United States General Accounting Office

GAO Report to the Honorable John M. Spratt,

Jr., House of Representatives

February 1996 COUNTERFEIT U.S.

CURRENCY ABROAD

Issues and U.S.

Deterrence Efforts

GAO/GGD-96-11

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-261994 

February 26, 1996

The Honorable John M. Spratt, Jr.

House of Representatives

Dear Mr. Spratt:

The U.S. currency,1

 reportedly the most widely held in the world, is

susceptible to counterfeiting. Of the $380 billion of U.S. currency in

circulation, the Federal Reserve estimates that over 60 percent may be

held outside the United States. The widespread use of U.S. currency

abroad, together with the outdated security features of the currency,

makes it a particularly vulnerable target for international counterfeiters.

Various congressional groups and the media have expressed concerns

about counterfeiting of U.S. currency abroad. Widespread counterfeiting

of U.S. currency could undermine confidence in the currency and, if done

on a large enough scale, could have a negative effect on the U.S. economy.

In light of these concerns, and in response to your request, we are

providing information on (1) the nature of counterfeiting of U.S. currency

abroad, (2) the extent of that counterfeiting and of concerns about this

issue, and (3) the status of U.S. efforts to deter such counterfeiting of U.S.

currency abroad. As discussed with your office, because of significant

limitations in the data on the size and direction of the problem of

counterfeiting abroad, we were unable to reach conclusions or comment

on the adequacy or effectiveness of the various deterrent efforts

described. Also, as discussed with your office, this report was prepared

using unclassified sources of information. The draft report underwent a

security classification review by the appropriate agencies, including

Treasury and the Secret Service, and was released by the appropriate

officials as an unclassified report.

Results in Brief U.S. currency is counterfeited by a diverse group of perpetrators using a

variety of methods. Although counterfeiters may engage in this activity for

direct economic gain, counterfeiting is sometimes linked with other more

nefarious criminal endeavors, such as drug trafficking, arms dealing, and

alleged terrorist activities.

According to law enforcement officials, counterfeiters run the gamut from

office workers to organized crime and terrorist groups, and the equipment

1

In this report, “U.S. currency” refers to U.S. Federal Reserve notes and does not include coined

money.

Page 1 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

used for counterfeiting U.S. currency ranges from photocopiers to

sophisticated offset presses. Moreover, the quality of counterfeit notes

varies significantly, and even those made using the same method vary

according to the sophistication of the perpetrator and the type of

equipment used. Of increasing concern is the fact that certain foreign

counterfeiters are becoming extremely sophisticated and are producing

very high-quality counterfeit notes that are more difficult to detect than

any previous counterfeits.

Due to the criminal nature of this activity, the true extent of counterfeiting

of U.S. currency abroad cannot be determined. The total level of

counterfeit-currency detections—$208.7 million in fiscal year

1994—represented less than one one-thousandth of U.S. currency in

circulation.

Both Treasury and Secret Service officials agreed that counterfeiting of

U.S. currency is a threat to be taken seriously, but that it is not now at a

level that poses an economic threat to the U.S. monetary system. Treasury

Department and Secret Service officials use counterfeit-detection data

from the Secret Service to help assess the extent of counterfeiting. The

Secret Service has also used these data to demonstrate significant

increases in counterfeiting activity abroad, citing a 300-percent rise in

detections in fiscal year 1993. According to the Secret Service, it

supplemented these data with intelligence information and field

experience in reaching its conclusions on the degree of and risk

represented by counterfeiting abroad.

Our analysis of the counterfeit-detection data used by Treasury and Secret

Service raised questions about their usefulness for illustrating either actual

counterfeiting activity or recent growth in counterfeiting activity. As

previously mentioned, because of the criminal nature of this activity, the

actual extent of counterfeiting cannot be directly measured. Other

limitations of the data are that they (1) included only those counterfeit

detections that were reported to the Secret Service, and thus may in part

have been a reflection of where Secret Service focuses its efforts; (2) may

have underreported the occurrence of high-quality notes because those

notes are difficult to detect; (3) may have reflected factors other than

increased counterfeiting activity, such as improvements in the ability to

detect counterfeits or to determine their source; and (4) may have shown

fluctuations over time that were skewed because of the occurrence of

unusually large seizures. Because of these limitations, use of the data

Page 2 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

alone to estimate the extent of counterfeiting or counterfeiting trends,

without appropriate qualifications, may be misleading.

Foreign law enforcement and financial organization officials we

interviewed varied in their degree of concern over the counterfeiting of

U.S. currency. Foreign law enforcement officials tended to be more

concerned about the counterfeiting of U.S. currency than were foreign

financial organization officials. Moreover, financial organization officials

did not complain of increases in chargebacks,2

 and financial and foreign

law enforcement officials we met with provided few examples of instances

where U.S. currency was no longer accepted due to concerns about

counterfeits.

The U.S. government, primarily through the Treasury and the Federal

Reserve, has increased its efforts to deter counterfeiting activities.

However, none of these efforts have been fully completed, and thus their

success cannot be evaluated at this time. These anticounterfeiting efforts

included (1) redesigning U.S. currency to incorporate additional security

features, and then publicizing and distributing the new currency; (2) using

joint federal agency team visits abroad to obtain more information on

counterfeiting and provide counterfeit-detection training; (3) increasing

Secret Service staffing abroad; and (4) using additional task forces and

increasing diplomatic efforts to combat counterfeiting abroad, particularly

efforts to eradicate the highest quality counterfeit note known to the

Secret Service, commonly referred to as the “Superdollar.”3

Background The widespread use of U.S. currency abroad, together with the outdated

security features of the currency, makes it a particularly vulnerable target

for international counterfeiters. According to the Federal Reserve, the

proportion of U.S. currency in circulation abroad has increased from

40 percent in 1970 to over 60 percent today.

High foreign inflation rates and the relative stability of the dollar have

contributed to the increasing use of U.S. currency outside the United

States. And, in fact, the United States benefits from this international use.

When U.S. currency remains in circulation, it essentially represents an

interest-free loan to the U.S. government. The Federal Reserve has

2

A chargeback occurs when the Federal Reserve or a bank detects a counterfeit note in a deposit and

charges the customer’s account for the value of the counterfeit.

3

The note is also known as the “Supernote” or the “Superbill” and is referred to as the “C-14342 Family”

by the Secret Service.

Page 3 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

estimated that the U.S. currency held abroad reduces the need for the

government to borrow by approximately $10 billion a year.

Despite this benefit, its increasing international use has made U.S.

currency a target for counterfeiting. Furthermore, with the exception of

two changes introduced in 1990,4

 the security features of the currency

have not substantially changed since 1929, which has resulted in the U.S.

dollar’s becoming increasingly vulnerable to counterfeiting. (See fig. 1 for

the existing security features of the currency.)

4

In 1990, Treasury added a security thread and microprinting to U.S. currency.

Page 4 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

Figure 1: Overt Security Features of U.S. Currency

Source: U.S. Department of the Treasury.

Page 5 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

Congressional groups and the media have continued to highlight their

concerns that the counterfeiting of U.S. currency abroad is becoming an

increasingly serious problem. Concerns about counterfeiting abroad were

heightened in 1992 with the issuance of the first of two reports5

 by the

House Republican Research Committee’s Task Force on Terrorism and

Unconventional Warfare. These reports charged that a foreign government

was producing a very high-quality counterfeit note, commonly referred to

as the Superdollar, to support terrorist activities. In 1993, the House

Appropriation Committee’s Surveys and Investigations staff completed a

report on the Secret Service’s counterfeiting deterrence efforts and briefed

the House Appropriations Committee. In the same year, a bill—the

International Counterfeiting Deterrence Act—was introduced to address

international counterfeiting and economic terrorism; however, it was not

passed.

The Secretary of the Treasury is responsible for issuing and protecting

U.S. currency. Treasury, including the Secret Service and the Bureau of

Engraving and Printing, and the Federal Reserve have primary

responsibilities for combating the counterfeiting of U.S. currency. The

Secret Service conducts investigations of counterfeiting activities and

provides counterfeit-detection training. The Bureau of Engraving and

Printing designs and prints U.S. currency, which includes the

incorporation of security features into the currency. The Federal Reserve’s

role is to distribute and ensure the physical integrity of U.S. currency. It

receives currency from financial institutions around the world and uses

specialized counting and verification machines to substantiate the

authenticity of all U.S. currency received. The various counterfeiting

deterrence efforts are coordinated through the Advanced Counterfeit

Deterrence Steering Committee, which was formed in 1982.

The Secret Service is the U.S. agency responsible for anticounterfeiting

efforts abroad. At the time of our work, the Secret Service primarily used

its six overseas offices, three task forces, two temporary operations, and

resources from six domestic offices to conduct this task. (See app. I for a

description of Secret Service offices responsible for locations abroad.)

Secret Service offices outside the United States typically are staffed by one

to six agents. Agents working abroad are involved in the same issues as

their domestic counterparts, such as detecting counterfeits, investigating

financial crimes, and protecting dignitaries. However, the majority of a

typical agent’s time abroad is spent on counterfeiting deterrence efforts. In

5

The House Republican Research Committee, Iran, Syria and the Trail of Counterfeit Dollars

(Washington, D.C.: July 1, 1992); and Update: Iran, Syria and the Trail of the Counterfeit Money

(Washington, D.C.: July 13, 1994).

Page 6 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

pursuing these efforts, agents must rely on the cooperation of foreign law

enforcement agencies and sometimes are allowed to provide only

investigative support. This situation is different from that in the United

States, where agents have direct investigative authority. The Secret

Service also provides other staff to support international counterfeiting

deterrence activities. For example, the Secret Service has assigned two

Counterfeit Division staff to work with the Four Nations Group6

 and three

agents to work with Interpol—the International Criminal Police

Organization.

Scope and

Methodology

To obtain information on the nature and extent of counterfeiting of U.S.

currency abroad, as well as U.S. efforts to combat this activity, we

obtained views and material from (1) U.S. government agencies in the

United States and abroad; (2) foreign law enforcement and financial

organization officials in seven European countries, as referred to us by

U.S. embassy officials; (3) Interpol officials in the United States and

abroad; and (4) individuals researching the Superdollar case, including the

author of the House Republican Task Force on Terrorism and

Unconventional Warfare reports on the Superdollar. We performed our

review in the United States, England, France, Italy, Germany, Hungary,

Poland, and Switzerland. Interpol, State Department, and Secret Service

officials recommended these countries for our review on the basis of their

knowledge of counterfeiting abroad.

To obtain U.S. government perspectives on the nature and extent of

counterfeiting as well as on efforts to deter this activity, we interviewed

and obtained documentation from senior Treasury officials in Washington,

D.C.; Secret Service officials in Washington, D.C.; New York, New York;

San Francisco, California; England; France; Italy; and Germany; and

Bureau of Engraving and Printing officials in Washington, D.C. We also

interviewed Federal Reserve Board officials in Washington, D.C.; Federal

Reserve Bank officials in San Francisco and New York; and State

Department officials in Washington, D.C., and abroad.

To secure information on the extent of the problem of counterfeit U.S.

currency abroad, we obtained Secret Service data on domestic and

international counterfeit detections. We then reviewed the Secret Service’s

counterfeit-detection data for fiscal year 1987 through fiscal year 1994. We

also reviewed Interpol’s 1991 to 1993 annual reports on international

6

The Four Nations Group, an international group with representatives from the United States, Great

Britain, Australia, and Canada, meets every 18 months to share information on counterfeiting trends

and investigations.

Page 7 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

counterfeiting activity. We did not independently verify the accuracy of the

data that the Secret Service and Interpol provided.

To gain perspective on both counterfeiting and deterrence efforts abroad,

we obtained input from foreign law enforcement and financial

organization officials in the countries we visited. (See app. II for a listing

of foreign agencies and organizations we contacted while abroad.) In

conducting our interviews, we did not pose the same questions to all

officials. Thus, the responses we obtained cannot be generalized.

The scope of our work was limited by a number of factors related to

national security and investigative concerns. First, due to the criminal

nature of counterfeiting, the actual extent of counterfeiting abroad cannot

be determined. Second, since current known counterfeiting activities

involved ongoing investigations, we were not able to fully explore and

discuss these investigations with law enforcement and intelligence

officials. Third, due to the sensitive nature of the ongoing investigation of

the so-called Superdollar, we were unable to fully explore this extremely

high-quality, allegedly foreign government-sponsored, counterfeiting

operation. As a result of these limitations, this report is not evaluative, and

it thus contains no conclusions or recommendations.

This report was prepared using unclassified sources of information. The

draft report underwent a security classification review by the appropriate

agencies, including Treasury and the Secret Service, and was released as

an unclassified report. Although they initially stated that some of the

information was or should have been classified, Treasury and the Secret

Service later rescinded this statement after they performed a full security

classification review and we reached agreement with them on a minor

revision to appendix VII. (See app. VIII, pages 66 and 67, for Treasury and

Secret Service statements that the report is unclassified.)

We conducted our review from September 1994 to May 1995 in accordance

with generally accepted government auditing standards. In June and then

again in November 1995, we updated our work on Secret Service staffing

abroad. We obtained written agency comments on a draft of this report

from the Departments of the Treasury and State and from the Federal

Reserve. These comments are discussed at the end of this report and

presented in appendixes VIII through X.

Page 8 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

The Nature of

Counterfeiting of U.S.

Currency Abroad Is

Diverse

The nature of counterfeiting of U.S. currency abroad is diverse, including

various types of perpetrators, uses, and methods. The relative

sophistication of the counterfeiter and method used results in counterfeit

notes of differing quality. According to a National Research Council report

requested by Treasury,7

 the counterfeiting problem will increase as

technologies improve and are made more accessible to the public.

Already, the Secret Service has been troubled by some very high-quality

counterfeits of U.S. currency identified as originating abroad.

Perpetrators include both the casual and the professional counterfeiter.

The casual counterfeiter is a person who commits the crime because it is

convenient or easy to do. For example, an office worker may use a

copying machine to counterfeit U.S. currency. The number of casual

counterfeiters is expected to increase with the greater accessibility of and

improvements to modern photographic and printing devices, according to

the National Research Council report. Conversely, the professional

counterfeiter may be a member of a gang, criminal organization, or

terrorist group. Foreign law enforcement and Secret Service officials that

we interviewed told us of suspected links between counterfeiting and

organized crime.

Counterfeit U.S. currency is used for economic gain and is sometimes

linked to other crimes. According to foreign law enforcement and Secret

Service officials, counterfeit U.S. currency is sometimes distributed in

conjunction with drug trafficking, illicit arms deals, and other criminal

and/or terrorist activities. Moreover, Secret Service and foreign law

enforcement officials told us that counterfeit U.S. currency is now

sometimes produced by counterfeiters in one country for export to

another country. For example, in Milan, Italy, counterfeiting has become

an industry in which counterfeit U.S. currency is produced for export,

according to Italian law enforcement officials. They added that the

counterfeits typically were exported to the former Soviet Union and

Eastern Europe.

The methods used by counterfeiters of U.S. currency abroad are the same

as those used within the United States, according to Secret Service

officials. Common techniques include using black and white,

monochromatic, or color photocopiers; cutting and taping or gluing

numerals from high denomination notes to the corners of a note of lower

denomination, also known as making “raised notes”; using sophisticated

7

National Materials Advisory Board, Commission on Engineering and Technical Systems, National

Research Council, Counterfeit Deterrent Features for the Next Generation Currency Design

(December 1993).

Page 9 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

computers, scanners, and laser or ink jet printers; bleaching good notes

and reprinting higher denominations on the genuine paper; and using

photomechanical or “offset” methods to make a printing plate from a

photographic negative of a genuine note.

Depending upon the sophistication of the counterfeiter and the method

used, the quality of counterfeit notes can vary a great deal. The Secret

Service has found good, fair, and poor quality notes for each method used.

For example, a good color copier-produced note could be better than a

poor ink jet-produced note. However, the offset printing method generally

results in the highest quality counterfeits, whether produced abroad or

domestically. (See app. III for descriptions of common methods used and

some examples of counterfeit notes.)

Recently, very sophisticated counterfeiters have been producing very

high-quality notes using the offset process. High-quality counterfeit notes

are difficult for the general public to discern, but according to Federal

Reserve officials, the notes can be detected by experienced bank tellers.

(See app. IV for case examples of high-quality counterfeit notes produced

in Canada, Colombia, and the Middle East.)

The Extent of the

Problem Could Not Be

Determined, and

Foreign Views Were

Inconclusive

The criminal nature of the activity precludes determination of the actual

extent to which U.S. currency is being counterfeited abroad. The best data

available to reflect actual counterfeiting are Secret Service

counterfeit-detection data.8

 However, these data have limitations and thus

provide only a limited measure of the extent of counterfeiting activities.

Use of these data should be qualified to reflect these limitations so that

conclusions reached using the data do not mislead. Overall, detected

counterfeits have represented a minuscule amount of the currency in

circulation. According to Secret Service officials, the data that they

gathered was supplemented by intelligence information and field

experience to demonstrate an increase in counterfeiting activity abroad.

However, our analysis of the same counterfeit-detection data proved

inconclusive. Moreover, foreign officials’ views about the seriousness of

the problem of counterfeit U.S. currency were mixed. Foreign financial

organization and law enforcement officials that we interviewed reported

no significant numbers of chargebacks and few reported instances of U.S.

currency not being accepted abroad.

8

Interpol data, the only other international compilation of counterfeit-currency statistics, were less

reliable due to the limited amount of reporting by foreign countries. According to Interpol officials,

reporting to Interpol was inconsistent and mostly limited to European nations.

Page 10 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

Treasury Believed the

Level of Counterfeiting

Was Economically

Insignificant

On the basis of the number of Secret Service counterfeit-detections,

Treasury officials concluded that counterfeiting of U.S. currency was

economically insignificant and thus did not pose a threat to the U.S.

monetary system. According to Secret Service and Treasury officials,

detected counterfeits represented a minuscule portion of U.S. currency in

circulation. Secret Service and Federal Reserve data showed that, in fiscal

year 1994, of the $380 billion in circulation, $208.7 million had been

identified as counterfeit notes, a figure which represented less than one

one-thousandth of the currency in circulation. However, while Treasury

and Secret Service officials agreed that, overall, counterfeiting was not

economically significant, they considered any counterfeiting to be a

serious problem.

The Secret Service

Believed Counterfeiting

Abroad Was Increasing

The Secret Service reported that counterfeiting of U.S. currency abroad

was increasing. It used counterfeit-detection data, supplemented with

intelligence information and field experience, to support this claim. It also

employed two counterfeit-detection data measures to illustrate the extent

of counterfeiting abroad: (1) counterfeit-detections abroad and

(2) domestic detections of counterfeits that were produced abroad.

Counterfeits detected abroad are categorized as “appearing abroad,” while

counterfeits detected domestically are divided into two separate

categories. Domestic detections of counterfeits not yet in circulation are

called “seizures,” and those counterfeits detected while in circulation are

called “passes.”

The Secret Service has reported a significant recent increase in detections

of counterfeit U.S. currency abroad. In one analysis, it reported that the

amount of counterfeit currency detected abroad increased 300 percent,

from $30 million in fiscal year 1992 to $121 million in fiscal year 1993,

thereby surpassing domestic detections in the same period (see fig. 2).

Page 11 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

Figure 2: Secret Service Counterfeit

Detection Data, Fiscal Years 1987-94 Dollars in millions

0

25

50

75

100

125

1987 1988 1989 1990 1991 1992 1993 1994

Fiscal years

Domestic detections

Foreign detections

Note: See pages 13 to 15 for our views on the limitations of this data.

Source: U.S. Secret Service.

The Secret Service has also reported that, in recent years, a larger dollar

amount of the notes detected as domestic passes has been produced

outside the United States. Since 1991, the dollar amount of counterfeit U.S.

notes detected while in circulation and produced abroad has exceeded the

dollar amount of those produced domestically (see fig. 3). In fiscal year

1994, foreign-produced notes represented approximately 66 percent of

total domestic passes detected.

Page 12 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

Figure 3: Secret Service Domestic

Pass Data, Fiscal Years 1987-94 Dollars in millions

0

2.00

4.00

6.00

8.00

10.00

12.00

14.00

1987 1988 1989 1990 1991 1992 1993 1994

Fiscal years

Produced within the United States

Produced outside the United States

Note: See pages 13 to 15 for our views on the limitations of this data.

Source: U.S. Secret Service.

The Actual Extent of

Counterfeiting Abroad

Could Not Be Determined

The true dimensions of the problem of counterfeiting of U.S. currency

abroad could not be determined. Treasury and the Secret Service use

Secret Service counterfeit-detection data to reflect the actual extent of

counterfeiting. However, although these data are the best available, they

have limitations. Specifically, they are incomplete and present only a

partial picture of counterfeiting. If these limitations are not disclosed, the

result may be misleading conclusions.

First of all, the actual extent of counterfeiting could not be measured,

primarily because of the criminal nature of this activity. Secret Service

data record only those detections that are reported to the Secret Service;

they do not measure actual counterfeiting. As a result, the data provide no

information about the number of counterfeiters operating in any given

year or the size and scope of their operations. More importantly, these

data could not be used to estimate the volume of counterfeit currency in

circulation at any point in time. In the case of counterfeit currency

Page 13 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

appearing abroad, reasons for this include the following: (1) the data do

not distinguish between how much counterfeit currency was seized and

how much was passed into circulation; (2) they could not provide

information about how long passed counterfeits remained in circulation

before detection; and (3), most critically, they provide no indication of

how much counterfeit currency was passed into circulation and not

detected.

Second, counterfeit detection data may in part be a reflection of where the

Secret Service focuses its efforts. Use of these data thus may not identify

all countries with major counterfeiting activity, but simply countries

where agents focused their data collection efforts. For example, in fiscal

year 1994, almost 50 percent of detections abroad occurred in the six

countries where the Secret Service was permanently located. In other

countries, counterfeit-detection statistics tend to be more inconsistent.

For example, in fiscal year 1994, certain African and Middle Eastern

countries reported no counterfeiting activity to the Secret Service. This

lack of reported detections, however, does not necessarily indicate that

counterfeiting activity did not occur in these countries.

Third, detection data for high-quality notes may be underreported. The

Secret Service has said that, because so few Superdollars have been

detected, this indicates that there are not many in circulation. However,

according to the Task Force on Terrorism and Unconventional Warfare

report, the majority of Superdollars are circulating outside the formal

banking system and therefore would not be reported to the Treasury if

detected. Also, as we discovered on our overseas visits, many foreign law

enforcement and financial organization officials had inconsistent and

incomplete information on how to detect the Superdollar. Thus, financial

institutions abroad may be recirculating the Superdollars.

Fourth, reported increases in counterfeiting abroad, as supported by

Secret Service detection data, may be due to a number of factors other

than increased counterfeiting activity. For example, in 1993, the Secret

Service changed its reporting practices abroad to be more proactive in

collecting counterfeit-detection data. Instead of relying solely on reports

from foreign officials, agents abroad began to follow up on Interpol

reports and intelligence information in order to collect additional data.

Also, according to Treasury officials, foreign law enforcement officials

have improved their ability to detect counterfeit U.S. currency and report

it to the Secret Service. Furthermore, although domestic reporting and

detection practices have been more consistent, the increase in domestic

Page 14 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

detections of counterfeits produced abroad is also subject to

interpretation. For example, rather than foreign-produced notes

increasing, it is possible that the Secret Service’s ability to determine the

source of counterfeit currency has simply improved over time.

Fifth and finally, counterfeit-detection data fluctuate over time, and one

large seizure can skew the data, particularly for detections abroad. For

detections outside the United States, the Secret Service has relied heavily

on information provided by foreign law enforcement organizations, and

has obtained little information from financial organizations. Thus,

counterfeit detections “appearing abroad” have primarily been seizures

reported by foreign law enforcement organizations, and the size of these

seizures can have a significant impact on detection data. For example,

according to the Secret Service, several large seizures accounted for the

jump from $14 million in counterfeit detections abroad in fiscal year 1988

to $88 million in fiscal year 1989. The following year, the data indicated a

significant drop in detections (see fig. 2).

Foreign Views on the

Extent of Counterfeiting

Abroad Were Mixed

Overseas law enforcement and financial organization officials’ views on

the extent of the problem of counterfeit U.S. currency varied. Foreign law

enforcement officials tended to be more concerned about counterfeit U.S.

currency than foreign financial organization officials. Financial

organization officials we met with said that they had experienced minimal

chargebacks, and most expressed confidence in the ability of their tellers

to detect counterfeits. Furthermore, we heard few reports from foreign

financial organization and foreign law enforcement officials about U.S.

currency not being accepted overseas because of concerns about

counterfeiting.

Most foreign law enforcement officials we spoke with believed that the

counterfeiting of U.S. currency was a problem, but their opinions on the

severity of the problem differed. While the Swiss, Italian, and Hungarian

law enforcement officials said that it was a very serious problem, French

and English law enforcement officials said that the problem fluctuated in

seriousness over time; German, French, and Polish officials said that the

counterfeiting of U.S. currency was not as serious a problem as the

counterfeiting of their own currencies. Some of these law enforcement

officials expressed concern over increases in counterfeiting in Eastern

Europe and the former Soviet Union. Some also expressed particular

worry about their ability, and the ability of financial organizations in their

countries, to detect the Superdollar.

Page 15 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

Conversely, most foreign financial organization officials we spoke with

were not concerned about the counterfeiting of U.S. currency. Of the 34

organizations we visited in 7 countries, officials from 1 Swiss and 1 French

banking association and 2 Hungarian banks viewed the counterfeiting of

U.S. currency as a current or increasing problem. According to other

foreign financial organization officials, they were not concerned about

U.S. counterfeiting activity because it did not have a negative impact on

their business. For example, none of the 16 financial organization officials

with whom we discussed chargebacks told us that they had received

substantial chargebacks due to counterfeit notes that they had failed to

detect. In addition, some of these officials cited other types of financial

fraud and the counterfeiting of their own currency as more significant

concerns. For example, officials from one French banking association

were more concerned with credit card fraud, and officials from two

financial organizations in Germany and one financial organization in

France said counterfeiting of their country’s currency was a greater

problem.

Furthermore, foreign financial organization officials we spoke with were

confident about their tellers’ ability to detect counterfeits and, in some

countries, tellers were held personally accountable for not detecting

counterfeits.9

 In most of the countries we visited, detection of counterfeit

U.S. currency relied on the touch and sight of tellers, some of whom were

aided by magnifying glasses or other simple detection devices, such as

counterfeit detection pens.10 Other counterfeit-detection devices used

abroad, like ultraviolet lights, did not work effectively on U.S. currency.

While foreign financial organizations appeared confident of their tellers’

ability to detect counterfeits, some of these organizations had incomplete

information on how to detect counterfeit U.S. currency, particularly the

Superdollar.

Finally, foreign financial organization and law enforcement officials

provided a few isolated cases in which U.S. currency was not accepted

abroad. For example, when it first learned about the Superdollar, one U.S.

financial organization in Switzerland initially stopped accepting U.S. $100

notes, although it later resumed accepting the U.S. notes from its regular

customers. Also, Swiss police, Hungarian central bank, and French

9

For example, in Hungary tellers were charged for every counterfeit note they accepted that the bank

later detected.

10Counterfeit detection pens are filled with a chemical that, when applied to currency, turns gold if the

currency’s paper contains certain characteristics of genuine paper and black if those characteristics

are not present.

Page 16 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

clearing house officials reported that some exchange houses and other

banks were not accepting $100 notes. We were unable to confirm these

reports. However, a State Department official commented that, because

drug transactions tended to involve $100 notes, some foreigners were

reluctant to accept this denomination, not because of counterfeiting

concerns, but rather because of the notes’ potential link to money

laundering.

Additional U.S.

Counterfeit Currency

Deterrence Efforts

The U.S. government, primarily through the Treasury Department and its

Secret Service and the Federal Reserve, has been increasing its

counterfeiting deterrence efforts. These recent efforts include redesigning

U.S. currency; increasing exchanges of information abroad; augmenting

the Secret Service presence abroad; and undertaking efforts to stop

production and distribution of counterfeit currency, including the

Superdollar.

In an effort to combat counterfeiting both domestically and abroad,

Treasury is redesigning U.S. currency to incorporate more security

features intended to combat rapid advances in reprographic technology.

This change, the most significant to the U.S. currency in over 50 years, is,

according to some U.S. and foreign officials, a long overdue one. The

redesigned currency is planned for introduction in 1996 starting with

changes to the $100 note, with lower denominations to follow at 9- to

12-month intervals. According to Treasury officials, the currency redesign

will continue, becoming an ongoing process, because no security features

are counterfeit-proof over time. These officials also said that the old

currency would not be recalled and would retain its full value. Moreover,

Treasury is leading a worldwide publicity campaign to facilitate

introduction of the redesigned currency, ensure awareness and use of the

overt security features, and assure the public that the old currency will

retain its full value. Through this campaign, the Federal Reserve hopes to

encourage the public to turn in old currency for the redesigned notes. (See

app. V for further information on the currency redesign.)

In addition, the Secret Service, through its team visits abroad in company

with Treasury Department and Federal Reserve officials, has both

gathered further information on counterfeiting and provided

counterfeit-detection training. As of May 1995, the team had met with law

enforcement and financial organization officials in Buenos Aires,

Argentina; Minsk, Belarus; London, England; Zurich, Switzerland; Hong

Kong; and Singapore. According to Secret Service officials, their visits

Page 17 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

were successful because they were able to develop better contacts, obtain

further information about foreign financial institutions’ practices, learn

more about tellers’ ability to detect counterfeits, and provide counterfeit

detection training seminars for both law enforcement and financial

organization officials. Future trips were planned to Russia and possibly the

Middle East.

Further, the Secret Service has been attempting to increase its presence

abroad, although it has encountered difficulties in obtaining approval. The

Secret Service has over 2,000 agents stationed in the United States, but it

has fewer than 20 permanent positions abroad. The Secret Service first

requested additional staff in February 1994 for permanent posting abroad

beginning in fiscal year 1996. However, due to uncertainties over the

funding of the positions as well as to other priorities within the Treasury

Department, as of June 21, 1995, the Secret Service had secured approval

for only 6 of 28 requested positions abroad. Subsequent to our discussions

with the Secret Service, Treasury, and State, on July 21, 1995, Treasury

approved the remainder of the positions and passed them on for State’s

approval. As of November 30, 1995, the respective chiefs of mission had

approved only 13 of the 28 positions, and only 1 agent had reported to his

post abroad. (See app. VI for further information on increasing the Secret

Service presence abroad.)

Additionally, the U.S. government has undertaken special efforts to

eradicate the highest quality counterfeit note—the Superdollar. These

efforts include the use of task forces and diplomatic efforts among senior

policy-level officials of the U.S. and certain foreign governments. Due to

the sensitivity and ongoing nature of this investigation, we were made

generally aware of these efforts but not provided with specific

information. (See app. VII for further information on U.S. efforts to

eradicate the Superdollar.)

Agency Comments

and Our Evaluation

The Department of the Treasury, including the Secret Service, the

Department of State, and the Federal Reserve provided written comments

on a draft of this report. (See apps. VIII, IX, and X.) These comments

included technical changes and/or factual updates that have been

incorporated where appropriate. However, Treasury, including the Secret

Service, also raised and later rescinded issues of security classification

and sensitivity and did not fully agree with our characterization of the

limitations of the Secret Service counterfeit currency detection data and

other supporting methods for estimating trends in counterfeiting. In their

Page 18 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

comments, Treasury and the Secret Service made frequent reference to

activities that they believed provided additional support for the

conclusions they drew from the detection data. These activities included

contacts with foreign law enforcement and financial organization officials,

vault inspections of banks abroad, and analysis of Federal Reserve data.

Although the Secret Service recognized the limitations of its counterfeit

currency detection data, Treasury and Secret Service conclusions

provided in hearings and reports have not always reflected these

limitations. Thus, in this report, we discuss the data limitations and

conclude that any use of the data should be qualified to recognize these

limitations. Although the Secret Service has the best counterfeit-detection

data available, this does not negate the potential for the limitations of this

data to foster misleading conclusions. First, the actual extent of

counterfeiting cannot be determined because of the criminal nature of this

activity. Second, counterfeit-detection data may be a reflection of where

the Secret Service focuses its efforts. Third, detection data for high-quality

notes, which may more easily circumvent detection and reporting abroad,

may be even less representative of the actual extent of the problem.

Fourth, increases in counterfeiting detections abroad may be due to a

number of factors other than increased counterfeiting, such as improved

information gathering and reporting. Also, counterfeit-detection data

fluctuate over time, and one large seizure abroad can skew the data.

We acknowledge in this report that the Secret Service supplements its

detection data with intelligence information and field experience. Even

though we did not evaluate these specific methods, our work did yield

some information on these activities.

With regard to Treasury and Secret Service contacts with foreign law

enforcement and financial organization officials, in our discussion of

additional U.S. counterfeit currency deterrence efforts, we acknowledge

that Treasury and Secret Service officials have recently increased their

contacts with foreign financial organizations in preparation for the U.S.

currency redesign effort. However, almost all of the foreign financial

organization officials we met with in September 1994 had had little or no

contact with Treasury and/or Secret Service officials before that time.

Regarding vault inspections of banks abroad, Secret Service officials

initially told us that they were conducting vault inspections during their

joint team visits with Treasury and Federal Reserve officials. However,

according to Federal Reserve officials, and as subsequently confirmed by

Page 19 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
B-261994 

Secret Service officials, vault inspections had been conducted in only one

of the six locations visited during our review. Secret Service officials told

us that the inspections had been conducted in Argentina but were then

discontinued because of the limited results obtained there. The officials

told us that the inspections might be reinstituted in other countries if it

was subsequently decided that the effort was warranted.

Finally, regarding the use of Federal Reserve data, the Secret Service and

the Federal Reserve confirmed that the Federal Reserve data were actually

a component of the Secret Service data, and thus were effectively

addressed in our evaluation of the Secret Service data.

As agreed with your office, unless you publicly announce the contents

earlier, we plan no further distribution until 30 days from the date of this

report. At that time, we will provide copies of the report to interested

congressional committees, to the Departments of the Treasury and State,

and to the Federal Reserve. We will also make copies available to others

on request.

Please contact me at (202) 512-8984 if you have any questions concerning

this report. Other major contributors to this report are listed in appendix

XI.

Sincerely yours,

JayEtta Z. Hecker, Associate Director

International Relations and Trade

Page 20 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Page 21 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Contents

Letter 1

Appendix I 

Secret Service

Geographic Coverage

Abroad, as of May

1995

26

Appendix II 

Foreign Law

Enforcement and

Financial

Organization Officials

Interviewed

28

Appendix III 

Methods of

Counterfeiting U.S.

Currency

29

Appendix IV 

Three Case Examples

of High-Quality

Counterfeits

36

Appendix V 

Treasury Department

to Introduce Currency

Redesign

40

Page 22 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Contents

Appendix VI 

The Secret Service Is

Attempting to

Increase Its

Permanent Presence

Abroad

47

Appendix VII 

U.S. Efforts to

Eradicate the

Superdollar

52

Appendix VIII 

Comments From the

Department of the

Treasury

53

Appendix IX 

Comments From the

Department of State

70

Appendix X 

Comments From the

Federal Reserve

73

Appendix XI 

Major Contributors to

This Report

74

Table Table VI.1: Status of Secret Service Request for Increased Staffing

Levels Abroad, as of November 30, 1995

48

Page 23 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Contents

Figures Figure 1: Overt Security Features of U.S. Currency 5

Figure 2: Secret Service Counterfeit Detection Data, Fiscal Years

1987-94

12

Figure 3: Secret Service Domestic Pass Data, Fiscal Years 1987-94 13

Figure III.1: Offset Printed Notes 29

Figure. III.2: Ink Jet Printed Note 32

Figure III.3: Office Machine-copied Notes 33

Figure III.4: Raised Note 35

Figure IV.1: The Canadian Note 36

Figure IV.2: The Colombian Note 38

Figure V.1: New Overt Security Features of the Redesigned U.S.

Currency

42

Page 24 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Page 25 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix I 

Secret Service Geographic Coverage

Abroad, as of May 1995

Number of

agents Geographic coverage abroad

Overseas office

Bangkok 2 Asia (Indonesia, Malaysia, Singapore, and Thailand)

Bonn 1 Europe (Austria and Germany)

London 1 United Kingdom (England, Scotland, Wales, Northern Ireland, Channel

Islands, Isle of Man, Shetland Islands, Gibraltar), Iceland, and Ireland

Manila 1 Philippine Islands

Paris 6 Africa (Algeria, Angola, Benin, Burundi, Burkina Faso, Cameroon, Cape

Verde, Central African Republic, Chad, Comoros, Congo, Djibouti,

Equatorial Guinea, Gabon, Ghana, Guinea, Guinea-Bissau, Ivory Coast,

Madagascar, Mali, Mauritania, Mauritius, Morocco, Niger, Rwanda, Sâo

Tomé & Principe, Senegal, Togo, Tunisia, and Zaire), Europe (Belgium,

Czech Republic, Slovakia, Denmark, Finland, France, Liechtenstein,

Luxembourg, Monaco, Netherlands, Norway, Poland, Portugal/Azores,

Spain, and Switzerland), Former Soviet Republics (Belarus, Estonia,

Georgia, Latvia, Lithuania, Moldova, Russia, Tajikistan, and Ukraine),

and Greenland

Rome 5 Africa (Botswana, Egypt, Ethiopia, Gambia, Kenya, Lesotho, Liberia,

Libya, Malawi, Mozambique, Nigeria, Seychelles, Sierra Leone, Somalia,

South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia, and

Zimbabwe), Europe (Albania, Bulgaria, Cyprus, Greece, Hungary, Italy,

Malta, Romania, San Marino, Vatican City, and former Yugoslavia),

Middle East (Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman,

Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates, Yemen Arab

Republic, and Yemen Peoples Democratic Republic)

Domestic office

Buffalo a Canada

Honolulu a Far East, Australia, and all U.S. Pacific possessions

Miami a Bahama Islands, Canal Zone, Cayman Islands, Central America (except

Mexico), Cuba, Jamaica, and South America

New York a Bermuda

San Antonio a Mexico

San Juan a Puerto Rico, Virgin Islands, and West Indies (except Bahama Islands,

Cayman Islands, Cuba, and Jamaica)

Temporary assignment or task

forceb

Hong Kong; temporary assignment 1 Hong Kong

New Delhi, India; temporary

assignment

1 New Delhi, India

(continued)

Page 26 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix I 

Secret Service Geographic Coverage

Abroad, as of May 1995

Number of

agents Geographic coverage abroad

Latin America; task force 1 Central and South America

Milan, Italy; task force 2 Italy

Nicosia, Cyprus; task force 2 Cyprus

aDomestic agents cover U.S. territories as well as geographic regions abroad. Therefore, no

specific number of agents are assigned to cover regions abroad.

bBoth task-force and temporary-assignment agents are located in these countries on a temporary

duty basis. Agents on temporary assignments rotate more frequently than do those assigned to

the task forces.

Source: U.S. Secret Service.

Page 27 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix II 

Foreign Law Enforcement and Financial

Organization Officials Interviewed

Country Law enforcement agency Financial organization

England National Criminal 

Intelligence Service

Bank of England

National Westminster Bank 

Citibank 

Republic National Bank of

New York 

Hong Kong and Shanghai

Bank Holdings, plc

France Office Central Pour la 

Répression du Faux 

Monnayage

Association Française 

des Banques 

Banque de France 

Caisse Parisienne de 

Réescompte 

American Express

Germany Bundeskriminalamt Deutsche Bundesbank

Deutsche Bank 

Dresdner Bank

Hungary Landes Polizei 

Hauptkommissariat 

Ungarn

Magyar Nemzeti Bank 

Budapest Bank

Ibusz Bank

Magyar Hitel Bank 

American Express 

Citibank

Italy Polizia di Stato 

Guardia di Finanza

Carabinieri Presso la 

Banca d’Italia

Banca D’Italia 

Associazione Bancaria 

Italiana 

Banca Nazionale del 

Lavoro 

Credito Italiano 

American Express 

Thomas Cook

Poland Komenda Glowna Policji Bank Polska Kasa 

Opieki, S.A.

Bank Handlowy W 

Warszawie, S.A. 

American Express 

Citibank

Switzerland Bundesamt für 

Polizeiwesen

Swiss Bankers 

Association

Credit Suisse Bank 

Swiss National Bank 

Union Bank of 

Switzerland 

Citibank 

JP Morgan

Page 28 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix III 

Methods of Counterfeiting U.S. Currency

Figure III.1: Offset Printed Notes

One defect in this good-quality offset

counterfeit is the presence of diagonal

black lines in the hair (A).

Source: U.S. Secret Service.

According to Secret Service officials, the methods of counterfeiting U.S.

currency abroad are the same as those used domestically and range from

offset printing to raised notes. While offset printing tends to produce the

higher quality counterfeit notes, quality can vary within each method used.

In some cases, a good color copier note can be better than a poor quality

offset counterfeit. Although some of the overt defects used to distinguish

counterfeits from genuine notes appear minor, often a combination of

defects makes it easier to distinguish between the two. It is also important

to remember that covert security features11 are incorporated in U.S.

currency, and the makeup of the genuine paper is a highly guarded secret.

11Covert features are undetectable by the naked eye and allow sophisticated machines, such as those

maintained by the Federal Reserve, to identify counterfeit notes when those notes are of such high

quality that they escape detection by the average citizen during a transaction.

Page 29 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix III 

Methods of Counterfeiting U.S. Currency

One defect in this fair-quality offset

counterfeit is the presence of a

diagonal black line in the hair (B).

Source: U.S. Secret Service.

Offset Printed Notes Offset printing is the most common process used by counterfeiters,

according to the Secret Service. From a photographic negative of a

genuine note, a printing plate that includes the image and nonimage area is

produced. This plate is placed on a plate cylinder, which transfers ink onto

the blanket cylinder. Then paper is rolled between this blanket cylinder

and an impression cylinder, resulting in a printed image that appears to be

flush with the surface of the paper. A review of the range of counterfeits

produced through offset printing reveals various defects that distinguish

counterfeit from genuine notes. Examples are provided in figure III.1. The

good-quality offset sample has diagonal black lines in the hair on the right

side (see fig. III.1, A). The fair-quality offset sample has a diagonal black

line near the hair (see left side of fig. III.1, B).

Page 30 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix III 

Methods of Counterfeiting U.S. Currency

One defect in this poor-quality offset

counterfeit is the lack of shading lines

in the face and hair (C).

Source: U.S. Secret Service.

Finally, in the poor-quality offset sample, the portrait is missing a majority

of shading lines in the face and hair (see fig. III.1, C).

Ink Jet Printed Notes Ink jet printing is a counterfeiting method whose use is largely due to

improvements in technology—scanners, computers, and printers. Unlike

the offset method that uses plates to compress images onto paper, ink jet

printing is a pressureless and plateless printing process that employs

computers, electronics, electrostatics, and inks to compose and produce

images. Ink jet technology requires the image to be scanned and converted

to information that is transmitted to the computer. This image must be

created each time it is reproduced, providing counterfeiters an

Page 31 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix III 

Methods of Counterfeiting U.S. Currency

Figure. III.2: Ink Jet Printed Note

The ink jet counterfeit is detectable by

the small colored dots used to make

up the image (A).

Source: U.S. Secret Service.

opportunity to change the serial numbers on the notes. To create the

image, ink jet printers spray tiny droplets of ink from the printer head

through a small gap of air onto the paper (see fig. III.2, A). The ink jet

counterfeit has small red, blue, yellow, and black dots that make up the

image; the genuine note does not have these colored dots.

Page 32 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix III 

Methods of Counterfeiting U.S. Currency

Figure III.3: Office Machine-Copied

Notes

One identifiable defect in color

machine-copied counterfeit notes is

the loss of some of the shading lines

in the face and hair (A).

Source: U.S. Secret Service.

Office Machine-Copied

Notes

Copying genuine notes on office copier machines is one of the simplest

methods employed to produce counterfeits. Office machine copiers, which

include black and white, monochromatic, and color copiers, use an

electronic transfer of toner to paper. Black and white copiers apply black

toner only; monochromatic copiers apply one color of toner at a time; and

color copiers use a simultaneous combination of yellow, light blue, bright

pink, and sometimes black toners to produce all colors.

Page 33 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix III 

Methods of Counterfeiting U.S. Currency

One defect in this monochromatic

counterfeit note is the break in the

borderline of the portrait oval (B).

Source: U.S. Secret Service.

The result is an image resting on the surface of the paper. Under

magnification, these counterfeits sometimes reveal small, individual

particles of toner outside the image area. Also, the portrait image tends to

be less distinct in these notes. For example, in the sample color

machine-copied note in figure III.3, A, shading lines are missing in the face

and hair. In the sample monochromatic note, there is a small break in the

lower borderline of the oval (shown on the lower right of fig. III.3, B).

Page 34 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix III 

Methods of Counterfeiting U.S. Currency

Figure III.4: Raised Note

In this raised note, corners have been

cut off a $10 note and pasted on a $1

note (A).

Source: U.S. Secret Service.

Raised Notes Raised notes involve one of the most simplistic counterfeiting methods.

Using this method, a counterfeiter cuts numerals from higher

denomination notes and glues them to the corners of lower denomination

notes (see fig. III.4, A). To detect these counterfeit notes, a comparison of

the arabic numbers in the corners with the text number at the bottom of

the note or under the appropriate portrait can be made.

Page 35 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix IV 

Three Case Examples of High-Quality

Counterfeits

Figure IV.1: the Canadian Note

Two defects in this counterfeit note are

the lack of microprinting around the

portrait (A) and the break in the

borderline of the portrait oval (B).

Source: U.S. Secret Service.

Three cases, the first two provided by the Secret Service and the third

primarily by the House Republican Research Committee’s Task Force on

Terrorism and Unconventional Warfare, illustrate recent troublesome

cases concerning the counterfeiting of U.S. currency abroad; all involve

high-quality counterfeit notes produced by using the offset printing

method.

• In Canada, an individual linked to organized crime produced counterfeit

U.S. $100 notes using offset plates and a printing press. The “Canadian

Note” case took almost 2-1/2 years to solve, despite the good relations that

exist between the United States and Canada and their respective law

enforcement agencies, according to Secret Service officials. During that

period, the Secret Service detected over $10 million worth of these

Page 36 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix IV 

Three Case Examples of High-Quality

Counterfeits

counterfeit notes. The Canadian Note, as opposed to a genuine note, had

the red and blue fibers printed on, rather than embedded within, the paper.

When these fibers on the counterfeit were scratched, they would not pull

from within the paper as those in a genuine note would do. Also, for 1990

series and subsequent notes, another security feature, the microprinting

around the portrait that reads “The United States of America,” was added.

This feature is missing from the Canadian Note shown in figure IV.1, A.

Finally, one overt defect in the Canadian Note is the break in the

right-hand lower border of the oval (see fig. IV.1, B).

Page 37 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix IV 

Three Case Examples of High-Quality

Counterfeits

Figure IV.2: the Colombian Note

One defect in this counterfeit note is a

black dot near the outer border of the

portrait (A).

Source: U.S. Secret Service.

• In Colombia, organized criminals bleach low denomination U.S. notes and

then use the bleached paper to print higher denomination bills. According

to Secret Service officials, these criminals use the same distribution points

as those for drugs to circulate the “Colombian” or “South American Note.”

In addition, according to Secret Service officials, this note is especially

disconcerting because the paper is often genuine, a large number of

variations exist in this counterfeit family,12 and the number of counterfeits

detected for this note is large. From the time that the note was first

detected in 1981, through fiscal year 1994, over 100 varieties of these

counterfeits, amounting to almost $36 million, have been detected. One

overt defect in the Colombian Note is a black dot near the outer border of

the oval on the right-hand side, as shown in figure IV.2, A.

12According to Secret Service officials, a “family” is a grouping of variations of counterfeit notes made

by the same counterfeiters using the same process. A family can include any number of variations.

Page 38 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix IV 

Three Case Examples of High-Quality

Counterfeits

• In the Middle East, a group, allegedly a foreign government, is sponsoring

production of the Superdollar. While many allegations have been made

about the Superdollar, little evidence in support of these allegations has

been made public. According to the report by the House Republican Task

Force on Terrorism and Unconventional Warfare, the Superdollar is

printed in the Middle East on “high-tech state-owned presses with paper

only acquired by governments.” Also according to the task force, the

Superdollar is “designed for direct infiltration into the U.S. banking system

and has become a major instrument in facilitating the flow of militarily

useful nuclear materials and equipment and various weapons systems.” A

few of the foreign law enforcement and financial institution officials we

spoke with believed the Superdollar was being circulated through various

terrorist organizations around the world, on the basis of reports of

detections involving individuals with links to terrorist organizations.

According to the Treasury Department, no evidence exists to show that

the note is printed with paper acquired only by governments or that the

note is designed for direct infiltration into the U.S. banking system.

Treasury also maintained that support for the remaining allegations

concerning the Superdollar is inconclusive. Furthermore, although the

Task Force reported that between $100 million and billions in Superdollars

is in circulation, no evidence has been provided to support these

allegations. Since the Superdollar was first detected in fiscal year 1990,

Superdollar detections have represented a small portion of total

counterfeit currency detections, according to Treasury and the Secret

Service. (Due to the sensitivity and ongoing nature of this case, defects in

and pictures of the Superdollar were not included in this report.)

Page 39 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix V 

Treasury Department to Introduce Currency

Redesign

To deter counterfeiters both domestically and abroad, the Treasury

Department plans to issue newly designed U.S. currency with more

internal security features. According to Treasury officials, the redesign is a

preemptive step to protect U.S. currency from high-tech counterfeiting.

Some U.S. and foreign officials agreed that the change is overdue because

the current U.S. currency design is outdated and easy to counterfeit. The

new design incorporates a number of new security features and will be

periodically reexamined and updated because no one security feature

alone is sufficient and no single currency design can deter counterfeiting

indefinitely. The U.S. strategy for introducing the new currency includes

the replacement of old currency as it goes through the Federal Reserve

system and the encouragement of exchanges of old currency for the newly

redesigned currency. The U.S. strategy does not include a recall of old U.S.

currency. Finally, to facilitate introduction and maximize the effectiveness

of the redesigned currency, Treasury has initiated a worldwide public

information campaign. Through this campaign, Treasury and Federal

Reserve officials plan to emphasize and thus increase the effectiveness of

the new security features, make the public aware that the old currency will

retain its value, and encourage individuals to exchange their old currency

for the redesigned notes.

The Current U.S.

Currency Design Is

Outdated and Easy to

Duplicate

Some officials in the United States and abroad agree that the current

design of U.S. currency is outdated, making it particularly vulnerable to

counterfeiting. The U.S. currency has had only two changes in over 50

years, both in 1990. According to a June 1, 1995, Treasury Inspector

General’s report,13 despite the 1990 addition of a security thread and

microprinting, the lack of more major changes to the U.S. currency has

apparently left the United States with a less technologically advanced

currency than those of other industrialized nations. For example, the

report pointed out that Japan has already incorporated special ink to deter

counterfeiters, and Finland and Australia have added features similar to

holograms (three-dimensional pictures) to their currency. The Treasury

Inspector General concluded that, because of the advances made by other

nations and the lack of similar changes by the United States, the U.S.

currency has become one of the easiest to duplicate. This conclusion was

13Treasury Inspector General, Treasury’s Overt Changes to Currency Enhance Counterfeit Deterrence

(June 1, 1995).

Page 40 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix V 

Treasury Department to Introduce Currency

Redesign

further supported by reports contracted by the Bureau of Engraving and

Printing14 and the Committee on Next-Generation Currency Design.15

During our overseas visits, officials from the Swiss, German, and

Hungarian central banks told us that the United States should consider

improving the security features within its currency. The Hungarian central

bank and the Swiss bankers association commented that the

counterfeiting of U.S. currency was particularly egregious because the

design of the dollar is technologically out of date. German and English law

enforcement officials noted that U.S. currency could be widely

counterfeited because it is so easy to copy. Additionally, officials of a

currency exchange business in Italy stated that, if the United States did not

protect its currency by adding deterrence features, then increases in

counterfeiting could lead to the devaluation of the dollar.

Currency Redesign

Incorporates New

Security Features,

With More to Be

Added Over Time

After the 1990 security features were added to the U.S. currency design,

the Advanced Counterfeit Deterrence Steering Committee formed the New

Currency Design Task Force to analyze and recommend new security

features. On the basis of the task force findings, the steering committee

presented its recommendations to the Secretary of the Treasury on

changing U.S. currency. In 1992, the task force contracted with the

National Research Council to recommend overt counterfeit-deterrence

features. The study was completed in 1993 and was used by the task force

to recommend the new security features.

The new U.S. currency maintains its traditional appearance while

incorporating new security features. The redesigned notes retain their

familiar size and colors, with portraits of the same historical figures on the

front and the same buildings or monuments on the back. The greatest

number of new security features are incorporated in the highest

denomination bills, with fewer features built into the lower denomination

bills that are less likely to be counterfeited. The new security features

include overt features easily recognized by the public and covert features

for use by the banking system. The most obvious changes are a 50-percent

larger portrait that is off-center and the inclusion of a watermark that is

visible when the note is held against a light source (see fig. V.1).

14Price Waterhouse and The Institute for the Future, Implications of Increased Counterfeiting

(September 30, 1986).

15National Materials Advisory Board, Commission on Engineering and Technical Systems, National

Research Council, Counterfeit Deterrent Features for the Next Generation Currency Design

(December 1993).

Page 41 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix V 

Treasury Department to Introduce Currency

Redesign

Figure V.1: New Overt Security Features of the Redesigned U.S. Currency

Source: U.S. Department of the Treasury.

Page 42 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix V 

Treasury Department to Introduce Currency

Redesign

Production and distribution of the newly redesigned currency will take

several years to complete. The new $100 note will be introduced in 1996,

with lower denomination notes following at 9-to 12-month intervals,16

according to Federal Reserve officials. The $100 note will be produced

first because it is the note most widely counterfeited abroad. The Bureau

of Engraving and Printing has estimated that the first-year production

costs for the $100 note will represent an increase of between $7.5 million

and $10 million from current levels because of the addition of the new

security features.

Although these new deterrent features represent a significant change to

the currency, these changes will not be the last. According to Treasury

Department officials, the combination of rapidly advancing technology,

the continued worldwide demand for U.S. currency, and the ability of

counterfeiters to compromise deterrents over time will necessitate future

currency redesigns. Therefore, the Advanced Counterfeit Deterrence

Steering Committee will continue to review, on an ongoing basis, the need

for future deterrents. Treasury has also established the Securities

Technology Institute at The Johns Hopkins University’s Applied Physics

Laboratory to develop new materials to be used in U.S. currency to further

deter counterfeiting.

Additionally, the Secret Service has begun to develop more comprehensive

evaluation methods for the currency’s counterfeit-deterrence features. The

Treasury Inspector General’s office, which evaluated the security features

added in 1990, has recommended that the Treasury Department develop a

comprehensive system of performance measures for past and future

deterrents.17 The Secret Service plans to develop a performance

measurement method that will include a more detailed computer

classification system. The system would allow for categorization of

different counterfeit notes according to the features and series that they

attempt to simulate. Moreover, the Bureau of Engraving and Printing may

pursue the development of a classification system through its contract

with the Securities Technology Institute.

16According to the Federal Reserve, it takes almost a year to make a production plate.

17Treasury’s Overt Changes to Currency Enhance Counterfeit Deterrence (Washington, D.C.: June 1,

1995).

Page 43 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix V 

Treasury Department to Introduce Currency

Redesign

Treasury’s

Introduction of the

Redesigned Currency

Will Not Include a

Recall

Although officials in some countries believe a recall should be issued in

conjunction with the introduction of newly redesigned currency, Treasury

and Federal Reserve officials believe they have developed a more

appropriate strategy for the United States. The strategy calls for the

withdrawal from circulation of old or worn notes as they go through the

Federal Reserve system and their replacement by the redesigned currency,

as well as the publicizing of the new notes to encourage the public to

exchange old currency for new. In this way, Treasury and Federal Reserve

officials expect the number of old notes in circulation to diminish over

time, eliminating the need for a recall. Treasury officials have concluded

that this strategy will be more cost-effective and less risky to the stability

of the U.S. dollar.

Some foreign law enforcement and a few foreign financial organization

officials suggested that the United States might wish to consider recalling

all old currency after distributing the new currency. Foreign officials said

that changes to and recalls of other countries’ currencies are common

methods of combating counterfeiting abroad and that, without a recall,

there is nothing to stop perpetrators from counterfeiting the old currency.

For example, foreign law enforcement officials told us that, although the

United States incorporated two new security features into its currency

issued in 1990, counterfeiters in Paris circumvented this effort by

counterfeiting 1988 notes that did not have the new features. In addition, a

U.S. terrorism expert expressed the opinion that, in order to eradicate the

Superdollar, a recall would be necessary.

Conversely, a few other foreign financial organization officials

acknowledged the cost and other concerns cited by Treasury in choosing

not to recall the old currency. Some of these officials suggested that the

amount of U.S. currency in circulation would make a recall extremely

difficult and costly. Other foreign law enforcement and financial

organizations did not comment on recalls.

The strategy as developed calls for the Federal Reserve to remove old $100

and $50 notes from circulation as they go through the Federal Reserve

banks and to reissue only the newly redesigned currency. Federal Reserve

officials told us that it is possible that they will not remove the lower

denomination notes until they have completed their normal lifespan,

because their lifespan is usually shorter than that of the higher

denomination notes. For example, a $20 note is generally faded and torn

after 2.5 years in circulation and is thus removed from circulation,

whereas the lifespan of a $100 note is 6 or more years.

Page 44 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix V 

Treasury Department to Introduce Currency

Redesign

Federal Reserve officials also told us that they expected a large demand

for the new currency and that, although the U.S. government will not issue

a recall, it will develop a publicity campaign to encourage people to

exchange older currency for new currency. Treasury and Federal Reserve

officials expected people to gravitate to the new currency, particularly in

overseas areas where older notes are already subject to greater scrutiny.

They said that, at some point, the new currency will greatly exceed the old

currency in circulation and that by then merchants will universally prefer

the new currency and subject the old currency to even greater scrutiny.

Thus, they concluded, counterfeiting of the old notes would diminish over

time. They added that they were more worried that the demand for the

new currency would exceed the supply than that the old currency might

be counterfeited.

Treasury officials said that they have no plans for a recall of the old

currency because the costs are not justifiable and a recall could negatively

affect the stability of the U.S. dollar.

• According to Treasury officials, the potential costs associated with a recall

are not warranted given the current level of counterfeiting. The cost of a

recall of all old U.S. currency would be tremendous because U.S. currency

is an international currency that is widely held abroad. Treasury believed

that, since the legitimate use of U.S. currency significantly outweighs the

illegitimate use, imposing the enormous cost of a recall on legitimate users

would not be justified.

• Treasury officials also told us that the stability of the U.S. dollar is

primarily due to the stability of the U.S. economy and the stature of the

United States around the world. They added that a recall of U.S. currency

could negatively affect this stability. The United States has made only two

overt changes to its currency since 1929 and has never recalled its

currency. People have faith in a currency because they believe it will

retain its value. Moreover, the U.S. Treasury earns revenues from the use

of U.S. currency abroad, and a decrease in the use of U.S. currency abroad

thus would have a negative impact on these revenues. For example,

according to a Treasury official, a 1-percent decrease in U.S. currency

holdings overseas would cost the Treasury $75 million in annual revenues.

Page 45 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix V 

Treasury Department to Introduce Currency

Redesign

Worldwide Effort to

Facilitate the

Introduction of the

Redesigned Currency

Treasury is developing and implementing a comprehensive, worldwide

public education campaign to facilitate the introduction of the new

currency. Through this public education effort, Treasury officials hope to

(1) increase the effectiveness of the new security features by publicizing

the overt ones, and (2) ensure that individuals around the world realize

that the old notes will retain their value and that the U.S. government has

no plans to recall U.S. currency. Also, Federal Reserve officials said that

they hope to encourage individuals to exchange old notes for newly

redesigned ones.

A Treasury Inspector General’s report has noted that the 1990 overt

security features were not as effective as hoped, partially because of the

lack of an adequate long-term public education program. And, with the

introduction of the redesigned currency in 1996, the need to educate the

public will be even greater because three different Federal Reserve Note

designs will then be in circulation: (1) pre-1990 notes without the security

thread and microprinting, (2) 1990 and later notes with the security thread

and microprinting, and (3) the newly redesigned notes.

Treasury’s publicity campaign is expected to include the use of (1) a

high-profile campaign spokesperson, the Treasurer of the United States, to

inform the public about the newly redesigned currency; (2) staff dedicated

solely to public education who will work with the U.S. Information Agency

to encourage the establishment of foreign focus groups, as well as an

outside firm to help craft and disseminate the message to the general

public and selected target audiences abroad; (3) U.S. embassies overseas

and foreign-desk officers at Treasury as points of contact for information

regarding the redesign effort; and (4) the Federal Reserve, which has

already begun to send information about the redesign effort to central

banks around the world. Additionally, according to the Secret Service, it

intends to conduct an extensive training program for law enforcement and

financial organization officials.

Page 46 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VI 

The Secret Service Is Attempting to Increase

Its Permanent Presence Abroad

To better combat the counterfeiting of U.S. currency, the Secret Service

has requested an increase in its permanent presence abroad. As of May

1995, the Secret Service had the following overseas strength: 6 permanent

offices with 16 agents assigned to them, with this permanent presence

supplemented by 3 task forces, 2 temporary assignments, and 6 domestic

offices covering additional geographic locations abroad. In February 1994,

the Secret Service requested additional positions abroad, and over a

period of 5 months, the total positions requested grew to 28. The Secret

Service had hoped that these positions would be staffed by the beginning

of fiscal year 1996. However, due to uncertainties over funding and to

other Treasury priorities, as well as to the normal approval and staff

selection timeframes at Treasury and State, as of November 30, 1995, only

13 of the 28 positions had been approved (see table VI.1.), and only 1 agent

had moved to his new post abroad.

Page 47 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VI 

The Secret Service Is Attempting to Increase

Its Permanent Presence Abroad

Table VI.1: Status of Secret Service

Request for Increased Staffing Levels

Abroad, as of November 30, 1995

Locations

Secret Service

staff increase

requested

Under

discussion

between

Treasury and

U.S. chief of

mission Disapproved Approved

New offices

Canada 2 agents

1 support

a 1 agent

1 support

1 agentb

Colombia 2 agents

1 support

1 agent

1 support c

1 agentb

Cyprus 2 agents

1 support

a c 2 agents

1 support

Hong Kong 2 agents

1 support

1 agent

1 support

c 1 agentb

Mexico 2 agents

1 support

a 2 agents

1 support

c

Russia 2 agents

1 support

2 agents

1 support

c c

Existing offices

England 1 agent

1 support

a c 1 agentb

1 support

France 2 agents a c 2 agentsb

Germany 1 agent

1 support

a 1 support 1 agentb

Italy 2 agents a c 2 agentsb

The Philippines 1 agent 1 agent c c

Thailand 1 agent 1 agent c c

Total 20 agents

8 support

6 agents

3 support

3 agents

3 support

11 agents

2 support

aDiscussion completed.

bConditional approval based on agreement with U.S. ambassador regarding administrative

support costs.

cNot applicable.

Sources: U.S. Departments of the Treasury and State.

On February 2, 1994, the Secret Service submitted a request to the

Treasury Department for funding under the Crime bill (Violent Crime

Control and Law Enforcement Act of 1994, Public Law 103-322, Sept. 13,

1994). The Secret Service requested staffing for new offices in Bogota,

Colombia; Mexico City, Mexico; Ottawa, Canada; Nicosia, Cyprus; and

Page 48 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VI 

The Secret Service Is Attempting to Increase

Its Permanent Presence Abroad

Hong Kong. It requested additional staffing for existing offices in Rome,

Italy; Paris, France; Bonn, Germany; London, England; Manila, the

Philippines; and Bangkok, Thailand. The Secret Service provided

justification for its request, stating that counterfeit U.S. currency being

produced and circulated overseas had dramatically increased and that

high-quality counterfeiting had also escalated overseas. The Secret Service

added that, because of its extremely limited resources abroad, it was not

always able to take timely action to suppress counterfeiting abroad. The

Secret Service provided the examples of the Rome and Paris offices,

which cover districts consisting of over 40 countries with respective

complements of 5 and 6 special agents. Additionally, on June 6, 1994, the

Secret Service requested approval to open and staff a new office in

Moscow, Russia, stating that the office was needed due to the burgeoning

economic crimes in Russia and Eastern Europe.

As the Secret Service continued to maintain its need for 28 additional staff

abroad, because of concerns over funding constraints, Treasury was

considering a plan to consolidate Treasury Bureau staff overseas in a

cost-saving effort. Subsequently, on August 15, 1994, Treasury sent a

request to State to approve 22 Treasury agents and 4 support staff to be

taken from the Secret Service and other enforcement bureaus’ staffs,

depending on the greatest need at each location. The Treasury request

stated that the positions would be funded with existing resources should

Congress not approve additional funding. State responded with the request

that Treasury specify the bureau to which each position was to be

assigned.

On September 30, 1994, the Treasury, Postal Service, and General

Government Appropriations Act for fiscal year 1995 made $5 million

available to the Secret Service to combat the counterfeiting of U.S.

currency. However, according to the Treasury Department Budget Adviser

for Enforcement, Secret Service base funding was still uncertain at that

date. Thus, on November 18, 1994, Treasury sent a letter to State

requesting that 11 of the positions it had requested on August 15 be Secret

Service agents for the new offices, as requested by the Secret Service.

However, Treasury did not forward a request for additional staffing of the

existing offices at that time.

On March 29, 1995, State sent a letter to Treasury providing an update on

Treasury staffing requests, including the Secret Service positions, asking

Page 49 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VI 

The Secret Service Is Attempting to Increase

Its Permanent Presence Abroad

Treasury to respond to the cables from the chiefs of mission,18 which had

already been forwarded to Treasury. Five of the requested agent positions

had been approved, contingent on various clarifications. Approvals

consisted of two positions in Cyprus, one in Hong Kong, one in Colombia,

and one in Canada. The majority of the concerns and questions dealt with

the funding of administrative support costs. Furthermore, State noted that

it had not yet received proposals for the additional Secret Service

positions and that the proposals were needed so that State could forward

them to the chiefs of mission concerned.

As of our exit briefings with the Secret Service, Treasury, and State in

May 1995, Treasury had not yet responded to the cables from the chiefs of

mission, with the exception of that from Nicosia, and had not requested

any additional Secret Service positions for offices abroad. According to a

Treasury budget official, funding had remained uncertain until recently,

and then other priorities took precedence. However, the budget official

also told us that a request for the remaining positions would be forwarded

to State and that the cables would be answered shortly.

Subsequently, on June 5, 1995, the Secret Service provided Treasury with a

letter stating that it had not yet received a formal response regarding the

remaining positions and that it was willing to fund administrative support

costs. The Secret Service also asked that the process be expedited. In a

June 13, 1995, letter from the Secret Service to Treasury, the Secret

Service stated that it was moving ahead with candidate selection for the

approved Cyprus, Hong Kong, Bogota, and Ottawa positions and expected

to have those positions staffed in early fiscal year 1996.

On July 21, 1995, Treasury approved the remainder of the Secret Service’s

28 requested positions and forwarded the request to State. Cables were

sent to the respective chiefs of mission for approval.

Finally, as of November 30, 1995, the Secret Service had received approval

from the chiefs of mission for 13 of the 28 new positions originally

requested. Approvals had been granted for staff in Canada, Colombia,

Cyprus, Hong Kong, England, France, Germany, and Italy. Requests for

staff in Mexico and additional staff in Canada and Germany had been

denied. Requests for staff in Colombia, Hong Kong, Russia, the Philippines,

and Thailand were still under discussion between Treasury and the chiefs

of mission.

18The authority to determine the size, composition, and mandate of mission staffing elements rests

with the chief of mission and the Secretary of State. Other U.S. government agencies do not have

decision-making authority with respect to the size, composition, or mandate of missions abroad.

Page 50 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VI 

The Secret Service Is Attempting to Increase

Its Permanent Presence Abroad

However, although gains appear to have been made in the approval

process, staff selection and movement of staff to their new posts abroad

still remained to be completed. According to the Secret Service, as of

November 30, 1995, only one agent had moved into his new position

abroad (in Canada); two other staff had been selected for other positions

and were preparing to move; and the selection process was just beginning

for the remaining approved positions.

Page 51 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VII 

U.S. Efforts to Eradicate the Superdollar

U.S. efforts to eradicate the Superdollar include an interagency task force

led by the Secret Service, an overseas Secret Service task force, and

diplomatic efforts between senior policy-level officials of the involved

countries. Due to the sensitivity and ongoing nature of this investigation,

we were made generally aware of these efforts but were not given specific

information. However, the Secret Service has provided classified briefings

to Members of Congress on efforts to eradicate the Superdollar.

In a February 1994 Secret Service request to Treasury for funding under

the 1994 Crime bill, the Secret Service stated that, for the past 4 years, it

had spearheaded a multiagency effort to suppress the most technically

sophisticated note detected in the history of that agency. This initiative has

prompted an unprecedented forensic effort, utilizing the resources of the

Secret Service, other government offices, and several national

laboratories.

According to a State Department official, senior policy level officials in the

U.S. government are conducting ongoing diplomatic efforts concerning the

Superdollar with Middle Eastern government officials. This official said

that, in May 1995, our government asked these foreign governments to

provide a show of good faith in improving relations by locating the

printing plants and perpetrators involved in producing the Superdollar. He

added that these efforts did not specifically implicate these governments

in the production of the Superdollar, but that, at a minimum, they were

believed to be tolerating this illegal activity within their borders.

U.S. and Interpol officials we interviewed stated that final resolution of

cases similar to that of the Superdollar, should such cases occur, were

beyond the purview of law enforcement agencies and would require

diplomatic solutions. According to U.S. and Interpol officials,

jurisdictional constraints may prevent law enforcement agencies from

dealing effectively with cases of foreign-condoned or foreign-sponsored

counterfeiting of U.S. currency. In such cases, the Secret Service would be

able only to identify and assist in suppressing the distribution of the

counterfeit notes. In countries where the United States has no diplomatic

relations, U.S. law enforcement has no leverage to aid in the deterrence of

counterfeiting. U.S. and Interpol officials agreed that the decision on how

to suppress a foreign government-condoned or foreign-sponsored

counterfeiting plant would need to be made at a senior U.S. government

level.

Page 52 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 53 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

See comment 1.

Now on p. 2.

Now on p. 3.

Now on pp. 3-4.

Now on p. 6.

Now on p. 9.

Page 54 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Now on pp. 10-11.

Now on p. 11.

Now on p. 14.

Now on p. 14.

Now on p. 14.

Page 55 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

See comment 2.

Now on p. 16.

Now on p. 17.

Now on p. 17.

See comment 3.

Now on p. 18.

Page 56 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Now on p. 38.

Now on p. 40.

See comment 4.

Page 57 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Page 58 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Now on p. 2.

See comment 5.

Now on p. 6.

Now on p. 6.

Page 59 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Now on p. 7.

Now on p. 11.

Page 60 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Now on p. 12.

See comment 6.

Now on pp. 13-15.

Now on p. 14.

See comment 2.

Now on pp. 14-15.

Page 61 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Now fn. 10 on p. 16.

Now on p. 17.

See comment 3.

Now on p. 18.

Page 62 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Now on p. 30.

Now on p. 31.

Now on p. 33.

Page 63 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Now on p. 37.

See comment 7.

Now on p. 40.

Page 64 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Page 65 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Page 66 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

Page 67 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

The following are GAO’s comments on the Department of the Treasury’s

October 19 and November 30, 1995, letters, including the enclosures from

the Secret Service.

GAO Comments 1. Treasury states that U.S. currency is not highly susceptible to

counterfeiting and that counterfeiting statistics and supporting evidence

support its viewpoint. We modified the text to delete the word “highly” but

continue to believe that the evidence supports a conclusion that U.S.

currency is susceptible to counterfeiting. For example, the susceptibility

of U.S. currency to counterfeiting is established in a number of reports,

including: (1) Treasury’s Overt Changes to Currency Enhance Counterfeit

Deterrence (June 1, 1995), prepared by the Treasury Inspector General’s

Office; (2) Implications of Increased Counterfeiting (September 30, 1986),

prepared by Price Waterhouse and the Institute for the Future for the

Bureau of Engraving and Printing; and (3) Counterfeit Deterrent Features

for the Next Generation Currency Design (December 1993), prepared by

the National Research Council for the Committee on Next-Generation

Currency Design. Additionally, the State Department’s Bureau of

International Narcotics and Law Enforcement Office of International

Criminal Justice concurred with this position, as did Interpol officials we

contacted. Furthermore, counterfeiting statistics provided by the Secret

Service only give reported detections and cannot be used to reflect the

actual extent of counterfeiting.

2. Treasury states that, based on its vault inspections, Federal Reserve

data, detection data, and contact with overseas banking and law

enforcement officials, there is no evidence of which it is aware to support

the statement that banks may be recirculating the Superdollar. The Secret

Service states that it is known that the C-14342 does not circumvent

detection and further states that foreign banking institutions and currency

exchange houses have consistently demonstrated their ability to detect

these notes and that there has not been any indication of widespread

recirculation of the C-14342 family by financial institutions. However,

based on our interviews with financial organization and law enforcement

officials abroad, financial organizations in some countries may be

recirculating the Superdollar. Many of the foreign law enforcement and

financial organization officials we interviewed had inconsistent and

incomplete information on how to detect the Superdollar, and some

acknowledged that in some cases it may escape detection and be

recirculated.

Page 68 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix VIII 

Comments From the Department of the

Treasury

3. Treasury confirms that the report lists countries that were visited by the

joint Treasury/Federal Reserve teams during our review and adds

locations visited as of October 1995. The Secret Service suggests that we

should increase our scope to include additional locations visited after we

completed our work in May 1995. The report includes only visits that were

completed during our review and for which the joint teams had reached

preliminary conclusions and briefed us on their results. Since we did not

review information and conclusions from the additional visits, we did not

include them in the report.

4. Treasury states that it does not agree that U.S. currency is one of the

easiest to duplicate. We have revised the text to provide the specific

Treasury Inspector General report reference, which states that U.S.

currency is easy to duplicate, and we have added other specific

Treasury-contracted sources to the text.

5. The Secret Service states that it should be noted that well over

90 percent of all counterfeit U.S. currency is seized before it enters

circulation. This statement cannot be verified for two reasons. First, since

the total amount of counterfeit currency cannot be determined, one

cannot determine what percentage is seized before it enters circulation.

Second, for detections abroad, the Secret Service detection data do not

distinguish between detections occurring before and those occurring after

entering circulation. Thus, it is not possible to determine what percentage

of counterfeit U.S. currency detected abroad is seized before it enters

circulation.

6. The Secret Service states that foreign-produced counterfeit U.S. notes

passed in the United States during fiscal year 1994 made up 64 percent of

total domestic passes, not almost 60 percent as stated in the draft report.

However, the Secret Service was unable to provide supporting data for the

figure of 64 percent. Our analysis of updated fiscal year 1994 statistics

provided by the Secret Service resulted in a figure of 65.5 percent, and we

changed the text accordingly.

7. The Secret Service expressed its concern over our references to

material found in the House Republican Research Committee’s Task Force

on Terrorism and Unconventional Warfare reports. These reports are the

only unclassified government reports on the Superdollar. They are

frequently quoted by the media and “terrorism experts” and thus cannot be

ignored. We have not verified the information in these reports. We have

attributed all comments made by the task force to the task force.

Page 69 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix IX 

Comments From the Department of State

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

See comment 1.

Page 70 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix IX 

Comments From the Department of State

Page 71 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix IX 

Comments From the Department of State

The following is GAO’s comment on the Department of State’s October 30,

1995, letter.

GAO Comment 1. State concludes that we concur with its finding that counterfeit U.S.

currency is not a factor in international money laundering. We did not

address this issue in the scope of this report and have not reached this

conclusion.

Page 72 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix X 

Comments From the Federal Reserve

Page 73 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Appendix XI 

Major Contributors to This Report

Headquarters,

Washington, D.C.

Shirley A. Brothwell, Senior Evaluator

Martin H. De Alteriis, Social Science Analyst

Judith K. Knepper, Senior Evaluator

Rona H. Mendelsohn, Senior Evaluator (Communications Analyst)

Donna M. Rogers, Evaluator

Katherine M. Wheeler, Publishing Consultant

Office of the General

Counsel, Washington,

D.C.

Sheila K. Ratzenberger, Assistant General Counsel

Geoffrey R. Hamilton, Attorney

San Francisco/Seattle

Field Office

Kane A. Wong, Assistant Director

Kathleen M. Monahan, Evaluator-in-Charge

Pamela H. Brown, Evaluator

(280132) Page 74 GAO/GGD-96-11 Counterfeit U.S. Currency Abroad
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 6015

Gaithersburg, MD 20884-6015

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100