Best Practices in Level 3 Feature Selection and Use

At the end of March, the International Association of Currency Affairs (IACA) held a members-only webinar which focused on the best practices in Level 3 security feature selection and use.

Authentix hosted the event with Richard Wall, IACA Chairman and former Managing Director of Currency at the Bank of Canada, as the panel moderator. The panel included Gregorio Sanchez, Deputy Manager of Industrial Engineering at the Banco de Mexico, Alan Newman, Currency Product Director at De La Rue, and Timothy Driscoll, CTO of Authentix.

The webinar, attended by around 100 people, covered methodologies and criteria for Level 3 security feature selection, their desirable properties, and how to successfully integrate these security features into the banknote production environment and central bank banknote processing ecosystem.

The webinar began by framing the role of Level 3 features with respect to the other security elements on a banknote. Level 1 features are designed for public use, although awareness is often poor. Level 2 security features are machine readable. Detectors are commercially available, making the features susceptible to attack by savvy counterfeiters. Level 3 security features allow high speed sorters to authenticate banknotes to an extremely high level of certainty. They give central banks the ability to detect and remove from circulation advanced counterfeiting attempts quickly, with certainty and at scale.

Critical elements for Level 3 feature

Tim Driscoll highlighted several critical elements for a Level 3 feature. Level 3 features are a ‘system’ starting with something that is highly secure, robust and invisible both to the public as well as commercial banknote processors and detection systems. The feature must work with high speed sensors for both single note inspection and used banknote sorting is mandatory. They also require QC sensors to support the proper addition of the feature into or onto the banknote. These elements must be provided through a secure, controlled and robust supply chain.

While Level 3 features have been used for many years, there are signs that central bank requirements are evolving. For example, can a Level 3 feature be used in a variety of substrate types or printed by a range of printing or coating methods? Can a Level 3 feature detect composite counterfeit notes? Can it be inspected in the supply chain without sacrificing the security of the feature?

Evaluation and selection

Gregorio described how the Banco de Mexico’s Security Feature Analysis Methodology (MAES) can be used to evaluate and select all security features, including Level 3.

After registering the information related to the feature and the provider into the MAES database, the durability of the feature is analysed. If it passes the durability testing, it then undergoes adversarial analysis before entering the next stage of evaluating the ability of the Level 3 detector to process sample banknotes containing examples of the feature. This stage may also include the printing of millions of live banknotes to be evaluated as part of a circulation trial. If all stages are successfully passed, including confirmation that the feature cannot be detected visually or by other banknote inspection devices, it proceeds to the final evaluation phase where the results of the feature from each stage are compared to other Level 3 features.

Banco de Mexico continues to refine this process as it pertains to Level 3 features and is developing a set of criteria applicable to the unique characteristics and functionalities of these high security elements.

Incorporation into polymer substrates

Alan focused on the importance of the use and incorporation methods of Level 3 features onto and into polymer substrates. While the issuance of polymer notes to replace paper-based notes has been successful in lowering the occurrence of counterfeits over time, counterfeiters will adapt to the new substrates and Level 3 features are needed for polymer to provide that last line of defence, just as they are for paper notes.

To date, Level 3 features have been printed onto polymer banknotes, however, the robustness of the incorporation method can be increased if the Level 3 feature is added into the core of the polymer substrate.

Alan also highlighted that many paper customers who have experienced the benefits of having their Level 3 features in their cotton substrates prefer to have a similar incorporation method should they convert to polymer.

Adding a Level 3 feature into polymer creates its own different challenges, the feature must survive the polymer extrusion process without impacting the mechanical properties or affecting the film clarity, as transparent windows are one of the important overt security features of a polymer banknote.

The feature must be uniformly distributed through the substrate and not migrate out of the substrate or impact the subsequent banknote processing steps (such as the application of the opacification layer, printing and overprint varnishing.) Moreover, the requirements for a suite of detectors for online and offline inspection during note production and high speed sensors for single note and used banknote inspection for a Level 3 feature embedded in a polymer note are slightly different from those used with paper notes.

Level 2 versus Level 3

The panel fielded many excellent questions from attendees such as, ‘why should a central bank consider a Level 3 feature as opposed to adding more Level 2 features or investing in more advanced Level 2 features?’ The answer provided was that central banks should do both as each feature plays a different role in securing a banknote.

Machine readable Level 2 features help financial institutions, cash in transit companies and retailers to capture suspect notes more effectively. The weakness of relying only on Level 2 features, however, is that the magnetics, UV and IR properties that they rely on are understood and counterfeiters can often replicate them. In addition, the detectors are commercially available. That means that counterfeiters can also obtain these devices to test and optimise the ability of their counterfeits to pass these devices.

An attendee also asked if a Level 3 feature embedded in a polymer note could survive destruction and help assess the value of mutilated or melted banknotes. Alan’s response was that while the feature is very likely to be detected in the destroyed notes, it would be difficult to confirm the actual value of the degraded material.

Gregorio fielded several questions regarding how central banks could adopt a feature evaluation process such as the Banco de Mexico’s MAES methodology and what aspects of a Level 3 feature are most important to a central bank.

A recording of the webinar is posted on the IACA website and available to all IACA members. Marci Chavez, Executive Director or IACA, would also like to point out that access to information from past webinars, conference proceedings and electronic publications can be accessed by all incoming IACA members as well.