Counterfeit currency and money laundering: the 12 red flags and what a firm must do

On 27 February 2026, the European Central Bank reported that some 444,000 counterfeit euro banknotes were withdrawn from circulation in 2025, or 14 for every million genuine notes. Each of those fakes was accepted somewhere before anyone caught it.

For sterling the catch usually comes later. The Bank of England says the vast majority of counterfeits of its notes are found when notes are sorted in standard cash industry processes, so a till, a branch counter or a cash center had already taken them in.

In a June 2013 report on money laundering related to counterfeit currency, FATF calls the ways fake notes enter the financial system "very similar" to placement, the stage that opens most money laundering methods and typologies.

What is counterfeit currency?

Counterfeit currency is an imitation of the banknotes or coins of a legal currency, made so that it can be spent as the real thing. In everyday speech it is counterfeit money, fake money or counterfeit notes. The crime of making it is counterfeiting.

Altered notes count too. In the US, section 471 of Title 18 covers obligations that are falsely made, forged, counterfeited or altered, so a $10 bill bleached and reprinted as a $50 bill is counterfeit currency.

The term covers cash only. A forged check, a cloned card or a fake passport is a different crime with its own controls, such as those for check fraud.

In AML terms, FATF's glossary lists "counterfeiting currency" among its "designated categories of offences", the crimes every country is expected to treat as a predicate offense for money laundering.

How much counterfeit money is in circulation in 2026?

Issuers count differently. These are the latest figures from four of them as of November 2026, each on its own basis and period:

• Euro area, 2025. The ECB's count fell 20 percent on 2024. The €20 and €50 notes made up about 80 percent of the fakes, and 96.8 percent were found inside the euro area.
• Germany, first half of 2026. The Bundesbank identified about 30,000 counterfeit euro notes worth €1.75 million at face value, 4.3 percent fewer than in the second half of 2025. The €100 note went the other way: 5,043 fakes, 61 percent more than in that half. Counterfeit coins rose 8.6 percent to 64,900.
• United Kingdom, 2025. About 200,000 counterfeit Bank of England notes with a face value of £4 million were taken out of circulation. Fewer than 1 in 24,390 notes was a fake.
• India, year to March 2026. The Reserve Bank of India counted 229,746 counterfeit notes detected in the banking sector, 5.7 percent more than a year earlier. The 500 rupee note alone accounted for 141,907, or 61.8 percent. Notes seized by the police are not in the count.

The US Secret Service's counterfeit page, by contrast, publishes no annual count that compares with these four.

How do counterfeiters launder the money?

On 18 September 2026, the US Attorney's Office for South Carolina announced the indictment of four people in a wire fraud conspiracy involving counterfeit currency. It alleges that $10 bills were bleached, printed with the image of a $50 bill, loaded onto payment app accounts at discount stores and moved between the defendants through the app. The defendants are presumed innocent. If the charges hold, the fakes became account balances at a till.

FATF's June 2013 report describes that step and a second one in a single line: the link with laundering "operates at two distinct levels". Like any crime, trafficking in fakes produces proceeds that need laundering. And the trade itself places notes into the regular financial stream, fake as they are (counterfeit currency notes, in the report's term).

Placement mostly happens in small steps. Mixing counterfeit notes with real ones and buying goods of low value were the most common methods in FATF's survey, both with a low risk of detection.

Profit builds up the chain. In FATF's example, a printer sells fakes with a face value of USD 100 to a first distributor for USD 20 to USD 25, and the last buyer pays USD 65 to USD 75 for the same USD 100. Street level sellers may earn too little to need laundering. Higher up, in FATF's words, "there is a stage where profits no longer go undetected and illicit profits need to be laundered".

The profits then have to move. Cash couriers were the most used way to do it; the other routes FATF lists are bank accounts, money transfer services, hawala or other alternative remittance, and ATM cards.

For layering and integration, FATF names mixing the money into cash intensive businesses, moving it through several jurisdictions and accounts, and false or misleading declarations of goods and services.

Cash gets paid in along most routes. Transaction monitoring software reads that deposit side: who pays cash in, where, how often and into which accounts. A remitter on the transfer and hawala routes must also identify the sender and the receiver at each money line, as the AML rules for remittance businesses set out for five jurisdictions.

How did a bank become the channel for counterfeit dollars?

On 20 September 2005, FinCEN found Banco Delta Asia, a bank in Macau, to be a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act. The finding said sources showed senior officials at the bank working with North Korean officials "to accept large deposits of cash, including counterfeit U.S. currency, and agreeing to place that currency into circulation". The finding also counted the supernotes. Since they were first detected, the United States had taken possession of more than $45 million of these highly deceptive counterfeit notes.

On 19 March 2007, FinCEN imposed the fifth special measure, which lets the Treasury prohibit or set conditions on US correspondent accounts for a foreign bank. FinCEN turned down the bank's petitions to lift it. The last refusal, on 26 September 2019, found the bank's AML efforts still inadequate. On 10 August 2020, FinCEN withdrew the finding and repealed the rule as part of settling the bank's lawsuit, and said it would reassess whether the bank is presently a primary money laundering concern.

A correspondent bank reviewing a respondent can ask the question the finding raises: how the respondent checks cash deposits for counterfeits, and what it does with the fakes it finds.

FATF's 2013 report adds a second risk. Six countries in its survey (India, Kyrgyzstan, Nepal, Russia, Tajikistan and the United States) reported links between counterfeit currency, organized crime and terrorist financing, and referred to counterfeit money as a means of economic warfare.

Which red flags point to counterfeit currency?

Table 1. FATF red flags for counterfeit currency (June 2013) as monitoring rules. Thresholds and windows are illustrative; set your own from your data.

FATF marks flags (e) and (h) as specific to counterfeit currency, and says red flags for counterfeiting in general also apply to most predicate offenses. Three of the twelve, (b), (d) and (f), describe structuring: cash kept under a reporting line by splitting it across deposits, counters or accounts.

Two rows need data a transaction feed does not carry. Flag (k) is about the notes themselves. It works only if a teller can mark a dirty, carelessly packed or miscounted bundle, or a counterfeit found inside one, on the deposit record. Flag (i) is a screening check against people wanted for counterfeiting.

The other ten are transaction monitoring rules on deposits, branches and wires. In complead, formerly Sanction Scanner, a compliance team writes each one in the rules engine with no code. Before release, the team sees the alert volume each rule would have raised over the last 30, 60 or 90 days.

What must a firm do with a suspected counterfeit note?

A single suspected note follows the issuer's hand over route; when the same customer brings repeat fakes, the case becomes an AML question as well.

1. Take the note out of circulation and hand it over. In the EU, Regulation (EC) No 1338/2001 obliges credit institutions and other professional cash handlers, bureaux de change included, to withdraw euro notes and coins they know or have sufficient reason to believe are counterfeit and hand them over immediately to the national authorities. In the US, banks and cash processors submit suspected notes to the Secret Service. In the UK, the Bank of England's route runs through the police, who give a receipt and an incident number and send suspected notes to the National Crime Agency. Neither route pays the holder back. The Secret Service's processing facility returns only notes it finds genuine, and the Bank of England calls counterfeits worthless and says it cannot reimburse them. Why: a fake left in a drawer goes back out.
2. Record the passer. Under the Secret Service's February 2025 reporting guidance, notes with a description of the passer, a vehicle or other leads go to the local police or a field office, and notes without leads go to its processing facility on form SSF 1604. Why: the leads decide the route.
3. Check the customer against Table 1. Why: one fake can reach an honest customer; repeat fakes point to placement.
4. Decide on a SAR. 31 CFR 1020.320 sets the US bank rule. A transaction that involves or aggregates $5,000 or more, and that the bank knows, suspects or has reason to suspect involves money from illegal activity, goes into a suspicious activity report. It is due within 30 calendar days of first spotting the facts, or within 60 if no suspect was identified on that day. FinCEN's April 2026 SAR filing instructions list "Counterfeit instruments" as item 38(c). Why: the SAR reports the customer's activity, while step 1 deals with the note.
5. Keep the report to yourself. The same rule keeps the suspicious activity report confidential, together with anything that would reveal it exists. Why: disclosure is barred, and it would warn the people behind the notes.

The public is told to go to the police; for euro notes, the ECB also names the national central bank or the person's own bank, depending on national practice.

Is counterfeiting a predicate offense for money laundering?

Yes. US, UK and EU law all treat it as one, and FATF's 2013 report states that Recommendation 3 "designates counterfeiting currency as a predicate offence for money laundering".

In US law, section 471 of Title 18 punishes anyone who, with intent to defraud, falsely makes, forges, counterfeits or alters a US obligation or security, with up to 20 years in prison. Section 472 sets the same maximum for passing or keeping fakes, and section 473 for buying or selling them.

Section 1961(1)(B) lists all three as racketeering activity. Section 1956 draws on that list. It counts the offenses listed in 1961(1) as specified unlawful activity. The penalty for laundering such proceeds is up to 20 years, a fine reaching the greater of $500,000 and twice the property's value, or both.

In the UK, section 14 of the Forgery and Counterfeiting Act 1981 makes it an offense to make a counterfeit of a currency note or protected coin. Under section 22, making one with intent that it be passed as genuine carries up to ten years on indictment.

The Proceeds of Crime Act 2002, in section 340, treats any offense in the UK as criminal conduct, and a benefit from it is criminal property when the offender knows or suspects that it is one.

In the EU, the 6AMLD, Directive (EU) 2018/1673, lists counterfeiting of currency among the categories of criminal activity in Article 2(1)(j), including any offense set out in Directive 2014/62/EU.

Directive 2014/62/EU requires a maximum prison term of at least eight years for making or altering currency.

None of these laws needs cash. Section 1956 speaks of property involved in a financial transaction, and section 340 defines property as all property wherever situated, money included.

Is movie money or prop money counterfeit?

It can be. The Bundesbank's report of 7 August 2026 says counterfeits with "movie money" or "prop copy" markings have often been used in recent years, and that notes with lettering such as "facsimile" or "Geçersiz" are increasingly brought into circulation. The Bank of England is direct: a reproduction of its notes that misses its reproduction conditions may be counterfeit and may lead to prosecution under the Forgery and Counterfeiting Act 1981, even when printed with words such as "Movie", "Prop" or "Training".

Many fakes now travel by post. On 11 February 2026, Europol reported that in Operation DECOY III, authorities from 18 countries seized 379 parcels and more than 7 million counterfeit items worth an estimated EUR 1.2 billion between June and November 2025. More than 90 percent of the seized currency was linked to shipments from China.

So a marketplace or payment firm with a merchant selling prop notes that copy a real currency has a counterfeiting question to answer on top of its product policy. The AML rules for payment firms already require it to know each merchant.

How do authorities track counterfeit operations?

Europol says it and OLAF helped detect suspect parcels in DECOY III and refined risk indicators for future actions. The Secret Service runs international investigations aimed at counterfeiters and their distribution networks, and its field offices help banks and cash processors judge whether a suspected note may be genuine. In the UK, the police send suspected notes to the National Crime Agency, and confirmed fakes go on to the Bank of England for examination.

Which counterfeit currency reports and charges came out in 2026?

• 11 February. Europol published the DECOY III results: 379 parcels and more than 7 million counterfeit items.
• 27 February. The ECB reported 444,000 counterfeit euro notes withdrawn in 2025, 20 percent fewer than in 2024.
• April. FinCEN issued version 1.0 of its SAR filing instructions, dated April 2026, with "Counterfeit instruments" at item 38(c).
• 29 May. The RBI's annual report counted 229,746 counterfeit notes in the banking sector for the year to March 2026.
• 7 August. The Bundesbank reported about 30,000 counterfeit euro notes in Germany for the first half of 2026.
• 18 September. A federal grand jury in South Carolina indicted four people over bleached $10 bills reprinted as $50 bills.

Three things to do this week:

1. Confirm your cash deposit rules cover FATF's flags (e) and (h): many depositors paying into one account at one place, and small deposits in several places followed by quick cash withdrawals.
2. Compare the notes your branches handed over last quarter with your SAR log, customer by customer.
3. Give branch staff one route from "suspected note" to the MLRO, with the passer described.