Banks and money exchange services in the U.K. are no longer distributing 500-euro notes after a report showed that 90 percent of the demand for the bill came from criminals, the Serious Organised Crime Agency said today.

“For the first time there is hard evidence of the scale of criminal abuse of the 500-euro note,” SOCA said in a statement on its Web site. While the notes can still be deposited, they aren’t available by request, the agency said.

“There is no doubt that the main U.K. demand for the 500- euro note comes from serious organized criminals,” SOCA Deputy Director Ian Cruxton said in a statement.

As much as 6 million euros ($7.5 million) of the notes fit in an overnight bag, and 10 million euros in a 45-centimeter (18-inch) safe-deposit box, the central bank said in a 15-page internal study.

SOCA gave a similar analysis.

“Crime is a cash-based business and paying large amounts of cash into the banking system attracts unwelcome attention,” the agency said today. “Instead, criminals try to reduce the bulk of the cash as far as possible and move it undetected out of the country.”

Not for Groceries

The removal of the bills in the U.K., which isn’t a member of the euro, may boost arguments by other law-enforcement officials to do away with the 500-euro note, the second most- valuable bill among the world’s most-traded currencies.

“Any Italian can testify that they never would think of using such a big bill to buy groceries,” Laura Garavini, an opposition lawmaker and member of Italy’s anti-mafia commission, said in an e-mailed statement. “To fight tax evasion and money laundering, our country should also stop the circulation” of the 500-euro bill.

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 issuance, an ECB spokesman said last month.

The Bank of Canada withdrew its 1,000-dollar ($982) bill in 2000 “as part of the fight against money laundering and organized crime,” according to its Web site.

Circulation Increasing

Singapore’s 10,000-dollar ($7,240) 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 ($897) note are the most valued. The $100 bill is the U.S.’s highest denomination.

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 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.

Cocaine Traffickers

The Financial Action Task Force, the global money laundering watchdog based in Paris, recommended discarding large-denomination bills in 2005 to help fight crime and terrorism.

“Countries should give consideration to the elimination of large denomination bank notes,” the FATF said. “These notes can be used by cash smugglers to substantially reduce the physical size of cash shipments being transported across borders and, by doing so, significantly complicate detection exercises.”

Central and South American cocaine traffickers collect the 500-euro notes because they are easier to transport, according to Russell Benson, the U.S. Drug Enforcement Administration’s regional director for Europe and Africa. A million dollars in $100 bills weigh about 22 pounds (10 kilograms), while $1 million in 500-euro bills at an exchange rate of about $1.38 per euro weighs about 3.5 pounds, Benson said.

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