Counterfeiting in Australia

Counterfeiting of Australian banknotes is approaching its lowest level in a decade. The Reserve Bank of Australia (RBA) has carried out an analysis of the factors playing a role in this decline and quantified their effects. The report – Recent Trends in Counterfeiting – has been published in its June Bulletin.

Counterfeiting in Australia has been steadily declining since its peak in 2015. The Bank received around 17,000 counterfeits in 2021 with a total value of just over $1.3 million – a small amount relative to the total number of banknotes in circulation (c. 2 billion notes, worth £102 billion). The counterfeit ratio is currently 9 ppm. At its peak, in 2015, it was 27 ppm.

THE RBA has attributed the decline between 2015 and 2019 to law enforcement shutting down several counterfeiting operations, and the roll-out of the NGB series with upgraded security features. The NGB series began with the introduction of the new $10 in September 2016, and concluded with the new $100 in October 2020.

More recently, the pandemic has played its part, with lockdowns not just reducing cash payments, but also counterfeits being passed. The states and territories that experienced longer and more stringent lockdown restrictions – in particular, Victoria and New South Wales – had notable reductions in counterfeit detections.

Traditionally, the $50 has been the most counterfeited denomination, but in 2020 it was overtaken by the $100 for the first time. The reason given for this is that counterfeiters have focused on the previous series. As the new $50 was introduced a year before the new $100, there are proportionately fewer old $50 notes in circulation compared with the old $100 notes, and counterfeiters have therefore switched their efforts to.

All genuine Australian banknotes have been printed on polymer substrate since 1996. There were relatively low levels of counterfeiting until about 2010 when counterfeit detections began to rise steadily.

Initially counterfeits were produced on paper, but by 2015, polymer had become the predominant substrate, and counterfeiting operations using polymer were typically producing a relatively high volume of counterfeits that were of reasonably high quality.

Currently, around 60% of counterfeits are printed on polymer, compared to just over 20% a decade ago.

Despite the rise in polymer counterfeits, to date there have been very few counterfeits of the NGB series, with only about 50 detected. The NGB program incorporated new and upgraded security features, with the goal of ensuring these banknotes were more difficult to counterfeit. All NGB counterfeits detected have been of low quality.

Unsurprisingly, the decline in counterfeiting in recent years has correlated closely with the staggered release of the NGB series. Counterfeit detections for the denominations most commonly used in ATMs – the $20 and $50 banknotes – declined after the upgraded versions were issued. Detections for the $5 and $10 banknotes also declined after their upgrade, albeit from low bases.

The RBA also acknowledged that there are other factors – including, as noted earlier, law enforcement shutting down several counterfeiting operations, fewer banknotes being used for transactions and recent lockdowns.

To disentangle the effects of these factors and isolate the effect of the banknote upgrade, it used a regression analysis, the results of which supported the theory. After controlling for other factors, a 10 percentage point increase in the NGB saturation rate for higher denominations (the $50 and $100 notes) reduces the average number of counterfeit detected each month by 70 (around 5% of recent monthly detections).

Overall, the results indicate that the NGB program met its intention of reducing counterfeiting. While the reduction may not seem large, at higher saturation rates the reduction can be sizeable. The results also suggest that as the NGB series becomes more prevalent in the economy, counterfeiting rates could decline further.

On the other hand, as counterfeiters become more familiar with the enhanced sophisticated security features and technology continues to evolve, this trend may reverse. Lower cash use may also reduce the public’s familiarity with banknote security features, making it easier to pass counterfeits.

The full report can be viewed on the RBA website – www.rba.gov.au/publications/bulletin/2022/jun/recent-trends-in-banknote-counterfeiting.html.