ROME – Mafia money launderers, terrorists and tax dodgers may be accumulating 500-euro bills because they’re easy to hide and transport, the Bank of Italy said in a report.

As much as 6 million euros ($8.1 million) fit in an overnight bag, and 10 million euros in an 18-inch safe-deposit box, the central bank said in a 15-page internal study obtained by Bloomberg News.

“The wide diffusion of the 500-euro bill is a motive of possible concern in terms of fighting both money laundering and terrorism financing,” the June 2009 report prepared by the central bank’s financial intelligence unit said. “Cash is the ideal tool for illegal payment and movement of funds” and “the high-value banknote simplifies the logistical management of large sums of money.”

The report may boost arguments by law-enforcement officials to do away with the 500-euro ($673) note, the second most-valuable bill among the world’s most-traded currencies. The Frankfurt-based European Central Bank reviewed the denominations of its banknotes in 2005, and has no plans to change the structure of its currency, an ECB spokesman said. The Bank of Italy report may foreshadow a split within the ECB on the merits of keeping the 500-euro note at the next review.

The dangers tied to the use of the 500-euro bill may “merit attention by monetary authorities and the institutions fighting money laundering and terrorism,” the report said.

The Bank of Canada withdrew its 1,000-dollar ($981) bill in 2000 “as part of the fight against money laundering and organized crime,” its website said.

Latvia’s 500 lati ($951) bill is Europe’s highest-valued bill. Singapore’s 10,000 dollar ($7,248) note is the world’s most valuable, though rarely used. Among the six most-traded currencies, the 500-euro bills and the Swiss 1,000 franc ($939) note are the most valued, the Bank of Italy said. The $100 bill is the U.S.’s highest denomination.

Italy has one of the largest underground economies in Europe, worth as much as 19 percent of gross domestic product in 2008, or almost 300 billion euros, Rome-based research institute Censis says. The Italian mafias, the country’s biggest money launderers, prefer the large bills because they can transport higher amounts of cash in less space, said Maurizio De Lucia, a prosecutor who participated in the hunt and capture of Bernardo Provenzano, the boss of the Sicilian Mafia, in 2006.

The country’s main mafia groups boosted their profit by 12 percent to more than 78 billion euros last year, the anti- racketeering group SOS Impresa said in January.

Cash payments are the basis for 91 percent of all transactions in Italy, compared with 59 percent in France and 78 percent in Germany, the Bank of Italy said.

While the 566 million 500-euro notes in circulation outnumber the total population of the euro zone, Italians say they rarely run across them.

“We don’t see very many of them,” said Alessandro Migliacci, 28, a barber near the Spanish Steps in Rome. “The 20s and the 50s are by far the most common bills.”

Since the introduction of the euro to the public in 2002, the number of 500-euro bills in circulation has grown.

Fifty-euro bills made up almost 34 percent of the total euros in circulation in 2002, compared with 23 percent for the 500-euro note, the Bank of Italy said. In February of this year, the 500-euro note represented 36 percent of the total value of euros outstanding, surpassing the 50-euro note, which made up 31 percent of the total, according to the ECB.

The 500-euro bill’s use by money launderers and tax dodgers “is a strong argument for banning or at least reducing the quantity of these banknotes,” said Nicola Borri, a professor of economics at Luiss University in Rome. The big bill “makes it very easy for one person to carry across borders, say between Italy and Switzerland, large quantities of money.”

The Bank of Italy study found that there was a greater concentration of 500-euro bills per capita close to the borders of Switzerland and San Marino, where money-laundering regulations are less stringent. Italians who stashed their savings abroad to avoid taxes declared 95 billion euros last year as part of a tax amnesty passed by parliament, the country’s tax-collection agency said on Feb. 20.


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