MONEY

COUNTERFEITING

BY
ANUJ ISSAR(UM8303)
EKTA AGGARWAL(UM8304)
JIVJOT SINGH(UM8305)
 COUNTERFEIT MONEY

A counterfeit is an imitation that is made with the intent to

deceptively represent its content or origins. The word counterfeit most
frequently describes forged money or documents, but can also describe
clothing, software, pharmaceuticals, or any other manufactured item.

Counterfeit money is imitation currency produced without the legal

sanction of the state or government. Producing or using counterfeit
money is a form of fraud or forgery.
 WHY IS MONEY
COUNTERFEITED..?

1. Individuals or a group
• To make quick and easy money
• It is easily detectable as, old technologies and techniques are used which are unable to
produce quality clones.

2. ‘Economic subversives’
• Sponsored by unfriendly governments
• Extremely high quality forgeries
• Intention may be to undermine a currency for political ends or
• To support their own economy or overseas activities.
 A TOOL IN WARFARE

Nations have used counterfeiting as a means of warfare. The idea is to

overflow the enemy's economy with fake bank notes, so that the real
value of the money plummets.

Great Britain did this during the Revolutionary War to reduce the
value of the Continental Dollar.
 HOW IS MONEY COUNTERFEITED

Before the introduction of paper money, the most prevalent

method of counterfeiting involved mixing base metals with pure
gold or silver.

Methods used now days include:-

• Using photographic plates
• Stencils and offset printers
• Large printing presses and
• The ability to cut intricate designs by hand into metal plates.
 WHO ARE COUNTERFEITERS???

Based on the level of operations, resources at disposal and

there overall impact on economy.

• ‘Nuisance’ counterfeiters,

• Professional counterfeiters.
 NUISANCE’ COUNTERFEITERS

Term used for individuals who counterfeit at small scale using

• photocopiers,
• scanners,
• laser printers etc.

Produce small numbers of crude counterfeits and account for

about 5% of counterfeit notes circulating.
 PROFESSIONAL CRIMINALS

• More oraganized.
• Have better resource or funding.
• Work independently or, as part of organised crime.
• account for 95% of counterfeit notes.
• Use high quality image preparation and lithographic printing.
 ROLE OF TECHNOLOGY

Technology use goes both ways as it aids in both creation and

detection of counterfeits notes.
• Higher resolution color photocopiers.
• Micro printing, aliasing, foil stamps, security threads.
• Softwares such as Photoshop, having photo enhancing tools.
• Ultraviolet lamps to detect fake currency.
• Detector pens, detect presence of starch in currency which is
absent in real currency.
 EFFECTS OF
COUNTERFEITING

• Inflation.
• Depreciation in value of real money.
• Decrease in people ‘s confidence in the currency.
• Increase in illegal overseas activities in the country.
 INFLATION

• Increase in prices (inflation) due to more money getting

circulated in the economy - an unauthorized artificial increase
in the money supply.
• Companies are not reimbursed for counterfeits. This forces
them to increase prices of commodities.
 DEPRECIATION IN VALUE
OF REAL MONEY

The infusion of new money would lessen the marginal

value of money already in circulation, the beginnings of a
new round of inflation, albeit quite small.
However having been the first recipient of the new money,
forger do not feel the effects of the inflation.
 INCREASE IN ILLEGAL OVERSEAS
ACTIVITIES IN THE COUNTRY

The fake currencies produced in other countries can be

used to fund the terrorist operations in the targeted
country.
Most of the fake currency in India is suspected to be
imported from Pakistan and Bangladesh.
 DECREASE IN PEOPLE’S
CONFIDENCE IN THE CURRENCY

• Payees may demand electronic transfers of real money

or payment in another currency (or even payment in a
precious metal such as gold).
• Decrease in the acceptability(satisfactoriness) of
currency.
 ULTIMATELY WHO TAKES THE
HIT?

• Money Counterfeiting creates a vicious circle.

• Common man transfers money it to the bank.
• From bank it is routed to Federal Reserves .
• Federal Reserves then ultimately transfers the burden
to common man in from of taxes.
 EXTENT OF COUNTERFEITING
IN INDIA

• Around 15% of fake rupees are in circulation all over

India.
• Major target notes are Rs 500 and Rs 1000
denomination
• Gandhian note of Rs 500 note is virtually
undetectable to naked eye and can only be detected
using specialized equipment.
 INDIA IS MORE PRONE TO
COUNTERFEITS

There are two factors which makes India more

susceptible to counterfeiting

• Cash Based economy

• High denomination currency

 CASH BASED ECONOMY

As most of the transactions are in cash, the amount of cash that

people hold is pretty high.
Hence floatation of fake currency is easy amidst cash surplus.

In a primitive all-cash economy, counterfeiting would indeed

increase the cash in circulation and dilute its value.
 HIGH DENOMINATION
CURRENCY

Denomination currency means the face value of the notes available.

In India these are 1, 2, 5, 10, 20, 50, 100, 500, 1000.

The basic advantages of high denomination currency are

• It makes high value transactions easy,
• Cash transactions are non traceable and hence leave no footprint.

Therefore high denomination currency results in

• Accumulating black money created out of tax evasion.
• Corruption, hence life blood for parallel economy.
 HIGH DENOMINATION
CURRENCY (CONTD.)

• However its more wide spread and more harmful impact is fake
currency and its consequences which results to weakening of
official currency,
• To print a fake currency note, the cost is about Rs. 30 to 40/-.
• Hence very profitable to print fake notes for the amount 1000, 500
and also 100.
High denomination results to
• Corruption,
• Weakening of banking,
• Weakening of official economy and
• Of course counterfeiting.
Realizing this taken in the past even by other countries from time to
time, like US in 1969, they brought down their highest currency to
$100.
India should remove these denominations higher than Rs. 50/-
 PREVENTIVE MEASURES

• Polymer Bank notes, created with special mix of polymer

compounds aided with Holograms.
• Have distinct non paper like feeling and last till 5 years compared to
12-15 months of a paper note.
• Plastic money based upon credit and debit cards.
• Average cost of a high quality counterfeited note is Rs 30-50 so
Doing away with higher denomination notes eg Rs 500 and Rs 1000
will lower the margins and counterfeiting will be less profitable.
 STEPS BY RBI

• Mandates banks to install money sorting machines.

• Creates awareness about the security features in local
languages.
• Vigorous advertisement campaign named ‘Paisa Bolta hai’.
• Training to bank cashiers to detect fakes.
• Launched ‘www.paisaboltahai.rbi.org.in’ displaying security
features of all the notes.
• Plans to launch plastic notes.
• Constant security updates in the currency.
SECURITY FEATURES IN RS 1000
NOTE