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Au revoir, 500 euro note. What does this mean for terrorists and drug cartels?

·West Coast Correspondent

The European Central Bank is discontinuing the 500 euro bank note, making the 200 note the euro’s highest denomination.

The ECB will phase out the note by 2018, but for now, it’s still considered legal tender and can be used as a means of payment (there are currently 18.6 billion euro banknotes in circulation). One of the main reasons for its dissolution: It’s a large denomination that’s compact, easily convertible and widely accepted, and leaves no paper trail, making it a go-to currency for illegal transactions. In fact, criminals refer to the €500 euro bill as the “Bin Laden banknote” because their presence and appearance are well-known but the notes themselves are hard to find.

The €500 note, in particular, has faced scrutiny for its role in criminal transactions. It accounts for 1% of all euro notes in circulation, but since a fifth of all euro notes are not held in Europe, some are being used by foreign criminals, according to Europol, the EU’s law enforcement agency.

After the November terror attacks in Paris, the 28 finance ministers of the EU called for an investigation into the controversial €500 euro note (about $575) at a meeting in Brussels in February. After the Brussels attacks in March, the EU commission pledged to investigate the high number of notes in circulation, noting that the 500 euro is “in high demand among criminal elements due to their high value and low volume.”

Larger implications of a €500-less world
Since the euro was officially introduced on Jan. 1, 1999, it’s topped the list of most-traded currencies, alongside the U.S. dollar and the Japanese yen.

Michael McDonald & Associates is a consulting firm that specializes in international money laundering since 1998. Founder Michael McDonald says the $100 bill is widely used by drug cartels, and those who had previously used the 500 euro will just use the highest denominations of euros (€200) or dollars ($100). The U.S. circulated $500, $1,000, $5,000 and $10,000 bills until the Federal Reserve discontinued them in 1969 due to “lack of use”. “It doesn’t matter to criminals if they’re doing illegal activities in dollars or euros; they just stick to those two because they don’t want to get caught in currencies that could devalue overnight,” McDonald says.

When it comes to funding terrorist activity, specifically, McDonald says that individuals also trade commodities like opium or gold. “If I had a lot of money to launder, I would choose gold. There really isn’t anything else like it out there,” John Cassara, a former U.S. Treasury special agent told Bloomberg.

Getting rid of the 500 euro note may set a precedent. Despite larger U.S. bills being eliminated, now the $100 is in focus. Switzerland has a 1,000 franc note in limited circulation, but is not nearly as widespread or available.

As the rest of the world goes cashless, drug cartels, money launderers and other criminal enterprises will inevitably remain dependent on physical currency. “As long as there’s illegal activity, there will always be ways to transmit illegal money, whether through smaller bills or bitcoin,” says McDonald.