The Syndicate That Prints The Worlds Money

The Reserve Bank gets its currency notes from a clutch of secretive companies which maintains a tight control over the global currency market

Its a familiar storyline which takes in everything from cut-throat competition and cartel-formation to conspiracy, deceit and duplicity. Over the last 100 years, the men who dominate the world currency printing market have been rumoured to engage in what would only be called skulduggery in politer circles. During the Great War, some of them helped the Nazis as well as the Allies to counterfeit each others currencies. And there have been recent disclosures about businessmen who made agreements to divide the market between themselves. Naturally, the annual meetings of this group are close-knit affairs, where no outsiders leave alone journalists are allowed.

 

Just how big is their business? Only about 50 countries world-wide have their own currency printing facilities. And over a hundred are dependent on outside suppliers for their paper money including Angola, Bolivia, Dominican Republic, Ghana, Iran, Jordan, Kuwait, Malaysia, Malta, Mozambique, New Zealand, Portugal, Seychelles, Singapore, Solomon Island, Tanzania, Trinidad and Tobago, Zambia.

The Reserve Bank of India (RBI) recently decided to have a large number of currency notes printed abroad. It awarded the contracts to German, American, Canadian and British printers for 3,600 million pieces of various denomination notes at a total cost of $95.28 million. That works out to 2.7 cents per note, or nearly 94 paise. Though this is certainly not the first time that the RBI had to rely on foreign printers for the currency requirement of domestic market, India is still streets ahead of other developing countries.

The list of companies that have bagged the award for supplying currency notes to India this time reads like a Whos Who of the currency printing kings. Theres the UKs Thomas De La Rue, Germanys Giesecke & Devrient, the Canadian Bank Note Company, the American Banknote Company and Bundesdruckerei of Germany. Thomas De La Rue is easily the largest supplier of currency notes in the world, controlling nearly two-thirds of the market. That adds up to a whopping six billion notes per year!

The most curious aspect of this megabusiness is that its controlled by an unofficial syndicate of just about half a dozen companies. The syndicate has a wide reach they control not just the printing business, but the paper making, the machinery making, the ink supply and the security aspects that surround currency printing.

The bigger players in the business are open about the shroud of secrecy. As Siegfried Otto, the owner of Giesecke & Devrient said in an interview some years ago: There is hardly another field of knowledge over which the veil of secrecy is drawn so effectively as the production of money and everything connected with it. One reason for this secrecy is the understandable desire to keep techniques secret.

But its no secret that the cost of printing currency notes has gradually increased from 1.8 cents per note in the sixties to two cents in the eighties and to 2.5 cents now. The RBI will be paying 2.4 cent per note to one group of printers and 2.9 cents to another for the current contract.

The cost break up is interesting special paper and ink takes up just 15 per cent of the actual costs of production, while labour (including the note examination) accounts for a huge 41 per cent. General administrative costs are the next highest, coming in at 33 per cent, and after deducting another 3 per cent to cover engraving charges, the average company is left with a depreciation and profit margin of around 8 per cent. As the saying goes, it takes money to make money.

For currency printers, the profit can be quite large:: on an average, each large printer has a turnover of not less than $200 million, with 8 to 9 per cent margin. A sizeable chunk of profits comes not just from currency, but from travellers cheques as well.

Theres little room in the business for small printers because the requirement of currency notes by different countries is so huge, printers have to be able to handle large quantities too. Back in the early eighties, for example, the US Bureau of Engraving and Printing issued 12 million notes a day, using six tons of ink and 32 tons of paper in the process. Today, their output will have to be double that, if not more.

Technically, bank notes can be printed through the letter press, offset or intaglio method. The world has graduated from the first two to the last over a period. Intaglio is more accurate, but also much more difficult than other printing methods: it calls for more elaborate equipment and the specialised skills of the ultimate craftsmen the engravers. These are the people who do the initial cutting into the soft steel plates. This is the heart of the printing process as it results in the raised portion of the currency note that is also one of its prime security features. Naturally, the manufacturing of machines that will sort currency notes and check for counterfeits is also big business. But its traditionally been monopolised by the same players the few Indian companies that tried to break into this cartel failed miserably.

Where does India feature in this world business? De La Rue, one of the oldest and largest printers, turned down an offer to set up a currency printing press in India in the early twenties. One of its top officers noted later: Twentieth century De La Rues had the same inexorable capacity for sowing the seeds of their own destruction as central figures in a Greek tragedy. The decision meant that the company lost its largest banknote customer. India instead set up its own printing facilities. The first plant in Nasik came up in 1928, and was shortly followed by another press in Dewas. Last year, two more presses were commissioned one in Mysore and the other in Salgoni in West Bengal. The Indian currency printing presses combined now have a total capacity of 6.6 billion notes per year, though its demand is even higher.

In keeping with the unofficial laws of money, as the number of currency notes increases, the risk of counterfeits go up. Says one expert: Whatever the technical quality of the different devices used for bank note manufacturing, we all know that in his field a good specialist can obtain adequate results for the public to be unable to make any distinction between a counterfeited note and a genuine one. A paper maker surely knows how to make a satisfactory paper; a clever photographer how to succeed in good separation of colours; a skilful engraver how to reproduce lines of a drawing; and a good printer how to obtain a satisfying superimposition of colours. But it is difficult to find all these qualifications in one person.

Counterfeiters, however, frequently find themselves unable to hit the right note. Production costs do not permit counterfeiting on a scale that would disrupt the monetary system of a country unless the operation is riding on the back of another illegal business such as drugs or political terrorism. Its not entirely coincidental that Bogota, the drug centre of the world, is also the most crucial centre for counterfeiting today. And Colombia, where the Medellin cartels have ruled unofficially for so many years, has no law against the counterfeiting of foreign currencies.

Nearer home, the RBI has less threatening problems to deal with. Last year, they had introduced special features on currency notes for the first time as an aid to the visually handicapped. Unfortunately, international experts came to the conclusion quite some time back that this isnt much of a help. The tactile sensitivity required for reading Braille varies greatly from person to person and is not a universally acquired skill among the blind. At the third Pacific Rim Conference of Banknote Printers held in Ottawa in 1977, member nations agreed that Braille-typemarking currency notes has little real value to the blind and serve only a goodwill gesture. But India isnt alone Switzerland, Austria and the Netherlands are also spreading goodwill, even if it isnt particularly useful.

Meanwhile, money as we know now is fast being replaced by plastic cards and electronic transfers. As more people the world over change over to these newer mode of payments and receipts, the international business of currency printing will inevitably diminish.

It should be interesting to see whether the players in this unusual game can adapt to new opportunities, or whether they would dwindle into being paper tigers in more ways than one.Production costs do not permit counterfeiting on a scale that would disrupt the monetary system of a country unless the operation is riding on the back of another illegal business such as drugs or political terrorism. It is not entirely coincidental that Bogota, the drug centre of the world, is also the most crucial centre for counterfeiting today

The most curious aspect of this megabusiness is that its controlled by an unofficial syndicate of just about half a dozen companies. The syndicate has a wide reach they control not just the printing business, but the paper making, the machinery making, the ink supply and the security aspects that surround currency printing.

There is hardly another field of knowledge over which the veil of secrecy is drawn so effectively as the production of money and everything connected with it. One reason for this secrecy is the understandable desire to keep techniques secret