A Rough Guide to Money Laundering

Money laundering persists as a pervasive, understudied global phenomenon, fueled by a disconnect between the declining use of physical cash in daily life and the record-high volume of high-denomination banknotes in circulation. While standard economic theory defines money by its utility, large bills—such as the $100 note or the 500-euro note—primarily function as stores of value for criminal enterprises, including drug trafficking and tax evasion. Sophisticated laundering techniques, such as "carousel fraud" involving VAT rebates or the use of luxury goods like watches and handbags to move value across borders, exploit systemic vulnerabilities that formal banking regulations often fail to detect. Current compliance apparatuses, which impose heavy costs on ordinary citizens and charities, frequently miss these illicit flows while failing to address the underlying economic incentives that allow criminal financial networks to operate with relative impunity.