Criminal Law

Counterfeiting: Who Pays When Merchants, Banks, and Individuals are Duped?

By Janet Portman, Attorney
Counterfeiters are increasingly sophisticated, but banks can catch the results. Learn how to protect yourself from fakes.

Counterfeiting is an age-old crime, originally described as the making of any false money, obligation, or security of the government. Governments have always taken the crime very seriously, because the presence of counterfeit currency has the potential to destabilize the entire economy, a result that few other crimes can boast. Originally, when only metallic coins were used as currency, the crime was distinct from forgery, which requires a false signature. These days, the crimes of forgery and counterfeiting are quite alike, though counterfeiting is usually restricted to money and government obligations, whereas forgery extends to the making of false private obligations, as well.

Counterfeiting is a federal crime, but the states are free to write their own, supplemental laws. The federal crime of counterfeiting extends to deeds, stamps, certificates, contracts, and any other writings made to extract money from the federal government.

To commit the crime of counterfeiting, a person must possess fake money, know that it is fake, and have it with the intent to “pass” it, or use it. The fakes must be such that a person of ordinary powers of persuasion and care would be deceived (actual deception is not required). Altering a genuine bill is a crime. In addition, possessing tools that can be used to make fake money is a crime. The crime extends to the possession of “slugs” (used in vending and gambling machines), registered and brand marks, seals, narcotic drugs, lottery tickets, warehouse receipts, cigarette excise stamps, and peddlers’ licenses.

Where is Counterfeit Money Made?

Given the relatively simple means of production described above, you might conclude that most counterfeit money in the U.S. is made here, by many individuals. While there are certainly small-scale operators in the states, the biggest source of counterfeit money is Peru. In fact, in November 2016, Secret Service agents, working with Peruvian police, seized $30 million in fake U.S. currency in Peru. In addition, they suppressed six counterfeit presses, seized eight, and took over 1,600 printing plates and negatives, according to the Secret Service press release. The fakes are brought to the U.S. in operations that mimic narcotrafficking.

The Peruvian operations are old-fashioned, using printing presses and skilled artisans who replicate the plates used to print the money. According to the Secret Service, the Peruvians’ finishing process—creating the texture—is superior to most other counterfeiters. The process is compartmentalized and lengthy, taking up to 10 to 12 people and about a week to make an order.

How Do Counterfeiters Make Money on Their Money?

The goal of a counterfeit trafficker is to exchange the fake stuff for genuine money, the faster the better. Sources interviewed by the Washington Post, in their story on the Peruvian haul, explained that the money might be used in low-level street transactions, in Craigslist transactions, or in big-box retailers. With respect to the latter, a trafficker might spend several hundred (fake) dollars on clothing at a store, then return the items for cash—real cash. Because it’s so cheap to buy counterfeit Peruvian notes, the criminal has earned up to a 90% profit. At the same time, the scheme will be run many times at many different stores, racking up huge profits (and losses) in a very short period of time. Store clerks typically cannot recognize the fakes.

The Gig is Up

The game ends when stores, merchants, and individuals take their cash to the bank, which routinely subjects it to scanning equipment. According to the Secret Service, banks worldwide have equipment that will catch counterfeit, so that it will not continue to percolate through the economic system. Because the fakes will be destroyed at the bank, the public’s trust in the country’s banking system should remain intact (there is no reason to fear that the bank will give out counterfeit money, or otherwise keep it in circulation). But for the unwitting consumer or merchant who has given something of value in exchange for a counterfeit bill, that’s cold comfort. Read on to learn what you can do if stuck with counterfeit bills.

Avoid Becoming a Victim

After reading about the ingenious methods foreign criminals are using to create money, you might think there’s little you can do. Not so. Follow these common sense practices to help you avoid trouble:

  • Do not accept large amounts of cash as payment. If someone insists on paying in cash, ask that person to meet you at a bank, and ask the bank to convert the money to a check or money order, or deposit it directly into your account. The bank will first scan the bills and will catch anything amiss.
  • Scrutinize the bills you receive. You might spot a poorly-made counterfeit.
  • Never pass it on. If you suspect you’ve got a fake, never use it. If it came from a merchant, a bank, or an individual, ask for a replacement before leaving. If they refuse, call the police.
  • Call the police if you’re accused of trying to pass a fake bill. If you don’t and the merchant confiscates the bill, you might not be able later to recover the money. After all, the merchant might be wrong about the bill, or could even be trying to scam you out of a genuine bill.

It’s a Fake. Now What?

The bank teller who informs you that the roll of 20’s you want to deposit are fakes will not give you a stack of good bills or add a deposit to your account. Those bills will be confiscated and, if there’s reason to believe that you knew they were fakes and were trying to pass them, the teller might put in a call to the local police. But assuming you’re not the object of suspicion, you will become the object of pity, because the balance in your bank account will not budge. You’re out of luck.

Or are you? Interestingly, your homeowners’ insurance policy (and even your renters’ policy) might cover you, up to $500 or $1,000. In addition, the usual deductible may not apply, depending on the policy wording.

Falsely Accused

Because it’s very hard to identify fake bills, many people have them and innocently offer them as payment. But as explained above, that’s not a crime – in order to be convicted, the prosecutor must show that you knew that they are not the real article. A criminal caught passing counterfeit will feign ignorance and may be hard to differentiate from the truly unsuspecting victim.

For this reason, if you’re charged with passing counterfeit currency, it’s very important to obtain legal counsel immediately. An experienced criminal defense attorney will know how to develop the facts for your defense, and how to present your story in the best light.

Questions for Your Attorney

  • Do I have to give a customer a different bill if the customer thinks that the one I gave as change is counterfeit?
  • Can someone be charged with counterfeiting if he's arrested for some other offense and a fake bill is found in his wallet, but he had no idea the bill was fake?
  • Is it illegal to use counterfeit U.S. money in another country?
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