Counterfeiting is Major Concern as Euros Go to Press

By Sean Milmo, Ink World European Editor | 10.05.09

The launch of the new currency is taking place amid controversy about whether the European Central Bank (ECB) has done enough to avoid confusion among European consumers.

The European Union is now only a few months away from the climax of what is the biggest exercise ever in the printing and distribution of a new currency’s banknotes and coins.

On Jan. 1, 10 billion banknotes of the euro will start to be put into circulation with another 4.25 billion being held in reserve. The banknotes, in seven denominations from R5 to R500, will be worth a total ofR625 billion ($570 billion).

But the launch of the new currency is taking place amid controversy about whether the Frankfurt-based European Central Bank (ECB), which is supervising the whole project, has done enough to avoid confusion among European consumers. In particular, critics claim the introduction of euro banknotes is vulnerable to a large amount of counterfeiting.

Some security experts say that the ECB could have incorporated into the banknotes some of the latest technologies, like digital inks and magnetic metallic foils, to make the work of the counterfeiters far more difficult. Others contend that the complexity of the notes is sufficient to deter a lot of forgers.

Defenders of the bank also argue that its scope for state-of-the-art security features has been limited by the necessity to have the notes printed at sites throughout the EU, many of which have outdated machinery.

As a result of deficiencies in security, some observers are, nonetheless, warning that the level of counterfeiting could be so high that the banknotes will soon have to be partly redesigned so that more sophisticated security components can be included.

The euro was introduced in virtual form at the beginning of 1999 so that it could be used for commercial transactions and currency trading. Twelve of the 15 EU member states are in the euro zone, with the U.K., Sweden and Denmark remaining outside the currency area.

The printing of the euro banknotes started around mid-1999 so that by this past September the operation was 75 percent complete. The first banknotes, as well as coins, have already been made available to banks, which are starting to deliver them to business customers, such as cash-in-transit companies, the cash-operating machine sector and retailers.

Printing the Euros

The printing is being done by a mixture of the printing works of the central banks, state-owned printers and privately-owned companies in the 14 euro-zone countries.

But for producers of security inks and other banknote components which have been able to win supply contracts, the launch of the euro has been a big bonanza.

The ECB has announced the names of all the banknote printers – eight central bank works and other state-owned printers and seven private ones. To minimize the risk of counterfeiting, it is not identifying the suppliers of the inks and other banknote items.

It has, nonetheless, revealed that four ink producers are supplying inks, although more have received ECB accreditation. All suppliers have to be approved by the ECB before they can be given contracts by euro banknote printers.

Some ink makers have disclosed that they have been accredited by the ECB but will not say whether they have won any euro banknote business. Some banknote printers, like De La Rue of the U.K., make their own intaglio inks as well as components like holograms, but it is unclear whether these are being used.

Providers of specialist security items like holograms have been a little more forthcoming. Applied Optical Technologies, a U.K.-based hologram technology specialist, announced in May that it has received its first commercial order for foil to be used in the production of euro notes, although it did not disclose the size of the order or the identity of the customer.

Critics of the ECB’s security strategy believe that the secrecy about the identity of suppliers, which is normal practice in banknote and other security printing, will do little to prevent widespread counterfeiting. In anticipation that counterfeiters will be eager to take up the challenge of forging banknotes common to so many different countries, Interpol has already set up a dedicated database for tracking counterfeit euros.

The ECB claims that the euro notes contain 90 security features, although some skeptics believe these include low-grade anti-forgery items like complex background designs.

Security Features

At the end of August, the bank revealed for the first time visual items which could be detected by the general public and by cash handlers in outlets such as banks and shops.

They include intaglio printing on mold-made cotton-fiber paper with a dark-lined security thread and multi-color litho backgrounds with ornamental bands or guilloche rulings.

There are optical variable devices (OVDs), such as holograms patches showing the value of the banknote, color-shifting ink in the colors of some of the numerals, and iridescent stripes which shine and slightly change color when tilted.

Other features include micro-lettering, color patterns which cannot be photocopied, fluorescent fibers and magnetic threads.

The ECB boasts that its notes are among the most difficult to counterfeit because they bring together so many different security techniques.

“It is this combination of a wide variety of features which makes the notes so secure,” said an ECB official. “There are no big technological breakthroughs being incorporated in the notes for the first time but they will still be very difficult to forge.”

From the beginning of the design of the notes several years ago, the ECB has taken for granted that it would not be able to avoid counterfeiting. Its objective has been to reduce it to the lowest possible level.

“We have to expect some counterfeiting,” said the official. “Where there are banknotes there will always be counterfeiters. We have wanted to make the forger’s job as difficult as we can.”

Security specialists believe that a major weakness in the whole printing operation has been that it is a multi-site process, in which economic and logistical considerations have initially been of secondary importance.

Many Printers Involved

Since the early days of banknotes, a basic security rule has been that they should be printed at a single site or at least at as few sites as possible, in order to ensure secrecy as well as uniformity and consistency.

“It is generally accepted that having a lot of locations can be a security risk,” said Peter Harrop, former chairman of U.K. security printers Kalamazoo and now an independent consultant. “The decision to use so many printers was taken for political reasons because all the central banks of the countries in the euro zone had to be involved.

“Consequently, in order to allow aged government-owned presses to do the work, some old-fashioned security techniques have had to be employed, which makes the euro relatively easy to counterfeit,” he explained.

The forgeries will only have to be a high enough standard visually to fool members of the general public, particularly when money is exchanged in places without good lighting. There may also be many counterfeits which evade forgery detection machines in retail and other commercial outlets

“Some unusual inks are being used in the banknotes but they are the sort which have to be examined under an electronic microscope or some other sophisticated forensic instrument to determine that they are genuine,” Mr Harrop said.

A large proportion of the printing has, nonetheless, been done at some of the most advanced banknote printers in the world, such as De La Rue, Johan Enschede of Netherlands and Giesecke & Devrient of Germany.

But even if the ECB had been able to have a more centralized printing operation, the sheer size of the project would have stretched the capabilities of the largest and best printing works.

One of the biggest glitches so far reportedly took place at the Munich site of Giesecke & Devrient, which is thought to beresponsible for half Germany’s allocation or equivalent to about 15 percent of the total of euro notes. ECB quality control officials rejected 325 billion E100 notes at the site because of problems with the feature preventing color photocopying.

Multi-site printing has been one of the factors behind the ECB’s decision to have several suppliers of inks and other components, which has raised questions about levels of consistency between notes printed at different sites.

The ECB believes that it has laid down such detailed specifications for items like inks and papers that only forensic examination will show up any differences.

“No two inks are exactly the same, but once they are printed they are visually identical, and the same applies to the paper as well,” said an ECB executive. “The key point is that the notes will be visually the same and they will feel the same. You would need at least a strong magnifying glass to see what will be minor differences.”

The participation of so many printers is also considered to have been a major barrier to the use of techniques which have been available for a relatively long time. These include plastic banknotes with windows which were first introduced in Australia nearly a decade ago.

Features like inks and magnetic patterned foils which emit simple digital signals detectable by comparatively simple equipment were also ruled out because of the involvement of so many locations. But some specialists point out that many of these latest security developments have yet to be properly tested to be applied to banknotes.

“If the euro banknotes had been launched a few years later, the level of security would have been different,” said Ed White, marketing director at Scipher plc, Swindon, England, which is currently developing machine-readable magnetic threads with patterns which can be translated into digital data for banknotes.

“There will be big changes in the security features of banknotes because of new technologies like ours but they will not be commercialized in the bank sector for at least another year. The euro banknotes have come a little too early.”

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