The inseparable history of currency and counterfeiting
16 October 2019
Counterfeiting is the enemy of currency, a pernicious crime used by individuals or gangs for personal gain or in the political arena to “destabilise rival countries” as a recent article by the Reserve Bank Australia (RBA) reports.
Whilst the antithetical pair are on the one hand powerful forces working against each other, their history is one of close convergence.
This practice of forging dates back to the earliest forms of currency. In around 400BC Greek coins were manipulated by covering a less valuable metal with a layer of precious metal.
In 17th century England, Sir Isaac Newton, the man who theorised the laws of motion and gravity, was tasked with bringing counterfeiting under control after levels had risen to one in ten coins. His investigation led to the hanging of William Challoner for high treason.
Britain was subject to attempts by the Nazi Party to weaponise counterfeiting during the Second World War. By dropping forged pounds on the Isles, Germany hoped it could force hyperinflation. The operation never materialised; the money was instead used to purchase supplies for the war effort. So real was the threat however, the British authorities ceased to issue notes greater than £5 and it wasn’t until 1970 that the £20 note returned to circulation.
Banknotes were first issued (properly) in Australia in 1817 by the Bank of New South Wales (now Westpac), setting in motion a long period of counterfeiting until 1966, when it was hoped the switch to decimal currency would bring the problem under control.
However, barely a year later one of the largest counterfeiting episodes in Australian history took place, worth around $12.5 million in today’s money.
A crime syndicate was releasing large numbers of forged $10 notes, where the horizontal lines on the Times Bakery building featured on the note were aberrant with the vertical edge of the building. The ordeal became known as the ‘Times Bakery Incident’, resulting in charges successfully being brought against seven people.
Moving forward to 1988, the battle against counterfeiting took a favourable turn for central banks when banknotes issued on plastic substrate, now known as Guardian polymer, were first introduced in Australia.
The polymer commemorative $10 note contained the world’s first transparent window and hologram, making it the most secure banknote of its time and revolutionising what was possible for security features.
As new security features are introduced, counterfeiters will usually develop techniques to mimic them. Recently, the RBA launched the Next Generation Banknote program on Guardian to address increased counterfeiting rates. When the new $5 and $10 notes entered circulation in 2016/17, counterfeiting crime was reduced by 20% the following year.
CCL Secure worked closely with the bank to design and develop the innovative new notes. Featuring a complex top-to-bottom window, along with a number of additional security features, the notes are extremely difficult to replicate. The launches of the new $50 and $20, and future issuance of the new $100 note, are expected to reduce rates even further.
The outstanding success of Guardian polymer has not been limited to Australia. In every country where Guardian has replaced paper, counterfeiting has dropped significantly.
For example, in New Zealand, the Reserve Bank of New Zealand introduced Guardian polymer notes in 1999 and found the number of counterfeit notes fell from around 16 notes per million annually during the 1990s to an average of less than one note per million annually from 2001 to 2009.
Canada experienced a similar impact when it introduced Guardian polymer notes; the Royal Canadian Mounted Police reporting a reduction of 74% in 2015 from the previous year of counterfeit banknotes passed onto retailers.
Mexico arguably provided the blueprint for fighting currency criminals. When the Guardian polymer $50 note was introduced in 2006, counterfeits of the denomination reduced from 249 notes per million to 31.6 notes per million , making it the second least counterfeited where it has previously held the highest rate.
The response from criminal gangs was to turn to experts in a bid to outfox the authorities, deploying advanced printing technology, commercial and automotive inks and commercial software to aid image manipulation. As a result, a large number of counterfeits re-entered circulation in 2010.
In 2012, the tide turned once again thanks to the arrest of a criminal gang and the launch of a new $50 note on Guardian polymer, featuring a more sophisticated design and returning counterfeit levels back to pre-2010.
The Mexican case study taught us that as technology advances and security features continue to improve, so too will the sophistication of counterfeiting; it will always exist alongside currency.
Guardian’s introduction has undoubtedly been a game changer for central banks in minimising the threat. Key to continued success is the ability to evolve at a faster rate than those looking to undermine the stability of monetary systems around the world.
CCL Secure is committed to investing in R&D and continues to improve its substrate and security features in order to mitigate the risk. While the threat will never be completely defeated, Guardian polymer has a proven track record of reducing counterfeit rates around the world.