Eliminating $100 Notes Will Reduce Crime, say currency experts


By Zeb Holmes and Ugur Nedim

Australian currency experts suggest that removing $100 notes from circulation will reduce organised crime and tax fraud.

Professor Steve Worthington from Swinburne University says that while $30 billion worth of $AUD100 notes are currently in circulation, most people rarely carry the currency.

“They are in circulation, somewhere, but not in my wallet or other people’s,” he said, describing $100 notes as the “instruments of choice” for money laundering and large cash purchasesdesigned to avoid paying GST.

India and the European Central Bank

India recently axed its 500 and 1000 rupee bank notes (worth approximately $AUD10 and $AUD20 respectively) in an effort to thwart organised crime and tax evasion.

On 8 November 2016, Prime Minister Narendra Modi declared these notes would be withdrawn from circulation, giving people six weeks to exchange them for other denominations before they are no longer accepted as legal tender. The notes represent 86% of the value of all rupee bills.

The government intends to introduce new 500 and 2000 rupee notes, although on a much smaller scale. It hopes to force individuals to pay tax on accumulated wealth.

India’s move has earned the praise of currency experts worldwide. Around 405,000 counterfeit 500 and 1,000-rupee notes were found in the banking system last year alone. Researchers at the Indian Statistical Institute estimate that the total value of counterfeit bills currently in circulation may exceed $60 million.

One of the problems with large notes is the opportunity they create for tax evasion. Only around 20 million individuals and families, or around 1.6% of India’s population, paid income tax in 2013, with most accumulated wealth hidden as cash.

The predominance of the Indian cash economy has also been blamed for the ease with which businessmen are able to pay bribes to government officials and political parties to buy votes during elections.

In a similar move, the European Central Bank began phasing out the €500 note earlier this year. A recent Harvard University study found that the note was the favourite convertible currency for criminals worldwide, being compact and convenient for evading the gaze of authorities.

The author of the study, Peter Sands, believes that getting rid of the €500 bill “will make life harder for criminals, raising their costs and increasing their detection risks,” noting that a million euro weighs just 5 pounds and can fit in a small bag.

While online transactions, especially digital currencies like Bitcoin, are changing the criminal economy, Robert Palmer, an expert on money laundering at advocacy group Global Witness, says that cash remains an important element.

“There is a range of ways that people launder money,” Mr. Palmer said. “Some are new and innovative, and some are old fashioned. Hard cash is still a common way of moving dirty money.”

In Australia

Investment bank UBS has called for countries like Australia to follow the lead of India, arguing that removing high denominations will lead to “reduced crime (difficult to monetise), increased tax revenue (fewer cash transactions) and reduced welfare fraud (claiming welfare while earning or hoarding cash)”.

UBS points out that online transactions are becoming easier to trace – especially in countries like Australia which have weak privacy laws, strong metadata retention laws and broad police powers. It says cash transactions are highly attractive to intending offenders in this context.

Ken Rogoff, an economics professor at Harvard University, estimates the value of unpaid taxes at over $3 trillion worldwide. Rogoff believes Australia would reap the benefits of a smaller cash economy if it were to withdraw the big green note from circulation.

However, there are concerns that moves towards a ‘cashless economy’ only serve to help governments track and control our each and every move.


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