Feature: Criminal's best friend? The reputation of the 500 euro note hits a new low

In the the criminal underworld, populated by money launderers, arms dealers, and even crooked priests, 500 euro banknotes are known as "Bin Ladens."

The nickname originated in Spain when people there began to joke about the purple-colored banknotes that everyone knew existed, but which very few ordinary people had ever seen, like the elusive Saudi terrorist himself. The 500 euro banknote (about 530 U.S. dollars) gained the reputation as the preferred denomination of people wanting to make large money transactions without ever leaving a trail.

In Italy, the banknotes came to the public's attention in 2013, when the senior Vatican official Monsignor Nunzio Scarano earned the sobriquet "Don 500" after prosecutors said he had used mostly 500 euro banknotes to smuggle 20 million euros (about 21 million U.S. dollars) into Italy from Switzerland, and then laundered banknotes used to buy a 1.7-million-euro luxury flat in Salerno.

This week, however, revealed new evidence of a wave of money laundering in Italy that is unprecedented in scale and that is not simply the work of mafiosi or hardened criminals.

Shocking new figures from Italian authorities suggest that the country's burgeoning "grey economy," the murky area of business that lies somewhere between organized crime and respectable commerce, is also cashing on the convenience and non-traceability of the 500 euro note.

Bank of Italy figures show that last year, banks here received one hundred times as many 500 euro notes as deposits as they had distributed. This suggests that even as the use of the banknotes winds down in some parts of the continent, instead of being traded, or kept in circulation, they're being laundered on a monumental scale.

Nello Rossi, the deputy chief prosecutor for Rome, said this week the evidence pointed to "a massive hording and banking of the notes that appears to be aimed at performing illegal operations."

Experts say the figures leaked to La Repubblica newspaper suggest that the illicit activity has been responsible for a 37-billion-euro black hole in the Italian gross domestic product (GDP) in 500 euro notes alone in just the last five years, as tax dodgers and criminals bank their earnings with as little fuss as possible.

It is thought that export companies as well as mafia groups are leading the use of the remaining 500 euro banknotes in the huge laundering-tax evasion scam.

The number of purple notes being banked in the northern regions of Italy with expanding exports markets has increased exponentially between 2010 and 2014, with 500 euro banknote deposits up by 393 percent in Lombardia, up 847 percent in Emilia Romagna, and up by nearly 4,000 percent - a 40-fold rise - in Trentino-Alto Adige, Bank of Italy figures show.

There are rules that call on Italian financial institutions to report suspicious deposits. But despite this, the "Bin Ladens" continue to pour into Italian bank accounts. One possible reason for this is the relative leniency with which offending banks are treated. Those that are caught taking suspicious deposits face fines amounting to only 40 percent of the banked money, and this penalty is capped at just 50,000 euros.

It seems likely that for many of the smaller banks, the risk of a fine is worth taking in order to ensure the continued business of rich clients. There is no threat of jail sentences for bank managers, as there is for lawyers or accountants involved in similar activity.

But could the latest evidence spell the end of the violet-colored note? The European Central Bank created it at the time of monetary union to replace high value notes that were popular in some of the euro zone countries. And even now the ECB shows little desire to kill off the world's most powerful - and controversial - bank note.

An ECB spokesman said: "There are no plans to withdraw the 500 euro banknote. It's about logistics. If we abolished it, it would be more difficult to store and distribute large amounts of money."

Two years ago, however, senior officials at the Bank of Italy told the ECB that 500 euro banknotes should be withdrawn from circulation because they had already become the tool of mobsters and money-launderers.

But some experts said withdrawing 500 euro notes, which account for around 300 billion euros of the money in circulation in the EU, might have serious repercussions for the luxury goods market.

In the UK, however, the Serious Organised Crime Agency (SOCA) persuaded British bank wholesalers to withdraw the notes from circulation back in May 2010.

SOCA said 90 percent of the notes sold in the UK were in the hands of organized criminals. Its eight-month analysis of movements of the note in the UK revealed that it was almost exclusively used by money launderers shifting cash for major crime gangs.

In the United States, Drug Enforcement Administration officials have warned the purple note is enabling Latin American drug barons to transport large amounts of cash without being discovered.

The 500 euro banknote is not the highest value note currently in circulation. This title goes to the 10,000 Singapore dollar banknote and 10,000 Brunei dollar banknote which are worth more than ten times as much. But their circulation is limited compared to the 500 euro banknote, the highest value denomination for what is the official currency of the world's largest economic bloc and the world's second largest reserve currency after the U.S. dollar.

Other central banks already appear to have accepted that very high value banknotes are not a good thing. The Bank of Canada withdrew its 1,000-dollar (about 793 U.S. dollar) bill "as part of the fight against money laundering and organized crime," back in 2000.

But in Europe, the 500 euro banknote, supposedly described by a leading Colombian drug baron as "a gift from God," is here to stay, at least for now. Endit