Counterfeit Money: Still Going Strong

In the month of October, U.S. law enforcement officials arrested people in North Carolina, Virginia and Kentucky for trying to use counterfeit money. Earlier this year, the U.S. Secret Service seized $8.4 million in fake U.S. currency that was being printed in Peru.

Though government statistics place the total amount of U.S counterfeit currency in circulation at less than 3 percent, Chad Wasilenkoff says technology has allowed counterfeiters around the world to become more sophisticated and those percentages are much higher in other countries. Wasilenkoff is CEO of Fortress paper, which manufactures security papers such as banknotes, passport and visa pages. Wasilenkoff spoke with CSO about the global state of counterfeiting in 2009.

CSO: Fortress makes several products that might be targeted for counterfeiting. Are the concerns different for each product?

Chad Wasilenkoff: They differ for each product and also for each country. Some countries have a high threshold or tolerance for counterfeiting. They recognize they aren’t getting the absolute most premium product and that they are not implementing every single security feature so they know it will result in a higher level of counterfeiting. But it’s a cost-benefit analysis. They recognize that many more security features would be just that much more expensive. So whether its banknotes, visa stickers, passport pages or something else, from country to country, there are variations of how many security features they want to put in. It all comes down to cost-benefit analysis.

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What countries have a low tolerance for counterfeiting and how does that play out in their currency?

In the banknote world, it is sort of a general industry acceptable standard to have approximately 100 counterfeits per one million banknotes. That is a typical rate for the Euro and that is what the U.S. targets for the dollar.

About five years ago Canada went through a counterfeiting crisis and their counterfeit rates went to about 1,200 pieces per million. They quickly had to change some of the security features. They couldn’t change the banknote entirely because it typically takes seven or eight years to design a banknote. So, they had to change the paper supplier because they were not able to make high enough quality banknote with the water mark and woven thread and some of the other security features. They had been getting their paper from a mill in Quebec and canceled that and went with a mill in Europe. So the banknotes now look somewhat similar but since they’ve changed their supplier, they have their rates back in line and last I heard it was now at about 80 pieces per million.

In which countries does a lot of counterfeiting take place? How widespread is it?

Maybe five or ten years ago, most of the counterfeiting of banknotes was done with US dollars. There were several large hubs in South America, particularly Columbia. The Secret Service in the U.S. is in charge of securing and maintaining the dollar. So they had teams in Columbia to stop these counterfeiting operations, which were mainly underground and basically just made fake money all day.

There were several ways they were accomplishing it. One was to take a real one dollar bill and bleach it out, scrub it with toothbrushes and other chemical agents, and then over print it as a $100 bill.

But things are starting to migrate. China is really starting to pick up with counterfeiting operations; not only with their own currency but also other international currency. There is also a steady amount of counterfeiting of the Euro, which is typically done in Eastern Europe. And in the UK, the problem is not that bad with the exception of one counterfeiter. Apparently this counterfeiter has been operating for about 15 years and they cannot track him down. They have done all of the forensic analysis and they know it is the same counterfeiter. He was previously counterfeiting 20 British pound notes. So they changed their series. And unfortunately he was quickly able to adapt. I’m told he accounts for about 80 percent of the counterfeiting in the UK. But they can’t seem to track him down.

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Also, in the industry there is something we call a ‘supernote,’ which is an incredibly high-end counterfeiter that we think is a full-scale commercial operation with notes coming at high volume that are high quality. There is hypothesis that there is one now based in North Korea that is turning out $100 bills of such high quality they are as good as the original.

You have stated you think the banknote world is a secretive world that needs to be more open? Why do you feel that way?

The industry in general is sort of an old-boys club. Even with our mill around for 130 years, we are considered a new entrant. A lot of the European banknote printers have been around 300 or 400 years. These companies are well established and they have a monopoly on a global level. They like to keep things quiet and they don’t want to upset the apple cart for obvious reasons; when you have a monopoly, it’s a strong position to be in and the longer you can maintain that, the better.

My view is: I dislike delusion. And if we lift the veil of secrecy and the process becomes more open, we’ll be able to raise the quality and reduce counterfeiting.