Smaller firms bear brunt of booming trade in fake notes

Counterfeiting: businesses, banks and police are hard pressed to cope w ith a flood of forged currency estimated at more than £20m

AS MUCH as £20m of money now in circulation is worthless. That figure is a conservative estimate of the face value of forged notes already produced and passed on by one of Britain's fastest growing businesses - counterfeiting. Full-colour photocopiers, desktop publishing systems and a network of professional counterfeiting printworks are putting retailers, banks and the police under increasing pressure.

The Bank of England says that one in 10,000 notes it pulps is counterfeit, representing "a tiny proportion of 1 per cent" of the money in circulation.

And the British Retail Consortium in last month's report Retail Crime Costs put the losses to retailers at £1.8m, a small figure compared with credit-card fraud, which is 10 times that amount.

But these figures understate the problem. Smaller retailers, a higher proportion of whose takings are in cash, are more likely to be affected than the larger retailers surveyed by the BRC. Some notes, spotted by retailers, may never reach the Bank of England for destruction. And the figures largely ignore another growing problem, that of counterfeit £1 coins, fed into vending machines, which are made to fool the machine not the eye.

Many small retailers, especially in inner-city areas, say the number of forged notes they are given is much greater than 1 per cent. The Bank of England confirms that the problem varies according to area. "Once the public's awareness is raised, the forger will move on," said a spokesman.

Several of the printing presses discovered by the police have been in North London, with just one raid there last month seizing £20 notes with a face value of £5m. Another counterfeit factory was discovered last year in Dublin, and distribution rings were broken in London's East End, Edinburgh, Glasgow and Durham. In 1993, £18m of forged notes were seized, of which £12m never reached the streets.

The Bank of England launched a "Know Your Banknotes" campaign last October, designed to help retailers and the public detect forgeries. Members of the public as well as retailers can pick up booklets in high-street banks, building societies and post office branches, and a video is being made available for staff who handle notes.

Retailers are warned not to rely on the increasingly common testing machines that use ultra violet light, as they are unreliable, and give false readings. Apparent fakes can be genuine notes that have been in contact with washing powder "brighteners" (for example, if notes have been kept in a shirt pocket) and UV lights may fail to spot the better fakes.

Using sight and feel is more reliable. Good notes feel different from fakes: they should be crisp rather than limp, waxy or shiny, and some of the lettering will feel rough to the touch.

The watermark should be barely apparent, unless held to the light, when a portrait of the Queen will become visible.

The thread of metal running down the note should appear like a series of silver dashes until the note is held to the light, when it will look like a continuous line. And the note's lines should be sharp and the colours clear.

It is important for a retailer to spot a forgery before accepting it. It is illegal to knowingly pass on a counterfeit note, but any bank or building society deposit of a forged note will lead to confiscation without compensation. Recipients must call in the police to investigate any note of which they become aware.

Local police forces co-operate over forgeries through the National Crime Intelligence Service, which, since the 1920s, has had a division called the National Office for the Suppression of Counterfeit Currency.

Once the police have completed their investigations, confiscated forged notes are passed on to the Bank of England for destruction.

For a small retailer, a comparatively small number of forged notes could be ruinous. Detective Inspector Bob Stretton, of the Leicestershire Constabulary, said: "The real problem is not the amount of forgeries in circulation, but the individuals who getlumbered with them. It might not sound much to lose £60, but a retailer might have to sell £500 or £600 worth of goods to make it up."

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