Is the Bank of Canada winning the battle against Canadian counterfeiters?

In fact, while counterfeiting Canadian cash is on the steady decline according to the Bank of Canada, it continues to plague consumers and retailers.

Many stores no longer accept $50 or $100 bills, even though it turns out most counterfeits these days are $10s and $20s.

In this three-part series, I look at the issue of counterfeiting money in Canada, and then offer some ways you can protect yourself from phoney notes.

So let's first review the size of the problem, starting with who's responsible for preventing bogus bucks from circulating and catching the counterfeiters here in Canada.

Turns out, unlike the United States of America with its specialized single agency approach to the battling fake US bucks, we don't have Secret Service agents hot on the trail of counterfeiters and forgers.

It's left to the Bank of Canada, which oversees the actual making of our colourful money, and followed by our local, regional and national police forces to make sure the bad guys and their fake money are stopped.

Let's start with the Bank of Canada. They design, print and circulate legitimate Canadian currency. Over the years, they've tried to make it more and more difficult to duplicate our bills. It's an ongoing battle against determined counterfeiters using the latest printing and scanning technologies.

But BofC officials claim that it's a battle they're winning. David Longworth, Deputy Governor of the Bank of Canada, told the Greater Kitchener-Waterloo Chamber of Commerce yesterday (Feb. 6, 2007) that counterfeiting is on the steady decline in Canada.

"By 2009, we aim to reduce the level of counterfeiting to fewer than 100 counterfeits detected annually per million notes in circulation," he said. That's down from 225 per million in 2006, 326 per million in 2005 and 470 per million in 2004.

An internal bank report made public last year revealed that the bank felt counterfeiting in Canada had reached "dangerous levels," especially when the BofC considers anything over 120 counterfeit bills per million to be unacceptable.

Just consider this little fact: About 402,000 counterfeit notes were passed in 2005, and 553,000 in 2004. That means if they were all $10 denominations, that's at least a phoney $4-$5.5 million in circulation; or much worse if they were fake $20s, $50s and $100s.

No wonder signs popped up everywhere telling consumers that $50 and $100 bills were no longer accepted in stores.

It's a simple truth: When retailers no longer trust the cash handed them by Canadians, our whole system of commerce quickly crumbles.

As a result, the main objective of the Bank of Canada's currency division is giving Canadians "paper money that can be trusted," Longworth said.

Despite the overwhelming number of counterfeit bills in circulation, he believes Canadians still have a high level of confidence in their money. "They use banknotes for day-to-day transactions without worrying unduly about counterfeiting."

"Can we do better?" Longworth rhetorically asked his Ontario audience. "We think we can."

Among the first steps to stay ahead of the counterfeiters is yet another wholesale redesign of Canadian banknotes as part of a strategy to stay ahead of counterfeiters.

"As I speak, my colleagues at the bank are hard at work designing the next generation of banknotes, planned for introduction beginning in 2011," explained Longworth. This next revamping should offer a significant increase in security with several anti-counterfeiting features built into each denominational bill.

In addition, the BofC is working with the RCMP on a national database to better track counterfeiters. They have also launched an annual Law Enforcement Award of Excellence for Counterfeit Deterrence to promote vigourous law enforcement. The bank works closely with police forces and the Crown to provide the information and training that can help in the prosecution of counterfeiters.

Canada needs stronger laws and agency to police Canadian counterfeits

So is it enough?

Probably not, especially when Longworth himself only gives his employer a lukewarm "fairly well" assessment of the Bank of Canada's success to date.

While we seem to be making progress, the federal government should consider giving the BofC additional  powers to pursue, prosecute and penalize counterfeiters. This is a white-collar crime that hurts everyone, but is often too small individually to garner much attention from an overworked police force.

Who cares in the criminal system if I just lost $20 because the bill I was handed happened to be counterfeit. It hardly seems worth going to court over.

But if Canada had a dedicated team of investigators, patterned after the American Secret Service, who would chase leads, hunt counterfeiters and indict the guilty, we could come closer to really eradicating fake money from the Canadian economy. Add stiffer prison penalties for convictions, along with seizure of any assets gained through criminal means, and you have a sure-fire recipe for making the price of manufacturing a phoney $20 bill way more expensive than earning it the old-fashioned way - through hard work!

Preventing you or your store from getting stuck with 'funny money' is no laughing matter. In part  two of this short series on Canadian counterfeiting, I examine how alert retailers and consumers help bust counterfeit crooks in Canada.