Earlier this year, the European Central Bank stopped all production of the 500 euro note. The action came after years of concern from academics, multinational police agencies, and EU finance ministers: The 500 euro, they alleged, had grown far too popular in the funding and facilitation of drug trafficking, human smuggling, and terrorism. Because of its illicit reputation—and because “many know what it looks like” but “few have ever seen one”—the European media ominously dubbed the note “the Bin Laden.”
It’s a strange kind of underdog story. Pop culture, and general consensus, will tell you that international crime runs on U.S. dollars. But for a little while there—roughly from the early 2000s to today—authorities say the euro was actually the underworld’s currency of choice. The reason is simple: It’s easier to move stacks of 500 euros—about $560 each—than stacks of $100 bills. The weight of $1 million in $100 bills is 22 pounds. The equivalent sum in Bin Ladens? A measly 4.4.
So how did the 500 euro become king of the criminal underworld? And how far would halting its production go in actually stopping international crime?
The euro became legal tender at midnight on Dec. 31, 2001. And even before it was birthed, there were already misgivings about the 500 euro. In May of 2000, while speaking to a U.S. House Subcommittee on Financial Institutions, the former Miami money launderer Kenneth Rijock warned that “the 500 euro note looms on the horizon” and would encourage “launderers to simply convert from U.S. dollars.” The years to come would bring a steady string of evidence of the rise of the 500 euro.
In 2004, a drug mule en route from Spain to Colombia was found to have swallowed $197,000 in euros. In 2007, in Miami, more than 12,000 500 euro notes were found shipped and sealed in tamper-proof plastic bags. One Angolan general, alleged to have ties to money laundering in Lisbon, had 8 million euros hidden in one of his residences, almost all of it in Bin Ladens. Authorities have found euros hidden in secret truck compartments, cereal boxes, chocolate bar wrappers, and Kinder eggs.
A 2010 analysis by the U.K.’s Serious and Organized Crime Agency estimated that “90% of the [500 euros] sold in the United Kingdom are in the hand[s]” of crime syndicates. An analysis from Germany’s central bank, Bundesbank, found that from 2002 to 2009, more than 70 percent of the 500 euros issued in Germany went overseas, with half of that figure landing specifically in Russia. Europol, the European Agency for Law Enforcement, has said the 500 euro trades among criminals above its face value.
With evidence mounting, why wasn’t anti–500 euro noise made earlier? Perhaps because European economies were deriving some benefit from all these illegal transactions. As the Wall Street Journal reported in 2010, “gangsters, drug dealers and money launderers” are “shor[ing] up the financial stability of the euro zone” thanks to their “demand for high-denomination euro bank notes.”
Seigniorage is the term for the profits that banks make by selling notes. It’s the difference between the cost of production on a note and the amount a note is sold for. Post financial crash, “the ECB’s gains from seigniorage are becoming increasingly important,” Stephen Fidler wrote for the Wall Street Journal. “In 2008, the year of the Lehman Brothers crisis, it was €80 billion.”
This was just one small factor in a large constellation keeping the eurozone moving. But it did its bit.
Over the phone from Florida, with what sounds like that morning’s bowl of breakfast cereal still in his mouth, the ex-launderer Kenneth Rijock explains to me how cleaning cash works. “Bulk cash smuggling, it’s virtually bulletproof!” he bellows. “I spent 10 years of my life in the Miami Vice days doing bulk cash smuggling and I can tell you that it works!”
Rijock would personally ferry drug money, upward of $10 million a trip, from Miami via private planes to various Caribbean tax havens. That’s the first step of money laundering; it’s called “placement.” He’d do Friday to Monday trips, dressed like a tourist: Hawaiian shirts, cargo shorts. Rijock, a lawyer by trade, eventually served just under two years in the famously cushy Federal Prison Camp at Florida’s Eglin Air Force Base. But he was arrested only after a co-conspirator provided incriminating information. He was never actually caught in the act.
From the tax havens, the money would be moved further into the international banking system: That’s called “layering.” “It goes to Panama, then somewhere in Asia, and it ends up back in the city of London,” Rijock says, throwing out arbitrary examples. “And once you’ve cleaned your money, you use it for a civilian transaction, like borrowing money against an office building.” That’s the third and final level, “integration.”
The appeal of this system is clear. According to his brother, Roberto, Colombian drug kingpin Pablo Escobar’s operation would lose up to 10 percent of its cash proceeds—a couple of billion a year—in part because rats would eat it in storage. In 2014, Chinese Gen. Xu Caihou was arrested on charges of bribery, with several million U.S. dollars in his possession stored, highly indiscreetly, in Chinese renminbi, where the highest denomination note is worth about $16. It took 12 trucks to remove the cash. And while we’re here, just one slightly less relevant example: Triple Frontier, Netflix’s B-movie instant classic from earlier this year, revolves around the very issue of trying to move just way, way too much drug money. If Ben Affleck and the crew were carrying those millions in Bin Ladens instead of dollars on that chopper, you know hotshot pilot Catfish Morales would have cleared the Andes!
But in 2019, why would the gangsters want cash at all?
A 2016 Europol report, “Why Cash Is Still King,” acknowledged the possibility of criminal organizations subverting cash altogether using “virtual currencies” like Bitcoin: “[T]his scenario would eliminate the need to cash in or out, as income and expenditure could take place within a closed system which does not interact with ‘real world’ finances.” As of right now, though, the report countered, “almost all criminals use cash at some stage during the money laundering process.” Even a criminal enterprise that doesn’t generate cash proceeds will convert its proceeds into cash before transferring them—there’s nothing like cash to anonymize the origins and to “break the link between the crime and the proceeds.”
Despite its bad reputation, there are reasons to think that eliminating the 500 euro won’t have the dramatic impact its advocates are hoping for. In the past few years, the EU has investigated specifically the 500 euro’s role in international terrorism. But despite the bill’s nickname, that prominence is most likely overstated. Terrorism does not involve the kind of bulk cash seen in drug smuggling. There are exceptions of course: In 2014, a woman named Amal el-Wahabi was convicted in the U.K. for attempting to move 20,000 euros in 500 euro notes to Turkey, where it would then have been moved to Syria to fund her ISIS fighter husband. (Her friend was stopped at Heathrow and removed a roll of 500s from her underwear.) Twenty thousand euros is certainly easier to move in 500 euro notes. But it’s quite possible to move in smaller denominations, as well.
And whatever denomination they’re working in, money launderers are famously slippery. Some even ply their trade right in the open. The 2016 Europol report relays the peculiar story of a group of Ukrainians, all from the same small town, who “travel together in rented mini vans” to the border, “where one person declares money on behalf of the other passengers.” The money is legally declared but, to put it mildly, “the vast sums of cash transported are not commensurate with the living standards of the couriers.” And yet the route is technically legal and so has stayed open: The Ukrainians have moved more than $550 million and more than 14 million euros since 2008.
Which leads, naturally, to an idea much bigger than eliminating the 500 euro. “This is nothing to do with crime,” says Friedrich Schneider a retired professor of economics at Austria’s Johannes Kepler University. “This is a nice story, which is good for newspapers but not for effect. It’s an action for TV. It’s an action to show people, ‘I’m doing something’ while in principle doing nothing.”
And so how would Schneider combat crime? “It’s quite difficult to fight shadow economies, but it can be managed,” he says. “It’s a political issue.” He points to the decriminalization of marijuana in the U.S. “Liberalize drugs; crime rates go down.” To carry his point forward: Legalize all drugs, and illegal money will certainly be reduced.
European authorities have long pushed back against the 500 euro. Now they’ve managed to stop its production. What will actually change? Rijock, the original anti–500 euro advocate, admits that in a world with a constricted Bin Laden flow, “the $100 bill will end up [again] being the currency of choice.” Even the rosiest of prognostications would suggest the action will only force criminals to work a little harder.
The 500 euro is not being canceled entirely. Eurozone banks will continue to accept it as legal tender. As of June, there’s a little over 480 million of them still in circulation. But that number is dropping monthly; soon, they’ll be increasingly difficult to find. In fact, while I was working on this piece, someone I know, who asked not to be identified, told me he’d already been finding it very tricky to find 500 euros.
“Why do you need them?” I wondered.
“You can move a lot of money,” he shrugged.
“Yeah but like … what do you need the money for?”
“Nothing. Just for safety. I always carry $10,000 on me. Just for when the shit happens.”
He held up his fingers an inch apart. “With 100 USD, $10,000 is about that much. But with euros, it’s that much.” He narrowed his finger space down to a quarter of an inch and then stared at his hand, with unhidden nostalgia, and a love of efficient anonymized cash flow, and the ardor of a bygone age.