Counterfeit U.S. Currency Abroad: Observations on Counterfeiting and U.S.
Deterrence Efforts
(Testimony, 02/27/96, GAO/T-GGD-96-82)
GAO discussed U.S. efforts to combat international counterfeiting of
U.S. currency. GAO noted that: (1) U.S. currency is vulnerable to
international counterfeiting because it is widely used abroad and lacks
updated security features; (2) counterfeiters range from office workers
to organized crime and terrorist groups using equipment ranging from
simple photocopiers to sophisticated offset presses; (3) the U.S.
government is particularly concerned about a high-quality counterfeit
note known as the "Superdollar" and rapid advances in photographic and
printing devices; (4) U.S. agencies' and foreign governments' views on
the extent and significance of counterfeit U.S. notes vary, and U.S.
counterfeit-detection activities are limited and inconclusive; and (5)
to deter international counterfeiting, the Department of the Treasury is
redesigning U.S. currency to incorporate more security features, the
Secret Service has gathered additional information on counterfeiting and
provided counterfeit-detection training, and the U.S. government is
using international and interagency task forces and diplomatic efforts
to eradicate the Superdollar.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-GGD-96-82
TITLE: Counterfeit U.S. Currency Abroad: Observations on
Counterfeiting and U.S. Deterrence Efforts
DATE: 02/27/96
SUBJECT: Currency and coinage
Forgery
Currency losses
International cooperation
Money supply
Foreign governments
Intelligence gathering operations
Crime prevention
IDENTIFIER: Superdollar
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Cover
================================================================ COVER
Before the Subcommittee on General Oversight and Investigations,
Committee on Banking and Financial Services, House of Representatives
For Release on Delivery
Expected at
11:00 a.m., EST
Tuesday,
February 27, 1996
COUNTERFEIT U.S. CURRENCY ABROAD
- OBSERVATIONS ON COUNTERFEITING
AND U.S. DETERRENCE EFFORTS
Statement of JayEtta Z. Hecker, Associate Director
International Relations and Trade Issues
GAO/T-GGD-96-82
GAO/GGD-96-82T
(280163)
Abbreviations
=============================================================== ABBREV
COUNTERFEIT U.S. CURRENCY ABROAD:
OBSERVATIONS ON COUNTERFEITING AND
U.S. DETERRENCE EFFORTS
============================================================ Chapter 0
SUMMARY OF STATEMENT BY JAYETTA Z. HECKER, ASSOCIATE DIRECTOR,
INTERNATIONAL RELATIONS AND TRADE ISSUES
U.S. currency has become a vulnerable target for international
counterfeiting because it is widely used abroad and currently lacks
updated security features. GAO's testimony focuses on the diverse
nature and the unknown extent of counterfeiting abroad, as well as
the recent U.S. efforts to deter this activity.
U.S. law enforcement officials say that counterfeiters range from
office workers to organized crime and terrorist groups and that the
equipment used for counterfeiting U.S. currency includes both simple
photocopiers and sophisticated offset presses. Moreover, counterfeit
currency varies significantly in quality. Of increasing concern is a
very high-quality family of counterfeits commonly known as the
"Superdollar." According to reports by the House Republican Task
Force on Terrorism and Unconventional Warfare, the Superdollar is
printed in the Middle East on "high-tech state-owned presses with
paper only acquired by governments." However, the Secret Service says
that the task force has provided little evidence to support its
allegations.
Counterfeiting is a criminal activity. Thus, it is impossible to
determine the actual extent of this activity abroad. Both Treasury
and Secret Service officials agreed that counterfeiting of U.S.
currency is a threat to be taken seriously but said that it is not
now at a level that poses an economic threat to the U.S. monetary
system. Treasury Department and Secret Service officials use
counterfeit-detection data from the Secret Service to help assess the
extent of counterfeiting. According to the Secret Service, it
supplemented these data with intelligence information and field
experience and concluded that counterfeiting of U.S. currency abroad
has been increasing. Our analysis of detection data raised questions
about their usefulness for illustrating either actual counterfeiting
activity or recent growth in such activity.
Foreign law enforcement and financial organization officials we
interviewed in seven European countries varied in their degree of
concern over the counterfeiting of U.S. currency. Foreign law
enforcement officials tended to be more concerned about the
counterfeiting of U.S. currency than were foreign financial
organization officials.
The United States is increasing its deterrence efforts. It is
redesigning U.S. currency to incorporate more security features;
bolstering exchanges of information abroad, including providing more
counterfeit-detection training; attempting to increase the Secret
Service presence abroad (although the Secret Service has encountered
difficulty in obtaining approval); and trying to stop production and
distribution of counterfeit currency, including the Superdollar,
using special task forces and diplomatic efforts.
============================================================ Chapter 1
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our observations on the
counterfeiting of U.S. currency abroad and recent U.S. efforts to
combat this activity. In light of the impending release of the new
U.S. currency design and media reports concerning high-quality
counterfeits, much public attention has recently focused on the
vulnerability of our currency. Our currency has become a target of
counterfeiters because of its increasing international use and
outdated security features.
My testimony today will discuss the diverse nature and unknown extent
of counterfeiting abroad, as well as the recent efforts of the United
States to deter this activity. These efforts include (1) redesigning
the currency, (2) exchanging more information with foreign law
enforcement agencies and financial organizations, (3) attempting to
increase the Secret Service presence abroad, and (4) attempting to
stop production and distribution of an extremely high-quality
counterfeit commonly known as the "Superdollar."
My remarks today are based on the work that we performed for
Representative John Spratt, Jr., over the past year and a half on the
counterfeiting of U.S. currency abroad. This work is more
comprehensively summarized in our report entitled Counterfeit U.S.
Currency Abroad: Issues and U.S. Deterrence Efforts
(GAO/GGD-96-11), which was released by Representative Spratt today.
In doing our work, we obtained views and material from (1) U.S.
government agencies in the United States and abroad, including the
Treasury Department, the Secret Service, the Bureau of Engraving and
Printing, the Federal Reserve, and the State Department; (2) foreign
law enforcement and financial organization officials in England,
France, Italy, Germany, Hungary, Poland, and Switzerland; (3)
Interpol (the international police organization) officials in the
United States and abroad; and (4) individuals researching the
Superdollar case, including the author of the House Republican Task
Force on Terrorism and Unconventional Warfare reports\1 on the
Superdollar.
Please note that our work was limited by a number of factors related
to national security and investigative concerns. All of my remarks
today are based on our report, which was cleared as unclassified
through a security classification review by the appropriate U.S.
agencies, including the Treasury and the Secret Service.
--------------------
\1 The House Republican Research Committee, Iran, Syria and the Trail
of Counterfeit Dollars (Washington, D.C.: July 1, 1992); and Update:
Iran, Syria and the Trail of the Counterfeit Money (Washington, D.C.:
July 13, 1994).
BACKGROUND
---------------------------------------------------------- Chapter 1:1
The U.S. currency,\2 reportedly the most widely held in the world,
is susceptible to counterfeiting. High foreign inflation rates and
the relative stability of the dollar have contributed to the
increasing use of U.S. currency outside the United States. Of the
$380 billion of U.S. currency in circulation, the Federal Reserve
estimates that over 60 percent may be held outside the United States.
The widespread use of U.S. currency abroad, together with the
outdated security features of the currency, makes it a vulnerable
target for international counterfeiting. Excluding two changes
introduced in 1990,\3 the overt security features of the currency
have not substantially changed since 1929. This situation has
resulted in the U.S. dollar's becoming increasingly vulnerable to
counterfeiting.
Widespread counterfeiting of U.S. currency could undermine
confidence in the currency and, if done on a large enough scale,
could even have a negative effect on the U.S. economy. The United
States benefits from the international use of its currency. When
U.S. currency remains in circulation, it essentially represents an
interest-free loan to the U.S. government. The Federal Reserve has
estimated that the existence of U.S. currency held abroad reduces
the need of the government to borrow by approximately $10 billion a
year.
The Treasury, including the Secret Service and the Bureau of
Engraving and Printing, and the Federal Reserve have primary
responsibilities for addressing the counterfeiting of U.S. currency.
The Secretary of the Treasury is responsible for issuing and
protecting U.S. currency. The Secret Service conducts
investigations of counterfeiting activities and provides
counterfeit-detection training. The Secret Service is also the U.S.
agency responsible for anticounterfeiting efforts abroad. The Bureau
of Engraving and Printing designs and prints U.S. currency and
incorporates security features into the currency. The Federal
Reserve's role is to distribute and ensure the physical integrity,
including the authenticity, of U.S. currency.
--------------------
\2 In this statement, "U.S. currency" refers to U.S. Federal
Reserve notes and does not include coined money.
\3 In 1990, the Treasury added a security thread and microprinting to
U.S. currency.
NATURE OF COUNTERFEITING OF
U.S. CURRENCY IS DIVERSE
---------------------------------------------------------- Chapter 1:2
A diverse group of perpetrators uses a variety of methods to
counterfeit U.S. currency. And, although counterfeiting is carried
out primarily for economic gain, it is sometimes linked with other
more nefarious criminal endeavors, such as drug trafficking, arms
dealing, and alleged terrorist activities.
According to law enforcement officials, counterfeiters run the gamut
from office workers to organized crime and terrorist groups, and the
equipment used for counterfeiting U.S. currency ranges from
photocopiers to sophisticated offset presses. Moreover, the quality
of counterfeit notes varies significantly. Even those notes made
using the same method vary according to the sophistication of the
perpetrator and the type of equipment used. Of increasing concern is
the fact that certain foreign counterfeiters are becoming extremely
sophisticated and are now producing very high-quality counterfeit
notes that are more difficult to detect than any previous
counterfeits.
The highest-quality family of counterfeits known today is commonly
referred to as the Superdollar.\4 While many allegations have been
made about the Superdollar, little evidence in support of these
allegations has been made public. In the Middle East, a group,
allegedly a foreign government, is said to be sponsoring production
of the Superdollar. According to reports by the House Republican
Task Force on Terrorism and Unconventional Warfare, the Superdollar
is printed in the Middle East on "high-tech state-owned presses with
paper only acquired by governments." Also according to the task
force, the Superdollar is "designed for direct infiltration into the
U.S. banking system and has become a major instrument in
facilitating the flow of militarily useful nuclear materials and
equipment and various weapons systems."\5 A few of the foreign law
enforcement and financial institution officials we spoke with
believed the Superdollar was being circulated through various
terrorist organizations around the world. This belief was primarily
based on reports of detections involving individuals with links to
terrorist organizations.
However, according to the Secret Service, the task force has provided
almost no evidence to support its allegations. According to the
Treasury, no evidence exists to show that the Superdollar is printed
with paper acquired only by governments and that it is designed for
direct infiltration into the U.S. banking system. The Treasury also
maintained that support for the remaining allegations concerning the
Superdollar was inconclusive. Furthermore, although the task force
reported that between $100 million and billions of Superdollars are
in circulation, the report provided no evidence to support these
allegations. Since the Superdollar's initial detection in fiscal
year 1990, Superdollar detections have represented a small portion of
total counterfeit currency detections, according to the Treasury and
Secret Service.
While high-quality counterfeit notes, such as the Superdollar, have
received the most attention from the media, Treasury officials told
us that their biggest concern was the rapid advances in photographic
and printing devices. According to a 1993 National Research Council
report requested by the Treasury, the counterfeiting problem will
increase as these technologies improve and are made more accessible
to the public. The Treasury has planned to combat such
counterfeiting through changes to the U.S. currency design, expected
to be introduced in March 1996.
--------------------
\4 The note is also known as the "Supernote" or the "Superbill" and
is referred to as the "C-14342 Family" by the Secret Service.
\5 The House Republican Research Committee, Iran, Syria and the Trail
of Counterfeit Dollars; and Update: Iran, Syria and the Trail of the
Counterfeit Money.
EXTENT OF THE PROBLEM COULD NOT
BE DETERMINED, AND FOREIGN
VIEWS WERE INCONCLUSIVE
---------------------------------------------------------- Chapter 1:3
The criminal nature of the activity precludes determination of the
actual extent to which U.S. currency is being counterfeited abroad.
The best data available to reflect actual counterfeiting are Secret
Service counterfeit-detection data.\6 Using these data, Treasury
officials concluded that counterfeiting of U.S. currency was
economically insignificant. Secret Service officials told us that
they supplemented the counterfeit-detection data that they gathered
with intelligence information and field experience and that these
data demonstrated an increase in counterfeiting activity abroad.
However, our analysis of the same counterfeit-detection data proved
inconclusive. Secret Service data have limitations and thus provide
only a limited measure of the extent of counterfeiting activities.
Foreign officials' views about the seriousness of the problem of
counterfeit U.S. currency were mixed.
--------------------
\6 Interpol data, the only other international compilation of
counterfeit-currency statistics, were less reliable due to the
limited amount of reporting by foreign countries. According to
Interpol officials, reporting to Interpol was inconsistent and mostly
limited to European nations.
TREASURY SAID THE LEVEL OF
COUNTERFEITING WAS
ECONOMICALLY INSIGNIFICANT;
SECRET SERVICE SAID ACTIVITY
ABROAD WAS INCREASING
-------------------------------------------------------- Chapter 1:3.1
On the basis of the number of Secret Service counterfeit detections,
Treasury officials concluded that counterfeiting of U.S. currency
was economically insignificant and thus did not pose a threat to the
U.S. monetary system. According to Secret Service and Treasury
officials, detected counterfeits represented a minuscule portion of
U.S. currency in circulation. Secret Service and Federal Reserve
data showed that, in fiscal year 1994, of the $380 billion in
circulation, $208.7 million had been detected as counterfeit notes.
This figure represented less than one one-thousandth of the currency
in circulation. However, while Treasury and Secret Service officials
agreed that, overall, counterfeiting was not economically
significant, they considered any counterfeiting to be a serious
problem.
The Secret Service used counterfeit-detection data, supplemented with
intelligence information and field experience, to report that
counterfeiting of U.S. currency abroad was increasing.\7 In one
analysis, it reported that the amount of counterfeit currency
detected abroad increased 300 percent, from $30 million in fiscal
year 1992 to $121 million in fiscal year 1993, thereby surpassing
domestic detections in the same period.
The Secret Service has also reported that, in recent years, a larger
dollar amount of the notes detected in circulation domestically has
been produced outside the United States. Since 1991, the dollar
amount of counterfeit U.S. notes detected while in circulation and
produced abroad has exceeded the dollar amount of those produced
domestically. In fiscal year 1994, these foreign-produced notes
represented approximately 66 percent of total counterfeits detected
in circulation domestically.
--------------------
\7 It employed two counterfeit-detection data measures to illustrate
the extent of counterfeiting abroad: (1) counterfeit detections
abroad and (2) domestic detections of counterfeits that were produced
abroad. Counterfeits detected abroad are categorized as "appearing
abroad," while counterfeits detected domestically are divided into
two separate categories. Domestic detections of counterfeits not yet
in circulation are called "seizures"; counterfeits detected while in
circulation are called "passes."
THE ACTUAL EXTENT OF
COUNTERFEITING ABROAD COULD
NOT BE DETERMINED
-------------------------------------------------------- Chapter 1:3.2
The true dimensions of the problem of counterfeiting of U.S.
currency abroad could not be determined. The Treasury and the Secret
Service use Secret Service counterfeit-detection data to reflect the
actual extent of counterfeiting. However, although these data are
the best available, they have limitations. Specifically, they are
incomplete and present only a partial picture of counterfeiting. If
these limitations are not disclosed, the result may be misleading
conclusions.
First of all, the actual extent of counterfeiting could not be
measured, primarily because of the criminal nature of this activity.
Secret Service data record only those detections that are reported to
the Secret Service; they do not measure actual counterfeiting. As a
result, the data provide no information about the number of
counterfeiters operating in any given year or the size and scope of
their operations. More importantly, these data could not be used to
estimate the volume of counterfeit currency in circulation at any
point in time. In the case of counterfeit currency appearing abroad,
reasons for this include the following: (1) the data do not
distinguish between how much counterfeit currency was seized and how
much was passed into circulation; (2) the data could not provide
information about how long passed counterfeits remained in
circulation before detection; and (3) most critically, the data
provide no indication of how much counterfeit currency was passed
into circulation and not detected.
Second, counterfeit detection data may in part only reflect where the
Secret Service focuses its efforts. Use of these data thus may not
identify all countries with major counterfeiting activity, but simply
countries where agents focused their data collection efforts. For
example, in fiscal year 1994, almost 50 percent of detections abroad
occurred in the six countries where the Secret Service was
permanently located. In other countries, counterfeit-detection
statistics tend to be more inconsistent.
Third, detection data for high-quality notes may be underreported.
The Secret Service has said that, because so few Superdollars have
been detected, this indicates that there are not many in circulation.
However, according to the House Republican Task Force on Terrorism
and Unconventional Warfare reports, the majority of Superdollars are
circulating outside the formal banking system and therefore would not
be reported to the Treasury if detected. Also, as we discovered on
our overseas visits, many foreign law enforcement and financial
organization officials had inconsistent and incomplete information on
how to detect the Superdollar. Thus, financial institutions abroad
may be recirculating the Superdollars.
Fourth, reported increases in counterfeiting abroad, as supported by
Secret Service detection data, may be based on a number of factors
other than increased counterfeiting activity. For example, in 1993,
the Secret Service changed its reporting practices abroad to be more
proactive in collecting counterfeit-detection data. Instead of
relying solely on reports from foreign officials, agents abroad began
to follow up on Interpol reports and intelligence information in
order to collect additional data. Also, according to Treasury
officials, foreign law enforcement officials have improved their
ability to detect counterfeit U.S. currency and report it to the
Secret Service. Furthermore, the increase in domestic detections of
counterfeits produced abroad is also subject to interpretation. For
example, rather than foreign-produced notes increasing, it is
possible that the Secret Service's ability to determine the source of
counterfeit currency has simply improved over time.
Fifth and finally, counterfeit-detection data fluctuate over time,
and one large seizure can skew the data, particularly for detections
abroad. For example, according to the Secret Service, several large
seizures accounted for the jump from $14 million in counterfeit
detections abroad in fiscal year 1988 to $88 million in fiscal year
1989. The following year, the data indicated a significant drop in
detections. For detections outside the United States, the Secret
Service has relied heavily on information provided by foreign law
enforcement organizations, and has obtained little information from
financial organizations.
OFFICIALS SAID SECRET
SERVICE FIELD EXPERIENCE AND
INTELLIGENCE INFORMATION
SUPPLEMENTED DETECTION DATA
-------------------------------------------------------- Chapter 1:3.3
According to Secret Service officials, they supplemented their
counterfeiting detection data with knowledge their agents gained
through field experience and the sharing of intelligence information.
Some of this information was not available or was considered too
sensitive for an unclassified report. Our work did yield some
information on the unclassified activities. For example, the Secret
Service told us that it was conducting vault inspections during its
joint international study team visits with Treasury and Federal
Reserve officials. According to a Secret Service agent who performs
the vault inspections, they include the checking of all U.S.
currency in the vault for counterfeits. According to Federal Reserve
and Secret Service officials, vault inspections had been conducted in
only one of the six locations the Secret Service visited during the
time of our review. Secret Service officials told us that the
inspections had been conducted only in Argentina and were
discontinued because of the limited results obtained there. The
officials told us that the inspections might be reinstituted in other
countries if it was decided that the effort was warranted.
FOREIGN VIEWS ON THE EXTENT
OF COUNTERFEITING ABROAD
WERE MIXED
-------------------------------------------------------- Chapter 1:3.4
Overseas law enforcement and financial organization officials' views
on the extent of the problem of counterfeit U.S. currency varied.
Foreign law enforcement officials tended to be more concerned about
counterfeit U.S. currency than foreign financial organization
officials. Financial organization officials we met with said that
they had experienced minimal chargebacks,\8 and most expressed
confidence in the ability of their tellers to detect counterfeits.
Furthermore, we heard few reports from foreign financial organization
and foreign law enforcement officials about U.S. currency not being
accepted overseas because of concerns about counterfeiting.
Most foreign law enforcement officials we spoke with believed that
the counterfeiting of U.S. currency was a problem, but their
opinions on the severity of the problem differed. Swiss, Italian,
and Hungarian law enforcement officials said that it was a very
serious problem. French and English law enforcement officials said
that the problem fluctuated in seriousness over time. And German,
French, and Polish officials said that the counterfeiting of U.S.
currency was not as serious a problem as the counterfeiting of their
own currencies. Some of these law enforcement officials expressed
concern over increases in counterfeiting in Eastern Europe and the
former Soviet Union. Some also expressed particular worry about
their ability, and the ability of financial organizations in their
countries, to detect the Superdollar.
Conversely, most foreign financial organization officials we spoke
with were not concerned about the counterfeiting of U.S. currency.
Of the 34 organizations we visited in 7 countries, officials from 1
Swiss and 1 French banking association and 2 Hungarian banks viewed
the counterfeiting of U.S. currency as a current or increasing
problem. According to other foreign financial organization
officials, they were not concerned about U.S. counterfeiting
activity because it did not have a negative impact on their business.
For example, none of the 16 financial organization officials with
whom we discussed chargebacks told us that they had received
substantial chargebacks due to counterfeit notes that they had failed
to detect. In addition, some of these officials cited other types of
financial fraud and the counterfeiting of their own currency as more
significant concerns. For example, officials from one French banking
association were more concerned with credit card fraud, and officials
from two financial organizations in Germany and one financial
organization in France said counterfeiting of their country's
currency was a greater problem.
Furthermore, foreign financial organization officials we spoke with
were confident about their tellers' ability to detect counterfeits
and, in some countries, tellers were held personally accountable for
not detecting counterfeits.\9 In most of the countries we visited,
detection of counterfeit U.S. currency relied on the touch and sight
of tellers, some of whom were aided by magnifying glasses or other
simple detection devices, such as counterfeit detection pens.\10
Other counterfeit-detection devices used abroad, like ultraviolet
lights, did not work effectively on U.S. currency. While foreign
financial organizations appeared confident of their tellers' ability
to detect counterfeits, some of these organizations had incomplete
information on how to detect counterfeit U.S. currency, particularly
the Superdollar.
Finally, foreign financial organization and law enforcement officials
provided a few isolated cases in which U.S. currency was not
accepted abroad. For example, when it first learned about the
Superdollar, one U.S. financial organization in Switzerland
initially stopped accepting U.S. $100 notes, although it later
resumed accepting the U.S. notes from its regular customers. Also,
Swiss police and Hungarian central bank and French clearing house
officials reported that some exchange houses and other banks were not
accepting $100 notes. We were unable to confirm these reports.
However, a State Department official commented that, because drug
transactions tended to involve $100 notes, some foreigners were
reluctant to accept this denomination, not because of counterfeiting
concerns, but rather because of the notes' potential link to money
laundering.
--------------------
\8 A chargeback occurs when the Federal Reserve or a bank detects a
counterfeit note in a deposit and charges the customer's account for
the value of the counterfeit.
\9 For example, in Hungary tellers were charged for every counterfeit
note they accepted that the bank later detected.
\10 Counterfeit-detection pens are filled with a chemical that, when
applied to currency, turns gold if the currency's paper contains
certain characteristics of genuine paper and turns black if those
characteristics are not present.
ADDITIONAL U.S. COUNTERFEIT
CURRENCY DETERRENCE EFFORTS
---------------------------------------------------------- Chapter 1:4
The U.S. government, primarily through the Treasury Department and
its Secret Service and the Federal Reserve, has been increasing its
counterfeiting deterrence efforts. These efforts include redesigning
U.S. currency; increasing exchanges of information abroad;
attempting to increase the Secret Service presence abroad; and
attempting to stop production and distribution of counterfeit
currency, including the Superdollar.
TREASURY DEPARTMENT TO
INTRODUCE CURRENCY REDESIGN
-------------------------------------------------------- Chapter 1:4.1
To combat counterfeiting both domestically and abroad, the Treasury
is redesigning U.S. currency to incorporate more security features
intended to combat rapid advances in reprographic technology. This
change, the most significant in over 50 years, is long overdue,
according to some U.S. and foreign officials. The redesigned
currency is planned for introduction in 1996 starting with changes to
the $100 note, with lower denominations to follow at 9- to 12-month
intervals. According to Treasury officials, the currency redesign
will be an ongoing process, because no security features are
counterfeit-proof over time. These officials also said that the old
currency would not be recalled and would retain its full value.
Moreover, the Treasury is leading a worldwide publicity campaign to
facilitate introduction of the redesigned currency, ensure awareness
and use of the overt security features, and assure the public that
the old currency will still be accepted in full. Through this
campaign, the Federal Reserve hopes to encourage the public to turn
in old currency for the redesigned notes.
SECRET SERVICE SHARING MORE
INFORMATION ABROAD
-------------------------------------------------------- Chapter 1:4.2
In addition, the Secret Service, through its team visits abroad in
company with Treasury Department and Federal Reserve officials, has
gathered further information on counterfeiting and provided
counterfeit-detection training. As of May 1995, the team had met
with law enforcement and financial organization officials in Buenos
Aires, Argentina; Minsk, Belarus; London, England; Zurich,
Switzerland; Hong Kong; and Singapore. According to Secret Service
officials, their visits were successful because they were able to
develop better contacts, obtain further information about foreign
financial institutions' practices, learn more about tellers' ability
to detect counterfeits, and provide counterfeit-detection training
seminars for both law enforcement and financial organization
officials. Since May 1995, the team has taken initial trips to
Moscow, St. Petersburg, and Novgorod (Russia); Ankara and Istanbul,
Turkey; Cairo, Egypt; Bahrain; Abu Dhabi; Dubai; and Riyadh, Saudi
Arabia.
SECRET SERVICE INCREASING
ITS PRESENCE ABROAD
-------------------------------------------------------- Chapter 1:4.3
Further, the Secret Service has been attempting to increase its
presence abroad, although it has encountered difficulties in
obtaining approval. The Secret Service has over 2,000 agents
stationed in the United States, but it has fewer than 20 permanent
positions abroad. The Secret Service first requested additional
staff in February 1994 for permanent posting abroad beginning in
fiscal year 1996. However, due to uncertainties about the funding of
the positions and to other priorities within the Treasury Department,
as of June 21, 1995, the Secret Service had secured approval for only
6 of 28 requested positions abroad. After our discussions with the
Secret Service, the Treasury, and State, on July 21, 1995, the
Treasury approved the remainder of the positions and sent them to the
State Department for approval. As of November 30, 1995, the
respective State Department chiefs of mission had approved only 13 of
the 28 positions, and only 1 agent had reported to his post abroad.
U.S. EFFORTS TO ERADICATE
THE SUPERDOLLAR
-------------------------------------------------------- Chapter 1:4.4
The U.S. government has undertaken special efforts to eradicate the
highest-quality counterfeit note--the Superdollar. These efforts
include an interagency task force led by the Secret Service, an
overseas Secret Service task force, and diplomatic efforts between
senior policy level officials of the involved countries. Due to the
sensitivity and ongoing nature of this investigation, we were made
generally aware of these efforts but were not given specific
information.
In a February 1994 Secret Service request to the Treasury for funding
under the 1994 Crime bill, the Secret Service stated that, for the
past 4 years, it had spearheaded a multiagency effort to suppress the
most technically sophisticated note detected in the history of that
agency. According to the request, this initiative has prompted an
unprecedented forensic effort, utilizing the resources of the Secret
Service, other government offices, and several national laboratories.
The efforts of senior policy level officials in the U.S. government
involve ongoing diplomatic contacts concerning the Superdollar with
Middle Eastern government officials, according to a State Department
official. This official said that, in May 1995, our government asked
these foreign governments to provide a show of good faith in
improving relations by locating the printing plants and perpetrators
involved in producing the Superdollar. He added that these efforts
did not specifically implicate these governments in the production of
the Superdollar, but that, at a minimum, they were believed to be
tolerating this illegal activity within their borders.
U.S. and Interpol officials we interviewed stated that final
resolution of cases similar to that of the Superdollar, should such
cases occur, were beyond the purview of law enforcement and would
require diplomatic solutions. According to U.S. and Interpol
officials, jurisdictional constraints may prevent law enforcement
agencies from dealing effectively with cases of foreign-condoned or
-sponsored counterfeiting of U.S. currency. In such cases, the
Secret Service would only be able to identify and assist in
suppressing the distribution of the counterfeit notes. In countries
where the United States has no diplomatic relations, U.S. law
enforcement has no leverage to help deter counterfeiting. U.S. and
Interpol officials agreed that the decision on how to suppress a
foreign government-condoned or government-sponsored counterfeiting
plant would need to be made at a senior U.S. government level.
-------------------------------------------------------- Chapter 1:4.5
Mr. Chairman, this concludes my prepared statement. I would be
pleased to answer any questions you or the Subcommittee may have.
*** End of document. ***