Counterfeiting has resulted in many changes to U.S. currency, including the intricate designs, color, watermarking, and other elements of the U.S. dollar.
Some of those changes occurred when the nation was still a British colony! Counterfeiting and other fraudulent practices with currency and coins have plagued currency since before the first colonists arrived in Plymouth Bay. Coin reeding emerged as a response to coin clipping. Before coins had reeded edges, unscrupulous individuals were able to shave pieces off their coins, allowing them to spend the coins for their full value and melt the shavings to spend as well.
Response to Counterfeit Issues in Colonial America
One of the issues that early colonists faced was a lack of standardization in their currency. Acceptable forms of payment in colonial America included Spanish doubloons, British pounds, and any of the local currencies used by the individual colonies.
As each colony began gradually issuing its own notes, counterfeiters had many legitimate bills and notes to copy. The diversity of monetary systems made detecting counterfeit currency difficult.
Understaffed law enforcement dealt with limited resources and a lack of coordination, which added a layer of challenges to prosecuting counterfeiters.
One of the first efforts to combat counterfeiting in the colonies was Virginia’s annual currency change. The colony of Virginia passed legislation in 1645 mandating a “new impression” be stamped every year with a fresh figure.
Some colonies printed clear warnings on their currency itself that counterfeiting carried severe criminal charges, including capital punishment. New York notes denominated in pounds from the 18th century warn, “’Tis Death to counterfeit.”
Counterfeiting During the Revolutionary War
While there had been efforts made to work against counterfeiters, there was not an active central banking system during the Revolutionary War. The Continental Congress did not have the resources to produce secure, uniform currency. Some skilled counterfeiters were able to exploit that and produced elegant, convincing notes. Utilizing methods like letterpress printing and engraving to issue notes circulated alongside genuine Continental currency.
The Revolutionary War is one of the few times that major counterfeiting efforts were led by a foreign party. The British worked diligently to reproduce American notes in an attempt to destabilize the colonial economy. Their counterfeit Continental dollars spread throughout the colonies, undermining confidence in the fledgling government and inflating the economy.
The response from the 1779 General Assembly was legislation to criminalize all reproductions of currency and lottery tickets issued through the Continental Congress and all states. This struggle against forgeries of the dollar and earlier issues laid the groundwork to establish the U.S. Mint in 1792.
Benjamin Franklin’s Efforts to Battle Counterfeiting
Benjamin Franklin’s role in the early United States government cannot be understated. His appointment as the first Postmaster General put him in a position to do something about the numerous imitation notes in circulation.
Franklin led numerous efforts to fight counterfeiters, including the creation of pamphlets and articles to educate the public about counterfeit money. He pushed for the standardization of American currency and believed that consistent visual elements would make it harder for counterfeit notes to circulate.
His adoption of nature prints made from physical plants on currency notes utilized intricate leaf patterns that proved challenging to duplicate. He is also credited with implementing watermarks on currency notes and proposing the use of colored threads embedded in the notes.
The Fugio cent was designed by Benjamin Franklin and was issued just a few years before the United States Mint was established. It carried a warning to would-be imitators: “Mind Your Business.”
Counterfeiting Before and During the Civil War
Throughout the free banking era in the 19th century, banks, merchants, and companies issued their own currency. By 1860, there were an estimated 8,000 different kinds of money in the United States. When banks and businesses experienced financial woes, their currency was potentially worthless and unredeemable.
Some of the now obsolete currencies were used for everyday transactions, but the circulation was typically limited to the vicinity of an issuing bank. This left some Americans unable to pay for goods and services when they traveled unless they had planned ahead, as non-local merchants may not accept their local notes as payment.
The U.S. Mint introduced greenbacks in 1862. They were the first national currency and presented a major step towards standardization. However, private banks were still able to print their own private notes, resulting in thousands of available currencies, creating a counterfeiter’s paradise. Unscrupulous individuals with the skills to reproduce private bank notes were able to take advantage of the lack of regulation and print money on demand.
During the Civil War, counterfeiters exploited the system of individual bank notes in place. There were an estimated 5,400 counterfeit banknotes in the United States that accounted for upwards of one-third of the circulating currency. While this had a negative impact on the U.S. dollar, the Confederate dollar suffered worse at the hands of counterfeiters.
Southern abilities to issue paper currency were limited. And because the Confederate notes were crudely designed in comparison to the greenback, they were easily replicated by criminals and Northerners. By 1864, the Confederacy had instituted a process of stamped serialization and printed signatures to authenticate their currency.
The 1865 National Banking Acts
This wide array of available currencies and banknotes made the work of law enforcement highly difficult. The U.S. Marshalls were crucial in thwarting many counterfeiters, but amidst thousands of available circulating currencies, it was a losing game. In 1865, the National Banking Acts established national banks and prohibited private banks and businesses from issuing their own notes.
Counterfeit issues have even resulted in the creation of a law enforcement agency. The Secret Service was born out of necessity on April 14, 1865, the very day that President Abraham Lincoln was assassinated. The organization was established to investigate counterfeiting and apprehend the criminals who engaged in currency forgery.
Counterfeiting in the 20th Century and Today
During the second world war, the Nazis successfully reproduced U.S. dollars and British pounds. They called this Operation Bernhard and while many bills may have been convincing, they did not circulate widely.
The next major changes to the face of U.S. currency as a result of counterfeiting operations were in the 1990s. The circulating currency had been in use for some time, and counterfeiters had found ways to replicate many of the designs. Computer and photocopier technology advances made it easier for untrained individuals to make convincing reproductions of the dollar.
The U.S. Mint executed a multi-pronged approach that equipped high face-value bills with holograms, embedded paper strips, raised ink, and color-shifting inks between 1990 and 1996. The approach worked with a degree of success, thanks in part to advances in computers that allowed for other anti-counterfeiting measures. The inclusion of EURion constellation design features on dollars disabled operation on modern photocopiers. Computer programs like Adobe Photoshop began instituting safeguards to obstruct image manipulation of scanned dollars.
In 1996, the faces on U.S. currency bills began to shift to larger portraits, starting with the $100 bill. By the year 2000, the $5, $10, $20, $50, and $100 bills had new designs and larger portraits. Enlarging the portraits on the bills provided another disruption for counterfeiters since the portraits themselves are what many people look to.
Between 2000 and 2010, the $5-100 bills received updated designs with more colors present and the portraits featured no oval around the portrait on the obverse. In 2013, a new three-dimensional security ribbon appeared on the $100 bill, as counterfeiting technology again began to catch up with printing technology.
The United States Treasury Department reports that there are about $70 million in counterfeit bills circulating. That means for every 4,000 authentic U.S. dollar bills of any denomination, there is one counterfeit note. This is only based on annual seizure reports, and it is possible that may be more than that, as some notes circulate for multiple transactions before they are discovered.
While many advances in technology have equipped counterfeiters with the skills and tools to produce convincing fakes throughout history, the U.S. Mint has stayed one step ahead of calamity. This is, in part, due to Benjamin Franklin, whose diligent work and forward-thinking nature set the dollar up for success.
