currency, financial instruments, accounts
This page considers forgery and fraud relating to currency,
financial instruments (such as bonds and cheques) and
It covers -
Questions about exchange and currency in the digital environment
are explored in the Money
guide elsewhere on this site.
For many people forgery equates to counterfeiting. In
2004 criminals try to be cute with digital scanners, colour
photocopiers and bits of foil; two millennia ago they
forged their own coins or 'improved' existing currency.
Pre-industrial forging is discussed in Classical Deception:
Counterfeits, Forgeries & Reproductions of Ancient
Coins (London: Kraus 2001) by Wayne Sayles.
The invention of paper currency - banknotes, bills of
exchange, cheques - offered new opportunities. Randall
McGowen suggests that one-third of all the capital statutes
passed in the UK between 1700 and 1830 dealt with forgery.
That is illustrated in The Perreaus and Mrs. Rudd:
Forgery and Betrayal in Eighteenth-Century London
(Berkeley: Uni of California Press 2001) by Donna Andrew
& McGowen, supplemented by his 'Making the 'bloody
code'? Forgery legislation in eighteenth-century England'
in Law, Crime & English Society, 1660-1830
(Cambridge: Cambridge Uni Press 2002) edited by Norma
Landau. The Perreaus also feature in Sarah Bakewell's
The Smart: The True Story of Margaret Caroline Rudd
& the Unfortunate Perreau Brothers (London:
Chatto & Windus 2001).
Andrew Motion's factive Wainewright the Poisoner:The
Confessions of Thomas Griffiths Wainewright (London:
Faber 2000) and James King's Faking (Toronto:
Simon & Pierre 1999) offer accounts of TG Wainewright,
sometime Australian colonist, forger and recurrent murderer.
Unauthorised manufacture of currency continues. In 2004
for example a raid by the UK National Crime Squad uncovered
about £170,000 worth of €50 notes and printing
equipment. Europol, the European Union's police agency,
helped dismantle 20 clandestine print shops in 2003, with
one raid involving seizure of 22,000 counterfeit notes.
In 2006 Colombian authorities raided two private residences
in Bogota, seizing a printing machine, printing plates
and an estimated $650,000 in almost completed Australian
$100 notes along with 8,000 sheets of partially printed
polymer (with a potential face value of $5 million). During
the following year an international counterfeiting gang
tried to con the Bank of England out of £28 billion
with 'special issue' £500,000 notes (which had never
existed) and thousands of forged £1,000 notes (a
denomination that had not been legal tender for over 60
Damage to an enemy's economy through counterfeiting under
official auspices has been a feature of warfare throughout
Milan sought to undermine Venice by debasing the Venetian
ducat from 1470 to 1476. Napoleon counterfeited Austrian
and Russian notes. Frederick the Great had earlier dumped
several counterfeit currencies on his opponents in the
Seven Years' War. During the US struggle for independence
the UK counterfeited Continental currency to the extent
that it became worthless, reflected in the expression
"not worth a Continental".
The UK went on to counterfeit French Assignats in the
1790's. During the US Civil War the North and South sought
to print each other's notes, supposedly inspired by Mexico's
counterfeiting of Texan notes during the 1846 War.
The 1914-18 War was marked by British counterfeiting of
Ottoman currency, with indifferent success. In 1926 Hungarian
notables such as the Budapest Chief of Police and Prince
Ludwig Windisch-Graetz were arrested after revelation
that they had been involved - with tacit endorsement by
the government - in manufacturing 30 billion counterfeit
French francs, allegedly either to finance a Habsburg
coup or gain vengeance on France for territorial losses
through the Treaty of Trianon. The embarrassment was followed
by the 1929 International Convention for the Suppression
of Counterfeiting Currency (here).
During the 1939-45 War Germany's 'Operation Bernhard'
involved production of bogus Allied notes by slave labour
in the Sachsenhausen concentration camp, equivalent to
US$7 billion in today's currency. Notably, prisoners in
concentration camps - such as Salomon Smolianoff - were
used to forge more pound notes than those in the vaults
of the Bank of England, equal to about 15% of all genuine
UK notes in circulation.
Berhard is described in Anthony Pirie's Operation
Bernhard (New York: William Morrow 1962) and Krueger's
Men: The Secret Nazi Counterfeit Plot and the Prisoners
of Block 19 (London: Little Brown 2006) by Lawrence
Malkin. The US and UK counterfeited the Reichsmark.
It has been alleged that the US subsequently sought to
destabilise the Castro regime by producing Cuban pesos
for distribution as part of the Bay of Pigs invasion and
printed North Vietnamese dong. More recently, North Korea
has been accused of counterfeiting US dollars.
Alves Reis, profiled in The Man Who Stole Portugal
(London: Secker & Warburg 1967) by Murray Teigh Bloom,
forged documentation in 1924 authorising printing of Portuguese
banknotes equivalent to US$125 million. That fraud - one
of the masterpieces of social engineering - involved use
of the same English printer who printed the authorised
Portuguese notes, with the same paper, plates and ink.
The proceeds of Reis' scam allowed him to become the largest
depositor in some Portuguese banks, owner of the Bank
of Angola & Metropole and - before unexpected disclosure
- a serious contender for control of the Bank of Portugal.
Teigh Bloom is also responsible for Money of Their
Own: The Stories of the World's Greatest Counterfeiters
(New York: Scribners 1957)
Forgery by governments is explored in Currency Wars:
Forging Money to Break Economies (London: Constable
2008) by John Cooley.
Stephen Jory (1949-2006), head of the so-called Lavender
Hill mob in the UK, served time in prison for what was
described as a "£300m international perfume
fraud" and counterfeited UK notes, eventually admitting
to manufacture of £50 million worth of counterfeit
£20 notes (some of which featured a watermark in
which Elizabeth II appeared to have a beard). He provided
an engaging account in Loadsamoney: The True Story
Of The World's Largest Ever Counterfeiting Ring (London:
Trafalgar Square 2005).
What better way to fund a revolution than to print your
In 1848 Hungarian activists in London counterfeited Austrian
notes. In 1896 Frederico Mora used the Spanish-American
Printing Company in New York to manufacture US$1 million
of Costa Rican notes for a coup against president Iglescias.
The plan failed when customs officials discovered the
loot hidden in a sofa.
Thirty years later Austrian royalist Ludwig Windischgraetz
organised printing of 100 million French Francs to finance
restoration of the Habsburgs to the throne of Hungary.
Government responses to counterfeiting have essentially
taken three forms -
of legislation, often with capital punishment provisions
adoption of new technologies such as watermarks, thread
paper and polymer-based notes - discussed in more detail
of anti-counterfeiting agencies to enforce the regime.
Johnson's Illegal Tender: Counterfeiting and the Secret
Service in Nineteenth-Century America (Washington:
Smithsonian Institute Press 1995) notes that during the
US Civil War up to 40% of the notes in circulation were
counterfeit. That is unsurprising given the absence of
a central bank and the enthusiasm with which over 1,200
banks issued their own notes, much of which approached
the status of a private
currency and like many private currencies had limited
acceptance. A response under President Lincoln was creation
of a national currency, underpinned by the establishment
of the Secret Service as the federal agency responsible
for protecting the integrity coins and notes.
An Australian perspective is provided by Willibald Kranister's
The Money Makers international (Cambridge: Black
Bear Publishing 1989) and Les Coventry's 1998 Australia's
Counterfeiting Experience (PDF),
highlighting the move to polymer-based notes after a counterfeiting
scare in the 1960s following introduction of decimal currency.
how much phony paper?
In 1994 the US Treasury estimated that US$208.7 million
of the US$380 billion of notes in circulation was counterfeit,
with foreign-produced notes representing around 66% of
total counterfeits in circulation detected domestically.
Ten years later 58,807 counterfeit Scottish banknotes
- with a notional value of £1,166,724 - were discovered
and removed from circulation (down from 106,335 in 2002,
31,287 in 2003 and 65,363 in 2001. The number of counterfeit
notes represented 0.016% of the 367,874,146 genuine Scottish
banknotes on issue at the end of 2004. During the same
year the Japanese government reported detection of around
30,000 fake notes, out of over ten billion Japanese banknotes
in circulation. In 2004 Canadian authorities seized some
552,980 notes with a nominal value of C$12.96 million.
cheque forgery and fraud
Cheque forgery and fraud takes a variety of forms, from
counterfeiting forms to faking signatures.
The vast numbers of cheques in circulation (particularly
in jurisdictions such as the US, where consumers have
proved more resistant than Australian counterparts in
uptake of electronic payment systems and where there are
over 70 billion cheques each year from a large number
of cheque-issuing institutions) means that counterfeiting
of cheque forms (eg by using scanners and digital printers)
still occurs. Theft of unused cheque books, in particular
through the post, with forgery of the account holder's
signature, also occurs.
Forgers have been known to alter legitimate cheques, eg
by using solvents or mechanical erasors to remove information
that is then replaced with new payee details: one reason
why you shouldn't use pencil on a personal or commercial
More crudely, some criminals exploit lax record-keeping,
with forgers for example using cheques from inactive accounts.
Incidents of identity theft
have involved criminals opening personal or corporate
accounts (using legitimate or forged official
documentation), receiving a cheque book which is then
used to defraud people and organisations. The individual
whose identity was stolen has in some instances had significant
difficulty repairing a damaged reputation.
Estimates of the prevalence and significance of cheque
fraud vary. The American Bankers Association reported
in 2000 that there were US$679 million actual losses and
US$1.5 billion potential losses in the preceding year.
Ian Woods' 1998 paper Fraud & the Australian Banking
suggests that comparable Australian figures haven't been
Insights are offered by Edward Potter's Customer Authentication:
The Evolution of Signature Verification in Financial Institutions
In 1840 the London Times exposed a million pound
plot to defraud continental bankers by forged lettres
circulaires (letters of credit) purportedly issued
by the Glyn, Mills bank. The scheme involved the Marquis
de Bourbel, Baron Louis d'Arjuzon and Cunningham Graham
("an anonymous partner in the house of Bogle, Kerrich").
Allan George Bogle sued John Joseph Lawson, printer and
publisher of the Times, for defamation.
The result of Bogle v Lawson was that Bogle was
awarded a derisory one farthing damages.
credit card fraud
In 2001 we noted one of the Financial Times's more
mordant articles claiming that "online credit card
fraudsters were almost as rare as profitable dotcoms last
Online credit card losses in the EU in 2000-01 rose £2m
to £7m, an unexpectedly small proportion of the near-£300m
total fraud losses, witha slower growth rate than other
types of card swindles. Canadian authorities reported
that around 50.4 million credit cards were in circulation
at the end of fiscal year 2003, with overall losses of
around C$200 million for the twelve-month period ending
Europay, the Mastercard's European arm, had forecast that
6% of all EU card fraud was internet-related. The UK-based
Association for Payment Clearing Services (APACS) dissented,
that internet fraud "is not a very serious issue" and
the biggest losses now come from organised crime. The
rise in old-world postal theft of cards, at £2.7m, outstripped
the increase in internet fraud.
APACS spokesman Richard Tyson-Davies said the involvement
of organised gangs had led to "frightening" losses from
counterfeiting of cards. £102.8m went to swindlers copying
cards in 2000, more than double that in 1999.
had expected a bigger figure from the internet ... The
figure is not a lot out of line with what we guess turnover
in the sector increased by. There are other things we
really need to concentrate on.
pornography websites, which generated half of the online
fraud, are being targeted in an effort to improve internet
security. APACS members are also investing heavily in
counterfeit-resistant 'smart' cards. Visa for example
has accelerated its plans to introduce chip cards throughout
Europe, investing £107m to subsidise replacement of terminals
and upgrade bank systems by 2003.
The report is in line with The Phantom Menace document
and other government reassurances highlighted in our Security
& Infocrime guide.
Currency surrogates such as frequent flyer schemes have
also attracted forgery and fraud.
In a 2003 example Satbal Singh, a check-in agent at Heathrow
airport, 'siphoned' five million air miles from passengers.
He established 13 bogus accounts in his own name, adding
the free air miles of Air Canada, Virgin Atlantic and
other airlines when their passengers checked in. Apart
from his own travel, Singh converted some miles to tangibles
such as cameras, provided trips for associates and apparently
sold some of the miles.
cooking the books
The very clever accountants at Enron
had an almost magical ability to make troublesome numbers
move from one column to another or transmute negatives
into positives. We should all be so lucky, particularly
at tax time. Some past financial scandals had simpler
foundations, based on pen, ink, photocopiers and the observer's
willingness to believe.
One example was US derivatives group Equity Funding, whose
employees dealt with pesky auditors by manufacturing fake
insurance policies and other documentation - all carefully
filled out by different people and using different pens.
It is lovingly described in The Great Wall Street
Scandal (New York: McGraw-Hill 1974) by Raymond Dirks
& Leonard Gross and The Impossible Dream: The
Equity Funding Story, the Fraud of the Century (New
York: Putnam 1975) by Ronald Soble and Robert Dallos.
US carpet cleaning to insurance group ZZZZ Best (founded
by 16-year old Barry Minkow) went public in 1986 with
a market capitalisation of US$200 million. Its staff responded
to pre-flotation financial wobbles by whiting out "inconvenient"
parts of legitimate bank statements and then inserting
new numbers, names and addresses before photocopying the
documents for provision to the auditors. Those auditors
who requested confirmation from the new addresses duly
received the requisite data. As Joe Domanick notes in
Faking it in America: Barry Minkow and the Great ZZZZ
Best Scam (New York: Contemporary Books 1989) over
22,000 documents had been 'massaged'. The fraud is also
discussed in Daniel Akst's Wonder Boy: Barry Minkow
(The Kid Who Swindled Wall Street) (New York: Scribner's
Michael Marion Emil Anacletus Pierre Savundranayagam (aka
Emil Savundra) (1923-1976) engaged in shipping frauds
and dodgy arms deals in Ceylon before swindling the Kredietbank
of Antwerp in 1954 over a non-existent cargo of rice.
After a spell in prison he posed as an economic saviour
of Ghana in 1958, was deported
only to perpetrate a coffee bean swindle on the Costa
Rican government in 1959. He formed the Fire, Auto &
Marine Insurance Company (FAM) in 1963. Although he was
consistently dishonest an aggressive use of UK libel
law gave him "indispensable protection" when
he forged government securities worth £540,000 and
invented £870,000 of 'blue-chip' shares while shipping
FAM's assets to his bank in Liechtenstein. Savundra sold
his FAM shares in 1966: the company collapsed within days,
leaving 400,000 motorists uninsured. He is profiled in
Fraud: The Amazing Career of Dr Savundra (New
York: Stein & Day 1979) by Jon Connell & Douglas
High profile Ontario lawyer Julius Melnitzer - famous
for a lavish party, complete with C$100 bottles of champagne,
to celebrate the birthdays of his dogs - manufactured
over C$100 million of share certificates bearing blue-chip
names such as Exxon, using them to secure C$67 million
loans from several banks. He had persuaded a printing
company to make the certificates, claiming they were for
use in an upcoming trial. Having been sprung, in 1992
he pleaded guilty to 43 counts of fraud.
deeds and securities
US forger James Reaves (1843-1914) manufactured land titles,
letters, diaries and other documents in support of increasingly
preposterous claims to ownership of what is now Arizona.
His career is explored in Donald Powell's The Peralta
Grant: James Addison Reavis and the Barony of Arizona
(Norman: Uni of Oklahoma Press 1960).
Oscar Hartzell (1876-1943), a precursor of contemporary
419 email scammers, claimed
to be heir to the vast fortune of Elizabethan explorer
Sir Francis Drake, persuading several thousand naive (or
merely greedy) US citizens to hand over money for 'legal
fees' that would unlock the supposed Drake estate. He
features in Drake's Fortune: The Fabulous True Story
of the World's Greatest Confidence Artist (New York:
Doubleday 2002) by Richard Rayner.
Imposter 'John Lindsay Crawfurd' appeared after the 1808
death of the 22nd Earl of Crawfurd and 6th Earl of Lindsay,
claiming that he was the legitimate heir with precedence
over the late earl's sister Lady Mary Crawfurd. The pretender
and accomplices forged documents to substantiate his claims;
unfortunately a falling out saw saw members of the gang
cash in by revealing the truth to Lady Mary. Crawfurd
and James Bradley were sentenced to fourteen years' transportation,
arriving at Botany Bay in 1813. He obtained release in
1920s 'match king' and telecommunications magnate Ivar
Kreuger, whose dizzying
financial manipulations are described in Robert Shaplen's
Kreuger, Genius and Swindler (New York: Knopf
1960) and Karl-Gustav Hildebrand's Expansion, Crisis,
Reconstruction: The Swedish Match Company, 1917-1939
(Stockholm: Liber Tryck 1985), forged US$142 million of
Italian government bonds in an effort to shore up a conglomerate
that encompassed Ericsson and Electrolux along with global
timber and match interests.
More recently Brian Sherry claimed to be the 'administrator'
of the fictive Badische Trust, supposedly granted a 'special
deed of trust' by 'His Majesty King Henri Francois Mazzamba,
Sovereign Ruler of the Kingdom of Mombessa' and thus worth
a mere US$50 billion ... if only the administrator could
find a few dollars for those final legal fees. He collected
US$3 million before spending time in a New York prison.
Australian financial specialist William Wallader appeared
in Brisbane District Court on charges of trying to sell
counterfeit Turkish government bonds with a nominal $US900
billion. The bonds had "numerous spelling and grammatical
errors" and were reportedly printed on a standard
For consumers in advanced economies it is axiomatic that
postage stamps for day to
day use - in contrast to stamps as collectibles
- are not forged. That perception reflects the low value
of stamps and expectations that a crude forgery would
be detected by the post office, which would refuse to
deliver the letter/parcel that features the forgery.
Experience in developing economies may be different. Russell
Smith for example notes (PDF)
that between August and November 1998 Australia Post confiscated
4.5 tonnes of advance fee
correspondence (1.8 million items) from Nigeria and other
countries that had counterfeit postage.
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