Globally we are in an age which is driven by technology and one in which people tend to think that whatever the problem is, there will be a way around it.
And yet, even in the 21st century we still have a problem with counterfeit money.
This problem is as serious in developed and Western countries, as it is in poorer, less developed countries. So for once, the problem is not a isolated to the Third World or under developed countries, it is a problem and that affects all countries and all different types of currencies.
So, despite the fact that we live in a very developed age, we have still not been able to solve this problem completely and indeed it is likely that we will never completely eradicate the problem of counterfeit money.
Even the euro, which was only launched in 2002 has been the target of counterfeiters, indeed some experts now believe that it is the desired currency for counterfeiters, who have turned their attention away from the US dollar and now concentrate on the euro.
Counterfeit notes or coins tend to be referred to as one group, however, strictly speaking there are two sub groups of counterfeit money. The first is seized money. That is money which the police or secret service managed to seize before it actually hits the streets and it is not passed on to members of the public. The other group is passed notes or coins. These have actually been brought into the market and have been passed as genuine notes or coins.
Historically, the police or secret service managed to seize a lot of the counterfeit money before it got into circulation, but now more and more fake coins and notes are somehow managing to be passed as genuine.
History of counterfeiting
The history of counterfeiting money is quite a long one. This is actually because ever since money was invented and started to be used on a regular basis, people have attempted to replicate it.
Prior to the introduction of bank notes, money tended to be issued in the form of either gold or silver coins. To some extent this was quite easy for counterfeiters, they simply mix some metals in with gold and silver, to create coins, which would look like the standard coins in use. The difference was that the counterfeited coins were actually of a lesser value than the standard gold or silver coins.
Some less than honorable people also used to clip coins, where they would shave bits off the coin. When you had collected enough shavings, then you could start to make some counterfeit coins.
This was always a problem for the government of the day and they often exacted harsh punishments on the people who had produced a counterfeit coins. People were even hung, drawn and quartered for this offence, which is certainly not a nice way to die and it seems quite a draconian sentence for shaving 40 silver coins. However, the guy in this instance may have come off better than his wife, because she was burnt at the stake. Yet despite these draconian sentences, counterfeiters still took the risk and have always come up with new and innovative ways of replicating the currency.
One interesting episode in history involves the British government using counterfeit money in the Revolutionary War, which lasted from 1775 until 1783. This war is also referred to as the American War of Independence.
The British got a huge amount of counterfeit money and then flooded the American market with this money, so that the Continental Dollar, which was the currency in use at the time, would significantly lose its value. It did work and is a good illustration of just how powerful counterfeit money can be.
The American dollar and counterfeiting
Although the euro may have overtaken the dollar, in terms of being the counterfeiters favourite, the dollar has certainly attracted her fair share of counterfeit attention.
In 2007, it was estimated that around one in every 10,000 notes could possibly be a fake. It was also estimated that the direct cost of counterfeiting i.e. the cost to people who had lost money, as a result of getting counterfeit notes was actually in the region of $62 million. This figure shows just how serious the problem of counterfeiting is. And it is quite a scary thought that despite the technological advances from the year 2003, counterfeiting is actually up by 69% from that date.
So America is certainly not winning the war against counterfeiting. And around $62 million of its economy is actually fake money. But that is just the money that we know about, there could well be more in circulation.
It certainly seems to be big business for the people involved and we don't even know how many are actually involved in these operations.
The Euro and counterfeiting
It really is quite strange that the euro has become the currency of choice for counterfeiters. Given that it was only launched in the year 2002, you would think that it would be protected by all the latest anti-counterfeiting technology and that as a currency it would actually be counterfeit proof.
However, this is far from the case and ever since its inception in 2002, counterfeiters have managed to get a great many counterfeit euros in circulation. Sadly for the euro, it is not just coins that have been counterfeited, but notes as well.
The figures involved in this counterfeit activity are actually quite hard to estimate. Primarily this is because counterfeiting is obviously an illicit activity and as such counterfeiters do not boast about how much they have produced or where they have introduced counterfeit notes. This makes the problem harder to solve, because authorities don't even know how serious the problem is.
However, 2004, French police were able to take a total of around Є1.8 million, in the form of 10 and 20 euro notes, out of circulation. It is thought that over 140,000 notes had already been circulated.
Euro coins have also been subject to counterfeiting and over 585,000 counterfeit euro coins have been detected and then taken out of circulation, since 2002.
This may seem inordinately high, but when you think that there are €75 billion coins in circulation, then this figure does seem quite low.
However, figures released by the European Commission indicate that the number of counterfeit coins identified in 2007 were higher than 2006. The number of counterfeit coins ceased was actually up by a staggering 29%.
The €2 coin is actually the easiest coin to counterfeit and it represented something like 85% of all counterfeit coins.
The European Commission has responded by saying that they feel that although many fake euro coins are in circulation, most countries that have joined the euro actually find that the counterfeit rate is lower, than when they had their own unique national currency. However, the European Commission has not issued definitive facts and figures on this subject, it has merely indicated that this is the case.
Why is counterfeiting a problem?
Counterfeiting is a problem in two ways. Firstly, when counterfeit coins or notes come onto the market, their use actually defrauds the central bank that has issued them and so, they lose money. A secondary aspect to this first reason, is that counterfeiters also do not pay any tax on their incomes (they are hardly likely to declare counterfeit activities on their tax return) and so the government loses out again, through losing potential revenue. Potentially, too many fake notes and coins in any currency can lead to problems such as inflation, because there has been an artificial increase in how much money is actually being circulated. This is yet another reason why governments are keen to stamp out the counterfeiting of any currencies.
The second aspect to counte
rfeiting is that it defrauds the individual who is given that coin or note unknowingly. They may accept it in change from a store, in all good faith. But when they try to use it in the next store, their coin or note may be refused on the grounds that it is a fake. Obviously with some of the higher denomination notes, this can leave people seriously out of pocket and is a major inconvenience to them. So it is not just a crime against the government, it is also a crime against the person who ultimately receives the counterfeit note or coin.
Counterfeiters tend to be amazingly flexible and clever. They have the technical ability to be able to produce coins and notes, which very closely resemble the real thing. Were they to channel their energy and ingenuity into lawful activities, they would probably find that they could make as much if not more money, than they do counterfeiting.
An example of just how ingenious they are and how speedily they work, is the fact that as early as 2003, when the euro had only been in circulation for a just over year, over 500,000 fake Euros notes were taken out of circulation, along with just over 27,000 fake euro coins. So the counterfeiters had obviously had a very busy year to be able to produce so many fake notes and coins in just over a year.
What is done to prevent counterfeiting?
Governments and Treasuries all around the world are working hard to develop money that cannot be counterfeited, or at the very least is exceptionally difficult to counterfeit. Holograms are often included in bank notes to prevent fraud Some notes have specific inks, which will change colors, if they are viewed in a different light. Some have strips embedded into them, which are fairly difficult to replicate.
Often Treasuries will make use of a variety of inks in different colors, to try and discourage people from making the effort to forge it.
Experts believed that digital counterfeiting technology is developing rapidly and so it may be necessary to replace every banknote every 7 to 10 years. This would mean that Treasuries could stay just a little bit ahead of the counterfeiters and so hopefully reduce the amount of counterfeit notes that are in circulation.
Polymer notes are also introduced in many currencies, because these are much more difficult to forge and so act as a good deterrent against counterfeiting.
How can you tell if money is counterfeit?
Since counterfeit money is such a problem worldwide, if you are traveling, or even at home, you should always try and check your notes to ascertain whether or not they are counterfeit or genuine.
When looking at US dollars, you should look at the printing quality. Genuine notes will be printed to a very high standard and they will have no blurry areas. In addition the borders will be very crisp, clear and unbroken. Fake notes often have small blurry areas and the borders may not be continuous.
Genuine US dollars will all feel the same in terms of the quality of paper. So if you do suspect that a note may be fake it is worth checking the quality of the paper is the same that is used for other notes. If it is the same, then it is likely to be genuine.
When you go traveling, it is also important to check currency, particularly in any countries where there may be significant problems with regard to counterfeit money. It is obviously more difficult for travelers to identify any counterfeit notes, because you are not familiar with the currency.
One thing that you should be very careful of when traveling is to avoid on the street exchangers. These are people who will come up to you and ask whether or not you want to exchange money. Many of them may offer you a particularly good rate of exchange, but if the money they give you is counterfeit, then you really will not have got a bargain at all.
Often these exchangers will present you with some genuine notes at the top of the pile of money that they give you and there will be some genuine notes near the bottom. But the notes in the middle may all be counterfeit and as such, you will have been ripped off. And the worst thing about these types of exchanges, is it you have no legal redress and you probably won't be able to find that person again, to get your money back. Some of them may be quite unsavoury characters, so even if you do find them, you probably will not get your money back and they will simply deny everything. So the moral of the tale is, go to a bank or a bona fide exchange centre.
You should also beware that in some countries it can be illegal to exchange money informally, which means that if you do get ripped off and you go to the police, you could end up facing arrest and they probably will not do much to find the person that you exchanged money with.
So, once you have withdrawn money from an ATM machine or you have gone to the bank and exchanged some money or cashed your traveler's checks, how do you know if they are genuine?
Well again, you should check also notes and see whether or not they look the same. If one seems significantly different from the others, then you should check it out more thoroughly or a take it to a bank, preferably the bank that you got it from in the first place.
If there is a watermark or a strip embedded in the note, then check that it is not broken.
If you do have difficulty, then ask somebody in your hotel how to spot a fake note and take their advice, about how you can make sure that you only received genuine notes.
Counterfeiting: the future
Unfortunately, it looks as if counterfeiting will be with us for as long as we have money. Some experts believe that even if we develop digital or electronic money, this will still be subject to counterfeit activity, so basically no system of money will ever be safe and secure enough, to be completely counterfeit proof.
Given that there may well be in the region of over $60 million in the US economy that are counterfeit and these are the ones that we know about, it suddenly becomes clear just why this is such a big business and why counterfeiters will risk going to gaol if they are caught.
Counterfeiters often protest that they are not all that bad, because there crime is really against the government and the state. However, for the people who are passed the fake notes and the fake coins, it is a very real crime and a crime against them, not just the state. So that is why people get very angry about counterfeit money, and quite rightly so, because they have basically been defrauded.
And yet, no matter how sophisticated money printing techniques become, the counterfeiters never seem far behind.