Thousand-franc note is a hidden treasure (Jul 2013)


Source: – Thousand-franc note is a hidden treasure

Notable excerpts:

The use of the Swiss thousand-franc bill is on the rise. Despite its apparent popularity – it makes up almost one in ten Swiss banknotes – few people ever lay their hands on one.

The total value of all CHF1,000 ($1,070) notes in circulation was more than CHF35 billion in 2012. Their share in the CHF55 billion total of all Swiss banknotes rose to a record 60 per cent last year from 50 per cent a year earlier.

As a comparison, only a third of all euros are circulating in the highest denomination €500 (CHF613) bills, and those have already alarmed crime-fighting organisations and authorities. In Switzerland, there is – officially at least – little concern.

Swiss banknote circulation is the second highest in the world behind Japan and more than double that in the United States or the euro zone. Swiss National Bank spokeswoman Silvia Oppliger explains this by the fact that holdings and use of cash remain popular, and that many people still withdraw cash in order to pay their bills at the post office counter.

“People consider using banknotes to be very practical. Also, the wish for privacy has always been high in Switzerland,” Oppliger said. “Using cash for payments is one manifestation of this. This popularity of cash payments is no indication for illegal usage.”

High denomination

The violet thousand-franc bill depicting the face of 19th century art historian Jacob Burckhardt is the banknote with the second-highest denomination in the world, right behind Singapore’s S$10,000 (CHF7,355), and ahead of the €500 bill.

Officially, the high circulation and denomination of the Swiss currency are no issue. The Money Laundering Reporting Office (MROS) of the Federal Office of Police (fedpol) says it does not know the denomination of the notes in the transaction it is investigating.

“From time to time, cash transactions are reported to the MROS. The financial intermediaries, however, report the sum and not the denomination,” said fedpol spokesman Alexander Rechsteiner. “Fedpol is concerned about the black economy in general; the denomination of the cash involved doesn’t play a role.”

Still, the franc’s top face value makes it possible to hoard – or transport – large amounts in a small space. A 10-centimetre pile of notes worth CHF1 million weighs one kilogramme and has a volume of 1.3 litres – half the euro’s volume, according to the website 1,000, In comparison, $1 million weighs 10 kilos, €1 million about two kilos.

Criminal use

British bank wholesalers agreed to stop selling the €500 euro note back in 2010 after an investigation by the Serious Organised Crime Agency (SOCA) in Britain found that nine out of ten of the pink notes were used by criminals for illegal activities such as bribes, tax evasion, money laundering and terrorism.

“There is no doubt that the main UK demand for the €500 note comes from serious organised criminals,” Ian Cruxton, SOCA deputy director, said at the time.

The Canadian C$1,000 notes were also retired in May 2000 as part of the fight against organised crime at the recommendation of the Canadian police who said they were mostly being used for money laundering.

“MROS and fedpol should also look more closely at who is using the CHF1,000 notes and for what,” said Mark van Thiel, former deputy head of MROS. “Swiss authorities will have to deal with the issue of high denominations because they are instruments which can help criminals to move assets from A to B more easily.”

And there is also the tax component to consider, because with cash you can pay part of a purchase under-the-counter,” said van Thiel, founding director of consultancy TvT compliance in Zurich.

Van Thiel explains that when a couple of years ago banking transactions started to be controlled more closely in Switzerland, criminals were forced to fall back on other less traceable channels such as cash – particularly those with higher denominations.

One of them is the €500 bill. European Central Bank Vice-President Vítor Constâncio on April 25 told European lawmakers that it was “worth discussing” whether it should be abolished because it is “not commonly” used.

Cars and cattle

The 33 million CHF1,000 notes are not common either. Although Swiss shops are obliged to accept them, smaller retailers or grocers are reluctant or simply refuse, a snapshot survey in the city of Bern showed. And they are not easy to withdraw.

“Our cashpoints do not dispense CHF1,000 notes,” said Hanspeter Merz, board secretary of Bern’s cantonal bank BEKB. “People still withdraw and pay in CHF1,000 notes at our branches. For the main part, they use them for larger purchases such as a car.”

This is also observed by the SNB, which unlike the ECB does not conduct a systematic survey on the use of its bills. It told that the CHF1,000 notes are for example still used for cash transactions by “used car dealers and cattle traders”.

The ECB in 2011 conducted a survey on the use of its cash. More than half of respondents said they had never come across a €500 note and almost half said they have never had a €200 note in their possession. The majority of people pay cash only for transactions below €100.

Store of value

As the SNB points out in a report, “the high proportion of large denominations indicates that the banknotes are used not only as a means of payment but also – to a considerable degree – as a store of value.”

In other words: people use the hard paper currency to pile up cash in safe deposit boxes, personal safes or under their mattresses – particularly in times of uncertainty and not necessarily criminals.

Zurich police say they have not observed that criminals use higher-value notes. Drug dealers for example are much more likely to use lower values because they can get rid of them much quicker, the police say.

The CHF200 notes are the highest seized in connection with crimes, said Marc Besson from canton Zurich’s police. “We come across CHF1,000 notes only in so-called pensioners’ scams.” And at Bern Police they are also “extremely rare”, confirms Christoph Gnägi.

“This is not surprising. It’s not so much the petty crooks at the end of the food chain who use them but those who pull the strings,” van Thiel said.

Switzerland so far has no plans to investigate the use of its CHF1,000 note, let alone discuss its abolishment. Commercial banks like BEKB appreciate that it “usefully complements” the range, according to Merz.

And, the SNB, which decides about the currency’s denominations, says that the new banknote series to be introduced from 2015 will naturally also feature a CHF1,000 note.


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