The Effect Of Counterfeit Money On The Economy And How To Identify Them
Currency counterfeiting is a crime that continuously poses a threat to a country’s economy and is a source of financial loss to its citizens. Some of the ill-effects that counterfeit money has on society are a reduction in the value of real money; and increase in prices (inflation) due to more money getting circulated in the economy – an unauthorised artificial increase in the money supply; a decrease in the acceptability of paper money; and losses, when traders are not reimbursed for counterfeit money detected by banks, even if it is confiscated.
At the same time, in countries where paper money is a small fraction of the total money in circulation, the macroeconomic effects of counterfeiting of currency may not be significant. The microeconomic effects, such as confidence in currency, however, may be large.
Failure to take significant action in combating counterfeiting can lead to uninsurable risk, which has a harmful effect on the reputation and functioning of a country’s central bank. Legislation in South Africa is being examined with a view to effecting improvements. There are at present two statutes in South Africa that regulate the counterfeiting of currency. Both Acts provide for punitive measures amounting to imprisonment for a period not exceeding fifteen years.
Current initiatives in South Africa are based on a multi-agency approach to the combating of counterfeiting. The South African Government’s Departments for Safety and Security and Justice and Constitutional Development, the South African Reserve Bank, the South African Note Company, Interpol and the South African Mint have established formal relations and meet regularly to combat these crime forms. The formal relationship yielded a strategy as a basis for the combating of counterfeiting in the country. The strategy establishes joint planning, co-operation and liaison at all levels, the sharing of information, expertise and resources, as well as joint consideration of legal, economic and social issues that have a bearing on counterfeiting in South Africa. There is also recognition that the public can play an important role in combating the circulation of counterfeit currency in the South African economy. The early detection of counterfeit operations is essential to the limiting of the impact of counterfeit money on the economy. Conditions have been created that make it difficult for counterfeiters to circulate forged notes, including the prompt informing of all stake holders about new counterfeit notes and coins and the providing information on how to detect counterfeit money.
How to identify counterfeit notes
There are 3 methods for identifying counterfeit notes:
1) Money counting machines
Most money counting machines have built-in counterfeit detection. The level of detection differs from product to product but common features include; ultraviolet, magnetic thread and size detection.
South African big 5 series notes (new Mandela notes do not glow under a UV light) have multi coloured fluorescent markings that can be seen when the note is places under a UV light. Unfortunately many of the counterfeit notes that have been circulated recently in South Africa have had ultraviolet markings and therefore products that only have UV detection will not register them as counterfeit.
The note is scanned during the counting process to ensure that there are magnetic properties to the paper. This is one of the most reliable security features for South African currency as it is very difficult for counterfeiters to copy. When looking for a money counting machine, it is highly recommended that you choose a product with the magnetic (MG) function.
2) Desk top ultra violet Light Counterfeit detection
Installing a desk top counterfeit detector at the point of sale can be a cost-effective counterfeit detection method. Beware of relying on UV detectors because they are in no way completely accurate as many counterfeit notes in South Africa have UV markings so will appear real under the florescent light. Some ultra violet counterfeit detectors also have a magnetic (MG) identification feature, this is far more reliable and highly recommended as it is difficult for counterfeiters to copy. PLEASE NOTE: THE NEW MANDELA NOTE SERIES DOES NOT GLOW UNDER A UV LIGHT.
3) Manual identification
To view the full security and design features to look out for, please click here to view the South African Reserve Bank’s easy-to-use guide.
To view our full article in the FM Essentials Safety & Security October 2012 Newsletter, please click here.