicknamed the €500 note “the Bin Laden”, Delahousse and Lévêque recount. “You know it exists, you know what it looks like, you know it travels a lot, but it’s hard to pin down.”

In May 2010, the UK Financial Intelligence Unit banned the sale and exchange of €500 banknotes in Britain. The unit’s study showed more than 90 per cent of €500 notes in the UK were used by criminals. Tests by the Serious Organised Crime Agency found it was possible to carry €25,000 in €500 notes in a cigarette packet, €300,000 in a cereal box – £1 million in banknotes weighed 50kg while its equivalent in €500 notes only 2kg.

The US withdrew the $500 bill in 1969 to fight money laundering and organised crime. Canada ended its $1,000 bill in 2000 for the same reason.

These €500 notes are so prized by Chinese gangsters in Paris that they offer up to €50 a note. Hostage-takers in Asia and Africa now demand ransom in €500 notes rather than dollars.

“I don’t understand why we’re still making €500 banknotes,” Jean-Baptiste Carpentier, the director of Tracfin, the unit that fights money-laundering at the French finance ministry, testified last year. Most French shops accept neither €500 nor €200 banknotes.

Finance minister Pierre Moscovici and then budget minister Jérôme Cahuzac subsequently appealed for “a European reflection on the circulation of the €500 note, whose use in illegal traffic is widespread”.

The initiative floundered after Cahuzac resigned and was charged with tax fraud. Cahuzac’s hair transplant clinic used to take in €15,000 daily, much of it in cash.


Bring in notes
The US financial managers Merrill Lynch suggested last spring that the Euro group abandon the €500 note. The ECB should give owners a month to bring in their notes and require justification for any sum over €10,000, Merrill Lynch said.

Thereafter, they proposed, any notes found in circulation could be seized by the ECB and used to recapitalise banks.

Mathieu Delahousse says €327 billion of the €918 billion in circulation are €500 notes, yet more €500 notes are scheduled for printing. Why? “The euro was fragilised by the debt crisis,” Lévêque comments. “If they admit that the highest denomination is an instrument for crime, it would shake confidence. Imagine the president of the ECB saying, ‘I’m withdrawing a third of the banknotes because they’re mainly used by criminals.’ He can’t do it.”