Everyone’s watched a movie or TV show with a pay-off to crooks of a $1 million in $100 bills comfortably fitting in one of those aluminium briefcases.
Fiction highlights a real problem for law enforcement worldwide – a lot of money can fit into a small space with high denomination notes and that makes bribery and corruption harder to detect.
India has become the latest country to call in high value 500 and 1,000 rupee bank notes in a bid to beat the black economy.
Eurozone countries want to get rid of the 500 euro note because the main users are crooks shifting illicit funds.
High value bank notes withdrawn
That same aluminium briefcase that takes $1 million can also comfortable accommodate euros worth $5.5 million.
Other high value notes are in the firing line as well – such as the British £50 note. The Bank of England reckons the only time ordinary British consumers spend the notes are to pay off tax cheating builders in cash or to fund criminal purchases.
In India, the government’s sudden decision to scrap large denomination notes was aim at flushing out corrupt officials and tax evading businessmen with hidden stashes of cash.
The point is not that bribery, crime and corruption are stopped by reducing the face values of bank notes. Black money will still circulate but a builder avoiding tax is less likely to take a pay off in 100 rupee notes that take up almost 10 times as much space as the same amount in 1,000 rupee notes.
Stopping crooks and tax cheats
In Delhi, ministers accept the inevitable but stress that the black economy will take three or four decades to climb back to the same level.
The problem for tax cheats and crooks is they must take their stashes of cash to a bank to exchange for smaller notes – and the bank will record who they are and how much they switched.
The Indian government would prefer savers to keep cash in the bank or to convert the money to fixed assets such as gold or real estate that can be taxed and monitored on disposal.
Indian gold buyers investing more than 200,000 rupees must already show their tax details to complete a purchase.