Making Money Keeps Getting Easier Making Money Keeps Getting Easier

September 1, 2000

Recently, a young man approached the cashier at a local McDonald's and paid for his hamburger with a $20 bill. Next in line was his friend, who did the same thing. After that came a third. Nothing unusual in all of this, except that all three had produced the $20s at home on a desktop computer. Although the quality of the phony bills was high enough that they were initially accepted, the trio was almost immediately apprehended once suspicions were raised about how three counterfeit bills all ended up in the same drawer on the same day, and the cashier recalled one of the youths. ? Welcome to the new face of counterfeiting. Whereas it once was an expensive and laborious process to reproduce a high-quality U.S. greenback - not to mention the difficulties in laundering the large quantities of cash needed to repay the investment - today's color photocopiers, scanners, and ink-jet printers have opened up counterfeiting to a new breed of criminal. Younger, more comfortable with technology, and sometimes with no prior criminal record, the easy availability of technology has tempted some into committing a serious felony who otherwise might never have dreamed of taking such a risk.

Last year, counterfeiters produced an estimated $180 million in bogus money. While this total is fairly small when compared to the $500 billion in U.S. currency in worldwide circulation, there are several recent trends that are a source of concern. First, after a decline in counterfeiting in the mid 1990s, the total amount of counterfeit currency has been rising since 1997, driven entirely by an increase in computer-generated money. In 1990, counterfeit currency produced by technological means accounted for only $1 million. By 1992, it had increased to $6 million. Today, it accounts for $72 million, just under 40 percent of the total. Second, after decades in which counterfeit money was much more likely to be seized at its source than it was to be passed into circulation, in the last two years the trends have reversed - for the first time in modern history - with domestic counterfeits now three times more likely to be passed than seized. Consequently, although counterfeiting remains fairly rare, the threat behind these trends has gotten the attention of law enforcement.

The battle between counterfeiters and the law is not new; it is as old as money itself. From the first Roman coins to the invention of paper money in twelfth century China, thieves have found a way to make their own cash, and authorities have tried to stop them. Before sophisticated anticounterfeiting techniques were invented, some money carried its own warning of "Death to Counterfeiters!” right on its face, in the hope of deterrence. In the United States, counterfeiting had become such a problem by the time of the Civil War that an estimated one-third of the paper currency in circulation was counterfeit. In 1865, Abraham Lincoln chartered the Secret Service, with the mission of reducing counterfeiting. (Still part of the Department of the Treasury, the Secret Service didn't begin presidential protection duties until after President McKinley's assassination in 1901.) Over the years, the war between the government and counterfeiters has grown ever more sophisticated, with each new advance in technology opening up a new opportunity for the illegitimate production of U.S. currency and new efforts to fight it.


Until fairly recently, the techniques available to counterfeiters had not changed much in the twentieth century. Using photographic plates, stencils, and offset printers, counterfeiting was the exclusive domain of the professional criminal, who over the years would hone his craft in an attempt to overcome the security features of U.S. currency. Primary among these is the printing method of money itself - the "intaglio” technique - where heavy presses force ink deep into the paper, to create the distinctive "raised” feel that is recognizable to anyone who has ever handled a Federal Reserve Note. Offset printing can only imperfectly re-create such an effect but, with care, the result is often good enough to pass. It is the feel of currency more than any other feature that usually thwarts counterfeiters. Most counterfeits are slick and flat.

Numerous other security features, from intricate scrolling to the use of both green and black ink to the use of special paper, have historically presented roadblocks for all but the most determined thief. Some features of money are especially hard to reproduce, such as the fine red and blue fibers (made from the same material as Levi jeans) that are embedded in the paper of American money. Many counterfeiters omit these all together, or simply draw them on with a pen.

After producing an acceptable reproduction, the typical counterfeiter would repay his efforts by producing high volumes of cash, then face the difficult task of passing a large quantity of notes, normally leaving a trail both forward to the fence who would launder it and back to the supplier of the special ink and paper. The conspicuous nature of such large-scale activity routinely led to tips gathered by the Secret Service, whose success in seizing large quantities of fake money prior to its circulation has been legendary.

Today, counterfeiting requires a much smaller initial investment and, consequently, a smaller amount of product to make it profitable. A good color scanner, computer, and laser-jet printer, capable of producing passable-quality "P-notes” (short for "printer notes” ), can be had for about $1,000. This point was brought home in the early 1990s, when Envisions Corporation ran an ad proclaiming that "No other scanner can scan a hundred bucks and capture the hidden detail as well as ours,” until the Secret Service asked them to stop.

This lower threshold not only allows someone to print money anonymously at home, but also frees them from the need to rely on others to launder large amounts of cash. Thus, even though P-notes tend to be slightly lower in quality than offset notes, they are less likely to be seized and more likely to be passed into circulation. This is almost a recipe for attracting youth, and it is significant to note that 17 percent of today's counterfeiting cases for P-notes involve juveniles. Still, it is a mistake to suppose that all of the P-note problem has been due to youth or that desktop counterfeiting is done only by the casual criminal. According to Bruce A. Townsend, Special Agent in Charge of the Counterfeit Division of the Secret Service, there has been a recent proliferation in digital counterfeiting by street gangs and links with the drug trade.

The cumulative result has been an explosion in the number of counterfeiting operations, each producing a relatively small quantity of money, good enough to be passed at retail outlets. No longer able to rely on the seizure of large blocks of cash, the Secret Service has seen its domestic seizure rate fall steadily, from 70 percent in 1995 (when P-notes still accounted for only 10 percent of all counterfeits) to 26 percent today. Consequently, a growing number of counterfeits are being passed on to the public, and it is this more than the total amount of counterfeit money being produced, that is of greatest concern.

Of course, not all counterfeits are produced with high-tech methods. One common low-tech method is the "raised note,” where the edges of a lower denomination bill are removed and replaced with those of a higher denomination bill. In a quick transaction at a cash register, George Washington's portrait on a $10 bill might escape notice. But this method remains fairly unpopular, since the low quality of these bills carries a significant risk of detection.”

At the higher end of the quality spectrum are some of the counterfeits made overseas. Foreign counterfeits - which are still predominantly made using offset printing methods and account for over 80 percent of all offset notes - have represented the majority of the total volume of counterfeit U.S. currency produced in four of the last five years. With two-thirds of the total U.S. currency supply held overseas, the $100 bill is more common abroad than it is in the United States. Perhaps for this reason, the most commonly counterfeited bill outside the United States is the $100 (domestically it is the $20).

Some of the best counterfeits come from Colombia, which itself accounts for 80 percent of all foreign counterfeits. To avoid the problem of detection by feel, "Colombian notes” are printed on bleached $1 bills that are then converted into $100s. The quality of these bills is extraordinarily high, and they are virtually undetectable by the average citizen. Smuggled into the United States, the Secret Service estimates that up to one-third of all counterfeit money in circulation domestically is Colombian in origin. Recently, another bill has arrived from Russia, so good that it reproduces virtually all the security features of U.S. currency, except the pattern of the magnetic ink that eventually gives it away when it reaches cash processing at the Federal Reserve.

The best-quality foreign counterfeits, however, are those that are produced using intaglio methods, on the identical presses used by the U.S. Bureau of Engraving and Printing. Given the expense of such presses, and their availability only from a single manufacturer in Switzerland, the Secret Service suspects foreign government involvement, by such countries as Iran or Syria, in the production of these "superbills.” Fortunately, the "pass rate” for counterfeit U.S. currency overseas is extremely low, as a result of its detection and seizure in large quantities before it goes into circulation. Still, even ”the Secret Service acknowledges that there may be radical underreporting of counterfeit U.S. currency being passed outside the United States, given the diverse practices of law enforcement agencies and banks abroad. One encouraging facet of foreign counterfeiting, however, is that so far the number of foreign P-notes has been miniscule, as computer technology has not yet penetrated as far as it has in U.S. markets.


Surprisingly, it is not in and of itself a crime to reproduce the image of money, so long as it is done within certain guidelines and without the intention to defraud. It is legal to reproduce U.S. currency at a size that is 75 percent smaller, or 150 percent larger, than genuine notes - even double-sided - so long as it is done in black and white. These, it is felt, could not be confused with real money. Color illustrations of U.S. currency have recently been legalized, so long as the size requirement is met, the illustration is one-sided, and the negatives are destroyed after the art is created. Prior to this, a color photograph of a basketball hoop stuffed with $100 bills took Sports llustrated all the way to the U.S. Supreme Court. Not long ago, the photographs used to illustrate the article you are now reading would have been illegal.

When passing counterfeit, the intention to defraud is all that matters, and you are criminally liable even if you did not make the bill, so long as you knew it was counterfeit. If you didn't know the bill was counterfeit, technically there is no crime, though the Secret Service will confiscate it (with no compensation, for obvious reasons), and you will have to explain how you got it.

What happens to a counterfeiter when he (they are almost always males) is caught? These days the penalty is something less than death, though still a hefty fine and up to 15 years in a federal prison. In practice, the actual sentence depends on the offender's age and criminal history. If the offender is a youth who is committing his first offense, his equipment is usually seized and, after pleading guilty, most receive probation and a consequent criminal record. However, the growing threat from P-notes has forced the Secret Service to up the ante against even small-time operators, in order to deter others. With a zero-tolerance mandate, every case is investigated, and most small-time offenders are caught immediately. As Timothy Feeley, a federal prosecutor at the U.S. Courthouse in Boston, recounts, most of the kids, at least, tend to be better at computers than they are at covering their tracks, and have no real "exit strategy” in mind for how they will get away with the crime. The majority of P-note cases involving youth are closed within a few days of the bogus script making its way to the Secret Service.

The best way to stop counterfeiters, of course, is to deter them before they start. Anticipating the growing threat from desktop counterfeiting, U.S. currency was redesigned in 1996. On the redesigned bills (called "big-heads” by professional currency handlers), several new features make it more difficult to copy and easier to verify a larger off-center portrait, the watermark portrait on the front and back of the bill, a security thread in the fiber of the bill itself (which was actually added in 1990), additional microprinting, and color-shifting ink in the lower right-hand corner. Nonetheless, it was only a matter of months before the new bills started to be counterfeited, including all the new security features. Yet, the redesign appears at least to have raised the bar.

"If people took the time to really look at their money, 90 percent of counterfeiting could be wiped out,” says the Secret Service's Al Richmond. Still, most people are reluctant to heed this advice, and any effective scrutiny of currency for counterfeits by the general public - other than an occasional retailer - remains uncommon. The next line of defense is banks, where tellers screen bills at the time of deposit, based on a training program outlined by the Secret Service. In cash processing at the Federal Reserve, sophisticated machinery and expert human eyes weed out the rest.

At the Federal Reserve Bank of Boston, approximately twenty to forty counterfeit notes a day are discovered - most often the $20 bill (and virtually never the $1 or $2, which few bother to counterfeit). As of yet, most counterfeits are still the old-style bills. With six decades to hone their craft in reproducing them, and the high cost of changing offset plates, most offset counterfeiters will not make the switch until the old bills become rare enough to attract special attention. Similarly, according to Timothy Feeley, very few offset printers have switched over to computer technology. Because of the costs involved - and the slightly higher quality of offset notes - there would be little incentive for a former offset printer to begin making P-notes.

Yet, through attrition, counterfeiting will inevitably shift to high-tech methods, and this is where the Secret Service hopes that the currency redesign will pay off. For just as technology has made it easier to counterfeit money, there are also several weapons in the technological arsenal to fight it as well. Some office copiers, for instance, have a chip installed that will recognize currency, and print out a black sheet (and require a technician's visit to reset it) if money is copied. Another embeds a microscopic serial number on every copy it makes, so that the Secret Service can trace a fake directly to its source. Any such technological assistance in facilitating seizures is especially welcomed by the Secret Service, since preventing a counterfeit bill from being passed into circulation is so important; once a counterfeit has been passed, the damage has been done.


The Secret Service estimates that counterfeits account for less than 3/100ths of 1 percent of all U.S. currency. Others would place this figure somewhat higher, questioning the optimistic assumption that most counterfeits are detected and taken out of circulation almost immediately. Still, by any estimate, counterfeits remain rare, though still prevalent enough that each of us has probably unknowingly passed several counterfeit bills in our lifetime.

So long as the money is accepted, we might wonder, who really loses? Like a game of musical chairs, the person who is left holding the counterfeit bill when it is discovered is the only one who takes a direct financial loss. Yet, all of us ultimately bear some of the cost of counterfeiting. The higher prices that we must pay for the goods and services of banks and others who must recover their losses - which, when distributed across every man, woman, and child in the United States, comes to a mere 15 cents per person per year - is only a small part of it. The 1996 currency redesign, a large portion of the budget for the Secret Service, and cash processing at the Federal Reserve Banks all must be included in the final price tag. Beyond this, there are the "intangible” costs of the inconvenience of having to check our money and the erosion of public confidence in our currency that might arise if the threat from counterfeiting escalates. If it goes far enough, our society might even evolve into one that relies less on cash, and more on checks, plastic, and "electronic” money.

The computer revolution has marked a new chapter in the never-ending race between counterfeiters and the government. Already, scientists at Johns Hopkins University and elsewhere are investigating the possible role of holograms, plastics, and other materials that may be used to manufacture our money in the future. Still, no matter how sophisticated, there is no such thing as a "counterfeit-proof” bill. The best that we can hope for is to keep up. Says the Secret Service's Bruce Townsend, "You build a ten-foot wall, the other guy builds a twelve-foot ladder.”

How to Detect Counterfeit Money

1 The ability to recognize a human face is one of the most amazing capabilities of the human brain. Perhaps for this reason, nearly all the world's currency features a portrait. The portrait on a U.S. banknote provides one of the best and easiest ways to detect counterfeit money. A genuine portrait appears lifelike and stands out against its background. A counterfeit portrait is usually flat and lifeless, with details merging into the background, which is often dark or mottled. As we see on this P-note, even a good copy can be distinguished on this basis. That is why, on the newly redesigned currency, the portraits have been made much larger.

2 This Colombian note is one of the best counterfeits made. A bleached $1 bill is overlaid with $100 printing, making detection by feel all but impossible. The offset printing is so good that even visual detection is difficult. One subtle difference: On genuine money, the Treasury seal and denomination of the bill are vividly distinct from one another, the result of two separate printing processes. The particular shade of green used for money is also hard to reproduce exactly. If in doubt, compare a suspect note to a genuine one, and look for differences, not similarities.

3 The fine lines in the border of a genuine U.S. bill are clear and unbroken. On a counterfeit, the lines in the outer margin and scrollwork may be blurred or indistinct. The detail in this office-machine (photocopied) counterfeit is poor, and, under magnification, one can even see the tiny colored dots made by the toner. Despite its poor quality, this bill made its way into circulation and was accepted by a commercial bank before it was caught at the Federal Reserve.

4 Genuine currency paper has tiny red and blue fibers embedded throughout. Often, counterfeiters try to simulate these by printing red and blue lines on their paper, but close inspection reveals that they are only on the surface. On this counterfeit, the quality of the paper is so poor that no concern was given for such subtleties. It is a felony to reproduce, or even to possess, the distinctive paper that is used in the manufacture of U.S. currency.


Coin Counterfeiting

Perhaps the most surprising thing about coin counterfeiting is that it is done at all. One sometimes hears of "slugs” put in parking meters but, beyond that, what would motivate someone to try to reproduce a coin? Most coin counterfeiting is done to simulate rare coins of numismatic value. Commonly, this involves either adding, removing, or altering a feature of a genuine coin, to increase its value to a collector. But, some counterfeiters actually go to the trouble of reproducing a whole coin from scratch. The most common method is "casting,” which is done by pouring liquid metal into a mold; genuine coins are "struck” on a machine at the mint. Casting is a poor method of reproduction, as it generally leaves small pimples on the metal. The most effective way to detect a counterfeit coin, however, is by weight. Most genuine U.S. coins vary in weight by as little as 1 percent, while fakes are usually heavy or light.

Still, some try to get away with it. Last year, a number of counterfeit quarters turned up in New Hampshire and Massachusetts, consisting of silver spray paint on a copper blank. They were passed in rolls to businesses and in vending machines. The Secret Service is still investigating their origin. If their manufacturers are caught, they face the same 15-year sentence as someone who counterfeits currency. Which, more than anything, probably explains why coin counterfeiting is so rare.

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