Tuesday, 2 February 2016

EU Set To Probe €500 Notes’ Links to Terrorism

The €500 note, beloved by gangsters and Greek savers, is now being investigated for ties to terrorism.

The EU Commission on Tuesday will pledge to investigate the suspiciously high number of the notes in circulation in the eurozone as part of a plan to choke-off financing for terrorists in the wake of November’s attacks in Paris.

“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 seen by the Financial Times. “These notes are in high demand among criminal elements . . . due to their high value and low volume.”

The commission will work with Europol, the EU’s police agency, on the problem but while the commission can consider options for curtailing the use of €500 notes by terrorists and other criminals, it is the European Central Bank that has exclusive control over the denominations of euro notes and coins in circulation.

According to one person briefed on the ECB’s thinking, the problems around misuse of the €500 bank note have been under consideration for some time and technical work is under way more generally to look at high-denomination bills. The last review was in 2005, when the ECB’s governing council decided to keep large-value bills in circulation.

Mario Draghi, European Central Bank president, told the European Parliament on Monday that the matter was being studied by the central bank and that no decisions had been taken yet. “We want to make changes,” he said, adding that “we are determined not to make seigniorage a comfort for criminals.”

According to a study published by Europol last year, shops often refuse to accept €500 bills but nevertheless they account for one-third of the value of all euro banknotes in circulation. ECB data suggest the number of €500 notes has grown disproportionately compared with most other denominations since single currency notes and coins entered circulation in 2002.

The distinctive purple note is one of the highest-value pieces of currency in the world, equivalent to around £380 or $540. It was intended to replicate some of the large denomination notes available in currencies that predated the euro, such as the old 1,000 Deutschmark bill in Germany, and similar bills in Austria, Belgium, Italy, Luxembourg and Netherlands.

The bulk of Tuesday’s proposal from Brussels, however, will focus on changes demanded by François Hollande, France’s president, who has sought to galvanise the EU’s efforts to combat terrorism in the wake of the attacks on Paris in November which left 130 dead and hundreds injured.

Much like earlier proposals from Paris in the days after the attacks, the commission blueprint will include plans for tighter supervision of bitcoin and other virtual currencies by law enforcement authorities and steps to make asset freezes more watertight.

Financial transfers in virtual currencies are currently not regulated by the EU, heightening the risk that they “may be used by terrorist organisations to conceal transfers”. according to the action plan. One problem is that, although bitcoin transactions are recorded “there is no reporting mechanism equivalent to that found in the mainstream banking system to identify suspicious activity”.

As a first step, the commission will propose bringing “anonymous currency exchanges” within the scope of existing European anti-money laundering regulations. Brussels will also study whether to apply other “licensing and supervision rules” to the sector.

Other plans include requiring all EU nations to have centralised registers of bank accounts and giving customs officials greater powers to seize historical artefacts if it is suspected they are being sold to finance terrorism.

The commission also plans to accelerate work on a blacklist of non-EU countries with “strategic deficiencies in the area of anti-money-laundering or countering terrorist financing.” It will come forward with the list by June.

Culled from: Financial Times