Detecting dodgy dollars
As the Reserve Bank works to mint new cash currency, Beck Eleven looks at the crime of counterfeiting in New Zealand.
Every now and then, police issue a warning to check your wallet. Not because your money may have physically gone missing but because you may have been unwittingly robbed by way of counterfeit.
Counterfeiting in New Zealand is rare but it does happen. A 30-year-old Christchurch man is before the courts at the moment facing charges of using counterfeit $20 banknotes in shops around the Riccarton area. In April, fake banknotes were found in Auckland and other North Island locations.
Kiwis travelling overseas are not immune from the counterfeiting trade. Last month, two young New Zealand women narrowly escaped three months in a Thai prison after being found in possession of counterfeit American dollars. Casey Hanson, 21, and her friend Megan Taylor, 24, were with a group who withdrew US dollars in Laos, exchanging some of it for local currency there and in Thailand. But while seeking to exchange further US currency at a Thai mall they were picked up for holding counterfeit money and taken to a police station for eight nerve-racking hours before being told by an embassy official they were free to go, adding they had been within "an inch of jail". Understandably, the pair high-tailed it out of the country.
The Reserve Bank recently announced it would be spending an estimated $80 million over the next five years on modernising Kiwi currency with the latest technologies and security features so counterfeiters continue to find it difficult to recreate our banknotes. Final designs will be made public in November and the new notes will filter through from late next year.
New Zealand has a good record of keeping counterfeit banknote numbers low. Retail banks, the Reserve Bank, police and casinos keep tight communications with regard to potential counterfeit notes and the Secret Service for Treasury in the United States sends global communications around trends and visits to conduct training.
Anyone found guilty of making or using counterfeit currency in New Zealand can be fined up to $100,000 or imprisoned for up to three years.
The Reserve Bank sets a target for counterfeit notes and regularly comes in under the target. Results in the latest available annual report show 141 counterfeit notes were found in circulation. That represents .07 counterfeits per million notes in circulation, far below the target of 10 per million. The highest it has reached in the last decade is 3 notes per million but it has regularly remained lower than 1.4.
The Reserve Bank's website says that this means most people will never touch a fake note. A person who uses cash might receive five banknotes as change in a typical week or 250 notes each year. So assuming the rate of counterfeiting remains below one per million notes in circulation, a person would receive a counterfeit about once every 4000 years.
Most counterfeits are discovered via note processing by cash-in-transit companies, the Reserve Bank's note processing machines or through police (who declined to speak for this story).
Sophisticated counterfeiting operations are conducted by criminals, mainly in Europe and America, but Kiwis tend to just give it a go. Traditionally it involved old-style offset printing but these days copycat designs are computer-generated.
BNZ's Owen Loeffellechner says he has seen some real "Monopoly money" during his time as the bank's head of enterprise security - as bad as coloured photocopied notes.
"It's not a not a big problem in New Zealand," he says. Largely because of good communication between banks, government and casinos, and New Zealand's relative isolation and dominant currency.
"The bad guys are not going to produce counterfeit currency where it's so limited. If the notes are made in US dollars or euros, then coming to an island nation where we typically use our own money and there is not much of a mix in the currency flow, foreign exchange currency tends to stand out."
A counterfeiter's aim is to quickly feed fake notes into the economic flow where there is a large mix of tourists, or at a major sporting event or places where people are often crossing borders.
"We're just not a very good target," he says. "We've seen very little locally manufactured counterfeit currency and what we see is of very low grade. The type that even someone who isn't trained could spot.
"It's only happened a few times in my experience where an offender comes in from overseas and tries to wash it into some kind of cashflow opportunity and that's usually somewhere like a casino.
"These people need to integrate it quickly because they don't want to be physically present in the country for long because that exposes them to detection. They want to go somewhere they can drop large portions of money at one time and those places are limited in NZ."
Genuine New Zealand banknotes are made of a type of plastic called polymer which has a smoother feel than paper. Each note has two transparent windows. The oval window has embossed numbers of the value of the note and if you hold the note to the light, you should see a shadow image of the Queen to the right of the portrait. The introduction of polymer banknotes in 1999 reduced the rate of counterfeiting.
Loeffellechner says despite the common use of credit or debit cards and online banking, the number of notes and coins in circulation has not dropped.
However, what this use of "plastic" has done, is increase fraud around cards, an offence separate to cyber crime.
He says the greatest risk to New Zealand card holders is while travelling overseas. The card can be skimmed at an ATM or at a merchant's, where the data is harvested, stripping the information embedded in the card. The data is then sold on, counterfeit credit cards are produced and fed into the black market.
"The success rate isn't high as banks invest heavily in protection and the customer is not usually affected because the bank takes the financial hit. But it's a real inconvenience when people are travelling because the card gets blocked and there is a delay in replacing it." He says the fraud often takes six months to begin so the customer is unaware.
BNZ have recently patented a system so their ATMs rewrite data every time a card goes through one of their machines, effectively creating a "new" card each time it is used. He says the best thing people can do around card fraud is check their online banking or card statements and make sure they know what a local note feels like wherever they are.
How to detect a fake NZ banknote:
Feel. A real note is printed in such a way that there are ridges which are easily felt on the note.
Look. There are two transparent windows on a real note. One has a fern on the left-hand side and an ovoid shape which has the number of the denomination etched on the right-hand side.
Rip. Real notes are made of a tough polymer which is resistant to rips and tears. If the note you receive is torn then it is most likely fake.
Waterproof. The polymer notes are stronger, non-porous and resistant to water.
Shadow. Real notes have a shadow of the Queen between the person pictured and the ovoid transparent window. Holding up the note to the light will show the shadow of the Queen.