Goodbye 500 euros and new cash ceiling in Europe

In a position paper sent to the European Commission, five EU countries (Italy, France, Spain, Holland and Belgium) have asked for the removal of the 500 euro banknote and to place a maximum limit of 5 thousand euros for cash payments throughout the European Union. Two measures, according to the proponents, against money laundering within the EU.

500 euro banknote and crime

From what derives the belief that large-denomination banknotes favor recycling phenomena? It was the Serious Organized Crime Agency that discovered in 2010 that around 90% of the 500 euro banknotes in circulation in the UK were in the hands of criminal organizations. Hence the proposed introduction of measures aimed at phasing out to allow for the progressive conversion by the public into smaller denomination banknotes under the supervision of banks and the Central Bank.

The ECB has stopped making this cut for two years precisely because of the concerns about the “illegal practices” associated with it, but the banknotes are still in circulation.

Numbers

At the beginning of 2019, when the production of 500 euro banknotes ceased, there were around 516 million banknotes in circulation. At the beginning of this year it was discovered that there were still 400 million, worth 200 billion euros. 30% of the banknotes in circulation are those of 500 euros, although they are not a common means of payment. Dutch Finance has discovered that in 2019 this banknote was used almost exclusively by drug traffickers.

Cash ceiling

Excess liquidity, the countries write, represents a serious risk. Cash is anonymous and untraceable and is therefore used, inter alia, for money laundering, terrorist financing, drug and human trafficking and for tax evasion. Hence, the 5 thousand euro ceiling for cash purchases. That Holland wanted even lower, at 3 thousand euros.

At the moment the maximum limit established by the Commission is 10,000 euros, even if the various countries already have the right to introduce more stringent measures (in Italy the maximum cash limit is set at 2,000 euros).

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