The counterfeit currency menace is growing in India. In 2011, the rupee appeared to have emerged as the counterfeiter's currency of choice internationally, displacing the greenback. By all accounts, Fake Indian Currency Notes (FICN) continue to be pumped in — much of it from abroad. A recent report compiled by the Financial Intelligence Unit of the Union Finance Ministry estimated a 400 per cent increase over recent years in counterfeit transactions in India's financial channels. During 2010-11, the agency detected “4,23,539 incidents of FICN with a face value of over Rs 35 crore.” The 2011-12 figures are higher. According to a 2011 report of the U.S. State Department, India faces an increasing inflow of ‘high-quality' counterfeit currency, produced primarily in Pakistan, and smuggled in through multiple international routes including Nepal and Bangladesh. Terrorist and underworld networks could be using the fakes to finance their activities in India. India has repeatedly blamed Pakistan as one of the major originating points. Porous borders facilitate the flow. The magnitude of the problem has not even been quantified. Economic crimes involving black money, hawala foreign exchange remittances and money laundering are but concomitants.
Gone are the days when a fake note could be detected by touch and feel: today, it has become almost impossible to make the distinction as counterfeiters employing sophisticated methods and materials have succeeded in replicating almost all the security features. In the face of such an organised and high-tech threat, in addition to stricter policing and intelligence gathering, India needs to deploy the right technological options on a massive scale to catch and root out the counterfeiters. The kind of machines that Indian banks need at the cash counters are those that can not only verify images but also check the chemical and physical properties of paper, ink, resins and other materials used. India should also look at options in pattern recognition technology and equip banking and other financial channels with them on a wide scale in order that every single note that passes through them are checked. The government should seek global expertise to incorporate more security features in currency notes. It also needs to indigenise the production of currency note paper and end the current dependence on imports from producers who supply it to multiple customers. India should raise the issue effectively at the inter-governmental meeting of the Financial Action Task Force to be held in June. This is a challenge worth investing in.
