Defending Against Counterfeit Cash

In 2019 the U.S. Secret Service reported that of the 100 million counterfeit notes in circulation, approximately 12 percent are “movie money.” These notes are legally made for films and are required to have text that identifies them as fake. However, they can accidentally end up in circulation, considering that many people don’t investigate the low-denomination cash they receive. The Secret Service has also admitted that some of these notes are convincing enough to fool cash-receiving devices like vending machines.

Security Features

The proliferation of counterfeit notes and convincing “movie money” raises the question of how the United States keeps cash secure. In a recent interview with The Wall Street Journal, Sean Ferrari, the chief commercial officer of Currency Research and a former Federal Reserve employee, broke down the anti-counterfeiting security features found on U.S. and world paper money. The first level of protection primarily deals with tactile features that are easily identifiable to the public and deter low-level counterfeiters. This includes the composition of the note, like the linen and cotton blend of U.S. currency and polymer bank notes used in other countries. For world paper money, features such as transparent windows help consumers quickly ascertain the legitimacy of the note.

The second level focuses on more advanced counterfeits designed to trick ATMs and vending machines. Note producers use magnetic ink patterns that cash-receiving machines recognize, but counterfeiters can bypass this by creating notes with the same magnetic pattern. The cost of changing the magnetic patterns machines recognize can be prohibitive to updating these designs. Invisible features known only to the bank itself are the final defense against counterfeits. This includes molecular components, how the note reacts to light, and other special chemical properties. This last line of defense primarily safeguards against foreign counterfeit money intended to destabilize a country’s economy, such as the North Korean $100 supernotes of the early 2000s.

The Future of Anti-Counterfeiting Technology

In response to the increasing quality of counterfeits, many countries have developed innovative security features, though these often result in a higher production cost. For example, Switzerland’s high-security notes, which include microlenses, color-changing ink, and microprinting, cost around 45 cents per note to produce. Meanwhile, the United States has not updated its $1 note design in over 60 years. However, low-denomination notes are rarely counterfeited, and the almost 15 billion $1 notes in circulation pose a pragmatic barrier to updating the note’s design. Additionally, there is a federal ban on changing the $1 note design in order to maintain trust in the dollar’s stability.