Counterfeit Corner

How many counterfeit banknotes are in circulation? I can’t tell you how many times I have been asked this question. So, let’s look at how counterfeit banknotes are found and reported.

There is a small chance that a cash handler will recognise a note as counterfeit and proceed to call the police to recover the note and begin an investigation. The police will usually store the counterfeits in an evidence locker until the case has been resolved, which could be years.

When the counterfeit is not detected at the point of sale, the retailer will deposit the money with a commercial bank. This is where most counterfeits are detected and reported to either the central bank/issuing authority, or to the law enforcement agency responsible for counterfeiting.

There are several scenarios where a counterfeit banknote is not detected or is recirculated. The most obvious would be in remote areas that do not use commercial banks and continuously use cash (including counterfeits) for purchases and then hand these notes as change to other customers. This is most common in open-air markets that primarily use cash for their transactions.

But what about a person that is selling something on an online market, such as Facebook Marketplace? The COVID pandemic has allowed counterfeiters to pass their notes to unsuspecting citizens by purchasing goods using fake notes. Will the seller report it to police (or bank) or just write it off as a bad decision and throw it away? Or maybe they will try to pass it on to a shop to get rid of it. There are also organised crime groups that produce massive quantities of counterfeit banknotes and are either storing them or have scattered them across a distribution network.

Given the three scenarios listed above, the likelihood of counterfeits in circulation that remain undetected are high. As cash is processed through the banking system, the counterfeit banknotes will be detected and removed from circulation. Having a robust cash cycle where all banknotes go through machine authentication on a regular basis will continue to remove the counterfeits and prevent them from being recirculated as genuine.

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