DHS Special Report | Secret Service stays on the trail of funny money

Digital technology makes counterfeit bills easier to create'and easier to detect

When it comes to IT-enabled crime, counterfeiters have gained some
helpful tools.

Once a crime committed by skilled professionals'
albeit professional criminals'
who put a lot of thought and effort into
their work, the easy availability of sophisticated
imaging software, and high-resolution
color printers and copiers, has turned
counterfeiting into an equal-opportunity
temptation that requires no special skills.

Just last month, for instance, a highschool
student in Florida was arrested after
using a fake $20 bill at his school's cafeteria.
He said another student had manufactured
$400 in counterfeit currency.

But standing in the way of wannabe
counterfeiters is the Secret Service, which
is using other technological advances to
thwart and catch them.

Protective services

The agency, formed in 1860 specifically to
combat bogus currency, continues to be the
first line of defense against counterfeiting.
Its twofold mission'to protect both the
monetary supply and key government offi-
cials'has evolved over the years to include
investigation of financial crimes that reflect
the digital age, such as computer and
telecommunications fraud, electronic funds
transfers and access-device fraud.

It was relocated to the new Homeland Security
Department in 2003, but 'operationally,
there were no changes to our mission,'
said agency spokesman Eric Zahren.
'Our work in the area of cybercrime, identity
theft, etc., stems from our core jurisdictions
of credit card and access-device fraud.'

Of course, 'counterfeiting [historically
has been] our bread and butter, what we
were founded for,' Zahren said. 'The U.S.
dollar is the most widely circulated in the
world. ... There are countries ... where the
dollar is preferred to their own currency
because of its stability and security.'

Over the past 10 years, the agency has
seen a significant change in counterfeiting.

'What we've seen in recent years is the
creation of 'digital notes''that is, currency
not produced through intaglio or offset
printing but high-definition copiers,'
Zahren said. 'Ten years ago, it would have
been less than 1 percent [of counterfeits
caught]; now it's over 50 percent.'

The shift toward digital notes is primarily
in the United States, Zahren said; overseas,
traditional counterfeiting methods are still
much more common, in large part because
they create higher-quality forgeries.

For instance, there are so-called 'supernotes,'
counterfeit U.S. currency reportedly
produced in North Korea, and which that
country uses to finance its government.

The supernotes are distributed almost
exclusively overseas, Zahren said.

'December of 1989 was the first time one
of these notes was detected,' he said. 'A
cash handler in the Philippines [caught it],
by the feel of the paper. People who handle
money all the time are pretty good at spotting
it, but with a little training anyone can
be brought up to speed.'

The $20 bill is the most commonly replicated
denomination here, while the fake
$100 bill is most common internationally.

In fiscal 2005, approximately $56.2 million
in counterfeit money was passed'that
is, used in a transaction resulting in a fi-
nancial loss to the recipient of the note'of
which $31.3 million was digitally produced.
Another $14.7 million in fake bills
was seized before they could be injected
into the economy. Internationally, $38 million
in fake money was seized that year.

There is about $750 billion in genuine
U.S. currency in circulation worldwide,
about two-thirds of it outside our borders.
The dollar amount of counterfeit currency
is notable for its smallness relative to the
size of the currency pool.

'About one one-thousandth of a percent
of U.S. currency in circulation [worldwide]
is counterfeit,' he said. 'We've managed to
keep counterfeiting numbers low relative
to the real thing ... and it's never been seen
in quantities where it would shake confi-
dence in the dollar.'

The Patriot Act authorized the Secret
Service to expand its national network of
Electronic Crimes Task Forces, Zahren
said. There are currently 24 task forces nationwide.

Reference collection

To aid in the hunt, the Secret Service
maintains a database of counterfeit
notes'at least of those produced the old-fashioned

'We ... ultimately get all the counterfeit
notes out there, whether from seizures, retailers,
banks,' Zahren said. 'We look at all
the notes to determine the method of
printing. ... For all the offset notes we see,
we look for the printing method, the ink,
the paper, all the defects. We keep at least
a couple of samples of each type of note
here at headquarters.'

All this information is entered into the
database, which the service refers to as the
counterfeit library and which is available to
Secret Service agents stationed around the

Other law enforcement officers at the
local, state, even international levels, once
they have been vetted, can also access the
database for information. And the counterfeit
library also is available online to banks.

The database is quite extensive and has
been in use 'for many, many years,' Zahren
said. 'There are a lot of notes in it.'

But instances of counterfeit digital notes
can't be compiled in a database in the same
way, he said. By definition, a color copy of a
real $20 bill isn't going to have printing or
design mistakes, and there's no good way to
distinguish among the many different
brands of ink-jet printer or color copier.

These limitations explain why several denominations
of currency have undergone a
redesign to introduce features that make it
easier to spot fakes, he said.

The redesign of the $100 bill, unveiled in
1996 and aimed at international counterfeiting,
introduced the larger, off-center
portrait of Benjamin Franklin, along with
less-obvious changes'among them, a watermark
visible only when held up to the
light, color-shifting ink, a security thread
that can only be seen in ultraviolet light and
microprinting invisible to the naked eye.

The redesigned $20 bill, introduced in
2003, includes these measures and others,
such as the use of subtle colors and additional
symbols added to the design. The $5,
$10 and $50 bills also have been overhauled
to incorporate new visual and technological
impediments to counterfeiting.

The new colors of money

The new $10, which began circulating in March, retains three security features introduced in the mid-1990s that cannot be produced by digital copying and which are easy for consumers and merchants to check: color-shifting ink, watermark and a security thread.


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