HISTORY OF CURRENCY COUNTERFEITING

Abstract
The crime of counterfeiting is as old as money itself, and can be targeted at both low- and high-value denominations. In most cases, counterfeiting is motivated by personal gain but, at times, it has also been used as a political weapon to destabilise rival countries. This article gives a brief history of counterfeiting, with a particular focus on Australia, highlighting selected incidents through time and the policy responses to them. For source material on Australia, we draw on Reserve Bank archives dating back to the early 1900s.

Introduction
Historical evidence suggests that, for as long as physical money has existed, it has been counterfeited.[1] The reason to counterfeit – in the distant past and today – is usually fairly straightforward: the possibility of money for (almost) nothing, offset of course against the likelihood of getting caught and punished. However, the means of counterfeiting has changed, with rapid technological advances making counterfeiting arguably easier and reducing the amount of time that a currency remains resilient to counterfeiting. As a result, currency issuers have tended to release new currencies in shortening timespans in order to stay ahead of counterfeiters.

Around 400 BC for instance, Greek coins were commonly counterfeited by covering a less valuable metal with a layer of precious metal (Markowitz 2018). Another method was to make a mould from a relatively low-value genuine copper coin, which was then filled with molten metal to form a counterfeit. The widespread practice of counterfeiting coins led to the rise of official coin testers, who were employed to weigh and cut coins to check the metal at the core.

Coin 'shaving' or 'clipping' was another commonly observed method of early coin fraud, whereby the edges of silver coins were gradually shaved off and melted down. In 17th century England, for example, the weight of properly minted money had fallen to half the legal standard, while one in 10 British coins was counterfeit (Levenson 2010). To remedy the situation, by mid 1690 all British coins had been recalled and reminted, and Sir Isaac Newton – the warden of the Royal Mint as well as the person who formulated the laws of motion and gravity – was tasked with stopping the situation re-emerging. By the end of 1699 he had successfully identified the lead counterfeiter as William Chaloner, who had produced counterfeits with a face value of £30,000 (worth around A$10 million today). He was ultimately hanged for his crimes.

Early paper banknotes were also counterfeited. Some of the first banknotes to be issued appeared in the Song Dynasty in China towards the end of the 10th century, and were known as 'jiaozi' (Von Glahn 2005). Initially jiaozi were issued privately by all manner of entities but, in 1005, the right to issue jiaozi was restricted by the authorities to 16 merchant houses. Complex designs, special colours, signatures, seals and stamps on specially made paper were used to discourage counterfeiters. Those caught counterfeiting faced the death penalty. Despite this, counterfeiting increased over time. This, along with an oversupply of jiaozi, led to inflation and in 1024 the right to print and issue currency was restricted to the government. The officially issued notes 'expired' after two years, after which they were redeemed, for a 3 per cent fee. This policy – perhaps the first 'clean note' policy in history – was in part aimed at preventing circulating currency from becoming too worn and tattered; having a higher quality of notes should make it easier to distinguish counterfeits from the genuine article. Some aspects of the evolution of the Song Dynasty's approach to note issue – such as moving from multiple issuers to just the government, having increasingly complex banknote designs and implementing a clean note policy – can be seen in modern banknote policy evolution 1,000 years later, including in Australia as discussed below.

JP adds:

To read the complete article, see:
A Brief History of Currency Counterfeiting (https://www.rba.gov.au/publications/bulletin/2019/sep/a-brief-history-of-currency-counterfeiting.html)

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