The passing of illegitimate crowns

(The Prague Post, March 5, 2009)

Counterfeiting rose last year, but is well below faked-euro rates

By Stephan Delbos - Staff Writer | Comments (0) | Post comment

Řežábek says Czech money is often counterfeited with commonly available color printers or copiers.

The number of altered and counterfeit bank notes seized by authorities in the Czech Republic grew 30 percent last year to 4,584 total instances of counterfeiting, of both crowns and foreign currencies. Two-thirds of the seized money was illegal Czech currency, the most replicated of which are 1,000 Kč bank notes, according to the Czech National Bank (ČNB).

According to police, the bulk of counterfeit money is used in night shops and bars. But, despite the rise of counterfeiting activity, the Czech currency remains relatively safe compared with the euro, which is both more attractive for counterfeiters and less secure than the Czech crown. The Prague Post interviewed Pavel Řežábek, a board member of the ČNB, to discuss counterfeiting trends and the methods Czech authorities use to combat such illegal activity.

The Prague Post: What was the total of seized counterfeit money in the Czech Republic last year?

Pavel Řežábek: The total value of counterfeit and altered Czech bank notes and coins was 2.29 million Kč, representing a moderate increase from 1.62 million Kč in 2007. Using the exchange rate valid as of Dec. 31, 2008, the total value of counterfeit and altered foreign currency bank notes and coins was 2.9 million Kč, which is almost unchanged from 2007. Counterfeits of foreign currency have been showing a shift from U.S. dollar counterfeits to euro counterfeits. This can be explained by the rising attractiveness of the euro compared to the dollar in Europe and the enlargement of the euro area.

Number of fake and altered bank notes and coins in 2000-08:

TPP: Could you speculate about how much unseized counterfeit money exists in the country?

PŘ: Out of the total of 2,813 counterfeit Czech bank notes seized, 2,355 were discovered directly in circulation. Banks and cash handlers seized another 106, and the police 259. The ČNB seized a further 93 counterfeits during the final processing of Czech bank notes. As each bank note goes through this inspection process twice a year on average, the probability of a counterfeit remaining undiscovered in circulation is very close to zero.

TPP: What methods do counterfeiters use?

PŘ: Given the low attractiveness of the crown compared to the euro, counterfeiters of Czech money mostly use commonly available color printing or copying methods. Ink printing has traditionally been the most frequent method used to counterfeit Czech crowns, followed by color copying. By contrast, in the case of more attractive currencies such as the euro, counterfeiters focus on better and less readily available printing technology in larger volumes. Nevertheless, ink printing remains the most widely used. I must stress, however, that these comments relate only to data on euro counterfeits seized in the Czech Republic.

TPP: What effect does counterfeiting have on the economy?

PŘ: It might seem that counterfeiting has a minimal effect on the economy, as the number of counterfeit bank notes and coins is relatively small. But, as cash is the most frequently used means of payment across all demographic groups, bank note security and protection against counterfeiting is one of the most important activities of the central bank, and the reputational risk for the central bank and the financial system as a whole is considerable.

TPP: How does the Czech Republic compare with other nations when it comes to counterfeiting?

PŘ: A total of 2,813 counterfeit Czech bank notes were seized in the Czech Republic in 2008. At the end of 2008, there were 360.5 million bank notes in circulation. This represents roughly one counterfeit per 128,000 notes in circulation. As for the euro, 895,000 counterfeits were discovered worldwide last year. As there are more than 13.1 billion euro bank notes in circulation, this represents roughly one counterfeit per 14,600 bank notes in circulation.

TPP: What have been the trends in counterfeiting since the Czech Republic joined the European Union in 2004?

PŘ: The occurrence of counterfeit and altered Czech and foreign bank notes and coins seized in the Czech Republic increased slightly in 2008 compared to the previous year. Generally, however, there has been an overall downward trend since the launch of the independent Czech currency.

TPP: What kind of safety measures are taken with the Czech crown, and how effective are they?

PŘ: Probably the most widely used classification method involves the three target groups of users: protective elements for the public, protective elements for professionals and protective elements for special devices used to check the authenticity of bank notes when accepted or processed by sorting machines.

TPP: Why are euros more often counterfeited than Czech crowns?

PŘ: The protective elements of the Czech crown are of top quality and very hard to imitate. The ČNB is continuously researching and developing protective elements and implementing the results in its circulating currency. The most recent innovations include new versions of the 1,000 Kč and 2,000 Kč bank notes and the upcoming introduction of a new version of the 500 Kč bank note.

TPP: What's the largest heist ever busted in the Czech Republic?

PŘ: We have to look relatively far back in history to answer this question - before 2000, in fact. In 1998, the police seized a large haul of counterfeit 1,000 Kč and 5,000 Kč bank notes in the counterfeiters' printing room before they were put into circulation. This represented tens of thousands of bank notes.

Stephan Delbos can be reached at sdelbos@praguepost.com