Bank Systems & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


10:45 AM
Bob Gibson
Bob Gibson
Connect Directly

Increased Vigilance Needed to Reduce Counterfeit Risk

With counterfeiting changing thanks to new digital technology, banks need to increase their detection capabilities.

Advances in low-cost digital printing have made it easier than ever to produce high-quality counterfeit bills. What was once a sophisticated operation requiring significant technical expertise and financial investment has now become somewhat commonplace. In 2013, $88.1 million dollars of counterfeit currency was confiscated, an increase of 9% over 2012. There’s evidence that more counterfeiters are entering the market, based on a 49% increase in the number of arrests made. As counterfeiting of US currency continues to rise, it’s become even more critical for financial institutions (FI) to arm themselves with the knowledge and technology they need to protect their organizations and reputations.

Currency redesigns occur more frequently
With over $1.27 trillion in circulation, the US government takes the issue of counterfeit deterrence very seriously. In 1996, it introduced the first significant currency redesign in 67 years, beginning with a new $100 bill. In 2013, only 17 years later, it introduced yet another significant design change for the $100 bill, adding two new security features: the 3-D security ribbon and the bell in the inkwell.

According to Larry Felix, director of the Bureau of Engraving and Printing, counterfeiting using digital technology is becoming more dominant in the marketplace. The new $100 bill includes “security features (that) work collectively to create layers of complexity that make these redesigned notes, including the new $100 note, difficult to counterfeit, but easy to authenticate.”

All it takes is once
For a counterfeiter to be successful, it only requires the individual to pass the note once. The counterfeiter has more choices than ever in terms of where and how to pass fake cash, including ATMs and self-service check-outs, not to mention the usual choice of retailers. The goal is to pass off the fake bill and receive real cash in return. Once the unknowing individual or company has the fake, that party may either pass it along or try to deposit it at a financial institution.

Depending on the quality of the counterfeit, many FIs will detect it and the depositor loses the value of that bill. If the FI does not detect it, it may unknowingly pass it along to another FI, such as a Federal Reserve Bank (FRB). If it gets as far as the FRB, the depositing FI will lose the value of the note passed, plus pay a fine. Regardless of whether an individual, FI, or business knows a bill is counterfeit or not, the organization that is caught with a fake is stuck with the loss -- and a potential fine. For small bills, this may not have much impact, but the majority of counterfeits are $50s and $100s, which can add up to a very costly loss.

Prevention is the best cure
Counterfeiting is increasing and so is the need to protect against this risk better. While counterfeiting will never be eliminated, organizations can take action to safeguard their profits. Currency handling and processing machines are not new to financial institutions and the commercial industries they serve. For decades, there have been machines capable of counting and denominating banknotes at higher speeds and with greater accuracy than manual cash handling can match. 

However, with the advent of newer security features, currency handling systems have become much more sophisticated. These advanced systems incorporate detection technologies such as optical ultraviolet (UV), infrared (IR) and fluorescence sensors, magnetic sensors, and many more. These technologies are supported by an exceptional detection and authentication algorithm. An effective currency processing system has to rely on information from multiple sensors. Its decision algorithm is relying on a complex, multi-parameter analysis designed into the system by its developer.

Currency scanning equipment with the most advanced form of counterfeit detection, plus the ability to read and record serial numbers, is essential for financial institutions to safeguard against fraudulent currency. Tracking currency by serial number (and retaining this information for future retrieval) and using advanced counterfeit detection machines can lead to significant reductions in the number of false bills accepted, plus an increased understanding of how counterfeits are entering their system. With this increased prevention and knowledge, organizations can make adjustments to their security strategies and improve their ability to prevent counterfeit money from being accepted.

The bottom line
As long as currency is circulated there will be counterfeiters trying to pass fake bills. The latest redesign measures taken by countries such as the US aim to thwart counterfeiters in their quest to forge bills, yet these cannot be the only measures taken. A currency counting machine with the ability to detect forgeries is vital for any business that handles substantial amounts of cash.

With more than 25 years of industry experience, Bob oversees the operations of Cummins Allison's 50-plus branches in the U.S.  Bob plays an integral role in ensuring that every branch maintains alevel of excellence in sales and service that Cummins Allison's customers ... View Full Bio

Register for Bank Systems & Technology Newsletters
Bank Systems & Technology Radio
Archived Audio Interviews
Join Bank Systems & Technology Associate Editor Bryan Yurcan, and guests Karen Massey and Jerry Silva from IDC Financial Insights, for a conversation about the firm's 11th annual FinTech rankings.