In this article, Shubha Kumar discusses detection and Impounding of Counterfeit Notes.

Introduction

Everyone has once in his lifetime received a counterfeit note. In day to day life, people don’t take the pain to report one or two fake notes received, to the police and tend to pass them off to others. However, doing such a thing is a crime punishable with imprisonment. The Reserve Bank of India from time to time comes out with various notifications regarding detection and impounding of counterfeit currency. The latest notification was issued by the RBI on July 20, 2017. In the Master Circular for Detection and Impounding of Counterfeit notes, RBI issues guidelines on impounding such currencies. For detailed rules mentioned in the circular see here.

What does impounding mean?

Impounding means to take into ‘lawful custody’. In India, RBI has designated various authorities to impound counterfeit currency.

Authority to impound counterfeit notes

• All Banks
• All treasuries and sub-treasuries
• Issue office of the RBI

What are the steps to be followed while impounding counterfeit currency?

Step 1: Detection of counterfeit currency

• All banknotes which are presented by customers at the bank counters or received directly in currency chest should be examined through machines.
• According to the guideline issued by the RBI on May 11, 2010, on Installation of Note Sorting Machines-Note Authentication and Fitness Sorting Parameter (see here) all bank branches, as well as bank offices, should be equipped with ultraviolet lamp detection machine. The guidelines also provide other requirements to be fulfilled. At all currency chest branches of banks, there should be verification, processing, and sorting machines. Such machines help in detecting the counterfeit currency.
• The customers account should not be credited with the amount of fake currency.
• The fake currency should not be returned to the tenderer or customer and should not be destroyed by the branch.
• If the banks do not follow these guidelines, it will be considered that the bank is wilfully involved in circulating the counterfeit currency.

Step 2: Impounding of counterfeit notes

All counterfeit notes received at the bank branches cannot be destroyed by the bank. Counterfeit notes should be stamped as “COUNTERFEIT NOTE.” The size of the stamp should be 5 cm x 5 cm, and the following should be inscribed:

• COUNTERFEIT BANKNOTE IMPOUNDED   
• BANK / TREASURY/ SUB-TREASURY   
• BRANCH / CURRENCY CHEST  
• SIGNATURE  
• DATE

Step 3: Issue of receipt to tenderer

• If any counterfeit currency is detected, an acknowledgment slip is to be given by the bank to the customer, mentioning the serial number of notes and signed by the cashier and counter-signed by the customer.
• The receipt is to be issued even when the customer is unwilling to sign it.

Step 4: Reporting to the Police

• In the case where, in a single transaction four pieces of counterfeit currency are detected, a report is sent by the Nodal Bank officer to the nodal police station along with the counterfeit notes, at the end of every month. Every bank should appoint a nodal officer at the district level, and the same should be notified to the regional office of the RBI.
• In a case where, in a single transaction five or more pieces of counterfeit notes are detected, the notes are sent to the police station by the Nodal Bank Officer. The police after that register an FIR and start investigation.
• A copy of all FIRs registered in a month is sent by the police to the Forged Note Vigilance Cell. A Forged Note Vigilance Cell is established by all banks at its Head Office. The Forged Note Vigilance Cell submits a quarterly report on counterfeit notes to the Chief General Manager, Department of Currency Management, RBI.
• In order to identify persons circulating counterfeit currencies and to help police in investigation banks should have CCTV cameras at cash counters.
• The data on counterfeit notes is to be forwarded by the banks to the Issue Office of the RBI every month.

Step 5: Preservation and disposal of counterfeit notes

• All forged notes received back from the police by the bank should be kept in a safe custody and record of such notes needs to be maintained.
• They should be preserved for a period of three years from the date of receipt from the police.
• After three years these notes are sent to the Issue Office of the RBI with full details.
• In cases where the counterfeit note is a subject matter of litigation in the court, it should be preserved till the time court gives it decision.

ATMs dispensing counterfeit notes – Where to report

• For currencies of denomination more than INR 100, all notes are to be examined by machines before putting it into the ATMs. This instruction is applicable to all banks. Non-compliance with this instruction will be taken as a violation of the Directive No.3158/09.39.00 (Policy)/2009-10 dated November 19, 2009, issued by the Reserve Bank.
• If ATM of any bank dispenses forged currencies, it will be considered as an attempt by the banks to circulate counterfeit note.

Where to file a complaint if ATM is dispensing forged currency?

ATM machines dispensing forged currency has become common these days. It becomes difficult for customers to prove their case and they lose their money. To protect consumers, RBI has issued guidelines to be followed by banks before filling cash in the ATMs (rules to be followed by banks have been discussed above). If someone gets a fake currency from an ATM here is what he should do:

• Identify fake notes.
• Write down the serial number of the notes.
• Present the transactional slip and the passbook to the police.
• The police will register an FIR, followed by an investigation.
• If the bank is found guilty RBI will penalize the bank and refund your money.
• ATM security guard cannot be an evidence for supporting your claim while filing an FIR. Thus it is advisable that if you spot a fake currency, show it in the CCTV of the ATM.

Security features of the new 2000 and 500 rupee note:

For 2000 rupee note:

• Numeral 2000 can be seen when the note is held against the light.
• A latent image of 2000 when the note is tilted.
• Micro letters ‘RBI’ and ‘2000’.
• Colour shift security thread,
• Numeral panel growing big from left to right.
• Seven angular lines in raised print.

For 500 rupee note:

• Numeral 500 can be seen when the note is held against the light.
• A latent image of 500 when the note is tilted.
• Micro letters ‘RBI’ and ‘500’.
• Colour shift security thread,
• Numeral panel growing big from left to right.
• Five angular lines in raised print.

For detailed security features, please refer these notes as well as new 200 rupee note, 50 rupee note, 100 rupee note refer to https://paisaboltahai.rbi.org.in/#.

What are the laws in IPC under which I can be prosecuted for counterfeit currency?

Under Section 489A to 498E of the IPC, possessing or circulating counterfeit currency has been made an offence.

Section 498A states that any person who tries to counterfeit any bank note or performs any part related to counterfeiting shall be punished with imprisonment for life and shall also be liable to pay fine.

Section 489B states that any person who buys anything from another using a forged currency, knowing such currency to be forged or having reason to believe the same to be forged shall be imprisoned for life and shall also be liable to pay a fine.

Section 498C states that any person possessing forged currency having reason to believe it to be forged shall be liable for imprisonment for life along with fine.

Section 498D states that any person having any material which can be used for forging currency like paper, machine, inks, etc. or in any way he is related to the process of counterfeiting can be imprisoned for life.

Am I liable, for possessing any forge currency, unknowingly?

It may sometimes happen that you are not aware of the fact that the currency which you are holding with yourself is forged and present such note at the bank counter or at any shop. In such cases will you be liable under Section 498B of the IPC?

No, you won’t be liable. One of the most important ingredient for proving criminal liability is to prove Mens Rea, i.e., guilty mind or wrongful intention. If you are not aware of the fact, that the currency you are holding is forged, you cannot have the intention to use it wrongly. Thus, your liability does not arise. In the case of Umashanker vs. the State of Chhattisgarh, the Supreme Court held that mens rea is very essential to prove an economic offence under Section 489. Mens Rea can be inferred from the facts of the case or from the act of the guilty person.

It needs to be proved by the state that the person possessing forged currency at the time of possession knew it to be forged and he intended to use it as genuine.

Where to file a complaint if someone passes me off their fake currency?

If you receive a forged note from someone, and instead of filing a complaint you are thinking to pass it off, then you can be in serious trouble if you are caught.

To avoid this, you need to go to your nearest police station and report the matter to the police who will register an FIR against the accused for violation of Section 489 of the IPC. Then the police will carry out further investigation, and the court will prosecute him.

Problem of Cross-Border trafficking of fake currency notes

To deal with the problem of cross-border trafficking of fake currency, India has signed the International Convention for the Suppression of Counterfeiting Currency in 1929. Under this convention, the parties to the convention criminalise the creation, use, and exportation or importation of counterfeit currency. Under the agreement, no distinction is to be made as to what currency is the subject of the crime. Under the treaty, currency counterfeiting is an extraditable offence. States also agree to establish a central office that will forward to all other state parties cancelled specimens of their state’s currency and notify the other states when changes to their currency are implemented. The Financial Action Task Force is the statutory body which frames policies to prevent illegal trafficking.

Management of currency

For details regarding management of currency please read https://blog.ipleaders.in/mechanics-of-currency-management/.

Money laundering

For details regarding money laundering laws in India please read https://blog.ipleaders.in/money-laundering-prevention/.

Conclusion

Counterfeiting of notes is a serious problem to the economy. Due to this every year the country loses billions of rupees. RBI and the Union Government constantly work towards curbing this menace by adding additional security features to the notes and being vigilant at the borders to prevent the neighbouring country from draining fake currency in our economy. RBI and the government have adopted a policy of ‘Zero tolerance’ to ensure the integrity of the notes in circulation. In the last eight months, 1.57 lakh currency notes have been detected as fake. To curb this problem public should be aware of the process of detecting fake notes, RBI should conduct regular training in rural areas to help rural people identify fake currencies, promote digital payment, in addition to this ATMs should have the latest technology to identify fake currency and rest of the burden rests on us to be vigilant while making transactions in cash.