More Sour Notes in the Eurozone


By Carol Matlack For a while, the euro seemed to have counterfeiters stumped. In the year after the new European currency was officially launched in January, 2002, only 167,000 phony bills were found in circulation -- down dramatically from the 650,000 found in the 12 eurozone countries during 2001. The euro's state-of-the-art security features, including holograms and color-shifting ink, made forgery more difficult than ever (see BW Online, 12/3/03, "Happy Birthday Dear Euro").

Alas, the crooks now seem to be catching on. The European Central Bank (ECB) says more than 230,000 fake bills were found in circulation during the first half of 2003 alone. Most experts predict the second-half numbers will be even higher.

In fact, some experts fear that faking of the euro will exceed the combined total counterfeiting of the currencies that the euro replaced in a few years. That's because forgers rarely bothered with relatively weak and thinly circulated European currencies such as the Portuguese escudo and Greek drachma. "The euro represents a greater prize than many of the other former currencies," says Allister McCallum, head of the ECB's counterfeit analysis center.

OUTSIDE EFFORTS. As they battle the currency copiers, European police face several worrisome developments. One is the growing availability and decreasing cost of high-quality color-printing equipment. Philippe Ménard, head of the anticounterfeiting unit of France's Police Nationàle, says forgers in the past needed bulky, expensive offset printers to produce reasonably genuine-looking bills. Now, Ménard says, they're turning to desktop computers and printers that can easily be transported and concealed.

In mid-November, French police raided a house in the Mediterranean port city of Marseille, where they found stacks of phony 100-euro bills that had been produced on inkjet color printers hooked to PCs. The police also found sophisticated gilding equipment to replicate the holograms on euro bills.

Another troubling trend is the increased production of counterfeit euros outside the eurozone. Europol, the organization of European police agencies, says of 12 major euro-counterfeiting operations discovered during this year's first half, two were in countries where the euro doesn't circulate. Europol declines to identify the locations, but police sources say euro counterfeiting is on the rise in Eastern Europe and even in Latin America. The activity often goes undetected by local police, since the forged bills aren't circulated within their borders.

AMATEUR WORK. That's the bad news. The good news is that most of the bogus bills found so far have been of such poor quality that laymen can easily spot them as fakes, police say. Just to be sure, the ECB is planning a new public-education effort, echoing a campaign before the euro's launch that encouraged people to "touch, look, and tilt" the new currency. A genuine euro bill has raised print that can be felt with the fingers, its watermark and security thread are clearly visible when held up to the light, and its embedded hologram images shift when the bill is tipped from side to side.

Police say most counterfeiting -- especially outside the eurozone -- is run by organized gangs who not only produce but carefully control how and where the fake bills are put into circulation. Europol recently signed agreements with law-enforcement organizations in several Eastern European countries to work more closely on cracking down on such groups.

At the other end of the spectrum, French police official Ménard says, the relative low cost of color printing has spurred some almost-laughable small-scale amateur efforts, with people printing a few fake bills to buy groceries or fill up their cars' gas tank. For organized criminals and freelancers alike, the most popular bill to fake is the 50-euro note, followed by the 20-euro. And while counterfeiting of coins is much less common, police this year have busted two illegal minting operations, in Italy and Portugal. The most valuable euro coin, the 2-euro piece, is worth nearly $2.40 at current exchange rates.

THE DOLLAR RULES. Watchdogs point out that even if the number of counterfeit bills found this year is likely to top 500,000, that's minuscule compared with the 8 billion or so genuine bills in circulation. "We're a long way from any kind of emergency or panic situation," the ECB's McCallum says.

The Europeans can take solace in knowing that the dollar, not the euro, remains counterfeiters' No. 1 target. The U.S. doesn't release figures on phony dollar activity, but European police have seen the data, and Ménard says, "For the moment, we are still well below the level of the dollar."

The Europeans' goal in introducing the euro, though, was to create a global currency to rival the greenback. The more they succeed, the more they're likely to face a major counterfeiting headache, too. Matlock is a Paris-based correspondent for BusinessWeek


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