A Federal Reserve Bank of Chicago study from early 2010 estimated that roughly $61 million in fake United States currency was making its way around the world at the end of 2005. This represented a small percentage of the nearly $760 billion estimated to be in circulation outside of the U.S., but still accounted for a loss of approximately 20 cents for every U.S. citizen.

SEE: The Federal Reserve

The Fed's study estimated that at any given time between $60 million and $80 million in counterfeit bills could be circling the globe. Given the study represented a sample, it's thought the total could potentially be as high as $220 million, though this would represent the higher end of its estimated range. In any case, for individual consumers or retailers, even a tiny fraction of counterfeit currency could result in a significant loss. Below are five recommendations from the U.S. Secret Service on how to best detect counterfeit money.

The picture of the president or other notable historical figure should "stand out distinctly" from the background of the note. A counterfeit portrait will look "lifeless and flat," and the lack of distinctness means that the picture will appear to be merged into the background. Overall, the image might also be too dark or mottled, which means it might be too spotted or blotched in terms of color.

A bill will have both a Federal Reserve and Treasury Seal. In a similar fashion to the portrait, a seal that is not "clear, distinct or sharp" might be a fake. In addition, the seal might have "uneven, blunt or broken saw-tooth points."

Each bill has a border of ink that turns to green right before the edge on each side. The lines should appear "clear and unbroken," as opposed to "blurred and indistinct" on a fake one.

Serial Numbers
The serial numbers on each bill are used to uniquely identify each one. Those that are not distinctly printed or unevenly spaced might be fake. Additionally, the serial numbers will be of the same color as the Treasury seal. Even spacing as well as alignment are some things to keep an eye out for.

The paper of a genuine bill will have "tiny red and blue fibers embedded throughout." A counterfeiter may try to just print these specs on the bill, so if it looks like the red and blue fibers are just on the surface and not part of the paper, you could be in possession of a fake bill.

Consumers and businesses can also purchase a marker that is meant to detect if a bill is fake and printed on bogus paper. If the pen's ink turns black, the bill could be fake. A yellow ink suggests that bill is genuine.

The Bottom Line
In the face of credit cards and electronic transfers, the supply of currency continues to shrink. Fraud also continues to rise in these newer currencies. The Fed Chicago study estimated that check fraud cost commercial banks $1 billion in 2005, or 20 times the counterfeit bill total. Additionally, the study detailed that the integrity of bills across the world has greatly increased in recent years. Advancements in technology have made it extremely difficult to create fake money and it all started with the introduction of a 1996 series of notes that made a huge leap forward in protecting the integrity of genuine notes.

Related Articles
  1. Economics

    What's the 1913 Federal Reserve Act?

    The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential ...
  2. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  3. Economics

    Open Market Operations vs. Quantitative Easing

    How does the Fed's implementation of Quantitative Easing differ from its more conventional open market operations?
  4. Professionals

    Will Interest Rates Rise at the Next Fed Meeting?

    Everyone wants to know what the Federal Reserve will do next, but the Fed doesn't even know what it's next move will be.
  5. Economics

    What Does a Central Bank Do?

    A central bank oversees a nation’s monetary system.
  6. Stock Analysis

    Why Is GE Selling Some of Its Subsidiaries?

    Learn why GE is selling off a substantial amount so it does not have to comply with increased government regulation in the wake of the 2008 financial crisis.
  7. Investing News

    Why Did Markets Rally on News of a December Rate Hike?

    Yesterday, Fed chairwoman Janet Yellen, in a speech to the University of Massachusetts at Amherst, indicated that the central bank is on track to still raise rates before the year is out.
  8. Economics

    How US Interest Rates Move the World Economy

    Because the US has the world's largest economy, fluctuations in America's interest rates affect much more than domestic growth
  9. Forex Strategies

    Will a Rate Hike Appreciate The Dollar Even More?

    Many market participants expect the US Dollar to rise after the start of the next rate hike cycle.
  10. Professionals

    3 ETFs to Play the Fed's Interest Rate Decision

    These three ETFs offer strong ways to play the Federal Reserve's decision not to raise rates.
  1. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  2. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>
  3. Why do some people claim the Federal Reserve is unconstitutional?

    The U.S. Constitution does not mention the need for a central bank, nor does it explicitly grant the government the power ... Read Full Answer >>
  4. How can the federal reserve increase aggregate demand?

    The Federal Reserve can increase aggregate demand in indirect ways by lowering interest rates. Aggregate demand is a measure ... Read Full Answer >>
  5. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  6. How does the bond market react to changes in the Federal Funds Rate?

    The bond market is highly sensitive to changes in the federal funds rate. When the Federal Reserve increases the federal ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!