Do Big Cash Denominations Help Organized Crime?
ERIC WESTERVELT, HOST:
Ever thought of getting rid of the $100 bill? What about the 500-euro note? The European Central Bank right now is talking about getting rid of the big note, which is a controversial move for some countries tied to the euro, especially Germany. Critics of the 500-euro note saying it's the currency of choice for organized crime groups looking to use cash for drug trafficking, corruption, money laundering, even for terrorist activities. Some even call the 500 euro the bin Laden. Meanwhile, supporters of the 500 note fear the move is a step toward getting rid of all cash transactions. Peter Sands is a former bank executive who's now a senior fellow at Harvard's Kennedy School of Government. He wrote a report on why such high-dollar currency should be eliminated to make it tougher for criminals to transfer funds. And Peter Sands joins us now. Thanks for being with us.
PETER SANDS: Hi.
WESTERVELT: What's your evidence that these big bills do in fact fuel criminality and corruption and even terrorism? Do we have hard evidence of that?
SANDS: I don't think it's right to say they necessarily fuel or encourage them. What high-denomination notes are doing is making it easier for the criminals to do what they want to do. And by taking them away, you're simply making their lives harder. People underestimate how sort of heavy cash is. If you want to move a million dollars in $20 bills, it weighs 110 pounds. It's actually pretty hard for a single individual to carry surreptitiously 110 pounds. In 500-euro notes, that's less than 4 pounds.
WESTERVELT: There's been some strong pushback, especially from Germany. Why are the Germans been so strong in support of the big note?
SANDS: It's funny that high-denomination notes in almost every currency carry symbolism to people. And I think that is certainly true in Germany. You know, Germany's history with currency has had its up and downs from the sort of terrible disaster the Weimar Republic to the Deutsche mark being very much a symbol of the resurgence of Germany in the postwar era.
WESTERVELT: One of the main arguments is that restricting cash could force that money back into banks, which is as we've seen in the past not always as reliable or 100 percent reliable.
SANDS: Well, for all the mistakes and gaps in the scrutiny and surveillance systems the bank have, at least they have some. The reality is we have no idea what's happening in the criminal flows of cash because cash is completely anonymous and leaves no transaction record.
WESTERVELT: And aren't there legitimate reasons for carrying 500-euro notes?
SANDS: Look, there are some legitimate reasons. People like high-denomination notes for giving gifts. They like it as emergency money when they're traveling. But you've got to trade that off against the fact that when we do seizures of drug trafficking or human traffickers or you're looking at the way that terrorist organizations finance themselves, you will find that a very large percentage of what is going on is being driven by high-denomination notes.
WESTERVELT: What about here in the U.S.? Is the Ben Franklin in any danger?
SANDS: I think there should be a debate as to the level of issuance and the role of the hundred-dollar bill. There are about 30 hundred-dollar bills for every U.S. citizen, yet the role they play in everyday life is extremely small. Around 5 percent of American adults have a hundred-dollar bill in their pocket at any one time. Yet somebody is holding those bills. And if you look at the data on seizures of drug cash, say, crossing the U.S.-Mexican border, the stuff that gets seized is almost invariably in hundred-dollar bills.
WESTERVELT: That's former banker Peter Sands. He's now a senior fellow at Harvard's Kennedy School of Government. Peter, thanks for speak with us.
SANDS: Thank you, Eric.