IDENTIFYING THE THREAT

To define the key requirements for a new family of banknotes, it is necessary to take into account the needs of all the stakeholders in the cash cycle.  SMI will liaise with the Central Bank, relevant government agencies, law enforcement officers and representatives from the commercial banking and retail sectors, as well as members of the public. We undertake:

• A review of the existing counterfeiting threat including an assessment of:
  • Current levels and methods of counterfeiting including fraudulent alteration (denomination upgrading)
  • National and international trends in counterfeiting
  • The susceptibility of each denomination to counterfeiting
  • A technical evaluation of counterfeits seized or withdrawn from circulation
  • Effectiveness of existing security features and methods of detection
  • Likely sources/provenance of counterfeits
  • Machine readable requirement for high speed authenticating and processing of notes in circulation
• Public education programmes and their effectiveness, identifying banknote features which are particularly ‘noticed’ by the public
• The role of national law (deterrence effect)
• A review of the durability of banknotes in circulation with particular emphasis on:

CASH CYCLE ANALYSIS

When planning the introduction of a new banknote or coin, whether a complete new family or a new high denomination, it is important to analyse and understand how the coins and banknotes circulate throughout the national cash cycle in order to identify how and where counterfeits are introduced, and how counterfeiting in general can be prevented. At the same time, by considering different circulation patterns of coin and note denominations, SMI’s cash cycle review highlights any structural anomalies so that a more efficient banknote denominational structure can be considered. This might include, for example, coining lower denominations or using more durable substrates whilst introducing higher banknote denominations for use in ATMs or similar.

Additional elements of the cash cycle considered include:

• an analysis of the existing denominational structure, including how long banknotes per denomination remain in circulation before being withdrawn
• local purchasing power of each denomination compared with per capita earnings
• ATM usage
• regulatory environment governing recirculation of cash by the commercial sector
• level of processing carried out by the Central Bank and commercial sector
• ways cash flows through the economy from party to party, and the drivers governing the daily distribution patterns

REQUIREMENTS

Having analysed the current situation and trends, this stage explores the Central Bank’s requirements for each denomination within the family (e.g. increased protection for the top denominations; specific machine-readability and security requirements for ATM denominations; appropriate security and increased durability for low denominations), to ensure a balanced result.

Aesthetics

There are numerous issues which will impact a Central Bank’s aesthetic requirements, including culture, history, aspirations, regional trends and the popularity of the current designs with the public. SMI advise on priorities and can assist with:

• the selection of aesthetic design content and artwork
• print appearance – e.g. quality and method of engraving, tonality colour harmony
• paper appearance  – e.g. quality of watermark (multi-tonal, electrotype, three dimensional), thread selection, machine readability

Durability

Equally as important as the look, feel and security elements of a banknote series is the ability for the notes to last in circulation. SMI’s knowledge and understanding of the substrates available will ensure the appropriate level of durability by considering:

• Note cleanliness, including a review and advice on the present clean note policy, which may need revising for both political and practical reasons
• Current circulation statistics
• A review of the options available to the Central Bank with respect to ‘real’ durability, cost-effectiveness and impact on security, of the following:
  • Polymer
  • Durable cellulose papers and strengthening agents
  • Hybrid papers
  • Post-print varnishing

Banknote Sorting Equipment

Central Bank requirements are naturally aligned to available equipment, in terms of what is currently used and what is available in the market. SMI provides a thorough overview of current technologies and equipment, and works with the Central Bank to:

• review the current infrastructure
• identify any current issues in the processing and dispensing of banknotes
• examine the processing requirements of both the Central Bank and commercial banks

TECHNOLOGY

With its comprehensive knowledge of anti-counterfeiting technologies and banknote production, SMI provides an independent review of current trends in banknote substrate and printing processes. Each of the following elements is explored in relation to the requirements identified previously to ensure that only those features and processes that are appropriate to the specific needs of the Central Bank in question are selected:

• Substrate technology, with particular focus on:
  • Generic specification, including strength, opacity, weight
  • Threads (paper only)
  • Foils
  • Coatings
  • Varnishes
  • Treatments (paper only)
  • Fibres (paper only)
  • Machine readability
• Print technology:
  • Off-set (lithography)
  • Screen
  • Intaglio
  • Thermal Transfer (hot stamping)
  • Letterpress
  • Varnishing
  • Finishing (sheet and single note)
  • Machine readability

SECURITY FEATURE SELECTION

Given the increasing range of banknote security features available on the market today, SMI’s knowledge and objective advice can be invaluable to ensure that only the most appropriate features are selected to meet the requirements identified for each Central Bank. In tandem with the previous stage, the features are independently examined and benchmarked for effectiveness in terms of:

• Type of threat addressed by the feature (e.g. nuisance/ opportunistic or serious volume counterfeits; photocopy/ ink-jet printer/ litho printing etc.)
• Feature detectability
  • Level 1: By human senses without equipment, intervention or stimulation
  • Level 2
    • 2.1: Via human judgment through hand-held devices or external stimulation
    • 2.2: By portable hand-held solutions with a yes/no decision
    • 2.3: Automated detection
  • Level 3: Dedicated to central banks’ banknote processing
  • Level 4: Forensic – laboratory testing & expertise
• Process required to incorporate the feature
  • Paper and polymer based features
  • Print based features
  • Surface Effect Features (SEF)
  • Others
• Cost/benefit analysis
• Supplier availability
• Intellectual Property Rights (IPR) and implications
• Compatibility with editing design and processes
• Proven and existing references

IMPLEMENTATION

Improvements in digital reproduction technologies both in terms of quality and cost have resulted in a higher frequency of counterfeiting from a broader section of the population. To counter this threat, Central Banks are changing their banknote designs more frequently – often every 5-7 years – and incorporating new and ever more sophisticated security features. This increase in design and product complexity, coupled with the pressure from the printers to specify their proprietary features, has made it more difficult for the Central Bank to ensure that their banknotes comply with the agreed specification and procurement requirements set out in the tender documents, and meet their needs rather than those of the supplier.

Compliance model

SMI’s compliance model gives control back to the Central Bank, helping to ensure supplier performance in terms of conformance and adherence to specifications. This is achieved via a comprehensive testing and analysis programme, offering the following benefits to the Central Bank:

• Independent physical, chemical and visual audit of the banknotes to ensure compliance with the tender specification, and conformity between design, proof and production stages.
• Independent testing to ensure compliance with any additional technical criteria provided by the supplier.
• Independent audit of supplier performance against contract, with a focus on on-going compliance.

Where appropriate all testing is carried out in accordance with BS or ISO standards and using independent laboratory resources.

Public Education

Public education is key to ensuring the successful introduction of a new series of banknotes. SMI provides advice on the development of the media resources needed to do this effectively, whether for stakeholders needing to reconfigure their ATMs, cash recyclers and other cash handling equipment or members of the public.