Would you accept this banknote as payment?

15 April 2015

United Kingdom

Ed Brindley

Glory Global

Would You Accept This Banknote

If you said yes you wouldn’t be alone. But look closer and you’ll notice staining at the top and bottom edges. And that means you could be handling stolen goods!

Recent initiatives at the central bank level have made me think about how ink-stained notes could be spent across Europe despite the likelihood that they are stolen property. The ECB and in particular the National Bank of Belgium are so concerned that they have declared war on notes dyed with ink applied by so-called Intelligent Banknote Neutralisation Systems (or IBNS for short).

There’s nothing new with IBNS technology – it has been around for many years in various forms. Put simply, it triggers when a specially designed cash container is opened by an unauthorised person or when activated by a timer. The banknotes in the container are covered with an extremely unpleasant dye that renders the cash unusable, or so goes the theory.

The problem has been that not all the notes get equal ink coverage. Notes towards the top and bottom of the stack can have their entire surface obliterated, but notes in the middle, particularly if tightly packed, may only have the edges coated in ink. The challenge is then one of public education – persuading members of the public that they are stolen goods and should treat these notes as they would a counterfeit, not spending them or accepting them as change.

If my friends from outside the banknote industry are any guide, many people are not aware of even basic features of a banknote and can even struggle to remember the base colour of the note when asked, so asking people to assess ink staining is a tall order. So stolen banknotes continue to be a favourite target for criminals in the knowledge that some of the notes will be relatively easy to pass into circulation, even if protected by IBNS.

Enter the National Bank of Belgium (NBB). The country has long been an advocate of IBNS solutions and it has been law to protect cash on the move in this way for many years. There has been much debate within the industry to work out how machines can be designed to better detect the ink staining and to take the judgment away from consumers, banks and retailers. Now however the debate has progressed to the stage where new legislation has been passed that gives the NBB the power to:

1. Propose a standard for the ink used in IBNS systems. The different characteristics of ink used have made it harder to design detection systems that can reliably identify marked banknotes and withdraw them from circulation.

2. Define parameters that allow banknote handling machines to be set up in line with the new regulations, including for example setting thresholds for the amount of ink that should be present before a note can be defined as ‘presumably neutralised’.Define parameters that allow banknote handling machines to be set up in line with the new regulations, including for example setting thresholds for the amount of ink that should be present before a note can be defined as ‘presumably neutralised’.

3. Act as the regulator for the new policy on behalf of the ECB, testing machines and monitoring the performance of cash handling organisations. They have the power to enforce penalties in line with those already established for counterfeit notes.Act as the regulator for the new policy on behalf of the ECB, testing machines and monitoring the performance of cash handling organisations. They have the power to enforce penalties in line with those already established for counterfeit notes.

The treatment of ink-stained notes as ‘presumably neutralised’ could have wide implications for cash in Belgium. Banks and professional cash handlers will not be able to credit accounts with the value of such notes and will have to instead return them to the central bank for inspection. Individual depositors’ details will also need to be retained to help with any subsequent follow-up.

Whilst Belgium is taking the lead on this, it would be of no surprise to see similar initiatives elsewhere in the Eurozone and beyond. If successful, it could have major benefits as criminals realise that stolen cash is much harder to pass off than had previously been the case.

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