Counterfeit Deterrent Features for the Next-Generation Currency Design (1993)

Highly sophisticated and technologically advanced reprographic systems are no longer the tools of the skilled technician but are widely available to, and accepted by, the general public. Ease of use and versatility, facilitated by user-friendly control panels, permit an unskilled user to make faithful, full-color reproductions of any document. Reproduction quality, ease of access, and relative freedom from discovery combine to create an atmosphere within which many individuals may experiment with the replication of U.S. banknotes: committing the so-called crime of opportunity. To the dedicated semiprofessional or professional counterfeiter, these reprographic machines are turnkey systems that can be purchased on the open market. They are easily installed and permit limited mass production. Law enforcement agencies could be overwhelmed by these counterfeits, since traceability to the source would be very difficult. The quality of the reproduction can be very high, not solely dependent on the skill of the counterfeiter. Even if the total monetary value of counterfeits grows at a modest rate, widespread counterfeiting capability could reduce public confidence in U.S. currency.

Traditional counterfeiting deterrents, such as unique high-quality paper, fine-line engravings and high-pressure (intaglio) printing, were adequate in the past to restrict counterfeiting to the dedicated craftsman with access to a printing press; these have kept counterfeiting to a reasonably manageable level in the United States. However, with the advent of advanced reprographic systems, these methods are no longer sufficient. Indeed, samples provided by the U.S. Secret Service, made on a commercially available color copier, were very impressive and, in the committee's estimation, would have no trouble in passing all but the most demanding visual inspection. Modern deterrents are required that possess a highly visible means of authentication that is difficult to reproduce and is readily observable by an individual unaided, or using low-cost, relatively unobtrusive devices. This latter requirement is important because of the perceived reluctance of the public to appear obvious in the inspection of a banknote. 1 The intent is to make the attempted forgery so obviously different from a genuine note that it is either readily recognized and intercepted at the first pass, or, even better, the counterfeiter decides that it is not good enough to risk passing.

Redesign of the U.S. banknotes is required to accommodate additional counterfeit-deterrent features. The extent of the design changes will depend upon the additional features selected, and which current ones are removed. Changes to banknote design are subject to several constraints. First, the size of the notes should not be changed in a manner that would prevent co-circulation of old and new notes and continued use of vending machines, automated teller machines, change machines, and Federal Reserve Bank sorting and authentication sensors and equipment. Design modifications to the note should not reduce circulation life or produce environmental hazards, either in manufacture, during circulation, or at the time of disposal. Finally, the evaluation of changes must include consideration of the manufacturing capability and cost.

The U.S. Bureau of Engraving and Printing (BEP) is among the world 's largest printers of banknotes, and it has a history of introducing innovations in printing equipment. This tradition should certainly be continued as plans are made for time-phasing the introduction of advanced deterrent features. Incorporation of some desirable features may lead to the need for future additional modernization of production equipment and facilities. For example, new intaglio presses would be required to greatly improve the front-to-back registration, and offset printing of some features would be needed if high-resolution lines or dots are required.

U.S. banknotes remain very important to the economy of the United States, and to many foreign countries, as the U.S. dollar is a de facto world currency. Thus, the security of U.S. currency is interwoven with the economic well-being of the United States and the U.S. currency 's stature in the world.

The conclusions and recommendations presented in the previous National Materials Advisory Board reports, are as relevant today as they were 6 years ago (NRC, 1985, 1987). The potential magnitude of the threat today is at least as great as was projected in those reports and could grow at a faster rate, perhaps geometrically. The print resolution of color copiers and printers will continue to improve and will soon challenge the resolution capabilities of present-day intaglio printing. Therefore, small-size intaglio printed characters or letters (microprinting) introduced on series 1990 banknotes will provide only temporary counterfeiting deterrence. Color reprographics technology continues to advance rapidly. It exhibits exceptional color quality and resolution and is starting to permeate all segments of the market, from business to home. Market growth is proceeding at a fast pace, and many companies are manufacturing color copiers and printers; the resulting competitive pressures are driving unit cost down. Placement of new non-impact color copier and printer systems in 1995 is expected to exceed 2 million units in the United States, and a similar number is expected for the rest of the world.

Widespread availability of advanced reprographic systems and their relative ease of use present an environment for occasional, casual counterfeiting. These systems also provide a convenient base technology for the more professional counterfeiters so that they need onlyconcentrate on simulating the deterrent features and not on the printing process itself. Sophisticated and inexpensive image-processing software is available that can be coupled with

high-resolution scanners and color printers to provide an opportunity for an advanced amateur, such as a computer hacker, to experiment with counterfeiting in relative privacy. These individuals will not only view the task as a challenge but may share their techniques and results over computer networks.

At the present time, the total value of counterfeit notes that enter circulation each year in the United States is relatively small compared with that of all of the currency in circulation. In 1991, the Federal Reserve System handled $265 billion worth of U.S. banknotes. In that same year, $15.1 million in counterfeit notes were passed in the United States. In addition, the Secret Service seized $87 million in counterfeit notes before they entered circulation. Most of these counterfeit notes (90 percent) were produced using a lithographic process; this requires considerable skill, specialized equipment, and special supplies obtainable from a limited number of suppliers (Brown, 1993a).

The amount of counterfeit notes produced using non-impact reprographic technology (i.e., copiers, scanners, and computer printers) is presently small in contrast to that produced by lithographic processes that use specialized equipment. The 1992 data indicates that counterfeits produced using non-impact reprographic technology accounted for $6 million to $8 million of the total amount; these types of counterfeits have been doubling for the past three years (Brown and Einsel, 1992). The most recent 1993 counterfeiting data indicates a dramatic increase in casual counterfeiting using ink-jet technology (Brown, 1993b). These reprographic methods are pernicious, because they do not provide the Secret Service with leads through which the production source can be traced.

The counterfeiting of U.S. currency overseas is also a problem. Interpol, an international police organization composed of 169 member countries, rarely encounters counterfeit notes of currencies that have incorporated sophisticated security features. Most of the counterfeit cases they are investigating deal with U.S. banknotes (87.6 percent; Kendall, 1993). In 1991, $50 million in counterfeit U.S. notes were detected overseas. While part of the overseas problem can be attributed to unfamiliarity with U.S. currency (although this is by no means proven to be true), it may be due primarily to the relative ease with which U.S. currency can be counterfeited compared with the currency of other industrialized countries, most of whom have recently redesigned their currency. Also, U.S. currency is widely accepted throughout the world, making it a prime target for international counterfeiters.

In line with the assessment of the Committee on Next-Generation Currency that these will be the primary methods for counterfeiting in the future, the rate of growth of notes created using color reprographic equipment is growing geometrically. An illustration of how large the problem could become is to assume that the rate of counterfeiting with non-impact reprographic equipment doubles every year until year 2000, as it has since 1989. With this assumption, the present day value of counterfeit currency could grow to $1.6 billion to $2 billion in the year 2000. Obviously, such a large amount of counterfeiting would cause severe problems for the economy. Appropriate actions can, and undoubtedly will, be taken long before counterfeiting becomes a problem of such proportions.

The combination of creative simulation by the counterfeiter and inattentiveness of the general public has permitted some very poor counterfeits to enter circulation. While they are eventually detected and removed with machine-based authentication systems, these are virtually untraceable if made by a copier or printer. Many other nations regularly change their currency designs, oftentimes to add advanced deterrent features. Some of these features are candidates for use on U.S. currency. Information regarding the effectiveness and durability of these features, derived from actual circulation experience, would be highly useful in judging their value as deterrents and suitability for use. At present, however, very little specific information appears to be shared among countries regarding effectiveness, cost, and durability of particular features.

The distinctive feel of U. S. banknotes this is imparted by a combination of intaglio printing and unique paper substrate continues to serve as an important method for banknote authentication by individuals who handle money on a regular basis. The security thread introduced in series 1990 banknotes will be effective once it is present in most U.S. banknotes,2 and the public becomes more aware of it. There are a number of additional deterrents now being considered for incorporation in U.S. banknotes. A systematic method is required to compare the advantages, limitations, and costs of each.

Over the course of this study, technical information about numerous deterrent features was gathered from vendors, expert witnesses, the BEP, the Federal Reserve Board, and the Secret Service. This information ranged from conceptual proposals with little or no supporting data to prototypes with extensive test results. A limited amount of data were also available for features already in use on the currency of other countries.

An extensive list of features was generated that represents a wide variety of technologies. Many candidates were based on a common theme. They were considered as a generic class unless a specific implementation exhibited highly advantageous characteristics.

The overall effectiveness of an individual feature was determined by two primary considerations: resistance against technical threat and technical success probability.

Resistance against technical threat assumes success in deploying the deterrent and is a measure of the feature's value as a counterfeit deterrent. This category is subdivided in the four subcategories: (1) visual and tactile recognizability, (2) inherent resistance to copying, (3) resistance to simulation, and (4) ease of machine readability.

Technical Success Probability is a measure of the risk of incorporating a feature into a banknote. This category is also subdivided into four subcategories to identify the primary areas of consideration. These are (1) availability and manufacturability, (2) change to recurring production costs, (3) durability, and (4) capital cost of new or modified production tooling.

Environmental considerations, in manufacture as well as disposal, were discussed where appropriate but not included as specific factors, as the majority of features did not appear to present a hazard. The selection of deterrent features by the BEP for eventual use should include such an evaluation.

The two categories with their eight subcategories form the cornerstone of the committee's evaluation by helping identify the relative strengths and weaknesses of each feature. Some caveats are in order. First, the subfactors are not equally weighted; depending on the threat scenario, some would be more important than others. For example, visual and tactile recognizability is much more important than machine readability when considering detection by the person on the street, whereas the opposite is true when considering machine validation. In a similar manner, the inherent resistance to copying addresses all levels of counterfeiter expertise, from unskilled to highly skilled, while the resistance to simulation targets those individuals willing to perform at least one additional step (the serious hackers and professionals) and will likely discourage the casual counterfeiter as well.

The committee did not expect that any single feature would rank first in all categories, and none did. Hence, the committee thought it was important to understand the intent (target) of each deterrent. In order to provide a multifaceted system of deterrents, consideration should be given to deploying multiple features that complement each other. A well-designed set would address issues of visibility and recognizability under different viewing conditions; require different methods and skills for simulation; and, generally, require too many additional process steps for anyone but the dedicated professional to attempt. Some caution is required, however. The use of too many features could overwhelm the public and thereby reduce the overall effectiveness of the deterrents.

The increased availability of advanced color copiers and systems composed of a computer-scanner, and printer makes widespread counterfeiting of U.S. banknotes a real and substantial threat. Ready access and ease of use could lead to abuse by “casual” counterfeiters. Copiers certainly pose a significant threat, but the most important threat in the foreseeable future, in the judgment of the Committee on Next-Generation Currency Design, is color scanner-computer-printer systems, aided by the continuing evolution of more-sophisticated image-processing software. These systems also provide additional opportunities for professional counterfeiters.

The system of deterrence used today has been very efficient, as measured by the relatively low rate of counterfeiting in the United States. The combination of a unique paper substrate, security thread (introduced starting in Series 1990 banknotes), fine-line engraved portraits, and intaglio printing has played an important role in this deterrence. The system should not, however, be assumed effective against future threats.

Features that defeat the casual counterfeiter do not necessarily work effectively against professional counterfeiters. Casual, opportunistic counterfeiters do not have the skills,

resources, or determination to defeat sophisticated individual deterrents or combinations of them, whereas professional counterfeiters do have these skills and the resources to simulate or duplicate any single deterrent, and probably most combinations, given sufficient time. Certain combinations of features, rather than features acting alone, offer robust potential for defeating the casual counterfeiter and slowing down the professional. In the committee's opinion, the set of deterrent features need not be the same on all denominations of banknotes. For example, more sophisticated features may be used on the $100 banknote than on a $5 (or $1) note3.

Many of the candidate deterrent features are effective within a particular set of conditions. For example, diffraction-based optically variable devices, such as holograms or kinegrams, while effective on rigid substrates such as credit cards, at present lack durability on a flexible substrate. Also, these features, though effective against casual counterfeiters, can be easily simulated by even semiprofessional counterfeiters. Metallized or specular reflecting features also offer deterrent protection against casual copying. As with the diffraction-based features, however, there are a number of durability issues. Color-shifting inks, on the other hand, have been shown to be more durable than diffraction-based features and are also effective against the casual counterfeiter if the public is willing to carefully manipulate the banknote to observe the color change. (They are in widespread use in foreign currency, stamps, and other security documents.)

Innovative covert deterrence concepts, such as unique three-dimensional random pattern generation combined with encryption of the pattern, are highly resistant to counterfeiting and effective against all levels of counterfeiting expertise. But they would not at present be a first line of defense, as they require machine sensing, and such devices are not yet available at most points of sale. The first generation of local, built-in intelligence for copiers and scanners, which prohibits banknote reproduction, does not appear to be a universally promising first line of defense either; as presently implemented, these systems store a limited number of banknote designs, and the controller can probably be circumvented by those who are electronically proficient. Also, there are many copiers, scanners, and printers that do not offer this feature.

It appears to the committee that the public in the United States, for a variety of reasons, does not aggressively examine its banknotes and report counterfeits. But it is not obvious to the committee what incentives could improve the situation. (The degree of inspection is probably correlated to experience in finding a counterfeit note.) An appropriately designed reward system may provide more of an incentive for people and businesses to report counterfeit notes. Personnel employed at points of sale who regularly handle cash, are a crucial line of defense (as are vending machines). The committee's opinion is that the casual counterfeiter would be significantly deterred if relatively simple, speedy, and inexpensive point-of-sale devices were commercially available and commonly used to authenticate banknotes. Such devices would detect one or more deterrent features incorporated in the note.

The use of color alone as a deterrent offers little protection against today's advanced copying technology. However, color used in combination with other features can provide enhanced visibility of deterrents and thus aid the general public in identifying counterfeits. Color can also be used to differentiate between different denominations.

It appears technically feasible to incorporate a low-cost application-specific integrated circuit in all color printers and copiers to encode the machine serial number on all output pages in a way that is not obvious. Assuming that such a circuit were tamper proof, it would allow forensic analysis of the copy to identify the owner of the machine that produced the counterfeit. It also would provide law enforcement authorities with the means to determine the volume of counterfeit produced from a particular source. Once the public became aware of this capability, it would serve as an excellent deterrent against casual counterfeiting (Canon, 1990).

Currently, there is no clear association between some of the banknote testing specifications applied by the BEP and the real-world use of currency. This leads to a concern that potentially effective counterfeiting deterrents may be erroneously eliminated from consideration.

A long-term deterrent strategy must anticipate and lead the evolution of reprographic systems and the level of expertise of the counterfeiting community. Technological progress in non-impact printing will continue to be driven by market forces in a never-ending quest for better accuracy and quality, and it is imperative that the Department of Treasury be informed of developments in ample time to respond to future threats. In a similar fashion, there is a considerable amount of basic research being conducted in the academic and industrial community that could have relevance for future counterfeit deterrence. However, the link between this research and the BEP's long-term needs would not normally be made in a timely way unless specific mechanisms were put in place.

Although there are many new features that can be used to deter counterfeiters, the BEP should continue to utilize fine-line engraving, intaglio printing on high-quality pale-tinted paper, and the security thread as methods of deterrence against “classical” printing technologies and present-day reprographics. Future banknote designs should also incorporate additional visible features to serve as deterrents against counterfeiting and as a means for rapid visual authentication. If analysis shows it is cost effective to do so, some of these overt features could be incorporated into a banknote and their existence not publicly disclosed until they are needed to thwart a new counterfeiting threat.

The BEP should implement a system of complementary features on each banknote that create added complexity for simulation by all levels of counterfeiters. They should not, however, constrain their design by a requirement that the same set of counterfeit deterrence features be on all denominations of bills. And although multiple features rather than a single dominant feature should be present on each banknote, the number of announced features

should not be so great that it overwhelms the user or does not allow space for future feature incorporation.

The BEP should redesign U. S. banknotes to include at least some of the features recommended below, making such changes in appearance as are necessary to produce a new series of notes that effectively and efficiently incorporates these advanced counterfeiting deterrents. The recommended features (discussed in detail in a subsequent chapter) fall into three categories: near term, intermediate term, and long term. Within the categories, the deterrent features are not prioritized because of insufficient data relating to implementation issues and the realization that no single feature is adequate protection from even casual counterfeiting.

The committee recommends (listed in alphabetical order) incorporation of at least some of the following visible features in the near term:

• color-shifting inks for printing;

• moiré (alias-generating) line structures, with color added as necessary to enhance the effect;

• security-thread modifications e.g., location or width based on the denomination;

• variable-size dot patterns, with color added to enhance the effect; and

• localized watermarks.

Incorporation of at least some of the following features, requiring inexpensive visual aids for detection at the point of sale, are recommended for the intermediate term:

• infrared inks for printing;

• optically active coated fibers and particles embedded in the substrate; and

• photoluminescent inks for printing.

Longer-term plans for advanced deterrents should include additional development and understanding of the following features:

• diffraction-based holograms and related devices;

• embedded zero-order diffraction gratings;

• laminated paper substrates with selected features;

• metallic or specular woven security features;

• optical fibers embedded in the substrate; and

• random pattern encryption methods.

For the far term, the BEP should continually assess fundamental advances in the chemical, applied physical, and biological sciences for developments that are applicable to innovative deterrent features. Assessment of research in psycho-physics would also be pertinent since a better understanding of how people perceive visible features may provide insight into the selection of the “best” features.

Before any new counterfeit-deterrent feature is implemented, it should be evaluated by adversary-analysis experts to determine how readily it can be defeated. This process would be aided by having a means to quickly produce currency with appropriate design changes.

There are other aspects of a counterfeit deterrent strategy that should be developed along with incorporating new features in banknotes. To begin with, counterfeit-detection education should be emphasized for point-of-sale persons as a priority, and it should be available for the public at large. Potential incentives that would encourage the public to turn in counterfeits should be closely studied to determine which would be effective and not subject

to abuse.

Industry should be encouraged to develop effective point-of-sale aids to assist in banknote authentication. Efforts that will lead to a high degree of authentication, particularly for the higher denomination bills, should be continued.

The Department of Treasury should investigate the cost effectiveness of requiring source identification (e.g., machine serial numbers) to be embedded in images produced by new copier and printer systems that are capable of producing quality color counterfeit banknotes. If it is determined to be cost effective, appropriate U.S. legislation requiring source identification should be encouraged. In addition, the Department of Treasury should strongly encourage the use of sensors built into color copier and printer systems that can recognize and inhibit banknote copying. For this approach to be most effective, a unique, feature with a high signal-to-noise ratio currency should be identified, developed, and applied universally to currency, possibly in conjunction with other nations. The application of this technology to lower-end systems, such as ink-jet printers, should be analyzed. Many of these printers do not now contain the sophisticated electronics necessary to implement this technology, and thus the inclusion of such technology would have a major cost impact. Also, it is unclear how easily these systems can be defeated by a determined, knowledgeable computer “hacker.”

To stay ahead of the evolving counterfeiting threats, the Department of Treasury (perhaps led by the BEP) should establish a multiphased program of identifying and evaluating advancements in relevant technologies. Understanding the technological progress in non-impact printing technologies, and which counterfeiting techniques and methods are being employed, would help the Department of Treasury anticipate advances in the sophistication level of counterfeiters so that the type and timing of counterfeit deterrents could be planned accordingly. Appropriate mechanisms to accomplish this can take the form of advisory panels, committees, workshops, and briefings.

In order to link the science and technology research community with BEP needs, the same mechanisms suggested above for keeping up to date with reprographic technology would be appropriate. However, this is such a wide-ranging area that more in-depth preparatory work would be necessary. In order to make maximum use of information about scientific and technological advances in all relevant areas, there should be internal Department of Treasury technical activity to ensure comprehension and proper interpretation of these research reports.

The BEP should continue to reevaluate its current materials, process specifications, and tests against actual use requirements, taking into account that different use requirements may apply to different bill denominations. Correlation should be made between the different failure modes of currency experienced in practice and the suite of specification tests performed by the BEP.

Long-range systematic planning for incorporation of features should be instituted as a regular part of the mission within the Department of Treasury.

Finally, the Department of Treasury should continuously gather data from other nations as to the effectiveness and durability of features such as color-shifting inks and holograms that have been incorporated into their currency.

Brown, J.1993a. Presentation by Special Agent James Brown, U.S. Secret Service, to the Committee on Next-Generation Currency Design. June 15, 1993.

Brown, J.1993b. Personal communication from Special Agent James Brown, U.S. Secret Service. September 1993.

Brown, J., and C. Einsel. 1992. Comments by Special Agent James Brown and Special Agent Craig Einsel, U.S. Secret Service, to the Committee on Next-Generation Currency Design. June 15–16, 1992; September 1–2, 1992; and October 21–22, 1992.

Canon.1990. Apparatus for Image Reading or Processing. European Patent Application EP 382,549. August 16, 1990.

Kendall, R. E.1993. Letter from R. E. Kendall, Secretary General, Interpol, to the Committee on Next-Generation Currency Design. April 5, 1993.

National Research Council (NRC). 1985. Advanced Reprographic Systems: Counterfeiting Threat Assessment and Deterrent Measures(U). National Materials Advisory Board. Washington, D.C.: National Academy Press.

National Research Council (NRC). 1987. Counterfeit Threats and Deterrent Measures. National Materials Advisory Board. Washington, D.C.: National Academy Press.