How They Make a Fake!

The most common Internet scams

 

The redesign of American currency was meant to foil counterfeiters. But in Colombia, a highly specialized criminal subculture has stayed barely one step behind. By KIRK SEMPLE

A fake bill from one of Colombia's fabled counterfeiting shops. Among the tells: (1) the microprinting "USA 100" repeated within the lower left-hand 100 is blurry, and (2) the microscopically thin lines behind Benjamin Franklin's portrait are broken in several places. A point of counterfeiting pride: (3) "The United States of America" printed on Franklin's lapel is nearly perfect.

Drawing an envelope from an inside pocket of his leather jacket, Fabio slides out a fresh $100 note and, clasping it gingerly between thumb and forefinger, holds it up to the bare bulb. "It's a good one," he says. "High quality." He hands it to his friend, a cocaine-and-arms dealer, who turns it over in his fingers and nods. We are in a house in north Bogotá, the capital of Colombia, which is the principal source of counterfeit bills in the United States. After a series of negotiations that led me downward through Bogota's underworld, I was introduced to Fabio, who agreed to explain to me the process of counterfeiting and the business choices counterfeiters make.


During the late 1970's and early 1980's, Fabio, who requested his last name not be used for this article, counterfeited U.S. dollars and other currency in the back room of an apartment in Bogota. While he was by no means the biggest player in the industry, he estimates that over the course of seven years he flooded the world market with low-to-mid-quality fake bills that had a face value of more than $100 million. He now works as a middleman in the counterfeit distribution industry, a chain of commerce that leads from the barrios of Bogotá, Cali and Medellin to the streets of New York, Newark, Miami, Buenos Aires, Tokyo, London and Madrid.

The first thing Fabio tells me is that, of course, the excellence of the finished product depends on a combination of skill and costs, as with any manufacturing enterprise, and the first spending decision a counterfeiter has to make concerns paper. The base paper of choice among counterfeiters is the $1 note. Through a bleaching process, the bill is washed of its ink, so that what remains is blank U.S. Treasury paper -- the perfect texture and weight, the correctly colored microfibers embedded in the paper, everything but the paltry denomination.

Fabio studies his $100 note, which he picked up on the city streets earlier in the day, and guesses it came from the greater Cali area in southwestern Colombia, where the best dollar workshops are located. Its makers made a critical cost-cutting decision, he says. They chose to use Venezuelan bolívar notes, a paper with decent texture and durability, rather than $1 bills.


It's a significant cost-saving measure, since a 10 bolivar note is worth about 1.5 cents. Multiply this by 20,000 bills -- the size of a standard shipment -- and the counterfeiter has already saved himself $19,700 when compared with a run built on $1 notes. (Though a $1 bill doesn't always cost $1; a drug-trafficking cartel recently found itself with too many $1 bills on its hands and was unloading the notes for 70 cents each.) Fabio estimates that the $100 fake in his hand cost somewhere between $2 and $2.50 to make and would fetch at most about $17 in Colombia. Final sale price, after the bill had been smuggled into the United States, might be between $35 and $40. Had the same crew used a $1 bill or illegally obtained currency paper, and had they employed the same level of workmanship and detail, the note would cost about $3 or more to make but would be sold in Colombia for as much as $22 and in the United States for $50. The shoddiest bills Fabio has come across had a top price in Colombia of only a few bucks and probably never even left the country. "Cardboard," he scoffs.


Fabio comes from a criminal subculture with a rich and very productive tradition. Of the $52.7 million in fake currency seized during raids or recovered from circulation in the United States during 1999, a remarkable 34 percent was identified as Colombian-made. During the same period, Colombian investigative agencies, with the cooperation of the U.S. Secret Service, shut down 16 factories in Colombia and seized $16 million in false U.S. currency.


"The Colombian counterfeiter has great ability," observes Lt. Col. Eduardo Bolanos, chief of the economic-patrimony crimes division of Colombia's national investigative police force. "Colombian criminals are world specialists in assassination, cocaine and falsification." Bolanos, who has been hunting counterfeiters in Colombia for two decades, attributes this in part to the country's weak laws. The maximum penalty for a conviction is six years in prison, but under the Colombian penal code, any sentence up to six years can be exchanged for a cash fine. A recent change in the criminal code, which goes into effect next year, will make counterfeiting a crime eligible for a maximum sentence of 10 years in prison, closer to the 15-year maximum in the United States.


While the law-enforcement community is optimistic that the change will hinder the counterfeiting industry, Fabio isn't convinced. "A quien le gusta, le sabe," he says, an expression from his home state of Caldas that roughly translates as "To each his own."

According to Bolaños, an entire industry of falsification has arisen in Colombia during the past 30 years. "It's a culture of counterfeit," he says. "Clothes, videos, CD's, drugs, household products, the most up-to-date dolls, Pokemon, stuff like that.


They're even taking fake Levi's blue jeans to the States and selling them." In the mid-1980's, Colombian counterfeiting also developed a symbiotic relationship with the cocaine trade. In one arrangement, Bolaños says, the Cali drug cartel used false dollars to buy coca base from easily duped indigenous coca growers in Bolivia and Peru. The demand for dollars to buy base stimulated the growth of the Cali workshops, and Cali remains the source of some of the finest fakes in the world.

That said, in most cases, a small group of associates -- three or four people, perhaps -- operate independently and may do business with larger criminal cartels. That was Fabio's arrangement.

How They Make a Fake Part II

He began his counterfeiting career in 1970, peddling small quantities of dollars on the street. Eventually he moved into production with three friends, one of whom operated a small offset print shop out of his home in a working-class neighborhood in Bogota. The shop ran as a legal business by day, "producing fliers, stickers, funeral announcements, that sort of thing," Fabio says. At night it became a money factory.

In this age of high-tech computers, digital scanners and commercial-quality film processors, Colombia's counterfeiters still use old-fashioned mechanical methods to churn out their notes. Both Fabio and his drug-trafficking colleague say they know of no one producing counterfeit money in Colombia with technology more modern than offset machines. The process is this: a counterfeiter first creates actual-size photographic negatives of a note's front and back, then cleans up each negative with a jeweler's precision. The images on the negatives are burned onto a series of photosensitized aluminum plates, with each plate showing different details from the bill. Then the plates are run through the offset printing press, so that one set of details is layered on top of another. No matter how high-quality the paper is, the finished product will amount to nothing if the photographic negative is shoddy. Smaller operations generally contract out the making of the negatives and plates. Today, Fabio says, a contracted set of negatives can cost anywhere from $750 to $2,000, depending on quality and quantity, and the plates cost another $500 to $1,500. Only the larger operations that control production as well as distribution have the money for the equipment to make negatives. The better the equipment, of course, the better the result.

As for the offset presses, Fabio's team employed a midcentury, American-made machine. Most Colombian counterfeiters, law-enforcement officials say, use archaic castoff machines from the United States that have been retooled in Colombia after a life of legal use in the States. Some top-of-the-line machines cost more than $100,000, but Fabio says he has commonly seen machines that cost about half that.

According to anticorruption investigators, they most often come across machines worth only a few thousand dollars each, though they say that the declining number of old offset machines on the market has inflated their price.

Part of the reason that counterfeiters have been slow to modernize, says Col. Miguel Evan Cure, a top anticounterfeiting investigator for Colombia's Administrative Department of Security (D.A.S.), is that over many years they have developed a complex skill. "They're artisans," Cure says with undisguised respect. Jim Mackin, a spokesman for the Secret Service in Washington, agrees that the best fakes come from offset machines, not computers. "Genuine currency is printed, not scanned or duplicated," he says. "Real plates are used in the manufacturing of real currency."

There is also the matter of cost. High-quality computerized equipment that would allow production of near-perfect offset-ready film might cost hundreds of thousands of dollars. Nonetheless, the use of computers and scanners to produce fakes is spreading rapidly in the United States. Forty-six percent of all fake bills seized or passed in the United States were produced through computer or inkjet processes, says Mackin, up from just 1 percent five years ago. To date, only one unfortunate fellow in Colombia has been caught counterfeiting with a computer and scanner. Says an official at the United States Embassy in Bogota, "His downfall was that he was using a counterfeit bill to make other counterfeit bills."

With the heavy tools in place -- plus top-grade paper cutters, electronic money counters, communication equipment (mostly pagers and cell phones) and guns and ammunition for protection -- the rest of the process depends on patience and precision. Fabio says it might take several weeks for a team to develop a good shipment of bills. "You can lose a lot of paper at the start as you try to get everything right," he says. "After that, it's like making bread rolls."

But there still remain important spending decisions to be made along the way. Fabio points out the security strip running through the $100 bill in his hand, the fiber that reads "USA 100 USA 100 USA 100" along its length. While most counterfeiters use a light print to give the impression of a strip, others will laboriously thread a material in between the two thin sheets that are used to make up the bill. The job of making those strips is almost always contracted out, he says. He knows of only one artisan in Colombia, a very busy "miniaturist," who does that work. A set of 100 decent strips can cost about $40, though the cheapest are made of similar material to the plastic tear strip found on a cigarette-box wrapper. "The guy who doesn't include that security strip won't get anywhere," Fabio cautions.

Inks, too, range in price and, like everything else, are for sale on the black market. According to lithograph printmasters, the basic inks sell for $15 per kilogram of powder. But those can smear easily, Fabio says, so better counterfeiters prefer to splurge for special magnetic and security inks that approximate those used by federal printers. On the black market they sell for upward of $750 per kilo, enough for 500,000 bills. (Antifraud authorities couldn't confirm that price, and several legal lithograph professionals winced at it in doubt.) Fabio also says that there is now a special ink on the black market that gives the numbers in the corners of the new- series bills a shiny, now-it's-green-now-it's-black effect, which counterfeiters normally achieve by dumping metal shavings or a metallic powder into ordinary ink.

The so-called optically variable ink was one of several design and security features that made their debut in 1996, when the United States Treasury began to issue new, higher-security notes. Other changes included the larger, slightly off-center portrait, a watermark and new microprinting details. "The U.S. has had to make changes to its currency because, well, we Colombians are total geniuses," exclaims Martha Muriel, spokeswoman for the D.A.S. When I ask Fabio whether he thinks the new features have impeded production of fake dollars, an impish grin flicks across his face. "If today they make a new one in the United States," he confides, "the day after tomorrow it'll be ready here."

Ready, perhaps, but not perfect. As they did with the security strip and the ink, counterfeiters have conjured approximations of the security devices in the absence of the real materials and techniques. A good watermark, for instance, continues to evade counterfeiters, since real watermarks are integrated into the bill during the papermaking process. The best counterfeiters can do is apply a pseudo-watermark by making a light print of the image on the bill.

The most difficult details to duplicate are the microprinting, fine-line printing patterns and the U.S. Treasury seal. "The Treasury seal is usually the big giveaway," says Patrick Convery of the counterfeiting division of the Secret Service in Washington. "It won't have sharpness, or sometimes the pointy ends will be jagged. The stars in the center won't appear to be stars; they'll just be dots." To reproduce those details with precision, the best counterfeiters often enlarge the photographic negatives of the bill to several times their normal size and spend hours touching up the lines.

On close examination, Fabio's $100 bill is less astounding. The Treasury seal looks passable when placed alongside a real bill, but the green is a bit darker than it should be and the cables on the scale are frayed. The microscopically thin lines behind Benjamin Franklin's portrait and etched in the sky above Independence Hall are even but broken in several places. The words "The United States of America" printed on Franklin's lapel look perfect, but the microprinting -- USA 100" -- printed repeatedly within the numeral 100 on the portrait side of the bill -- is blurry. Also, the watermark doesn't have the strong presence of a real one; the delicate grace is gone from the calligraphic lines bordering the top and the bottom, and the green color of Independence Hall lacks its usual tonal depth.

Still, there's no question the bill would have duped me and many other people, particularly Americans who, according to the Secret Service, inspect their currency far less closely than do foreigners who trade in dollars.

Fabio holds up the bogus note and tilts it back and forth beneath the light. The numeral 100 in the corner shimmers green, black, green, black. "That's really good," he says admiringly, and smiles at the beauty of it.

Secret Service stays on the trail of funny money

Digital technology makes counterfeit bills easier to create—and easier to detect

When it comes to IT-enabled crime, counterfeiters have gained some helpful tools.

Once a crime committed by skilled professionals— albeit professional criminals— who put a lot of thought and effort into their work, the easy availability of sophisticated imaging software, and high-resolution color printers and copiers, has turned counterfeiting into an equal-opportunity temptation that requires no special skills.

Just last month, for instance, a highschool student in Florida was arrested after using a fake $20 bill at his school’s cafeteria. He said another student had manufactured $400 in counterfeit currency.

But standing in the way of wannabe counterfeiters is the Secret Service, which is using other technological advances to thwart and catch them.

Protective services

The agency, formed in 1860 specifically to combat bogus currency, continues to be the first line of defense against counterfeiting. Its twofold mission—to protect both the monetary supply and key government offi- cials—has evolved over the years to include investigation of financial crimes that reflect the digital age, such as computer and telecommunications fraud, electronic funds transfers and access-device fraud.

It was relocated to the new Homeland Security Department in 2003, but “operationally, there were no changes to our mission,” said agency spokesman Eric Zahren. “Our work in the area of cybercrime, identity theft, etc., stems from our core jurisdictions of credit card and access-device fraud.”

Of course, “counterfeiting [historically has been] our bread and butter, what we were founded for,” Zahren said. “The U.S. dollar is the most widely circulated in the world. ... There are countries ... where the dollar is preferred to their own currency because of its stability and security.”

Over the past 10 years, the agency has seen a significant change in counterfeiting.

“What we’ve seen in recent years is the creation of ‘digital notes’—that is, currency not produced through intaglio or offset printing but high-definition copiers,” Zahren said. “Ten years ago, it would have been less than 1 percent [of counterfeits caught]; now it’s over 50 percent.”

The shift toward digital notes is primarily in the United States, Zahren said; overseas, traditional counterfeiting methods are still much more common, in large part because they create higher-quality forgeries.

For instance, there are so-called “supernotes,” counterfeit U.S. currency reportedly produced in North Korea, and which that country uses to finance its government.

The supernotes are distributed almost exclusively overseas, Zahren said.

“December of 1989 was the first time one of these notes was detected,” he said. “A cash handler in the Philippines [caught it], by the feel of the paper. People who handle money all the time are pretty good at spotting it, but with a little training anyone can be brought up to speed.”

The $20 bill is the most commonly replicated denomination here, while the fake $100 bill is most common internationally.

In fiscal 2005, approximately $56.2 million in counterfeit money was passed—that is, used in a transaction resulting in a fi- nancial loss to the recipient of the note—of which $31.3 million was digitally produced. Another $14.7 million in fake bills was seized before they could be injected into the economy. Internationally, $38 million in fake money was seized that year.

There is about $750 billion in genuine U.S. currency in circulation worldwide, about two-thirds of it outside our borders. The dollar amount of counterfeit currency is notable for its smallness relative to the size of the currency pool.

“About one one-thousandth of a percent of U.S. currency in circulation [worldwide] is counterfeit,” he said. “We’ve managed to keep counterfeiting numbers low relative to the real thing ... and it’s never been seen in quantities where it would shake confi- dence in the dollar.”

The Patriot Act authorized the Secret Service to expand its national network of Electronic Crimes Task Forces, Zahren said. There are currently 24 task forces nationwide.

Reference collection

To aid in the hunt, the Secret Service maintains a database of counterfeit notes—at least of those produced the old-fashioned way.

“We ... ultimately get all the counterfeit notes out there, whether from seizures, retailers, banks,” Zahren said. “We look at all the notes to determine the method of printing. ... For all the offset notes we see, we look for the printing method, the ink, the paper, all the defects. We keep at least a couple of samples of each type of note here at headquarters.”

All this information is entered into the database, which the service refers to as the counterfeit library and which is available to Secret Service agents stationed around the world.

Other law enforcement officers at the local, state, even international levels, once they have been vetted, can also access the database for information. And the counterfeit library also is available online to banks.

The database is quite extensive and has been in use “for many, many years,” Zahren said. “There are a lot of notes in it.”

But instances of counterfeit digital notes can’t be compiled in a database in the same way, he said. By definition, a color copy of a real $20 bill isn’t going to have printing or design mistakes, and there’s no good way to distinguish among the many different brands of ink-jet printer or color copier.

These limitations explain why several denominations of currency have undergone a redesign to introduce features that make it easier to spot fakes, he said.

The redesign of the $100 bill, unveiled in 1996 and aimed at international counterfeiting, introduced the larger, off-center portrait of Benjamin Franklin, along with less-obvious changes—among them, a watermark visible only when held up to the light, color-shifting ink, a security thread that can only be seen in ultraviolet light and microprinting invisible to the naked eye.

The redesigned $20 bill, introduced in 2003, includes these measures and others, such as the use of subtle colors and additional symbols added to the design. The $5, $10 and $50 bills also have been overhauled to incorporate new visual and technological impediments to counterfeiting.

________________________________________

The new colors of money

The new $10, which began circulating in March, retains three security features introduced in the mid-1990s that cannot be produced by digital copying and which are easy for consumers and merchants to check: color-shifting ink, watermark and a security thread.

Counterfeit cases highlight need to examine your cash

At one time, a counterfeiter needed certain skills to produce a phony but genuine-looking $20 bill.

Now, it only takes a high-end computer printer and a few minutes.

The changing technology, police said, allowed two college roommates, still teenagers, to print off a few fake $20s and exchange them for real cash at four hotels on Peach Street near Interstate 90 on Sept. 13.

On Sept. 28, police said, a group of still-unidentified suspects paid for $400 worth of merchandise with counterfeit bills they passed at Lowe's on Keystone Drive. Police said a woman on Sept. 28 also left counterfeit $20 bills behind at the nearby Wal-Mart.

The local cases show counterfeit money still is in circulation, despite the recent changes to currency designed to make fake bills easier to spot.

But counterfeit cases are also easier to solve, said James Gehr, the U.S. Secret Service agent who oversees western Pennsylvania and West Virginia. He said fake bills produced on computer printers are easier to detect than those produced on far more sophisticated offset printing presses.

Losses to counterfeiting in western Pennsylvania totaled $140,000 this fiscal year, which ended Oct. 1, down from $230,000 the year before, Gehr said. As the local cases illustrate, merchants especially still need to keep a close watch on the currency that comes across their counters.

'Any device can be defeated'

In the case of counterfeit bills passed at the four hotels, state police charged Alyssa L. Diebel, 19, and Amber L. Silk, 18, both of St. Marys. The pair, roommates at Edinboro University of Pennsylvania, asked the front-desk clerks at the hotels to break $20 bills that turned out to be counterfeit, troopers alleged in a search warrant in the case.

The $20 bills -- all with the same serial number -- were passed at four hotels in 15 minutes on Sept. 13: Hampton Inn, 8050 Oliver Road; Country Inn & Suites, 8040 Oliver Road; Holiday Inn Express, 8101 Peach St.; and Comfort Inn, 8051 Peach St.

In the chaos of ringing phones, check-ins and check-outs, the lone clerk at the Holiday Inn Express -- attached to Splash Lagoon Indoor Water Park -- gave the woman change without thinking about it, hotel general manager Linda Holland said.

"You have so many people in and out of this hotel, especially with the water park, you can't really tell who's staying at the hotel," Holland said.

The bill wasn't discovered as a fake until the clerk later checked it with an anti-counterfeit pen, Holland said.

Catching a counterfeit bill isn't always as easy as using a pen. The Secret Service's Gehr said the anti-counterfeit pens are designed to detect starch in paper.

Real bills are made of a cloth and linen mix, Gehr said, so counterfeit bills printed on a cloth would go undetected.

Gehr said checking bills by hand, against another bill, if possible, typically works best in rooting out counterfeit cash.

"Any device can be defeated," Gehr said of the pens. "They are good as a tool, but you still have to use your eyes for comparison."

Small bills, duplicate serial numbers

Top: On real bills, the watermark matches the portrait on the front and should be visible when held up to light. Bottom: Watermarks on many counterfeits differ from the portrait and may look distorted.

Silk and Diebel are accused of using $20 and $10 bills, all with the same two serial numbers, police said.

Police said investigators found printed $10 bills in the trash of their dorm room with scraps of cut paper. Two $10 bills were in Diebel's purse when they were arrested, police said.

The $20 bills were passed at least at all four hotels and the Giant Eagle at 7200 Peach St., police said. Two turned up in the parking lot outside of the grocery store. Several were found in Silk and Diebel's dorm room, and police said Silk tried to hide another in her pants when police first stopped the two.

Police said investigators found a genuine $20 bill in Diebel's purse, folded in a credit card holder behind her Pennsylvania identification card. The counterfeit bills had the same serial number as the genuine bill, police said.

Domestic counterfeiters commonly copy bills in smaller denominations, Gehr said.

The smaller the denomination, he said, the more it blends in -- people usually use a $20 bill when shopping, but a $100 bill draws unwanted attention.

An accidental crime?
They blamed it on "Travis."

Silk and Diebel told police they needed money, so they sold a camcorder to a man they identified as "Travis" in St. Marys, police said in the arrest documents. Police said the two told investigators that Travis paid them in counterfeit bills -- bills they were trying to spend so they would not lose out.

Suspects in counterfeit cases typically tell investigators they received their fake currency from another source, sometimes a person, but usually a bank or ATM, Gehr said.

Getting a counterfeit from a bank is "very rarely going to happen," Gehr said. "Bank officials are very good at identifying counterfeits."

When a counterfeit note does slip through, having one is not automatically a crime. Intent is a large part of counterfeit law, Gehr said, and he said authorities would clear anyone who passes a counterfeit without knowing it was fake. The Secret Service urges anyone to report a suspected counterfeit bill.

Silk and Diebel are awaiting a preliminary hearing on Oct. 22, and their case, if held for trial, will go to Erie County Common Pleas Court.

Small-time counterfeiting cases, in which only a few counterfeit notes are passed, are usually tried as local offenses, Gehr said. He said the federal government usually handles larger printing operations.

The U.S. Treasury Department, which includes the Secret Service, continues to increase security measures for tracking counterfeit bills, to keep up with increases in technology, Gehr said. He said the Treasury Department is confident that no counterfeiter can make an undetectable fake bill.

"They're never 100 percent," he said.

CODY SWITZER can be reached at 870-1776 or by e-mail.

Local counterfeit cases

State police last month arrested two Edinboro University of Pennsylvania students on charges they passed counterfeit bills at four hotels on Peach Street near Interstate 90 on Sept. 13.

Alyssa L. Diebel, 19, and Amber L. Silk, 18, were arraigned before Summit Township District Judge James Dwyer on four counts each of forgery and theft by deception

Each is out of prison on $50,000 cash bond, and their preliminary hearing is Oct. 22

If convicted, each defendant faces up to 15 years in prison and a fine, authorities said.

State police are still looking for the people who passed counterfeit bills in Summit Township on Sept. 28.

Police said a woman walked out of the Summit Township Wal-Mart with a camcorder -- and she left behind only counterfeit $20 bills.

Police said two women and a man also used $400 in fake $20 bills at the nearby Lowe's store, 1930 Keystone Drive, between 8:30 and 8:50 p.m. the same day.

The cases are still under investigation, and police declined to comment on them. Police asked anyone with information on the cases to call investigators at 898-1641.

Facts

• Three items to easily check for counterfeit $10, $20 and $50 bills

• Watermark -- Authentic bills made after 1996 have a watermark of the president's portrait embedded in the paper, which can be seen when the bill is held up to light.

• Color shifting ink -- The number in the lower right-hand corner of the bill shifts colors between copper and green on $10, $20 and $50 bills when viewed from different angles on authentic bills made after 1996. The number on a $100 bill shifts from black to green.

• Security thread -- A security thread printed with a bill's denomination runs through a different location on each authentic bill after the 1996-style. It is larger on $50 bills and glows under ultraviolet light.




-- If you receive a counterfeit bill

• Don't give it back to the person who gave it to you.

• Delay the person who passed it to you.

• Be observant. Remember the description of the person who passed it to you and the people with him or her. Write down the license plate of their vehicle. • Contact local police or the local U.S. Secret Service field office.

• Write your initials and the date in the border of the suspected counterfeit bill.

• Put the bill in an envelope. Don't handle it more than you need to.

• Give the bill to a police officer or Secret Service agent, only.


Source: U.S. Secret Service

SOURCE: BUREAU OF ENGRAVING AND PRINTING

 More