Despite the widespread adoption of digital payments in countries like the United States, Europe, and much of Britain, the global supply of physical currency, especially high-denomination banknotes, is reaching unprecedented levels. This phenomenon, termed the ‘paradox of banknotes’ by Bank of England Governor Andrew Bailey, suggests that as legal spending via cash declines, the volume of money in circulation is increasing, with criminals becoming the primary users of these untaxed and untraceable funds.
Oliver Bullough, author of ‘Everybody Loves Our Dollars’, posits that if cash is not part of the legal economy, it must be in the hands of those involved in criminal activities such as terrorism, human trafficking, slavery, and the drug trade. Evidence for this lies in the distribution of currency. In the U.S., while over $2.33 trillion in dollars was in circulation as of April 2024, a significant portion of the estimated $7,357 per person in circulation is comprised of $100 bills. This concentration of high-value notes is a relatively recent trend; two decades ago, smaller denominations like $20 and $1 bills were more prevalent. The shift towards larger bills makes them easier to conceal and transport, aligning with the needs of criminal organizations.
Europol reported in 2015 that cash remains the predominant financial instrument for criminals. The value of these large bills is so high that in some countries, such as Argentina and Ethiopia, they trade at a premium on the black market, as they are far easier to smuggle than smaller denominations. Drug cartels, for instance, are known to vacuum-pack cash, concealing it within vehicles, yachts, or even the human body. U.S. authorities estimate that $25 billion in cash is smuggled across the border into Mexico annually. In the UK, cash flow to Albania has surged sixfold since 2016, reaching an estimated £400 million a year, coinciding with Albanian gangs taking over the cocaine market.
A notable method of moving illicit cash involves purchasing luxury goods, which are then transported across borders. Chinese criminal gangs, for example, reportedly use students and tourists to buy designer bags, watches, and other high-value items. These goods are then taken back to China, where they are handed over to gangmasters for resale, effectively laundering the criminal proceeds. This practice is believed to be a significant driver behind the popularity of luxury outlet shopping centers like Bicester Village in Oxfordshire, UK, which attracts an estimated one million Chinese visitors annually. These shoppers are drawn by discounts, tax advantages on goods exported, and the ease with which large purchases can be made.
While legitimate businesses can launder a limited percentage of their turnover through their books, criminal enterprises often rely on front businesses, such as barber shops, vape stores, and sweet shops, to declare false earnings and obscure the origin of illicit funds. A nationwide crackdown by the UK Home Secretary in early 2024 aimed to seize such funds and dismantle organized crime networks. However, the National Crime Agency estimates that high street cash laundries funnel at least £1 billion through the financial system annually, a figure that represents only a fraction of the total undocumented illicit financial flows worldwide.
The enduring appeal of physical cash, even in an increasingly digital world, highlights its continued utility for those operating outside the law. As Roman Emperor Vespasian recognized centuries ago, 'Money doesn't stink,' underscoring the timeless nature of wealth, regardless of its source.