How India Can Stop the Next Fake-Money Crisis
The sophistication of the counterfeiting, and the use of genuine currency paper, clearly suggested the involvement of state actors. Moreover, the counterfeit currency successfully imitated certain high-quality, cost-intensive security features of genuine Indian currency. Such features as a guilloché pattern in the background design, asymmetric see-through registration and latent image effects can only be incorporated using standard currency-making machines. These making machines are highly capital-intensive, and are sold only to sovereign governments and their central banks. There is only a handful of manufacturers for these currency-making machines in the world.
The clinching evidence for Indian investigators came when a Committee of Experts, set up to look into counterfeit forensics, opined that “all the batches of counterfeit currency notes which were seized by law enforcement agencies from different parts of the country, not only had a common source but based on their printing defects these were printed in the same currency printing press.” The earliest batch of these counterfeits dated back to 2000, when counterfeits five-hundred-rupee notes amounting to half a million Indian rupees (approximately $9,000) were recovered from the bodies of two Pakistani terrorists who were gunned down near the international border in Jammu and Kashmir.
The findings of the investigation were also taken to the Financial Action Task Force, an intergovernmental body set up to combat money laundering and terrorist financing.
The decision to invalidate five-hundred- and thousand-rupee denomination notes is a step in the right direction, as most of the counterfeit currency seized till now has been in these two denominations. This also makes sense, as five-hundred- and one-thousand-rupee notes together constitute 86.4 percent of the total value of Indian currency in circulation.
The Indian government needs to build upon this move with a multipronged strategy against counterfeiting by changing the cost/benefit calculus of decisionmakers in Islamabad. The strategy must involve both increasing costs and reducing benefits, in order to make the entire enterprise prohibitive. The present step of invalidating high-denomination notes would render millions of counterfeit notes as paper scrap. A few years ago, the Indian government amended its counterterror legislation and brought the circulation of high-quality counterfeit currency under the ambit of a “terrorist act.”
It is also imperative to ensure that the new notes have high counterfeiting costs. The invalidated five-hundred- and one-thousand-rupee notes had strong covert features, but it was the imitation of their overt features that dented their credibility. The new legal tender needs to have robust overt security features. Covert features are important, but these come into play only at the bank level, when the currency has already been circulated in the market. Effective counterfeit-resistant overt security features would make it easier for lay consumers to differentiate between genuine and counterfeit currency, thereby making counterfeiting a less profitable venture.
Sajid Farid Shapoo is a highly decorated Indian Police Service officer at the rank of Inspector General (two star general equivalent) with 18 years of progressively senior experience in sensitive and high profile assignments across India. He is currently pursuing a Master’s in International Affairs from Columbia University, New York.
Image: Indian 1000-rupee note. Pixabay/Public domain