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Thread: Why Criminals Love the 500 Euro Note

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    Post Why Criminals Love the 500 Euro Note

    Of course, in this case, it was some eastern european gang (or at least a woman with an eastern european name...)




    In some countries they're known as "Bin Ladens" - the banknote everybody knows exists but few, other than criminals, ever see. Now the 500 euro note is being withdrawn from sale in the UK.

    Like almost all organised crime, the breakfast cereal box plan was done with the minimum of fuss.

    Eftychia Symeonidoy stood outside a London apartment, casually holding the box under her arm.

    But instead of it containing the recommended daily amount of vitamins and minerals, it had been stuffed with 300,000 euros.

    As the undercover team from HM Revenue and Customs secretly filmed her, an ordinary estate car pulled up and the box was handed to the driver. It was another consignment of laundered drugs cash safely delivered - or so the gang thought.

    Symeonidoy and the rest of the 13-strong laundering gang were all later convicted and jailed. The group smashed by HMRC investigators had taken £24m of dirty money from their clients in the criminal underworld - and returned "clean" euros.

    Every month, they'd take in between £1m and £4m in cash - massive bags of sterling notes. They had so much of it, they had to stack it on sofas and in cabinets, and stuff it in bags in cupboards.

    "This crime group were providing the facility for other criminals to conceal the origin of their illicit cash," says Heidi Foggon, the assistant director of criminal investigations at HMRC.

    "They set up a complex system including registering their own money service bureau that provided the appearance of legitimacy required to undertake this crime."

    The jailing of that gang was a major breakthrough for investigators - but it's only the tip of the money laundering iceberg.

    Financial crime intelligence teams at the Serious Organised Crime Agency (Soca) have now, for the first time, established the extent to which criminals are using the money exchange business to manage their ill-gotten gains.

    And its eight-month analysis found that the 500 euro note is now at the heart of money laundering in the UK. The reason is simple: it's easier to shift.

    At current exchange rates, the 500 euro note is worth about £430 - eight times more than the UK's most valuable note, £50.

    If a drugs gang collects up to £1m in twenties from its clients on street corners, those notes will weigh more than 50kg - about 50 bags of sugar. The equivalent in 500 euro banknotes weighs just over 2kg.

    Converting it becomes a no-brainer. So they set up front businesses which buy in the 500 euro notes - and then make the new, clean and small consignments of notes disappear.

    So how did the crime busters know the British market in 500 euro notes was driven by drugs gangs rather than honest tourists, or business travellers, priming their wallets before a trip to the continent?

    They embarked on some analysis, tracking demand for the note. It found there is very little legitimate demand, says Ian Cruxton, deputy director of Soca and head of its proceeds of crime investigations.

    But that then posed a question. Who exactly is responsible for the annual trade in the notes in the UK - a trade that totals about half a billion euros?

    The answer was criminals.

    One suspicious exchange bureau identified by law enforcement agencies was operating out of an office that didn't even have a sign above the door.

    It asked the note wholesalers (the major banks and well-known international currency businesses) to supply it with four million euros worth of the bank notes in one year. Those orders were greater than the entire amount sold to travellers through the Post Office's network of 12,500 counters.

    In other words, there were two markets: the legitimate High Street businesses and something far murkier around the corner.

    "There's been a significant body of evidence over time that has recognised that high denomination notes are an important means of reducing the bulk of cash," says Mr Cruxton. "The 500 euro note is really the note of choice among criminals.

    "We estimate that more than 90% of the 500 euro notes that are provided in the UK have actually gone into the hands of serious organised criminals."

    These are startling sums - but the business hasn't sprung from nowhere.
    “ The reality is that from now on people are not going to be able to go into wholesale bank suppliers, the money bureaus and ask for a supply of 500 euro notes ”
    Ian Cruxton

    Economists have long charted how large denomination notes facilitate money laundering.

    The 500 euro note was born in 2002. But two years before that, the similarly high-value Canadian $1,000 bill was shredded after law enforcement agencies said it was being used for money laundering and tax evasion.

    A decade on, the same problems now haunt the 500 euro bill. An internal Bank of Italy report warned last year about the mafia's use of the note, saying it was just adding to the national problems of tax evasion.

    But follow the money further, and the data shows that it has turned up in in South America in vast quantities as drug cartels collect their profits.

    Professor Richard Portes of the Centre for Economic Policy Research, says the Eurozone countries were warned of the risks posed before the first note rolled off its high-tech anti-forgery printing press.

    "It was quite clear from day one that once they decided they would have something as large as a 500 euro note that it would give the euro an economic advantage to the $100 bill. It would be used by the Mafia and in all sorts of organised underground crime," he says.

    Eurozone warned

    Prof Portes is pleased at the note's withdrawal from UK foreign exchanges, as it will "make life much more difficult for people who should find life difficult".

    However, there's no plan to withdraw the banknote itself because, despite the problems in the UK and elsewhere, it plays a role in the economic culture of some countries.
    HOW MONEY LAUNDERING WORKS
    # Cash gathered - such as from drugs deals
    # Gangs use specialist launderers
    # They convert it high value Euros
    # Small consignments smuggled abroad
    # It passes through bank accounts or assets like property
    # Wealth emerges elsewhere as clean cash
    # Crime bosses avoid prosecution

    In some Eurozone nations, including Germany and Italy, people simply prefer cash to plastic - a demand that has risen since the credit crunch hit world markets.

    There's no doubt high denomination notes help low-level domestic tax evasion, but that's not the concern of the European Central Bank which administers the workings of what has become a global competitor currency to the US Dollar.

    All of which leaves the million euro question: Will banning its sale in the UK do any good? Won't money launderers switch to another commodity... like the 200 euro note?

    Ian Cruxton of Soca says that's entirely what investigators expect the gangs to do - but there are reasons to be optimistic, he says. In the case of the 200 euro, there are fewer in circulation - which means their movements are easier to track.

    He says his intelligence officers are well-placed to spot gangs making mistakes and they will watch and wait. Shifting vast quantities of sterling just can't be done without a fuss.

    "The reality is that from now on people are not going to be able to go into wholesale bank suppliers, the money bureaux and ask for a supply of 500 euro notes," says Mr Cruxton. "They won't be available, the supply will cease. It's going to make life a lot harder for them.

    "The sheer bulk of notes that they will have to move, if they continue to try to move it through cash is going to make it much more risky. They're going to have to change the methods that they use, make themselves much more open to intervention.

    "Given the nature of organised crime, taking out isolated criminals does not bring a significant benefit.

    "But the opportunity to take out something like this, when we remove one of the key enablers that benefit the whole criminal community, gives us an opportunity to have a much greater effect."


    http://news.bbc.co.uk/go/pr/fr/-/1/h...ne/8678979.stm
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    The whole idea of the €500 note was to replace the Feds $100 note as the bank note of choice for criminals and thus become the central bank of the illegal economy. There is much money to be made from supplying such a cash intensive sector with liquidity.

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