May 5, 2014 – In Europe Counterfeit Money hits All-Time High

Earlier this year, the European Central Bank (ECB) revealed that a record 670,000 counterfeit notes were withdrawn from circulation in 2013, representing an annual increase of more than 26%.

The Euro notes, when they were first released in 2002, were touted by European government officials as “the most secure banknote ever printed”.   It is surprising, then, to realize, 12 years later that the Euro is among the most highly-targeted currencies by counterfeiters and forgery operations. 

According to a recent article by Newsweek, one town in Italy may be responsible for much of the fake money floating around the EuroZone.  The city of Gugliano, Italy, located in the south of the country, not far Naples,  has been known as a mafia stronghold for decades.  But not as well known is that the city is a center of professional forgery operations – and has been for centuries!

In the Newsweek article, author Philip Jacobson interviews Alessandro Gentili, an Italian police official who for years had been in charge of the provincial police unit responsible for battling the counterfeit money operations in Gugliano.  According to Gentili, Giugliano’s present-day forgers are “inheritors of a tradition established by the counterfeiting rings operating around Naples, which formerly specialized in producing phony US dollars and French and Swiss francs.” He further acknowledged that today’s counterfeiters are experts in the graphic arts, printing and computer science. Among Gentili’s extensive collection of fakes, there is a 20 euro note that only the closest forensic examination would reveal as bogus. “As soon as the euros began circulating,” he recalls, “these skilled forgers were already figuring out ways to make them.”

Regarding how much Euro counterfeit there is in circulation, some currency specialists refer to the “iceberg factor,” arguing that a significantly greater amount of fakes are floating beneath the surface of the world’s monetary systems than may be reported in official numbers. In an interview in 2008 ECB conceded that, when it comes to the true number of forgeries, “we don’t know what is out there.” Europol’s private estimates reportedly put the figure at between three and five times the amount reported by the ECB.

The implication being that as many as 3.5 Million counterfeit Euro notes may be circulating.

Securing the Unsecurable?

Governments have issued negotiable instruments designed to function as fiat currency for thousands of years.  In almost every instance, criminals have attempted (and usually succeeded) to find ways to game the system and benefit from forged or altered versions of the currency.

In the United States, President Lincoln formed the Secret Service as a unit operating under the Treasury Department tasked specifically with battling the rampant counterfeiting issues in the nation at that time.  Estimates were that in the years leading up to Lincoln’s decision, as much as 1/3 of all US Dollars in circulation were counterfeit.

In ancient Rome, savvy forgers would hollow-out genuine Roman coins, stealing the valuable silver or copper used in their manufacture, and filling in the void with lead.  The problem was so common, that accepting a Roman coin for payment was typically accompanied by the receiver “biting” the coin to see if he could dent the metal with his teeth, since the lead coins were typically much softer and more malleable than their genuine counterparts.

In the end, the issuers of the currency are faced with genuinely difficult decisions to make.  Is it possible to create very high-security banknotes that can thwart counterfeiters?  Yes, of course it is.  But at what cost?  Looking at the Euro zone, at the end of Dec, 2013, over 17 billion Euro banknotes were in circulation.  This means that any process, procedure or element added to the production of the banknotes will ultimately create extreme costs for the ECB. 

For example, it has been proposed that unique barcodes, digital watermarks, heat-activated IC chips, and a variety of other technologies can be added to banknotes to make them secure.  But almost every idea must be cast-aside due to the per-unit cost of adding such a feature.  In an RFQ issued by the US government more than 15 years ago during the redesign of the US $5 note, an upper threshold of $0.0011 per unit (that’s 1/10^th of a cent) for proposed solutions was imposed on bidders.

Thus, most world currencies have remained focused on securing their notes using printing techniques and ink formulations designed to be read by either the human eye or by machines.  Most common are the use of infra-red, magnetic, optically variable and ultraviolet inks.  This mixture of security allows creative designs to be produced that enable both manual and automated verification of the notes. 

So What Should I do?

It may not seem fair, but business owners need to take proactive steps to protect themselves against the potential losses that might come as the result of the poorly-secured currencies that their governments require them to use. 

As mentioned above by officer Gentili, the truly specialized and expert forgers can make fake money that is so close to the real thing that the naked eye cannot detect them.  

Two quick and easy-to-use counterfeit detector products that any retailer, restaurant or other business that operates a cash register can use are the UV-16 or the CT550.  Each of these devices works on both dollars and Euros, and they are both low-cost and easy to use. 

Good fighting to you!