A security investigator working in Peru explained to the Associated Press the process of making fake money that made Peru the number one producer of counterfeit US dollars.

• Counterfeit 20 Dollar Bill 1977
• 1977 20 Dollar Bill Security Strips
• 1977 100 Dollar Bill
• 1977 20 Bill
• 1977 Dollar Bill

Glows green under UV light and a fake 20 dollar bill will not glow; $50 – Right side near the middle. Glows yellow Under UV light and a fake 50 dollar bill will not glow. $100 – On left side. Glows pink under UV light and a fake 100 dollar bill will now glow. The $2 and $1 do not have a security strip at all. All $5, $10, $20, $50, and $100 bills Series 1950A-1950E, inclusive, should have a note position that is a letter A-R, inclusive; All $5, $10, and $20 bills Series 1963 and later and all $50 and $100 bills Series 1963A and later should have a note position that is composed of a ‘check letter’ and a ‘quadrant number’.

In order to make counterfeit money, the counterfeiters use off the shelf software such as Corel Draw or Microsoft Office to design the dollar bill. Using a process called photolithography and the etching of metal plates, the bills are offset printed onto bond paper.

The sheets of fake money are then lightly coated with a varnish and then individually hand cut. The security strip of the bill, which can be seen when a real $100 bill is held up to a light, is inserted into the fake bill using needles and glued with the use of a medical syringe.

The counterfeit bills then pass through a machine with rollers to give the bill a rough texture. Finally, the fake bills are sanded down with sandpaper.

To create a batch of $300,000 counterfeit notes usually takes about four to five days.

Security officials state that counterfeiters earn a profit of $20,000 for every $100,000 in counterfeit dollars they make, or 20 cents for each fake dollar created.

(Profits and income from illegal jobs.)

Only fake $100 are smuggled into the United States, with fake $10s and $20s bills being smuggled to neighboring Argentina and Venezuela. The bills are smuggled the same way that cocaine is smuggled, through the use of false-bottom suitcases and even rolled up and swallowed.

The United States Secret Service stated that the counterfeit dollars are easily passed into circulation at retail stores.

Source: Associated Press, “In Peru, U.S. dollar counterfeiting “more profitable than cocaine”,” CBS News, September 5, 2013.

• STRIPS is the acronym for Separate Trading of Registered Interest and Principal of Securities.
• STRIPS let investors hold and trade the individual interest and principal components of eligible Treasury notes and bonds as separate securities.
• STRIPS are popular with investors who want to receive a known payment on a specific future date.
• STRIPS are called “zero-coupon” securities. The only time an investor receives a payment from STRIPS is at maturity.
• STRIPS are not issued or sold directly to investors. STRIPS can be purchased and held only through financial institutions and government securities brokers and dealers.

When a Treasury fixed-principal note or bond or a Treasury inflation-protected security (TIPS) is stripped through the commercial book-entry system each interest payment and the principal payment becomes a separate zero-coupon security. Each component has its own identifying number and can be held or traded separately.

For example, a Treasury note with 10 years remaining to maturity consists of a single principal payment, due at maturity, and 20 interest payments, one every six months over a 10 year duration. When this note is converted to STRIPS form, each of the 20 interest payments and the principal payment becomes a separate security.

Minimum Par Amounts

Fixed-principal securities:

The minimum face amount needed to strip a fixed-principal note or bond is $100 and any par amount to be stripped above $100 must be in a multiple of $100.

TIPS:

The minimum face amount needed to strip a TIPS is $100 and any par amount to be stripped above $100 must be in a multiple of $100.

Counterfeit 20 Dollar Bill 1977

Reassembly

1977 20 Dollar Bill Security Strips

STRIPS components can be reassembled into a fully constituted security in the commercial book-entry system. To reconstitute a security, a financial institution or government securities broker or dealer must obtain the appropriate principal component and all unmatured interest components. The principal and interest components must be in the appropriate minimum or multiple amounts for a security to be reconstituted.

If you have questions about buying, redeeming, or selling STRIPS, contact your financial institution, broker, dealer, or investment advisor. See also 31 CFR 356.31 for rules relating to stripping and reconstituting Treasury securities. If you are from a financial institution, broker, or dealer and have specific questions on the process for stripping or reconstituting Treasury securities, call the Federal Reserve Bank of New York at 201-531-3894.

Tax Considerations

• Interest earned on STRIPS must be reported in the year in which it is earned.
• Inflation adjustments to principal on TIPS must also be reported in the year earned.
• Income must be reported even though it is not received until maturity or the STRIPS are sold.

STRIPS are attractive investments for tax-deferred accounts, such as individual retirement accounts and 401(k) plans, and for non-taxable accounts, which include pension funds.

Every investor in STRIPS receives a report each year displaying the amount of STRIPS interest income from the financial institution, government securities broker, or government securities dealer that maintains the account in which the STRIPS are held.

For further information on the tax treatment of STRIPS and other zero-coupon securities, see Internal Revenue Service Publication 550, “Investment Income and Expenses.”

Valuation Guidance for Government Agencies

1977 100 Dollar Bill

Principal Payment

The stripped principal component of a security will be recorded at book value. Book value is defined as the par value of a security minus the amount of any unamortized discounts or plus the amount of any unamortized premiums.

1977 20 Bill

Interest Payment (TINT)

1977 Dollar Bill

The stripped interest component (TINT) of a security represents future interest payments due and will be recorded as accrued interest six months prior to maturity.