Inside the murky world of counterfeit money
Peter Holley
The product is carefully created in rural facilities throughout the Peruvian countryside using cheap labor, then hoarded in stash houses controlled by violent gangs in Lima. Once there, the goods are packed into parcels, loaded onto planes or hidden inside luggage, pottery, hollowed-out Bibles, sneakers, childrens toys or massive shipping containers bound for major U.S. ports of entry, such as Miami.
The products ultimate destination, according to the U.S. Secret Service, is generally New York, New Jersey, Boston and the greater Northeast. Its here, federal authorities say, that a few powerful organizations pass the product to splinter groups that control the streets, reaping huge financial rewards before authorities have time to react.
Its an illicit trade that bears an uncanny resemblance to narcotrafficking, and while there is some overlap between the two activities, this product has nothing to do with cocaine.
But the profits created by smuggling the counterfeit currency known as the Peruvian note generally considered the finest fake money on the planet are just as staggering, if not more so, according to the Secret Service. Responsible for producing and distributing an estimated 60 percent of the worlds counterfeit U.S. notes, more fake American money comes from Peru than any other country, according to the Secret Service, which has been combating the currencys rise since 2003.
Its very similar to the drug war, said Jose, a Secret Service agent who leads the agencys efforts to crack down on the trade in Peru and declined to provide his last name. The modus operandi is very similar, and a lot of the smuggling routes and the hierarchy of organizations involved are very similar, as well as the execution.
A lot of these organizations are family-run, he added. Making a counterfeit note is a skill thats been passed down. Its an art, and the skill isnt easily transferrable.
Last week, the Secret Service announced its largest seizure of counterfeit currency to date, after recovering $30 million in fake U.S. bills and 50,000 euros piled in houses and apartment buildings in Lima.
Known as Operation Sunset, the massive effort involved 1,500 Peruvian National Police officers and resulted in a total of 54 search warrants and 48 arrests in Lima.
Additionally six counterfeit plants were suppressed, eight counterfeit manufacturing presses seized and over 1,600 printing plates and negatives of varying denominations were found, the agency said in a news release. Secret Service Director Joseph Clancy called the Peruvian government a valuable partner in the fight against counterfeit currency.
Though Operation Sunset marked an important victory in the fight against counterfeit cash, it was but a single victory in an ongoing war. The Treasury Department is locked in a constant struggle to outwit counterfeiters by adding new designs, such as holograms, floating ink and security strips, according to the Guardian. No matter how many creative barriers the experts place in their way, the criminal competitors are never far behind.
Every time a new design would come out, we would have an informal pool on how soon it would be counterfeited, Don Brewer, the former head of the Secret Services anti-counterfeiting division, told the Guardian.
The Secret Services latest seizure is staggering compared to the total amount of counterfeit bills recovered in the previous seven years in Peru, according to authorities.
Since 2009, in our investigations with the Secret Service, we have seized about $75 million in fake bills, Walter Escalante, head of the Peruvian National Polices anti-fraud division, told the Guardian in March. We dont know what percentage entered the U.S. illegally and has gone inside the financial system. We think that our $75 million is the better part of what has entered the U.S.
For all the millions in fake currency intercepted by authorities, millions more flow into the United States each year. In an interview with the Guardian, a counterfeiter who goes by the fake name of Geraldo Chavez said that most currency in the United States arrives via Mexico.
The Secret Service says it recovered $30 million in counterfeit currency from Peru, the worlds leading source of fake U.S. currency. (U.S. Secret Service)
There are Peruvian-Mexicans who are in charge of passing the money over the border, he told the newspaper. You dont [smuggle] by airplane [directly] into the United States because their airport control uses the latest technologies. These bills get into the U.S. over the frontier by the coyotes. This is a mafia they get the bills into Texas and California.
The size of the latest recovery speaks to the organization and skill of those involved in the illegal trade, said Jose, the Secret Service official. In the United States, he said, counterfeiters rely on laser printers to reproduce U.S. currency; but in Peru, much of the reproduction relies on printing presses and skilled artisans.
In the end, a fairly unsophisticated process creates a very sophisticated bill. Once they cut the bills, the finishing process is what separates Peruvian notes from the rest of the world, Jose said. Theyre very good at creating texture on the note, which makes is passable not just in the U.S. economy, but also in South America and abroad.
It can take weeks to create a note, and they dedicate themselves to it, he added. They have all the people in place to finish.
That can mean as many as 10 individuals playing a role in producing a counterfeit note, from financiers, designers, printers and cutters to artists who re-create watermarks and raised textures that provide the appearance of authenticity. The entire process is compartmentalized, Jose said, allowing each chain in the link to remain ignorant of the others. The person who makes the design doesnt know the finisher or the distributor, he said.
Chavez, the Peruvian counterfeiter interviewed by the Guardian, told the paper that raw materials for making counterfeit money are very cheap.
I will give you an example, he said. A $100 bill that I sell for $20? My costs are between $3 and $5. So whats my profit? $15. Here [in Peru], you get the supplies you need at a low cost. This glue? It costs me 50 cents. The flour, even less. . . . The paper you buy in bulk, and that costs 40-50 sols or $10 to $15 per stack.
Chavez echoed Joses description of the requisite manpower. He told the paper that it takes about a week to fill an order. Typically that means producing about $10,000 to $15,000 worth of fake notes, for which the buyer pays 20 percent of the face value. To make these bills, you need 10 to 12 people, Chavez said. One runs the machine, there is a designer, you have someone in charge of the supplies the paper, the inks you need someone to cut the bills, someone outside watching. The packer. At a minimum eight people, but usually eight to 12 people for the production to come out right.
Chavez told the Guardian that weekly profits are as high as $600,000 in real currency for his gang.
If you have the best quality, people come to you, Chavez said. If it is second-rate? Doesnt have the raised lettering? If the papers not right? If it doesnt have the texture? They arent going to buy it. Nothings going down.
Once inside the United States, the currency might be used in low-level street crime, for Craigslist purchases, or in larger schemes that target big-box retailers. They might spend $400 at a retailer buying clothes, Jose said. Most big retails have relaxed return policies, and the individual will return their items and get cash back, making a 90 percent profit.
Theyll pick a large-box retailer and hit 14 of those stores across seven states in one day, he added. Its very organized. Big-box retailers dont look at the money closely until they take it to the bank.
The ruse ends at the bank, noted Brewer, the former Secret Service agent. He said banks rely on counting machines that can immediately separate fake bills from authentic ones by analyzing magnetic ink on legitimate currency. By that time, however, the damage to small businesses in particular is already done.
There is no counterfeit bill that I know of that will pass the scrutiny of the equipment used by banks worldwide, Brewer told the Guardian. So in my opinion, it is not a threat to our banking system in that way. But the dollar stands for the integrity of the U.S., and people everywhere depend on that. The Diplomat
