The Board of Governors of the Federal Reserve System has published a new paperSee Banknote paper. More “Estimating the Volume of CounterfeitThe reproduction or alteration of a document or security element with the intent to deceive the public. A counterfeit banknote looks authentic and has been manufactured or altered fraudulently. In most countries, currency counterfeiting is a criminal offence under the criminal code. More U.S. CurrencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More in Circulation” by Ruth Judson. It provides a comprehensive analysis of the incidence and economic impact of counterfeit U.S. currency. The study draws on data from the U.S. Secret Service (USSS) and the Federal Reserve to estimate the volume of counterfeit notes in circulation and assess the effectiveness of anti-counterfeiting measures.
The study estimates that the total value of counterfeit U.S. currency in circulation is likely around $15 million, with an upper bound of $30 million. This translates to approximately 1 counterfeit note per 80,000 genuine notes in domestic circulation. The estimate marks a significant decline from previous estimates, attributable to the introduction of higher-security banknotes and increased public education about currency security features.
The USSS recorded $102 million in counterfeit currency passed in the U.S. in fiscal year 2023. However, the economic loss to the public from high-quality counterfeits of commonly used denominations ($20 and smaller) is minimal. Most counterfeit notes detected are of lower quality, and losses from counterfeiting are minor compared to other forms of fraud, such as credit card fraud.
The introduction of new, more secure banknotes has been a significant factor in reducing counterfeiting. These notes include advanced security features that are more difficult to replicate. Public education campaigns have raised awareness of these security features, further reducing the acceptance rates of counterfeit notes.
The findings underscore the importance of ongoing efforts to enhance banknote security and educate the public about currency authenticationThe process of proving that a banknote or security document is genuine. More. The study suggests that a minimal level of vigilance is sufficient for the public to avoid losses from counterfeiting, given the low incidence of high-quality counterfeits.
The paper concludes that the volume of counterfeit U.S. currency in circulation is relatively small and has been declining due to enhanced security features and public awareness. However, sustained efforts are essential to mitigate potential future risks. The estimates provide a benchmark for understanding the scale of counterfeiting and its economic implications, highlighting the need for ongoing anti-counterfeiting measures. Future challenges may include advances in counterfeiting technology and the potential introduction of central bank digital currencies (CBDCs).