Modern counterfeiting begins with paper money. In pre-modern China, the need for circulating a medium that was less of a burden than exchanging thousands of copper coins led to the introduction of paper money or banknotes. In Europe, paper money was first introduced in Sweden in 1661. The country was rich in copper, but its value was low. Instead of producing large and heavy coins, it was decided to introduce paper currency. The advantages were numerous: it reduced the risky transport of gold and silver; it made loaning gold or silver easier, since the valuable specie never left the possession of the lender until someone else redeemed the note. There were serious problems as well. Since a note has no intrinsic value, there was nothing to stop issuing authorities from printing more of it than they had specie to back it. This increased inflationary pressures. Paper money would often lead to a bubble, which collapsed if people began demanding hard money. For considerable time paper currency was held in suspicion in Europe and America.
The printing of paper money was also associated with financing wars and maintaining a standing army. Moreover, nations have used counterfeiting as a means of warfare by overflowing the enemy’s economy with fake bank notes, so that the real value of the money would plummet. Britain applied this ploy during the American War of Independence in order to reduce the value of the Continental Dollar. During World War II, the Nazis implemented a similar plan against the Allies. Operation Bernhard was a plot devised to destabilize the British economy by flooding the country with forged banknotes. The plan was named after Bernhard Krüger. He selected a team of Jewish printers and artists from the Sachsenhausen concentration camp who were forced to engrave printing plates, develop paper and watermarks, and break the code to generate serial numbers. By the time the camp was evacuated in April 1945, the printing press had produced some nine million notes, or three billion pound in value. These banknotes are considered among the most perfect counterfeits ever produced. One of the prisoners, the Slovak printer and typographer Adolf Burger, who had survived Auschwitz and Birkenau (where his wife Gisela was sent to the gas chamber) before being transferred to Sachsenhausen, later contributed to the awareness of Operation Bernhard with the publication of his memoirs entitled The Devil’s Workshop.
However, the real masters in the art of dodgy printing were individuals. William Chaloner started his criminal career by forging coins. In 1694, William III of Orange had chartered the foundation of the Bank of England. Its first governor John Houblon, of Flemish descent, was responsible for the introduction of the new £100 notes in June 1695. To prevent forgery they were printed on official marbled paper. Soon after, Chaloner started printing his own new notes. It was a feeble attempt. The counterfeit notes were detected on 14 August 1695, within two months of their introduction. William was proven guilty of High Treason by Sir Isaac Newton, Master of the Royal Mint. He was hanged on the gallows at Tyburn on 16 March 1699.
One of the most spectacular cases of printing counterfeit banknotes is a relatively recent one. Anastasios Arnaouti was born in Manchester on 21 July 1967. When, in December 2002, police officers raided his business premises on the Cavendish Industrial Estate on Dean Street, Greater Manchester, they found counterfeiting machinery, including a four-colour printer, a guillotine, papers and inks. His gang had printed more than £2.5m worth of fake ten pound notes and $3.5m worth of counterfeit dollars. That was most likely an underestimate. The total number of notes produced has never been revealed as the printing operation had been in production for a number of years. The press was capable of producing tens of thousands of notes each day. Arnaouti was jailed for eight years for conspiracy to print and pass counterfeit currency.