Counterfeit Wars: Countering the Menace of Fake Indian Currency

According to figures disclosed recently by the Government of India, during 2006-09, 7.34 lakh of Rs 100 notes, 5.76 lakh of Rs 500 notes and 1.09 lakh of Rs 1000 notes have been seized. They are all fake, the “tip of the iceberg” when compared to the total number of notes in the Indian market still to be seized. The Naik Committee, appointed to assess the menace of fake currency, estimates the total amount of counterfeit money in circulation in India to the tune of Rs 1,69,000 crore. The magnitude of the problem, therefore, is immense.

Fake Indian currency notes principally originate from Pakistan, but are smuggled through various routes, in different ways. The popular routes are via UAE, Nepal and Bangladesh. Fake notes from Dubai are transported through air with the help of bonafide passengers or couriers appointed for the purpose. Thailand, Malaysia, Myanmar and Sri Lanka are also used as transit points. International airports in Bangalore, Chennai, Calicut, Cochin, Hyderabad, Mangalore, Mumbai and New Delhi are identified as main landing points of counterfeits from abroad. Porous and weak land borders respectively with Nepal and Bangladesh are utilised by organised gangs to smuggle counterfeits into India. Fake currency is also sent by land route through infiltrators from Pakistan to India. Once smuggled, the fake money is exchanged for original notes on roughly 2:1 ratio. There has been a spurt in fake currency circulation especially since 2006.

It has become increasingly difficult to distinguish between fake and real currency notes. The difficulty is mainly due to the fact that counterfeits are now printed with state of the art technology using security paper that is made available only to state actors. This clearly indicates involvement of government agencies in the neighbourhood. Pumping fake currencies is one of the sub-conventional warfare strategies pursued by Pakistan against India, an attempt to subvert the Indian economy and to fund terror networks. For Instance, investigations reveal that Rs 50 million that was incurred by the terrorists to trigger blasts in Hyderabad in 2007 and Rs 3 million spent on the attack on the Indian Institute of Science, Bangalore, in 2005 were generated mainly through fake currency. Apart from security, fake currency poses a huge socio-economic problem. Its impact on general crime on society is serious as more and more educated unemployed youth are attracted towards the counterfeit racket. In short, this can be dubbed as a dangerous facet of ‘economic terrorism’ confronted by India.

Given the complexity, a multi-pronged approach is required to counter the menace. Firstly, to stay ahead of counterfeiters, the Reserve Bank of India should constantly upgrade both paper-based (security thread, water mark, fluorescent fibres and physical and chemical characteristics of the paper) and print-based (anti-photo copying feature, optically variable ink - OVI- see through effect, intaglio printing etc) security features of Indian currency. The public should be educated on these security features, which will enable them to easily distinguish fake from real notes. Since the security features introduced in 1996 and 2000 have already been breached, these notes should be withdrawn from circulation with immediate effect. Note sorting machines should be installed at all bank branches to promptly detected fake notes as soon as they enter the banking channel.

Secondly, more use of credit/debit cards and online/digital transactions should be encouraged instead of cash transactions. In a country where more than 70 per cent of the population does not even have a bank account, this measure may take time, but realisable.

Thirdly, effective cooperation among the concerned agencies is essential to address the threat. The Central Bureau of Investigation is the nodal agency for coordinating and monitor cases related to fake currency; Department of Revenue Intelligence is the lead operational body at the national level; respective state police is the lead operational agency for indigenous counterfeit currency of that particular state; National Crime Records Bureau and Central Economic Intelligence Bureau hold all data pertaining to fake currencies. These apart, the state governments, central police organisations, intelligence agencies, the RBI, Enforcement Directorate, Ministry of External Affairs, Financial Investigation Unit, and Department of Legal Affairs are other concerned agencies. A holistic response should be formulated to avoid contradictions among these agencies in assessment, perception and counter-measures against the problem. Effective sharing of real time intelligence and relevant information among these agencies will go a long way in pushing them one step ahead of counterfeiters.

Fourthly, external dependence on security paper and ink should be reduced by increasing indigenous production. At the same time, India should use its diplomatic leverage to make sure that international companies contracted to supply India-specific paper maintain secrecy. Since most of the currency printing paper and inks are being imported from Europe, the European Union should be asked to keep a tight watch on importers of currency-related printing paper and ink based in Pakistan. New Delhi also should press relentlessly through INTERPOL for extradition of those criminal elements involved in the fake currency racket based in foreign countries.

Fifthly, India should offer to train Nepalese and Bangladeshi customs and immigration officials in identifying and keeping watch over frequent travellers to Dubai, Dhaka, Colombo and other neighbouring countries. New Delhi could also help the installation of hi tech luggage scanners at the international airports of Nepal and Bangladesh so that the baggage of passengers are thoroughly checked before boarding.
 

(Disclaimer: The views expressed in this article are those of the author and do not represent the views either of the Editorial Committee or the Centre for Land Warfare Studies).