Once upon a time, the Anglo-Saxon traveller venturing outside the safe haven of sterling or dollar felt, deep down, that all these little coins in an unfamiliar currency were Mickey Mouse money. Nowadays, in the worldwide scam of vending-machine fraud, a variety of funny money is being used, including one that the big-eared rodent is, literally, helping to produce.

The fraud is practised by individual tourists and by organised gangs who replace national currency with foreign currency of lesser value, customise it to ape the shape and weight of the real thing, and use it to extract chocolate bars or cigarettes. Methods of customising the coins are simple: stickers made from plastic and silver foil are used to enlarge or thicken them and dupe the vending-machine mechanism. For example, French 20-centime coins have been converted into single Deutschmarks with Mickey Mouse stickers. Polish zlotys, Swedish kronor, Estonian kroons and old-sized British and Irish 5p pieces, too, have all been successfully deployed as phoney DMs - worth considerably more.

But where there's money there's brass; a Sussex-based company whose business is sorting loose change makes well over pounds 1m a year - and much of it is from defrauded vending-machines. Each week, Coin Company International buys tons of coins from banks, charities and chain stores throughout Europe and Canada. Having painstakingly sorted the mixed coinage into national currencies, CCI sells it back to its various countries of origin.

CCI was set up by Geoff Rawlinson and John Baker, former Laker Airways employees who had to sort coins accumulated through in-flight sales. "Often very small amounts came in, which because they were too small to be converted to sterling we just threw into a bread basket," says Baker. They did some research, and discovered that the supply of such foreign coinage was large enough to support a business. Now, 15 years later, their company has a staff of 13 and a yearly turnover of pounds 1.6m - and its founders have learnt a lot about deceiving vending-machines.

Similarities between coins of different currencies make life easier for the fraudster. The Swedish 5-kronor coin, for example, bears a strong resemblance to the 5-DM coin; more exotically, Baker points out, the Swaziland 1-lilangeni coin is a near-lookalike of the British pound. Needless to say, the profitability of the scam depends on the accessibility of weak- currency coins. CCI's German clients are rich in Eastern European coins, the French ones have lots of Algerian coins and the UK scores heavily with Irish and former Commonwealth coins. Geography and historical ties have a lot to do with such traffic, as do wars. During the Falklands War, CCI's percentage of Ascension Island and Falkland Islands coins increased.

The inglorious tradition of defrauding coin-operated machines is as old as their invention. In 1891, in the early days, The Illustrated American wrote of a policeman "attracted by shouts of delight raised by a crowd of spectators in a public thoroughfare": a "gentleman" was using a hole- punched nickel with wire attached to empty a cigar vending-machine, before distributing his booty to the crowd. CCI has an old 5p coin with a metal strip welded on like a spoon, presumably for the same recycling purposes.

According to calculations made by RJ Reynolds, the US tobacco manufacturers and a client of CCI, the German tobacco industry lost approximately 6m DM (pounds 2.5m) last year through vending-machine fraud. It's harder to get evidence from British companies. Roger Williams, MD of Coinadrink, is currently preparing a seminar on "VM" security. "We know there's a problem but people are being circumspect about acknowledging it," Williams says. Increasingly, hi-tech coin validation mechanisms are being pitted against human cunning in what Williams describes as "a permanent battle of wits" between man and machine. However, as John Baker of CCI notes, perhaps with a certain satisfaction: "There hasn't been a machine invented yet that's going to stop it." !