Central banks should stop issuing £50, $100 and €500 notes to tackle crime, according to a former bank boss.

The high-denomination notes are favoured by terrorists, drug lords and tax evaders, argues Peter Sands, former chief executive of Standard Chartered bank, in a new report.

Illegal money flows exceed $2 trillion (£1.4 trillion) a year, Sands said.

Rather than focus on the criminals, his report argued G20 countries should now target the cash itself.

Sands, who produced the report for the Harvard Kennedy School, urged the world's 20 largest economies to take up the matter before their next summit in China in September.

CURRENCY OF CORRUPT'

High-value notes issued by rich countries are the "currency of corrupt elites, of crime of all sorts and of tax evasion", Sands said.

"They play little role in the functioning of the legitimate economy, yet a crucial role in the underground economy," he added. "The irony is that they are provided to criminals by the state."

Banning the notes would not stop crime, but it would make hiding transactions more costly and more difficult, Sands said.

His report comes after the European Commission said last week it would investigate the use of €500 notes.

The European Central Bank welcomed the investigation, but senior officials also said they needed more evidence that the notes facilitate criminal activity.

The UK asked banks to stop handling €500 notes in 2010 after a report found they were predominantly used by criminals.