In a few short years, the euro has become the second-most-traded currency in the world. Now, counterfeit euros are spreading faster than the real thing.
Earlier this week, Italian police seized 7.3 million euros ($10.4 million) in high quality bills and the European Central Bank noted on July 13 that there has been a 17 percent increase in fake bills removed from the system, with 413,000 notes confiscated in the first half of 2009.
The Guardian‘s Ian Sample noted five years ago that there “are certainly compelling reasons” to counterfeit the euro given that it was so rapidly spreading. Further, because it was so new, “even a mediocre forgery will fool most people.” The countermeasures were tremendous, however:
When the euro was launched, it was said to be the most counterfeit-proof currency ever. As well as the elaborate designs, all notes have at least five security features including watermarks and threads built into the paper, raised print, foil strips containing holograms and iridescent stripes that shine under a bright light. Higher denominations have additional holographic patches and ink that changes colour as the note is tilted.
That’s just for starters. A second tier of anti-counterfeiting measures mostly benefits bank staff and ATMs. Magnetic materials can be read by machines, while fluorescent inks and fibres are used to make notes glow under ultra-violet or infra-red light. Microprint, visible only under magnification, is also added.
The ultimate anti-counterfeit measure is known to just a few people at each country’s central bank. Tiny amounts of a secret material – just a few parts per billion – are incorporated into notes so that when they are x-rayed, they produce a unique fluorescent spectrum of light.
This, however, just cuts out the small operators and leaves counterfeiting to well-financed organized crime syndicates. Business Week‘s Leona Liu:
Europol says counterfeiters operate in highly organized criminal groups. About 70 percent of seized bogus bills have been traced to three major gangs, all based in Italy and the Balkans. Police say the spike in seizures of phony bills this year stems from increased production by one of the three gangs in 2008.
The €20 bill, worth about $28 at current exchange rates, accounts for nearly half of seized fake bills. Counterfeiters prefer it to higher-denominated bills that are likely to be more closely inspected, and to €10 and €5 bills that yield lower profits. The second-most-copied denomination is the €50 note, accounting for 34 percent of seized bills.
The same, of course, is true in the United States, with $20 bills long topping the most popular list for counterfeiters. And the varied design and rapid spread of the euro poses additional challenges. Liu again:
The absence of border controls between most European Union nations makes tracking counterfeiters more difficult. Jean-Louis Perrier, the deputy chief of the anti-counterfeiting unit within France’s Police Nationale, says many of the fake euros entering France are brought in by crooks from Poland, Lithuania, and Bulgaria. National police frequently cooperate with each other and with Europol on cross-border investigations.
One such investigation helped Europol bust a criminal gang in Bulgaria earlier this month, leading to the arrest of 17 people who had distributed counterfeit bills with a face value of more than €16 million.
For now, fake euros are found almost exclusively within the euro zone—unlike counterfeit dollars, which circulate worldwide, since the greenback is used for unofficial trade in many countries. The U.S. doesn’t release figures on dollar counterfeiting, but European police say the rate of euro forgery is much lower.
Especially frustrating to police is that, even with the resources of organized crime, most euro counterfeits are of extremely poor quality. But few people bother to check before accepting and passing on bad bills.
James Joyner is managing editor of the Atlantic Council.