A Harvard Kennedy School study released in February argues that high currency bills, like the $100 bill and the €500 note, should be eliminated in an effort to fight terror finance. The Kennedy School analysis posits that terrorists make use of high denomination cash transactions so as to eliminate a data trail and because the cash is easily portable. Doing away with high currency notes, according to the study, not only makes it more difficult to transfer funds due to the increased weight but also because transporting large amounts of small bills can be conspicuous. Experts interviewed by Forbes, however, suggest that getting rid of large denomination bills would amount to a “minor inconvenience in the short run.” Instead, the writers at Forbes suggest that one among the best way to fight terror finance in general and ISIS in particular is to relax privacy laws in the West, which would allow the proper authorities the ability to monitor our bank transactions more effectively. A recent study by the Norwegian Defense Research Establishment confirmed in fact that European jihadi cells tend to finance their criminal enterprises "by members' own legitimate activities." But the Forbes article relies on two problematic assumptions. The first is that “ISIS doesn’t depend on big bills as much as people think,” and the second is the implicit comparison between jihadist European cells' funding system and ISIS' in Iraq and Syria.
Contrary to the information provided by Forbes, ISIS transfers millions of dollars in cash in and outside ISIS occupied militant territories through remittance systems rather than through traditional banking. According to the Wall Street Journal, “Money changers provide a reliable way to conclude deals worth tens of thousands of dollars in towns hundreds of miles apart. They settle their accounts by shuttling bank notes, often through war zones.” Indeed, the WSJ investigation shows that a large portion of the cash being transferred to and from ISIS comes from Turkish remittance houses. For example, in one 30-minute stretch, reporters saw $50,000 being transferred from Turkey to Mosul.
Because of the fact that ISIS does not heavily rely on international banks, it is useful to think about ways to target the local use of cash, and eliminating large bills could actually carry weight. According to the study at Harvard, $1 million in €500 notes weighs about 5 lbs. and fits into a small backpack. Large currency makes it easy for just one currier to travel large distances with a large amount of cash. But the same $1 million in $20 dollar bills would weigh 110lbs and fill four suitcases. Thus, eliminating big bills would both require more manpower from ISIS to conduct financial cash transactions and would slow the operation down significantly. In addition, the risk of detection becomes higher when more manpower is required to fulfil a cash transaction, particularly across borders.
We would like to see the Kennedy School study given deeper consideration because of what we see as an out-of-the-box example of the kind work that could make it inconvenient, on a local level, to move money from place to place.