There were more than 2.2 billion bank notes in circulation in 2007. Of that number, 290,000 were counterfeit. Now that may seem like a small drop in the vast monetary ocean, but for an independent retailer on the front-line in the battle against the counterfeiters it’s a major problem.

In many ways independent retailers are like sitting ducks for the fraudsters. A lack of time, technology, and in many cases staff training in how to recognise fake money, means that many notes are able to creep through the net.

Andrew Bailey, executive director banking and chief cashier at the Bank of England, explains: “Just one note can impact heavily on retailers’ profit margins. Counterfeit notes are worthless, and once retailers have accepted them they cannot get any compensation –counterfeiters themselves would quickly exploit such refunding.”

The knock-on effect of counterfeit money is that it pushes up prices as retailers guard against losses. This is not good at the best of times, but certainly not at the moment, when shoppers and retailers alike are feeling the credit crunch bite.

Until recently, purple UV bulbs have been used by many retailers to detect fake money. However, many of the counterfeiters have got wise to this, and now have the ability to produce new ‘super notes’ that can beat the UV lights.

Under a UV lamp, the paper on which legitimate banknotes are printed is not supposed to fluoresce (it is ‘UV dull’), while the paper that used to be available to counterfeiters contained ‘brightening agents’ which gave it a characteristic blue glow. However, fraudsters are now able to make a similar UV-dull paper by spraying it with a readily available chemical. Likewise, UV-dull cotton paper can become ‘UV bright’ through contact with, for example, recently washed clothing.

And as the price of computers, scanners and printers falls and their performance increases, so the technological guerilla war between the establishment and the counterfeiters escalates.

“New technology means that counterfeiting techniques are becoming increasingly advanced,” adds Bailey. “The Bank of England is always working to put sophisticated new technology on notes and stay one step ahead of counterfeiters, but they will always find ways of catching up.”

In March of last year, the Bank of England issued a new-look £20 note featuring a portrait of Scottish economist Adam Smith. It included a range of enhanced security measures such as a wider holographic strip and micro-lettering designed to foil the counterfeiters. However, just a few months later, Liverpool-based cash security specialists Banknote Bodyguard reported that its retail clients were coming across fakes of the new design.

The Bank of England advises retailers to take a holistic approach to checking for counterfeit cash. “Retailers should not rely on UV light technology and detector pens alone,” says Bailey. “They should inspect every note to ensure that it’s the genuine article.”

For starters, a genuine note feels very different from a counterfeit, as counterfeiters are unable to obtain the special cotton-based paper from which genuine notes are made. Genuine notes also have raised printing on the words ‘Bank of England’. Retailers should also inspect the watermarks and the holographic strip, as attempts to reproduce these are noticeably different when compared to a genuine banknote. These special features provide a series of hurdles to trip up any would-be counterfeiters. And trip up they do.

Bailey says that many of the counterfeit notes he has seen have quite crudely reproduced holograms and watermarks. “If you have any doubts about a note in your store, compare it with another that you know to be genuine,” he adds.

Prevention in practice
The most commonly counterfeited denomination is the £20 note, and a common trick is to use high-value fake notes to purchase low-value items, resulting in a large amount of genuine change in return. In 2007, only 4,000 fake fivers were found, 6,000 fake tenners and 4,000 fake fifties. On the other-hand, an astonishing 276,000 fake twenties were identified.So what should you do if you catch someone trying to make a purchase with a counterfeit note in your store?

Accusing someone of trying to use fake money can obviously lead to a large amount of tension between retailer and customer, so it’s vital that the situation is dealt with in a controlled manner.

“You’re highly unlikely to get Mr Big attempting to pass counterfeit notes in your store, but you may get a smaller cog from within the distribution network,” says Bailey. “You should assess the situation and ask yourself: do they look violent? Under no circumstances should you put yourself or your staff in danger.”

The Co-operative Group says that the acceptance by stores of forged bank-notes represents an ongoing cost to its business. It is for this reason that Co-op staff undergo rigorous training in how to recognise a forgery and deal with the consequences.

A spokeswoman for the group said: “A till operator who suspects a note is forged should immediately report it to a supervisor, who then has two options: if the customer appears to be genuine and stays in the store, the note can be returned to the customer, who must be told that you suspect that something is wrong with the note tendered and that alternative payment is required. The customer should then be advised to take the note to a police station. If the customer runs off, then the note should be kept in an envelope in the safe, and the supervisor must contact the area loss prevention manager.”

This protocol was followed perfectly in a Co-op store in Ifield, Crawley, last month. A group of schoolchildren attempted to make some purchases using two fake £20 notes. The notes were immediately recognised as fakes by till staff and the incident was reported to the police, who launched an investigation.Intelligence suggests that there are two main sources of counterfeit notes in the UK. A very small minority (5%) are manufactured by ‘nuisance’ fraudsters who use scanners and laser printers to produce crude counterfeits.

However, the biggest producers of counterfeit notes are professional criminals working as part of an organised gang. Almost 95% of all fake notes circulating in the UK originate from one of these organised criminal networks and are made using high quality image preparation and lithographic printing. Access to such equipment and expertise is often gained through ownership, coercion or unauthorised use of legitimate printing businesses.

Intelligence suggests that as many as 80% of the counterfeits currently in circulation have origins in one criminal group which has links to other serious organised crime, including drugs and people trafficking.The good news for retailers, consumers and The Bank of England is that ways and means of disrupting such criminal operations are continually evolving and improving.

New technology to weed out the counterfeits is constantly being dreamt up, police dogs are being trained to sniff out fake notes and The Bank of England is working with law enforcement agencies to stop the criminals in their tracks. And it’s paying off – latest data from the Bank of England shows that the number of counterfeits taken out of circulation fell by 24%. last year.

Let’s hope that trend continues.
Security features on a genuine £20 note
1. Print is raised on the words ‘Bank of England’ and on the figure ‘20’ in the bottom right-hand corner.2. If you hold the note up to the light you will see coloured shapes that combine to form a pound symbol. 3. When the note is tilted, one of the holograms shows an image of Adam Smith; the other changes between a pound sign and a figure 20.4. Print quality on genuine notes is excellent. Lines are sharp and free from smudges. 5. The figure ‘20’ appears bright red and green under ultraviolet light. 6. The value of the note is written in micro-letters beneath the Queen’s portrait.7. When held up to the light, an image of the Queen appears in the clear area on the left, along with a bright ‘£20’. This can be viewed from the back.