Effectiveness of public security and features on bank notes
Speech to Interpol - 10th International Conference on Currency Counterfeiting
New Zealand is a country with a population of just under 4 million people, 80 per cent of European descent, regarded as `first world', well educated and with sophisticated communication technology available to all.
Ten years ago the Reserve Bank of New Zealand decided to change the bank note designs. One of the prime reasons for doing so was to update the public security features incorporated in our notes.
Because we do not have our own printer we went to international tender.
Over a period of a few months we were visited by a number of bank note salespeople from various security printers.
I was reasonably new to the currency area of the Bank at that time and I well remember being fascinated by all the public security features that were proposed for our notes.
These features included watermarks; security threads; micro printing; latent images; horizontal, vertical and odd size numbering; see-through features; anti scanning line structures; micro-engraved lettering; micro-line; rainbow anti-photocopying printings; engraved portraits etc.
At that time we consulted widely on the design features of our notes; the portraits, birds, flowers etc. It did not occur to us to consult the public on what security feature they could find easily and, most importantly, verify with confidence.
Sitting in my ivory tower, it was easy to take decisions on what, after all, we perceived to be a `technical' issue. The theory being, that the "more public security features the better", then in the event of widespread forgery, a particular feature that may not appear in the counterfeit note can be highlighted.
Naturally we decided to include lots of the security features recommended by the salespeople!
In subsequent years I have become more sceptical at the real value of all these features, most of which I now consider to be gimmicks. I believe that it is too easy for issuers to take the view that "what is obvious to me must also be obvious to the general public".
In talking to the public about bank notes, sometimes in giving addresses to Rotary Clubs and the like, I have been amazed at the lack of knowledge of what is on a bank note.
In some ways it initially made me feel a little superior, in that I had more technical knowledge than the audience did. But, we are talking about "public" security features here, and the public should know as much about them as I do!
My scepticism about the value of many of the public security features in bank notes was confirmed for me in a survey of public opinion we undertook in November 2000.
The results of this survey suggested to us that knowledge and self-checking of individual security features incorporated in our bank notes was low among the general public.
The survey participants were asked to show the researches the security features on our bank notes that they could identify.
A wide range of features was mentioned by relatively small numbers of participants, indicating that the detail of how security is achieved is not an area of particular saliency to the general public.
Participants were then asked to imagine that they had been given a $10 bank note and that they were suspicious that the note may not be genuine. They were then asked what they would do to verify that the note was genuine or a forgery.
Nearly half the participants said that their first option would be to take the note to a bank for verification. Some would check the watermark or other security features that they may be aware of.
The survey also revealed that 70% of the general public had never checked the authenticity of a bank note, and those who have, did so only infrequently.
As an issuer I have a number of concerns with the findings of the survey, to summarise:
- While only 5% of the public said that they don't know how to check the authenticity of a bank note, 70% said that they had never actually done so, and those who do, do so infrequently.
- When asked what they would do if they were suspicious that a note may not be genuine, the first reaction of nearly half the population is to take the note to a bank.
- A significant number of people would check to see if the note had a serial number. All reasonable forgeries I have seen have serial numbers.
- No participants in the survey mentioned that they checked the raised intaglio printing or the portrait.
- Only 15% mentioned that they were aware that bank notes are printed on special quality paper or material, and no-one mentioned it as a feature they would use to check if the note was genuine.
- No participants in the survey were aware of the see-through feature or micro printing.
On the positive side there is a high level of confidence that appropriate security features are incorporated in our bank notes. This is probably related to the fact that most of the general public would be happy to rely on an expert to check authenticity if they were suspicious.
The survey also included responses from retailers.
As expected these were a little more encouraging, with only 15 per cent of retailers saying that they would take a note to a bank for verification if they were suspicious. Also, forty-five per cent stated that they would check a note at least once a month and only 15 per cent had never checked a note.
However, retailers also identified a wide number of security features they check, including serial numbers. Thus, it can probably be concluded that retailers in New Zealand, as well as the general public, do not place a high priority in becoming familiar with the key security features in our notes.
Fortunately in New Zealand we have not had any sustained attempts to forge our currency. This probably explains the low numbers of the public who check notes for authenticity.
However in 1996/97, we did have a serious problem (by our standards), when counterfeits detected by the Bank rose to 16.47 notes per million in circulation.
At that time all our bank notes were printed on paper with a variety of features, but the only really effective public security features were the watermark and a thread; the other features were of little use because of the difficulty of verification.
Unfortunately the problem we had was that both the watermark and the thread needed the note to be held to the light to verify if it is genuine. In New Zealand we are most reluctant to hold a bank note to the light as it gives the impression that we do not trust the person offering the note.
Very few people were caught actually passing a forgery and the counterfeits only ceased after the Police apprehended the people responsible.
Thus, if we again look at our paper bank note that was on issue in 1997, it is apparent to us that five of the so-called public security features were ineffective.
Of the other three, no one seems to be aware that intaglio printing is a security feature and the thread and watermark need the note to be held to the light for verification.
Our 1996/97 experience, together with the ease with which reasonably good copies of bank notes can be made by a much wider section of the population these days, provided one of the prime motivations for our decision to change to polymer notes in 1999.
We believe that it is sensible to take advantage of new technology that provides an effective public security feature and makes casual counterfeiting more difficult.
The key public security feature in a polymer bank note is the transparent or clear window. We decided to incorporate two clear windows in our notes, one of them with differing sizes and shapes for the various denominations. This window also shows the numeral of the note embossed.
To date the two windows have maintained their structure and thus their effectiveness extremely well.
Since the introduction of polymer bank notes we have seen a significant reduction in counterfeits detected by our processing machines at the Bank.
In calendar year 2001, we detected just 1.2 counterfeit notes per million notes in circulation, compared with 6.1 in 2000 and 10.7 in 1999.
Most of the forgeries detected in 1999 and 2000 were of the former paper design. Attempts to counterfeit the polymer design have been negligible.
In recent years the note most often counterfeited was the high usage $20 denomination. In 1998, when all notes in circulation were paper, 61 per cent of all detected forgeries were $20 notes. There was a dramatic shift in 1999 after the introduction of the polymer $20 note, with forgeries of this denomination declining to only 3 per cent of the total detected in the year 2000.
The New Zealand Police have also seen a significant decline in reported forgeries.
The trends in the reporting of counterfeit notes to the Police follow very closely the trends experienced by the Bank.
Between September last year and January this year the Police saw only two counterfeit notes - one a paper simulation of a polymer $100 note, (with just one fake window), and the other a paper $50 note.
At the Bank we allow repatriations of fit notes post Christmas. In January and February this year, we machine processed 17 million notes (17 per cent of the total in circulation) and discovered just three forgeries.
We believe that the polymer substrate itself also provides a significant barrier for the casual forger. This is because it is difficult to print on plastic. All the forgeries of our polymer notes to date have been printed on paper, with some attempt to create a clear window by cut and paste.
An encouraging aspect for the Bank is that the November 2000 survey did reveal that 71% of the general public could identify the transparent windows as security features. This was after the polymer notes had been in circulation for just 18 months.
From the Reserve Bank's viewpoint it is becoming even more vital for our bank notes to have a very effective public security feature.
In recent months we have significantly reduced our role in the cash distribution cycle in New Zealand.
In 1998, when all our notes were paper, we machine processed 540 million notes; on average each note in circulation was checked eight times! In 2001, we machine processed just 48 million notes (out of 100 million in circulation).
Thus, we cannot now rely on the machine-readable features on the notes being checked on a regular basis by ourselves.
Our conclusion is, that to be effective in New Zealand, we need to have one really good public security feature which has the following characteristics:
- Be difficult and time consuming to counterfeit.
- Be prominent on the note.
- Be easily verifiable without needing to hold the note to the light or use a device (e.g. magnifying glass).
- Be durable and retain effectiveness as the note ages.
Our experience to date suggests that a bank note printed on a polymer substrate will meet our requirements, with the transparent window providing the public security feature.
In addition we would use a high-level authentication system for the machine that destroys unfit notes and only include other machine-readable features that are required by the cash industry.
In the future it is likely that we will drop the serial number and most of the other security features that we consider ineffective.
In the year 2000 we issued a limited edition polymer bank note into circulation. This note had a single very prominent public security feature in the form of a transparent window with a DOVD in the form of aluminium coating in the shape of two silver ferns within the window area.
While not perfect by any means, we do believe that this note will likely meet most of our requirements in the future.
As a final comment, I suggest that the concept of incorporating numerous security features into a bank note, in the hope that the public may use at least one of them, is not only unnecessary in my view, but causes confusion.