Despite few shops accepting the €500 note it makes up one third of all notes in the EU
The EU Commission is set to announce on Tuesday that it will investigate why there remains such a high volume of the notes in circulation, with suspicions that the €500 note is preferred by criminal and terrorist elements.
The Financial Times reports that the Commission has pledged to look at the €500 note as part of a broader clampdown on financing for terrorism in the wake of November’s Paris attacks, with French President Franoics Hollande pushing hard for a greater clampdown on the systems that enable funding of such groups.
“The use of high-denomination notes, in particular the €500 note, is a problem reported by law enforcement authorities,” according to a draft of the plans.
“These notes are in high demand among criminal elements ... due to their high value and low volume.”
A Europol report last year found that although the notes aren’t accepted in most shops they still make up one third of all Euro notes in circulation. There is also ECB data that suggest the number of €500 has grown disproportionately since the Euro came into use in 2002.
The Commission will work alongside Europol as part of the investigation but ultimately any decision on the number of notes of any denomination that remain in circulation is up to the European Central Bank (ECB).
The ECB are reported to have been considering the issue of misuse of the €500 for some time, with their most recent review on the issue in 2005.
“We want to make changes,” said ECB President Mario Draghi.
“We are determined not to make seigniorage a comfort for criminals.”
Much of today’s announcement will focus on virtual currencies – such as bitcoin, with the Commission to push for greater regulation of these markets as they believe virtual currencies “may be used by terrorist organisations to conceal transfers”.
The plan will outline that although virtual currency transfers can be monitored “there is no reporting mechanism equivalent to that found in the mainstream banking system to identify suspicious activity”.
A first step for the plan will be to bring anonymous currency exchanges under Europe’s current anti-money laundering laws. Other measures to be proposed include a for EU nations to have centralised registers of bank accounts and greater power for customs officials to seize historical artefacts if they suspect they are being sold to fund criminal activity.