If five of the twenty bills you withdrew at 9 am were deposited by Seven-Eleven at 7 pm, I can guess that you went shopping at Seven-Eleven... And more likely then not, I'll be right.
A particular bill does not change hands very frequently between ending up at a bank. If anything, a bill that you withdrew not ending up back in circulation is suspicious.
Right. At one time the US Fed estimated that the average number of transactions for cash outside a bank was two. That's an old number, measured years ago to plan bill replacement. (One of the Federal Reserve's functions is paper bill replacement. Banks pull worn bills and send them to the Fed, which tallies them, shreds them, and replaces them with new bills from the Bureau of Engraving and Printing. Dollar bills last about 18-22 months.)
Many ATMs already have the hardware. To improve counterfeit recognition, most ATMs which accept cash now take a high-resolution image of both sides of the bill and do considerable processing on it. It just takes a software upgrade.
Some bank counting machines also have this feature. Cummings markets their cash counter to law enforcement, so they can capture all the serial numbers from a drug bust and track them.[4]
[1] http://www.grgbanking.cn/en/chinaATMs/images/H68NL.pdf [2] http://hkmb.hktdc.com/en/1X09V6YK/hktdc-research/ATMs-to-pro... [3] http://en.yibada.com/articles/35951/20150601/china-worlds-fi... [4] http://www.cumminsallison.com/us/en/products/currency-handli...