15 Feb 2016
Peter Sands, the former CEO of Standard Chartered and an adviser to the British government, said in a statement this week that governments should consider removing high denomination notes from circulation in order to prevent fraud.
In a report he stated, “high-denomination notes are arguably an anachronism to a modern economy given the availability and effectiveness of electronic payment alternatives”.
Sands argued that high-value notes including €500, $100, SFr1,000 and £50 should be removed from circulation as they play a “crucial role in the underground economy”.
He blamed the £50 note for exacerbating a cash-in-hand culture, enabling individuals to avoid VAT, employment taxes and income tax by paying workers in cash.
According to the report, corrupt payments equate to $1trillion globally and tax evasion results in losses of up to 70% in tax income for some states.
Sands believes that while the move would not completely eliminate financial crime, it would have a positive effect by increasing criminals’ costs and making them easier to detect.
His statement supports the recent announcement from the EU Commission that they will be reviewing the role of €500 notes in terrorist financing following November’s terrorist attacks in Paris.
In today’s increasingly cashless society, it is becoming more and more difficult to conceive of legitimate reasons for the use of high denomination banknotes. Sands’ intervention is timely; the ECB should have ditched its €500 notes long ago, and other central banks should follow suit.
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