The Border Security Force and the National Investigation Agency intercepted two consignments of fake Rs 2,000 currency notes along the Indo-Bangladesh border in January, 2017. Counterfeiters have managed to replicate eight of the 17 security features in these currency notes, which raise considerable concern.
It defeats one of the principal objectives of demonetisation: to rid the national economy of fake Indian currency notes (FICN) especially in higher denominations. It is necessary to comprehend the counterfeit currency network in order to combat it.
The FICN principally originates from Pakistan and is smuggled into the country through trains and trucks. It is also illegally transported through ‘third’ countries such as United Arab Emirates, Nepal, Bangla-desh, Thailand, Malaysia, Myanmar and Sri Lanka. The Pakistani Inter-Services Intelligence agents hand over the FICN to bona-fide passengers who act as couriers to transport the consignment through air. The international airports across the country therefore become the points of entry for FICN.
India’s porous land borders, especially with Nepal and Bangladesh are utilised by organised gangs to smuggle FICN into the country. Pakistani infiltrators and terrorists also carry these fake notes on them when they cross over into India. Moreover, given the vulnerability in the maritime security matrix, FICN is also known to have been routed through sea. After the FICN has been successfully smuggled into the country, it is exchanged for original notes at roughly 2:1 ratio or even higher.
Another aspect is that the Government of India procures currency-related paper, printing material and ink from a couple of European companies to produce its high denomination currency at the Indian Currency/ Bank Note Presses at Nashik, Mysuru, Dewas (Madhya Prad-esh). Pakistan has figured out these companies, and buys the same paper to print FICN. Therefore, the quality and texture of the Pakistan-produced FICN is almost on par with genuine Indian currency notes which makes it very difficult to detect.
The spurt in circulation of fake notes started since 2006 and roughly coincides with Pakistan’s intensification of its proxy war against India. Islamabad’s objectives are to subvert the Indian economy and to fund terror networks to operate against the country.
Investigations reveal that terrorists incurred Rs 5 crore to trigger improvised explosive device blasts in Hyderabad in 2007, which was paid in FICN. Similarly, the terror attack on the IISc, Bengaluru, in 2005 was undertaken at a cost of Rs 30 lakh which was generated mainly through FICN.
Apart from national security, fake currency poses huge socio-economic problems. Its impact on crime rates in the society is serious as more and more educated unemployed youth gravitate towards the counterfeit racket. Clearly, it is a form of economic warfare that Pakistan has embarked on against India.
Complexity of challenge
Considering the complexity of the challenge that FICN poses to both the national economy and security, a multi-pronged approach is required to counter it:
It is important to stay ahead of counterfeiters. The RBI should constantly upgrade both paper-based (security thread, water mark, fluorescent fibres, and physical and chemical characteristics of the paper) and print-based (anti-photo copying feature, optically variable ink see through effect, intaglio printing etc) security features of the Indian currency. People should be made aware of these security features. All bank branches should have note sorting machines to detect fake notes which enter banking channels.
Use of credit/debit cards and digital transactions should be encouraged instead of cash transactions. In a country where a large number of people don’t have a bank account, this may take time, but is achievable.
Effective inter-agency channels among the state police forces and central intelligence agencies are necessary. In order to ensure policy coherence among these agencies, which should not work at cross purposes in their assessments, perceptions and counter-measures, they should constantly interact with each other’s problems. This collaboration between the security agencies will keep them ahead of counterfeiters.
India cannot afford to be dependent on external sources for currency-related paper/inks and should increase indigenous production through enhanced R&D besides technology transfer. Also, India should use its diplomatic leverage to ensure that overseas companies contracted to supply India-specific paper maintain confidentiality and avoid sales of currency related printing material to Pakistan. New Delhi also should press relentlessly through Interpol to extradite criminal elements involved in the FICN network based in foreign countries.
India should offer to train Nepalese and Bangladeshi Customs and Immigration Department officials in surveillance and identification of frequent fliers to Dubai, Dhaka, Colombo and other neighbouring countries. New Delhi could install hi-tech luggage scanners at international airports in Kathmandu and Dhaka to screen passenger luggage before boarding.
(Manoharan is Associate Professor, Department of International Studies and History; Nikita is studying her Masters, Christ University, Bengaluru)