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Countering counterfeits

By Alan Boaden, Head of Currency, Reserve Bank of New Zealand

There were several news media reports in April about counterfeit bank notes found in Auckland and some other locations in the North Island. The incidence of counterfeiting in New Zealand is very low by international standards. The fact that the recent counterfeits were regarded as newsworthy is itself evidence of the rarity of forged currency in this country.

The recent counterfeits do provide a reminder, though, that criminals do attempt to pass forged currency. A person who accepts a counterfeit note has effectively been robbed. A counterfeit note cannot be used to buy anything or be cashed at a bank. Any individual found guilty of making or using counterfeit currency can be fined up to $100,000 or imprisoned for up to three years.

New Zealand's bank notes have effective security features that should allow people to readily identify forged notes. Genuine notes are made of polymer (a plastic) which has a smoother, "shinier" feel than paper. Each note has two transparent windows. The oval window includes embossed numbers of the value of the note, e.g., "50" for a $50 note as illustrated below (this appears darker in the picture than in reality). If a note is held to the light then you can see a "shadow image" of the Queen just to the right of the portrait on each note. More detailed information about security features can be found on the Reserve Bank's website.

Security features of New Zealand banknotes

Figure 1: Embossed window:


The normal way of measuring the level of counterfeiting around the world is to calculate the number of counterfeits found in a year divided by the number of bank notes in circulation. To relate this measure to everyday experience, a person who uses cash to make transactions might receive five bank notes as change in a typical week, or 250 notes each year. The current rate of counterfeiting in New Zealand is just below one per million notes in circulation. So a person like this would only receive a counterfeit about once every 4,000 years!

In reality, most counterfeits are passed by criminals at retail outlets. Busy supermarkets, fast food outlets and bars are commonly targeted. A shopkeeper who might receive thousands of bank notes each year would have a much higher chance of being offered a forged note as payment. But care should still be taken by everyone.

The introduction of polymer bank notes in New Zealand in 1999 reduced the rate of counterfeiting to a very low level as illustrated in the chart below.

Figure 2: Counterfeits detected per million notes in circulation:


Note: The counterfeits detected in 2000 and 2001 were virtually all from the paper series.

The transparent windows in polymer notes have been difficult for counterfeiters to replicate and simple for members of the general public to check. This has contributed significantly to the fall in the rate of counterfeiting in New Zealand to about 1 per million notes. Some major currencies have counterfeiting rates between 50 and 80. Rates in some small European countries that have their own currencies are closer to New Zealand, often being between 1 and 10.

The Reserve Bank's Museum displays examples of some counterfeit bank notes found in New Zealand, as well as examples of many other New Zealand notes and coins.