Developments in Banknotes

Jeff Stuart

Published by
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Pira International Ltd 2006

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Contents

List of tables iv Coatings 21

List of figures v Clear windows 22
Executive summary vii Polymer substrates 22

1
Market impact 23
Micro-optics 25
DOVIDs 26
Microperf 27
Introduction 1 Suppliers 28
Scope 1 Paper substrate 28
Definitions 1 Long-life paper 29
Jargon 3 Polymer substrate 29

2
DOVIDs 30
Banknote ink 32

Banknotes: an overview 7
Global trends 7
Recent technology 8
Production volumes 9
4
Processing developments 33
Sheet-fed intaglio 33
Issuers’ aims 10 Komori 35
Costs 10 Main suppliers 35
Material prices 10 Enhanced intaglio 36
Production costs 11 Web intaglio 38
Counterfeiting 12 Automated examination 40
Threats of counterfeiting 12 The basic printing processes 42
Costs of counterfeiting 13 Letterpress 42
Numbering, automation, etc. 14 Litho 42
Competition between SPWs and HSPs 15 Intaglio 43
Technological developments 15 Screen printing 43

3
Gravure 44
Flexography 45
Inkjet 45

5
Other digital processes 46
Raw material developments 19
Introduction 19
Paper substrates 19
Long-life papers 19
Security devices 20 Regulation and legislation 49

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List of tables

2.1 Production stages: cost breakdown as 3.7 Banknote paper suppliers 29

percentage of total cost 11 3.8 Suppliers of long-life banknote
2.2 Materials: cost breakdown as papers 29
percentage of total cost 12 3.9 DOVID suppliers to banknote
3.1 Technology transition table: printers and papermakers 31
security devices for paper substrates, 3.10 Ink suppliers to banknote printers
2005–11 21 32
3.2 Technology transition table: polymer 4.1 Main suppliers of banknote printing
substrate, 2006–11 23 machinery 35
3.3 Polymer substrate: growth in 4.2 Suppliers of banknote ancillary
adoption for banknotes 25 machinery 36
3.4 Paper and polymer: average 4.3 Technology transition table: CTIP,
substrate prices 25 2006–11 38
3.5 Technology transition table: DOVIDs, 4.4 Automated examining systems: part
2005–11 26 or complete usage, 2005–11 41
3.6 Technology transition table:
Microperf, 2005–11 28

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List of figures

4.1 The letterpress forme 42

4.2 The litho printing press 42
4.3 Intaglio printing 43
4.4 Screen printing forme 44
4.5 Ink film thickness 44
4.6 Gravure printing 45
4.7 The flexo printing press 45
4.8 Inkjet printing 46
4.9 The electrostatic principle 47

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 Executive summary

This report complements a Pira International market report of 2006, one of the few
published reports that give comprehensive coverage of the banknote printing industry.
It describes the developments in banknote printing, the existing technology and the
likely developments. All the organisations – printers, raw materials suppliers, machinery
suppliers and customers – are very discreet or secretive. Banknote orders by central banks
indicate an economy’s future health and this information could have big political and/or
economic repercussions, hence their need for absolute discretion. For a global industry,
banknote printing is dominated by a surprisingly small number of printers and suppliers,
which helps to make it intensely competitive.

Banknotes Cash remains the most convenient way to pay for the vast majority of everyday small
purchases. The banknote market is expected to continue to grow, driven by demographics,
the growth in global economic activity, and the universal acceptance that banknotes are
irreplaceable.
The banknote printing industry is dominated by a small number of intensely
competitive companies – printers, machinery manufacturers, materials suppliers, etc.
Over 90% of the banknotes produced worldwide are manufactured by state printing
works (SPWs), many of which also have state-owned materials suppliers. It appears to
be an extremely conservative industry, but companies continually pursue technological
developments to gain a competitive edge and to combat counterfeiting, which has serious
economic consequences for countries and their issuing authorities. Banknote issuers have
three principal aims:
 To issue banknotes that cannot be counterfeited.
 To issue banknotes that end users can instantly recognise as genuine.
 To issue banknotes in denominations that adequately represent the economic
situation of the issuer’s country.

Raw materials Chapter 3 gives an overview of technological developments for each raw material.
It looks at conventional banknote paper substrates and the increasing inclusion of
security features, such as diffractive optically variable image devices (DOVIDs) and more
sophisticated threads and stripes. Long-life papers were created by adding linen and
silk to 100% cotton banknote paper. Their enhanced durability was a response to the
threat from more durable polymer substrate. Securency’s Guardian is the only successful
polymer banknote substrate. It has been used in banknote production for 18 years and
security features have been added during that time. A limited number of suppliers supply
holograms and other DOVIDs to the banknote industry, mainly for security reasons.
DOVIDs are often combined with security threads. One major supplier dominates the
banknote ink market.

Processing Sheet-fed intaglio, sheet-fed litho and letterpress printing are used to print every banknote
in the world. They are combined in a standard banknote printing line. Web intaglio

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 Developments in Banknotes
Executive summary

combines the three processes in one specially designed machine. There have been
developments in platemaking technology and exponential growth in computer to intaglio
plate (CTIP). Automated banknote examination now includes putting automated checking
devices in the early stages of banknote production to reduce waste early on and improve
quality in the later stages.

Regulation There is no national or international regulation and/or legislation specifically covering

banknotes, their printing or their materials. Banknote printers are governed by regulations
and legislation that govern the whole of the printing industry and its suppliers. Intaglio
printing creates some extra complications.

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 Introduction
1
Scope This report is exclusively dedicated to banknote printing. It gives a detailed description of
the industry and the machinery and materials used by the industry, plus an overview of
current technology and likely developments. Here are the technologies it covers:
 The fundamental banknote printing processes of intaglio, litho, letterpress
combination printing, sheet-fed and web
 Intaglio platemaking
 Banknote examining and finishing systems
 Ancillary banknote machinery
 Banknote substrates used in the industry: conventional banknote papers, long-life
papers, polymer
 Security threads
 Holograms and other diffractive optically variable image devices (DOVIDs).
Here are some of the cutting-edge technologies it covers:
 Enhanced intaglio printing and computer-to-intaglio-plate (CTIP) technology
 Long-life paper substrates
 Paper-based security devices: DOVIDs, holograms, security threads
 Coating applications for durability
 Clear windows in paper substrate
 Polymer substrate
 Web intaglio technology
 Micro-optics
 Automated banknote examination
 DOVID development
 Microperf.

Definitions Here are the major commonly accepted terminology and concepts used in the banknote
printing industry and the markets it supplies.

Available and non-available The market is clearly divided into the available market
and the non-available market. There are a few crossovers due to capacity problems or
the issue of completely new currencies, etc. Available market is open to competition
from privately owned high-security printers (HSPs). Non-available market is supplied by
state printing works (SPWs). There are around 120–135 billion banknotes currently being
produced annually for 232 countries. Approximately 15 billion of these banknotes, required
by 176 countries, are available to be printed by HSPs. The other 56 countries have their
own SPWs and therefore produce all their own banknotes; occasionally they use other
suppliers when demand is high, and some SPWs print banknotes for other countries,
usually for historical reasons. This division of the market into available and non-available
also roughly applies to substrate supply. Eight HSPs and their subsidiary companies
produce banknotes for the central banks and other authorised issuing authorities.

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 Developments in Banknotes
Introduction

Examples of authorised issuing authorities are Royal Bank of Scotland, Bank of Scotland
and Clydesdale Bank for Scotland, and Northern Irish Bank for Northern Ireland. The non-
available market is supplied by 56 SPWs.

High-security printers High-security printers (HSPs) are defined as companies with

the full range of equipment, staff and expertise to design, originate, print and examine
banknotes, store them securely and deliver them securely to end users. This is what they
must have:
 Graphic artists and designers, computer-aided design (CAD) systems, CTIP systems,
mechanical and hand-engraving skills.
 Intaglio printing and platemaking skills and equipment, multicolour litho perfecting
presses, letterpress printing equipment (mainly for high-speed consecutive numbering
and signatures), and the expertise to combine these printing processes to print
banknotes.
 Facilities for holographic and other DOVID applications.
 An ability to work with optically variable inks (OVIs), holographic patches and
threads, plus discreet security examination facilities and expertise to guarantee the
quality standards required for banknotes.
 Staff vetting plus procedures to control access and egress.
 Internal research and development (R&D) and quality control facilities.
 Physical site protection and vaults built to banknote storage specifications to reassure
governments, principal customers and other issuing authorities, such as private banks,
that their products will be stored safely and securely.
 The facilities to provide secure loading and transport of the finished products by
security vehicles to bank vaults, airports and shipping docks.
Intergraf now has a certification scheme for the validation of security printers under the
CEN Workshop Agreement (CWA). CEN is the Comité Européen de Normalisation; it is
affiliated to the International Organisation for Standardisation (ISO) and awards two
different certifications: Certified Security Printer and Certified High Security Printer. These
certifications broadly follow the model of ISO 9001:2000.
There are many more security printing companies in the world producing a wide
range of value documents, but without the full complement of equipment described
above. There are a few cases where they do possess the full range but choose not to
compete in the banknote markets because they do not wish to bear the higher costs of
additional human skills required in banknote printing, the additional export sales and
marketing costs, and the security costs of vaults to banknote security specifications,
perimeter security, protected loading and unloading facilities, etc.

State printing works State printing works (SPWs) require all the HSP facilities
described above but usually in a more limited way, as they mainly concentrate on their
own currency while the HSPs need facilities to produce a wide range of banknotes. Some

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Developments in Banknotes
Introduction

of the SPWs, especially the larger ones, have their own ink and substrate production
facilities.

Privatisation of SPWs In the past 15 years there has been a steady stream of SPW
privatisations. The largest is probably Bundesdruckerei of Germany, now an HSP. Tumba
Bruk, Sweden’s former SPW, was sold to Crane & Co. of the US and now operates as an
HSP under the name Crane AB. The Hungarian SPW was privatised and is still called the
Hungarian State Printing Works. Setec Oy, the Finnish SPW, was privatised then in 2005
it was acquired by French card company Gemplus. The Bank of England’s seven-year
contract with De La Rue is essentially a privatisation.

Diverse operations All HSPs and some SPWs are also involved in other HSP fields,
and the supply of security solutions to customers; this also applies to the machinery and
materials suppliers.

Jargon  A
 IIF: organisation of HSPs, now disbanded.
 ATM: automatic teller machine. A machine for dispensing banknotes and other
banking services to the public. Now one of the main conduits of banknote circulation.
 BOPP: biaxially oriented polypropylene, a polymer banknote substrate.
 CTIP: computer to intaglio plate.
 Cylinder mould watermark: a three-dimensional watermark that is almost impossible
to produce by any other system and cannot be reproduced accurately by any colour
photocopying or printing process.
 Digital watermark: digital watermarking is the inclusion of covert information in the
digital file of a document. The information is invisible in use but can be detected
using an instrument.
 DOE: diffractive optical element. An element designed for use in transmission mode
and therefore ideally suited to the clear window feature on polymer banknotes.
 DOVID: diffractive optically variable image device. The variation of the image is
caused by the diffraction of light. A hologram is a DOVID.
 Guilloche: intricate and complex designs and patterns that are used as backgrounds
and other artistic design elements on banknotes.
 HSP: high-security printer, privately owned.
 Latent image: a component of an image or graphic element that only becomes visible
when viewed at a particular angle or under special conditions; commonly used on
banknotes.
 Metamerism: where two colours match under one lighting condition but not under
another. It occurs when the colours have been matched with different pigments; the
differences are masked by some lights and accentuated by others. Sometimes used on
banknotes to prevent colour photocopying.

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Introduction

 Microperf: tiny holes in banknotes that are only visible when the banknote is held up
to a light source. The holes are made by a laser and cannot be reproduced or copied.
 Microprinting: very fine printing, usually text on banknotes, that appears as
continuous lines to the naked eye but distinguishable characters under magnification.
 Moiré: a pattern caused by conflict between different elements in multicolour screen
printing; can be used on banknotes to prevent colour photocopying.
 Phosphorescence: occurs when a compound absorbs electromagnetic energy, stores
some of the energy for a finite period then re-emits it in the visible range after the
energy source has been switched off. It is used as a security feature on banknotes.
 Planchettes: small discs of coloured paper or plastic, about 1mm in diameter, added
to the paper surface during banknote paper production. They are used as a validation
device on some banknotes.
 Polymer substrate: a biaxially oriented polypropylene (BOPP) not commercially
available, and used as a banknote substrate in place of paper. Pioneered in Australia,
it is currently being used by 23 countries as their banknote substrate and is becoming
increasingly popular because of its durability and anti-counterfeiting value.
 Polymeric substrate: a second-generation polymer-based substrate for high-security
printing, especially banknotes. It is a composite of opaque layers, clear deadfold
film, clear adhesive and clear core film, into which various security features can be
embedded. Polymeric substrates can have up to 21 layers and are claimed to be
alternatives to established polymer substrates and conventional banknote papers.
 Rag paper: paper manufactured from 100% cotton fibres, sometimes with linen or silk
fibres added to enhance durability.
 RFID: radio frequency identification. RFID tags are mainly used in packaging but if
the unit costs becomes low enough, they could be used on banknotes to make them
traceable throughout their lifetime.
 Security threads: thin polyester ribbons placed in paper during manufacture.
 Silurian fibres: distinctively coloured fibres that can be distributed throughout a sheet
of paper. They are used on some banknotes as a security validation device.
 SPW: state printing works.
 TIDE: transparent intaglio disappearing effect. A method for deterring reprographic
counterfeiting patented by Securency’s parent company, Note Printing Australia. It
combines transparent intaglio ink with a reflective metallic substrate to create images
that change colour or shape under different lighting conditions and viewing angles.
 Thermochromic: able to change colour rapidly when exposed to temperatures above
or below a threshold. Thermochromic inks can be used on banknotes as a security
validation device.
 USAM screener: a device developed by Joh. Enschedé that allows the general public
to verify printed hidden designs. A banknote can be verified by folding the screener
over the hidden feature in a polymer banknote’s transparent window to reveal text or
an image.

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Developments in Banknotes
Introduction

 Windowed metallic thread: a thread placed in the body of the banknote paper that
appears as a series of silver dashes on one surface but as a bold continuous line
when held up to the light.

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 Banknotes: an overview
2
Global trends Since the introduction of cheques in the mid 19th century, people have regularly forecast
the decline, even the demise, of banknotes as the main instruments of transaction. More
recent alternatives – postal orders, money orders, credit cards, cash cards, debit cards,
electronic bank transfers, plus e-purse and internet transactions – have continued to
fuel the belief that paper currency will decline. In fact, global banknote usage continues
to grow and there are two main reasons: (1) population growth and (2) cash remains
the simplest and most convenient way to pay for the vast majority of small, everyday
purchases.

Cash is convenient The number of transactions calculated by value is over 90%

non-cash but the number of transactions calculated by volume is over 90% cash. This
old equation was first published by the Bank of England (BoE) in the late 1940s and
confirmed by a US Treasury study in the early 1980s when it was investigating whether to
expand the Bureau of Engraving and Printing (BEP) in Washington – it decided to build
a sister plant in Dallas Fort Worth. Why? Because cash still remains the simplest and
most convenient method of payment for the vast majority of everyday small purchases,
such as a carton of milk, newspaper, drink, chocolate bar or loaf of bread. Much of the
world’s population remains so poor that cash transactions are the only kind they will ever
make, but cash transactions account for the highest volumes of purchases even in the
richer, more developed parts of the world. Cash continues to be largely untraceable which
unfortunately can result in it being used to fund criminal activities.

Population growth The inexorable growth in world population leads to similar growth
in cash requirements. During the 20th century, banknote volumes grew at 5% per year,
driven by demographic trends. The growing populations of the developing world require
paper currency, perhaps even more than the developed world. There are vast regions
where non-cash transactions are simply impractical. China and India, the world’s two most
populous nations, have over 33% of the world’s population. They are experiencing rapid
economic development and require the convenience of ever more cash facilities; plus they
are enthusiastically adopting all the methods for non-cash transactions. This also applies
to the rest of the world. Many parts of Africa are experiencing economic growth. Former
communist regimes have moved from central control to free-market economies and now
have growing economies with big requirements for cash.

Growth in the west The US and the EU are the world’s two most developed economies
and have the greatest number of non-cash transactions. Yet, contrary to popular
misconception, they continue to experience growth in banknote usage. The US Treasury’s
annual banknote requirements are growing by around 3% per year, and the annual
requirement for one-dollar bills is now over 4 billion. The European Central Bank (ECB)

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 Developments in Banknotes
Banknotes: an overview

reported 12.8% overall growth in the circulating value of euro notes in 2005, while the
volume increased by 7.4%. Economic activity is growing inexorably worldwide. Levels of
disposable earnings per head of population grow correspondingly and so does the use of
banknotes.

Recent technology Enhanced intaglio printing and CTIP Intaglio is still considered by all printers to
be the secure basis of banknote printing and there is a concerted move to enhance and
improve the quality and complexity of detail on banknotes. The introduction of computer-
aided design (CAD) for banknote detail has created a desire to transfer CAD designs
directly to plate, saving labour, cutting costs and shortening schedules. There have been
significant strides towards achieving this goal.

Long-life papers in response to polymer For a long time, 100% cotton was the only
substrate used for banknote printing, but it is now being seriously challenged by polymer
substrate. Polymer banknotes are claimed to have enhanced security and better durability
than 100% cotton. Consequently, the major papermakers have improved durability by
adding linen and/or silk fibres to cotton to create long-life papers.

Paper-based security devices Over the past 25 years there has been growing use
of diffractive optically variable image devices (DOVIDs) to improve banknote security.
Papermakers now introduce DOVIDs during papermaking, which eliminates any
attachment costs during banknote printing.

Coating paper for durability Coatings can improve the durability of paper banknotes,
helping them to compete with polymer banknotes.

Clear windows in paper substrate One of the greatest security advantages of

polymer banknotes is the ability to leave a clear window that is virtually impossible to
counterfeit and is easily recognisable by the general public. Papermakers are working to
develop clear windows in paper substrates.

Polymer substrate Economically viable polymer substrate is the most revolutionary

development in banknote printing over the past 28 years. It is now widely used and
increasingly chosen instead of paper.

Web intaglio printing Web intaglio printing offers obvious cost savings and speed
improvements, but its adoption is limited by printing quality and tactility plus its poor
flexibility on banknote sizes.

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Developments in Banknotes
Banknotes: an overview

Micro-optics Micro-optics is a new technology currently available from only one

company in the form of a security thread. Nevertheless, it is a practical security device in
the form of a DOVID and will probably grow in use up to 2011.

Automated banknote examination The Holy Grail of banknote printers is to

automate the costly, time-consuming and labour-intensive processes of banknote
examination and finishing. It was thought that computer-aided technology would provide
the answer, and it has largely been achieved by inline systems that examine and sift
banknotes throughout the production process.

Holograms and other DOVIDs DOVIDs are now common on banknotes and their use
is growing. There has been exponential growth in the number of DOVID producers but
only a small number can make them for banknote production. Ever more sophisticated
DOVIDs are regularly being developed by the manufacturers, but as their sophistication
grows, will the general public continue to recognise them? There are simpler DOVIDs
that are easier to recognise but more difficult to manufacture. The banknote industry is
currently debating whether to use them.

Microperf technology Created by laser, Microperf is a patented security device that

is already used on some banknotes. It is currently only available from one company and
this may somewhat limit its adoption by banknote printers. Microperf is marketed by KBA-
Giori, which already supplies over 95% of the industry’s banknote printing machinery, so a
near monopoly is not unusual.

Production volumes Excluding worldwide trends in population growth and the explosive economic growth in
countries such as China, India, Brazil and Russia, here are some reasons why banknote
production varies from year to year:
 Central banks’ policies on new and used notes.
 Mix of denominations required in any one year, e.g. low denominations in high
volume, high denominations in low volume.
 Central banks’ decisions on the structure of the denominational mix, e.g. the US
retained the one-dollar bill, the ECB decided to issue seven denominations, including
relatively low denominations.
 Central banks’ decisions on the transmutation of coins to banknotes, or vice versa.
 The ability of countries to find the foreign exchange needed to import banknotes
from high-security printers (HSPs) or raw materials for their state printing works
(SPWs).
 Political decisions on the issuing of a totally new currency.
 Political decisions on the issuing of new designs for security enhancement reasons or
a change in the head of state.

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Banknotes: an overview

 The formation of new political unions and thus currency unions, e.g. the euro; the
possible adoption of a common currency by the five nations of the Gulf Cooperation
Council, the proposed West African Monetary Zone and the South-east Asia Currency
Union.
 The fragmentation of political unions and the creation of new states, e.g. the
break-up of the former Soviet Union into 15 sovereign states, and the creation of an
independent Eritrea from part of Ethiopia.
 Economic difficulties resulting in hyperinflation, e.g. Zimbabwe, the Democratic
Republic of the Congo.
 The temporary total disruption of states due to civil wars and/or wars of invasion,
e.g. Somalia, Iraq, Afghanistan.
Economic activity is growing inexorably around the world, and so is disposable earnings
per head of population. Banknote usage in developed countries mirrors this economic
and population growth. The proliferation of alternative payment methods in the most
developed geographic markets, such as the US and the EU, appears not to have reduced
or slowed the growth of banknote usage.

Issuers’ aims Banknote issuers have three principal aims:

 To issue banknotes that cannot be counterfeited.
 To issue banknotes that the general public can instantly recognise as genuine (first-
level security) and that can be verified as genuine by banks and retailers using
specialised verification equipment (second-level security).
 To issue banknotes in denominations that adequately represent the economic
situation of the issuer’s country and that adequately meet the requirements of
its citizens.
The third aim is not relevant to this report. To fulfil the first two aims, all the HSPs and
SPWs in the world, plus their machinery and materials suppliers, continually develop
technology to improve their products. An industry that may seem innately conservative
is actually in a state of continual development.
All the companies, including SPWs, have in-house research and development (R&D)
facilities. A lot of technological development emanates from the machinery and materials
suppliers. Printers and suppliers often work together on developments. There is very little
research cooperation between the printing companies because the market is fiercely
competitive and a unique development can secure a sales advantage or protect an
existing market.

Costs The prices of all the raw materials used by HSPs rise steadily in line with inflation in the
supplier countries; almost all are EU countries except for Switzerland (machinery,
Material prices banknote inks, DOVIDs), Japan (machinery), the US (paper, security threads, DOVIDs),
hence they have EU rates of inflation. Inflation rates in Switzerland, the US and Japan are

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Developments in Banknotes
Banknotes: an overview

similar to EU rates. The only polymer substrate in use is produced in Australia; Australia’s
inflation rate is broadly similar to rates in the EU and the US.
Raw materials prices vary greatly with the technical specifications required for the
large number of different banknotes and denominations. For example, does the banknote
substrate include security features such as DOVIDs? Are there are other additions to the
substrate such as planchettes? What is the sophistication of the specified DOVID? How
complex is the ink or thread? Ink and paper specifications vary considerably, but the small
number of suppliers and the intense competition mean their prices are very similar per
tonne of paper, per kilo of ink or per million DOVIDs.
It is impossible to quantify raw materials prices for SPWs if their raw materials are
supplied by other state-owned organisations or if they have internal charging among
their own manufacturing sections. If they purchase from the major suppliers, the prices
are exactly the same as for the HSPs, except where economies of scale allow lower prices
when the SPWs require volumes far beyond those normally ordered by HSPs. Recently,
when its state papermaker could not meet demand, India placed huge orders with all four
major suppliers of banknote paper and received lower prices through economies of scale.

Production costs The breakdown of average production costs expressed as a percentage of total production
costs is roughly the same in all the companies. It is not possible to calculate production
costs for SPWs; this is because of their accounting and internal costing structures and
because there are transfers of raw materials between state-owned organisations, e.g.
banknote paper is transferred from a state-owned papermaking facility to an SPW.
Nevertheless, production stages and percentages for SPWs will be identical to those
for HSPs (Table 2.1). Table 2.2 shows the average breakdown of materials costs as a
percentage of total materials costs.

TABLE 2.1 Production stages: cost breakdown as percentage of total cost

Stage Cost (%)
Intaglio back 10
Intaglio front 10
Litho, both sides 10
OVI printing 15
Numbering 4
DOVID application 20
Finishing 6
Origination and platemaking 25
Total 100
Source: Pira International Ltd

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 Developments in Banknotes
Banknotes: an overview

TABLE 2.2 Materials: cost breakdown as percentage of total cost

Material Cost (%)
Paper 37
Intaglio ink 20
OVI inks 18
Offset inks 10
Other security inks 6
Numbering inks 4
DOVIDs 5
Total 100
Source: Pira International Ltd

The cost of banknotes is the overriding imperative for banknote issuers, not only in poorer
countries, where the import of banknotes may be one of their major foreign exchange
costs, but also in richer countries, where purchasing systems are usually more efficient
and more stringently monitored. The HSPs and SPWs use almost identical machinery
and materials, and have equal access to security devices. If the issuers were willing to
pay the price, any HSP or SPW could produce much more secure banknotes, using all the
most secure materials and latest security devices, from embedded smart chips to radio
frequency identification (RFID) for total traceability.
Chapters 3 and 4 concentrate on technologies that have recently been developed
or are currently being developed and where higher prices are acceptable to the issuers.
Acceptability is based on the prices that issuers are accustomed to being quoted by
printers using existing security devices and materials common to almost all currencies.

Counterfeiting Multicolour litho presents the most serious threat of volume counterfeiting by serious
criminal gangs. It is the easiest and most effective way to produce counterfeits on a mass
Threats of scale, which is what interests these gangs. The criminals have succeeded once the fake
counterfeiting has passed through its first transaction. The six-, seven- and eight-colour litho machines
now on the market can produce superb quality at very high speeds – 15,000 sheets per
hour is not unusual. With the average banknote printed 28 or 32 per sheet, imagine how
many counterfeits could be produced if the criminals could use one for only a few hours.
This is often what happens. Criminals fraudulently gain access to machines in legitimate
use, then use them illegally outside normal working hours. The same goes for litho
origination facilities, where scanning makes origination much simpler.
Opportunistic counterfeiting using colour photocopiers saw a significant increase
during the 1980s and early 1990s. Six-colour photocopiers and upwards became
commonplace in ordinary offices. Banknote printers and other interested parties had long
discussed this with the colour copier manufactures, but intense competition between the
major suppliers hindered agreement on how to prevent banknotes and other security
documents from being copied. There is now widespread agreement on blocking devices
that recognise attempts to copy currency plus anti-tampering systems on copiers so
they cannot be modified to get around the blocks. One of the major manufacturers also

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produces a system that encodes every sheet produced with a covert mark that will allow
the authorities to trace the machine, and even who made the copy if the machine was
linked to a network.
The most serious smaller-scale counterfeiting is through desktop publishing (DTP) and
inkjet printing. The proliferation and increasing sophistication of these systems over the
past 20 years has created a mini revolution in multicolour printing, with even relatively
small companies being able to produce their own brochures and point-of-sale (PoS)
material. A 2003 customer report by the world’s largest HSP became public when it was
leaked to New Scientist magazine. It identified inkjet desktop publishing as the ‘current
main counterfeiting threat’. This threat is exacerbated by the increasing availability of
small-scale hologram and security foil manufacturing and application systems. There are
now low-cost desktop hologram applicators designed to run in an office environment. The
facilities for counterfeiting therefore exist in accessible environments and criminals will
use them. Accessibility is anathema to the banking industry. Methods are being devised
to prevent this misuse, but none has been 100% effective.

Costs of counterfeiting Issuing authorities around the world have to consider how much counterfeiting costs
them, how much it costs to combat counterfeiting and whether it is justified to combat
counterfeiting on cost grounds. First they need to establish whether the incidence of
counterfeiting is accurately reported. Levels of banknote counterfeiting are routinely
underestimated and under-reported. Available figures are based on counterfeit seizures
and are published by organisations such as the UK’s National Criminal Intelligence
Service, the US Treasury, the Federal Bureau of Investigation and the US Secret Service,
the International Chambers of Commerce Intelligence Bureau, the ECB and Europol. Very
small volumes and values are recorded each year. Using counterfeit seizures to estimate
the number of counterfeits in circulation is similar to estimating drug abuse from illegal
drug seizures. The estimates are obviously inaccurate.
The world is awash with counterfeit goods from perfumes to software, openly valued
at hundreds of billions of dollars each year. Why is there is no similar acknowledgement of
banknote counterfeiting? Here are some of the reasons:
 Any member of the public in possession of, and recognising, a counterfeit note knows
that to hand it into the banks or the police will result in their losing its full value. A
person has no incentive to hand in a suspect banknote but a strong temptation to
pass it on.
 Counterfeit banknotes are often used to pay people in drug deals, such as distributors
and suppliers. These people are unlikely to hand in banknotes.
 Good counterfeits are difficult to detect until they are machine-read or checked by
banks, and by then they will have passed through their first transaction and the
counterfeiters will have succeeded. Goods or services of value will have been rendered
in return for a worthless piece of paper, and a national economy will have lost that
value.

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 Depending on their denomination, banknotes often stay in circulation for long

periods and through multiple transactions before they reach a bank, where they can
be checked and validated. UK £5 notes are in short supply as they are not dispensed
by automatic teller machines (ATMs), now the main conduit for banknote circulation
to the general public. These £5 notes routinely go through eight transactions before
banking, while £10 and £20 notes often go through only one or two transactions
before being banked. Therefore counterfeits can be in circulation for some time before
they are checked by a bank.
 Different countries have different policies on how long a banknote can stay in
circulation before it has to be destroyed. Not all banknotes are checked before
destruction to see whether they are counterfeit.
There is a more fundamental reason why issuing authorities, security forces and
governments are reluctant to acknowledge the possible level of banknote counterfeiting.
Banknotes are a cornerstone of the civilised world and to acknowledge that major
counterfeiting is endemic in many countries would undermine this cornerstone and make
it difficult to continue trading with paper money. It could lead to anything from civil
unrest and inflation to unstable and possibly unsustainable economies. A well-known
example is 1920s Germany but it also happened in 1980s Bolivia and 1990s Zaire (now the
Democratic Republic of the Congo), and is happening to Zimbabwe in 2006. That is why
governments and their agents try to minimise the incidence and effects of counterfeiting
in the minds of citizens, hence the low-key reporting and recording.

Numbering, Banknote numbering is still exclusively a letterpress operation, but future inkjet systems
automation, etc. might reach the required speeds to number millions of banknotes sequentially at 10,000
sheets per hour. Among the major banknote issuers, only the ECB does not demand
sequential numbering.
To prevent bottlenecks when all the other banknote printing processes are geared to
10,000 sheets per hour, almost all the world’s banknote printing plants use Numerota, a
specialist numbering machine made by KBA-Giori. These machines can be incorporated
into automated inspection systems that inspect, mark, segregate and sequentially number
banknotes in one continuous process. The latest generation is the Super Numerota 212.
Until about 10 years ago, all banknotes were examined by trained staff using the
stroboscopic method, in which a human eye detects a change in pattern as sheets are
flipped at high speed. Any sheets that looked defective were immediately removed for
more careful inspection later on; good parts of a sheet were salvaged by hand. Very
labour-intensive and costly, it is still used where labour is relatively cheap and where it is
economically and politically desirable to provide employment in an SPW. It is also used on
postage stamps. But the development of sophisticated optical character recognition (OCR)
systems has now led to the introduction of completely automated banknote examination.
Improvements in computer software and hardware, plus their greater availability, have led

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to a reappraisal of how automated checking devices could be used in the early stages of
banknote production to reduce waste early on and improve quality in the later stages.
Finishing – the counting, wrapping and packing of banknotes – was also a manual
operation until KBA-Giori introduced its CutPak machines in the mid 1980s. They also
increased the security of banknote production because the sheets of printed banknotes
are fed into the machine and are then untouched by humans until they emerge in shrink-
wrapped briquettes. CutPak is expensive but brings big labour savings and is therefore
cost-effective.

Competition between When an SPW is privatised it is immediately in competition with HSPs. Apart from that,
SPWs and HSPs there is little competition between HSPs and SPWs. The global market simply divides
into available and unavailable (page 1). Sometimes governments and/or central banks
ask their SPWs to compete with HSPs for certain markets, then the HSPs usually protest
through their own government organisations. Often successful, these protests claim unfair
competition because SPWs receive some state subsidy, even if it is only a captive national
indent that covers their basic operating costs. The internal accounting and auditing
systems used by some SPWs sometimes allow them to quote unrealistic prices if internal
transfers of materials and labour costs are charged in local currencies. Sometimes SPWs
will produce for other countries because it is politically expedient for the government that
owns the SPW. HSPs can do little to prevent this.

Technological The banknote printing industry is dominated by a small number of intensely competitive
developments companies – printers, machinery manufacturers, material suppliers, etc. Over 90% of the
banknotes produced worldwide are manufactured by SPWs, many of which also have
state-owned materials suppliers. It appears to be an extremely conservative industry, but
companies continually pursue technological developments to gain a competitive edge and
to combat counterfeiting, which has serious economic consequences for countries and
their issuing authorities.
All the HSPs, some of the SPWs and all the machinery and materials suppliers have
extensive in-house R&D facilities or departments. Materials suppliers to the security
printing industry in general are keen to produce for the banknote industry as a way of
boosting their credentials. Consequently, the banknote industry has a more innovative
stream of technology than many other industries, but the take-up rate can be quite low
as national central banks and other issuing authorities tend to be conservative about
changes to their national currencies. Lead times for the adoption of new technologies can
often be measured in years, much longer than for consumer-driven industries.
Except for the small number produced by web intaglio, all the world’s banknotes are
printed by a combination of sheet-fed intaglio, litho and letterpress using essentially the
same materials. This technology was used throughout the 20th century and is still used
today but with great improvements to machinery, materials and electronic equipment

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so that speeds and production outputs are much higher. Here are some of the basic
banknote technologies currently in use:
 Hand engraving, especially for portraits and designs
 C AD to improve and speed up design creation
 Intaglio printing and platemaking
 Multicoloured litho backgrounds
 Letterpress numbering
 100% rag paper substrate
 Security threads
 Mould-made watermarks
 Consecutive numbering
 Guilloche patterns
 Complex screening techniques.
Here are some printing and production improvements over the past 40 years:
 Simultaneous front/back litho printing
 Significantly increased litho and intaglio machine speeds
 Automated high-speed letterpress numbering machines
 The Orlof intaglio printing ink-saving system
 Automated cutting, finishing and packing machinery
 Improved platemaking systems and materials for litho and intaglio.
Here are some effective security devices introduced in the past 40 years:
 Perfect back-to-front register to get a see-through feature
 Latent image
 Microlettering
 Windowed security threads
 Microlettered threads
 Holographic threads
 Vertical and novelty numbering
 Moiré patterns and features
 Devices to prevent colour photocopying: quilt, patchwork, Om-rom
 Application of DOVIDs as patches or stripes on banknotes
 Registered holograms and other DOVIDs in the substrate
 Scrambled Indicia
 Optically variable inks (OVIs)
 Ultraviolet (UV) inks
 Infrared (IR) inks
 Fluorescent and phosphorescent inks
 Magnetic inks
 Solvent-reactive inks
 Fluorescent planchettes and embedded fibres
 Machine-readable features

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 Polymer substrates
 Clear windows on polymer notes
 Cellulose-enhanced and hybrid substrates, long-life paper substrates.
In theory, many other security devices developed for other areas of security printing could
be used on banknotes, but they are either impractical or not currently cost-effective for
the billions of banknotes required each year. RFID could provide complete traceability of
banknotes but is not yet cost-effective.
Here are some of the main developments that seem likely to feature prominently up
to 2011:
 Enhanced intaglio printing and CTIP technology
 Long-life paper substrates
 Paper-based security devices
 Coating applications for durability
 Clear windows in paper substrate
 Polymer substrate development
 Web intaglio technology
 Micro-optics
 Automated banknote examination
 DOVID development
 Microperf technology.

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3
Introduction Banknote printers, be they HSPs or SPWs, use virtually identical machinery, inks, substrates
and diffractive optically variable image devices (DOVIDs). There are 232 countries and at
least 236 issuing authorities, which issue over 1,180 different denominations of banknote,
and each denomination uses different combinations of security devices, designs, inks
and other materials. Yet all the banknotes are essentially the same product. The only
completely new technologies introduced during the past 20 years are polymer substrate
for banknotes instead of paper, and DOVIDs (including OVI ink) printed on banknotes or
embedded in the substrate.
Other technological developments are computer-aided design (CAD) and computer-
to-intaglio-plate (CTIP) systems, more sophisticated electronic control, measuring and
checking devices, ink-saving devices, DOVIDs and holograms, special security inks used as
security devices, improved numbering devices, more sophisticated security threads, coating
applications to increase banknote durability, and stronger paper substrates to increase
durability. All are additions to existing technology.
The banknote printing industry has five major divisions:
 Banknote machinery suppliers
 Banknote substrate suppliers, paper and polymer
 Banknote ink suppliers
 DOVID and hologram suppliers
 Banknote printers.
Banknotes continue to be printed by intaglio printing, and over 98% of the machinery
is supplied by KBA-Giori. Inks are intaglio ink and optically variable ink (OVI). Over 85%
of the ink is supplied by Sicpa. Paper substrate remains 100% rag paper. Long-life papers
have been introduced to extend the durability and life of the papers to combat polymer
competition. De La Rue/Portals of the UK produces paper for over 50% of the available
world market. Three other companies supply the rest: Giesecke & Devrient/Papierfabrik
Louisenthal of Germany, Arjo of France and Crane & Co./Crane AB of the US and Sweden.
Securency of Australia supplies all the polymer substrate for banknote printing. Over
1,000 companies in the world produce DOVIDs and holograms but only 10 are used by the
banknote printers and papermakers (page 30).

Paper substrates Long-life papers have security features embedded in their substrates so that no security
devices need to be applied during printing. They are coated with varnish to make the
Long-life papers banknotes more resistant to soiling qualities while maintaining adequate ink adherence.
Ink adherence was a problem when varnishes were first tried. Papermakers are trying to
replicate the clear window feature of polymer substrate.
The four major banknote paper manufacturers have added more linen and silk fibres
to the conventional 100% cotton mix to obtain these products:
 De La Rue/Portals has produced Platinum
 Giesecke & Devrient/Papierfabrik Louisenthal has produced Stronglife
 Arjo Wiggins Appleton has produced Diamone

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 Crane & Co./Crane AB has produced Marathon.

The Domtar Corporation of Canada has produced Luminus, a similar long-life paper. All
these products are essentially the same, but each manufacturer claims that its product
is the best on the market. They perform essentially the same functions. The makers all
claim that these long-life papers are almost as durable as polymer. This is disputed by
polymer manufacturer Securency. The papermakers claim that, over an extended period,
polymer costs twice as much as paper, while Securency claims that, in a five-year period,
polymer brings savings of around 25% over conventional substrates. It says that polymer
at least doubles and often trebles shorter banknote lifetimes, such as for high-volume,
low-denomination banknotes in heavy use in humid and hot climates, where conventional
paper banknotes can last as little as three months.

Security devices Conventional banknote papers made from 100% rag and containing mould-made
watermarks, security threads, planchettes and embedded fibres have been the industry
standard for many years. All substrate manufacturers have worked assiduously to improve
the security of their products against counterfeiting. Embedded security threads have
become a major security feature on almost all paper-based banknotes since Portals first
produced them for the Bank of England (BoE) in 1935.
The papermakers had been developing increasingly sophisticated threads for years.
They are excellent security features as they are supplied to the printers as part of the
substrate instead of having to be applied during the printing process. To help them
compete with polymer substrate, papermakers can now offer these security devices
supplied in the paper:
 Broader threads, up to 5mm, containing
 m
 ore sophisticated holograms
 m
 icroprinting, which is mainly text readable with simple magnifying equipment
 c overt messages to be read by ultraviolet readers in banks, etc.
 m
 achine-readable validation
 Magnetic coded threads
 Fluorescent threads
 Thermochromic threads.
All four major banknote papermakers can supply micro-optics and registered DOVIDs. A
micro-optic thread is manufactured as a windowed thread that displays overt optically
variable characteristics by using microlenses in the thread to produce magnification and
movement for the viewer as their viewing angle changes. This development, called Motion,
was announced by Crane & Co. Inc. in 2005. It is incorporated in the first banknote issued
by Crane in spring 2006 (page 26). Registered DOVIDs embedded in the substrate mean
there is no need to apply DOVIDs during banknote printing. They are supplied by De La
Rue/Portals, Giesecke & Devrient/Papierfabrik Louisenthal, Arjo Wiggins Appleton and
Gianasso Graphic Group International, a trade name of Belgium’s General Graphic Ltd.

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Security threads come second after watermarks as the security feature most commonly
recognised by the general public on euro banknotes, and they are the most recognised
feature in the US, where public recognition of banknote security features is lower than in
Europe. The US Treasury is planning to improve public recognition by emulating the euro
launch publicity when it issues the new generation of dollar bills. The tactility of intaglio
print was not commonly mentioned by the public, but the European Central Bank (ECB),
national banks and all the printers maintain that what people call the ‘feel’ of a banknote
is a crucial aspect of security. That explains the slogan ‘Feel, look, tilt’ that accompanied
the launch of the euro and which proved very successful. Table 3.1 shows the technology
transition for security devices in paper substrates.

TABLE 3.1 Technology transition table: security devices for paper substrates, 2005–11
Estimated use in 2005 Drivers for change Forecast use in 2011
(% of world volume) (% of world volume)
6.5 to 7.5 Cost savings as no need for DOVID application in 17.5 to 20
production process
Reduced waste
Improved security against counterfeiting
Possible use of broad thread for coding
Source: Pira International Ltd

Coatings Banknote papermakers quickly realised that coating their paper with varnish increased
banknote durability and improved resistance to soiling, helping their substrates to
compete with polymer. It partly resulted from the experiences of polymer substrate
producers. The first polymer substrate was Tyvek, produced by DuPont. Tyvek was
marketed as Bradvek by Bradbury Wilkinson, then owned by American Banknote Company
and the second largest HSP in the world. Bradbury Wilkinson was bought by De La Rue
in 1986. Bradvek was sold to the issuing authorities in Haiti and the Isle of Man in the
mid 1970s. It failed in circulation due to problems with oil absorbency (ink adherence).
Securency’s Guardian substrate initially had the same problems but it solved them by
overlacquering, which is a gravure process. Although this extra stage solved the problem,
it did increase production costs.
The papermakers could provide precoated substrate if required, and it became
apparent that coatings increased banknote durability and improved resistance to soiling.
Four major European SPWs have introduced it: the Bank of England, the Bank of Belgium,
Banque de France and the Bank of Austria. KBA-Giori, which manufactures over 95% of
the world’s banknote printing machinery, has introduced the NotaProtector overlacquering
machine into its total banknote production line. As overlacquering is a conventional
gravure process, there are alternative machines on the market. Many of these machines
are used in companies that are not classed as security printers or suppliers, and that do
not have the necessary external or internal security and protection systems, so in practice
only a few companies can coat banknote substrate for material suppliers or banknote
printers.

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Clear windows Two companies claim to have produced clear windows in paper substrates, Leonhard Kurz
and Giesecke & Devrient/Papierfabrik Louisenthal. Leonhard Kurz GmbH & Co. produced
and exhibited a clear window device in 2004. This was challenged as breaching the
patent of Securency’s Guardian polymer banknote substrate. Kurz withdrew it from the
market.
Giesecke & Devrient/Papierfabrik Louisenthal markets Verifeye, a paper substrate
that contains a clear window thread. It is clear when held up to transmitted light; a
latent image appears in the window when it is placed on a dark background. Verifeye has
been used on the Bulgarian 20 lev commemorative banknote. The effect is achieved by
producing a substrate with a heavy mould indent, onto which is fed a broad metallised
thread. This is then demetallised, leaving the clear polyester base in the paper and the
latent image is laid onto that. The number of banknotes produced for the commemorative
issue was extremely limited, so there is no data on its viability in long-run production.
The initial runs were very difficult as the clear window thread causes a marked
rippling on the stacked sheets, so they do not lie flat and it is hard to feed them and print
them. If this problem can be overcome – a solution is currently being developed – Verifeye
will be an effective security device, easily recognised by the general public, retail checkers,
bank tellers, etc.

Polymer substrates To date, the only polymer substrate that has been sold and successfully used in banknote
production has been Securency’s Guardian, first used in 1988 for Australian banknotes.
The substrate was developed by Note Printing Australia, the printing arm of the Reserve
Bank of Australia (RBA), in conjunction with the Commonwealth Research Institute and
UCB of Belgium. Guardian is based on biaxially oriented polypropylene (BOPP) that is not
commercially available. Since Guardian was first used in 1988, Securency has introduced
the following developments:
 Overlacquering to improve ink adhesion
 The unique clear window incorporates an optically variable device (OVD)
 Shadow Image replicates the effect of a watermark in the substrate
 Multiple clear windows allow one to be used as a lens to read other incorporated
security features, especially Joh. Enschedé’s patented MicroSam, formerly USAM
 Metameric features
 Complex window designs
 Optical machine-readable features
 Metallic patches
 Gold metallic patch
 Transitory images
 Transparent intaglio disappearing effect (TIDE).

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And here are the latest developments:

 WinDOE is a light-diffracting structure embossed into the surface of the Guardian
substrate in a clear window area. It is visible when the note is held up to the eye and
a point source of light is brought into the line of sight.
 G-switch is an optical feature that alternates between two complementary colours
when tilted under a light source. This creates an optically reflective effect.
DuraNote is the only pure polymer substrate that is a viable alternative to Guardian.
DuraNote is produced by the Canadian joint venture between Mobil Chemical Company
and Agra Inc. DuPont has revived Tyvek, which is not a pure polymer but a polymer
hybrid. Neither Tyvek nor DuraNote has yet enjoyed any commercial success.

Market impact The fairly rapid spread of polymer as a banknote substrate caused consternation in the
small club of banknote paper producers. They tried to dismiss it as a serious contender
but soon realised it was a revolutionary substrate that would be a major competitor
(Table 3.2).

TABLE 3.2 Technology transition table: polymer substrates, 2006–11

Use in 2006 Drivers for change Forecast use in 2011
(number of countries) (number of countries)
24 Cost savings through durability 28 (53 if adopted for low
Improved security against counterfeiting value denominations by EU)
Source: Pira International Ltd

Polymer substrate had four major advantages over conventional banknote paper:
 The material used in its manufacture was not commercially available, making it hard
for counterfeiters to obtain.
 The substrate looked different, felt different, was easily recognised by the public and
banknote counterfeiting fell dramatically wherever it was adopted.
 It was much more durable than banknote paper. According to its maker, polymer
substrate cost roughly twice as much as paper but lasted at least four times as long,
possibly even longer.
 It was able to contain a clear window, a unique security feature that could not be
achieved on paper by the banknote paper suppliers or by counterfeiters. This window
can incorporate an OVD viewable from both sides of the banknote, an advance as
important and dramatic as the introduction of the first DOVIDs into banknotes but
much less likely to be counterfeited.
The papermakers independently concluded that there was nothing they could do about
the first two advantages, but they could work on increasing the durability of their papers
and they could redouble their efforts to produce new and improved security features in
their substrates that would be just as effective as the clear window device. Another option
is to produce a clear window device in conventional banknote paper, and this is urgently

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being pursued by the papermakers and their suppliers. Two companies claim to have
produced a similar device that provides clear window security. Leonhard Kurz withdrew
its device after Securency challenged it with a possible breach of patent. Giesecke &
Devrient/Papierfabrik Louisenthal has produced a clear thread that is already being used
on a commemorative banknote.
Here are some of the important consequences and implications of using a polymer
substrate for banknotes:
 The polymer substrate’s durability substantially changed the issuing policies of the
national banks.
 The polymer substrate’s durability changed the volume of banknotes required and the
number produced per year as the national banks changed their replacement policies
to reflect the longer life of their banknotes.
 The denominational structure could change as national banks could issue durable
polymer banknotes to replace high-value coins.
 The structure of the industry could significantly change if HSPs with large banknote
papermaking segments were affected, especially De La Rue and Giesecke & Devrient.
Portals comprises nearly half of De La Rue’s security print and paper business. State
papermaking operations would be similarly affected.
 Counterfeiting could be effectively reduced by having an international body to control
the polymer material for banknote production, similar to the way the International
Civil Aviation Organisation (ICAO) determines the internationally agreed technical
specifications for all passports.
 The production capacity of Guardian substrate would have to be addressed.
Australian production capacity is being doubled, but is not sufficient for all potential
demand. Agreements would have to be reached for Securency to establish large-
scale production facilities in other countries, or there would need to be licensing
agreements with other operations, or the patents would need to be sold to other
companies so they could produce it.
 The cotton-growing and cotton-milling industries would be affected, especially as the
banknote paper industry uses specific types of long-fibre cotton not commonly used
for other purposes.
 There could be environmental effects from destroying billions of polymer notes every
year.
In the 1970s there was a missed opportunity for an international agreement to limit
certain types of holograms and other DOVIDs, other security documents and cards;
DOVIDs proliferated and they became commonplace on promotional materials and
packaging. One of the principal tenets of the security printing industry is that its materials
should not be commonly available. Perhaps control of polymer substrate will be a similar
missed opportunity.
If just one of the major high-volume banknote issuers – China, India, Indonesia, the
US, Brazil, Nigeria or the EU – were to adopt polymer substrate, it could lead to all the

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above consequences. This may well happen in the near future and there is currently no
international body to address them. The situation is not improved by the fact that the
world’s two largest HSPs have major interests in making conventional banknote paper,
as do many SPWs. They would all rather see polymer substrate disappear. Even without
a decision by one of the large issuers, there has been rapid growth in the use of polymer
substrate, especially by the normal standards of such a conservative industry (Table 3.3).

TABLE 3.3 Polymer substrate: growth in adoption for banknotes

Year Number of countries Number of denominations
1988 1 1
1998 17 23
2006 24 54
Source: Pira International Ltd, Securency

Three countries have adopted Guardian for all their denominations. Australia was the
first, becoming all polymer in 1996, followed by New Zealand in 2000 and Romania in
2005. Other countries are seriously considering polymer substrate for all their banknotes.
Vietnam will probably be the next major country to go all polymer. Other countries,
such as Zambia, are closely monitoring polymer substrate to assess its durability
and cost-effectiveness in regular use, with a view to increasing its adoption for other
denominations. Zambian banknotes are the only normally circulating banknotes to be
produced by an HSP, Canadian Banknote Company (CBC), and perhaps tellingly, CBC does
not have a papermaking operation. The Northern Ireland £5 note is a commemorative
note but it is in circulation; it too is produced by CBC. Table 3.4 compares average prices
for paper and polymer substrates.

TABLE 3.4 Paper and polymer: average substrate prices

Banknote substrate Price per tonne (€) Drivers
Conventional banknote papers 6,525–7,250 Durability, long-term costs
Long-life papers 8,700–9,425 Durability, long-term costs
Guardian polymer substrate 11,600–12,325 Durability, long-term costs
Source: Pira International Ltd

To date, CBC is the only HSP to use polymer substrate; all the other polymer notes have
been printed by SPWs. It is possible, indeed probable, that vested interests influence
the use of polymer by HSPs. The world’s two largest HSPs own the two largest private
manufacturers of banknote paper. When they plan and order banknotes, issuing
authorities that do not have their own SPWs tend to follow the design and technical
advice they receive from the HSPs.

Micro-optics Micro-optics was first used for banknote production in 2006 and took the form of micro-
optic thread. The thread is used in the 1,000 krona note issued by Sveriges Riksbank, the
Swedish central bank, on 15 March 2006. The banknote paper containing the thread was

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produced by Crane AB at its Swedish plant, formerly owned by Tumba Bruk. Tumba Bruk
was the Swedish SPW and was acquired by Crane & Co. in 2002. It is currently used only
in the 1,000 krona note, as all the other denominations have recently been upgraded, but
it could be incorporated into all the denominations at short notice if security dictated.
Crane & Co. Inc. has patented micro-optics under the trade name Motion. The
movement of colours in the thread is easily perceived by the general public and is an
effective security device. Motion is incorporated into banknotes as a windowed security
thread. It is an overt, optically variable security feature incorporating an array of
microlenses. The microlenses project magnified versions of microscopic images, causing
them to appear hundreds of times larger than their actual size – they behave like pixels
that assemble into magnified images. As the angle of view changes, the focal point of
each microlens sweeps across the image plane, creating a dramatic movement of the
magnified images. The images move perpendicular to the angle of tilt. The effect is visible
in reflected light even under poor lighting conditions and is also visible in transmission
– looking through the banknote. Crane is working on developments that include
luminescence effects and machine-readable characteristics.
The banknote industry has a track record of taking these patented technologies,
adopting and adapting them so as not to infringe any patents, then using them for
different purposes. It is likely that Motion will follow this path.

DOVIDs The use of DOVID security devices on banknotes continues to grow, in patch, stripe and
thread form, embedded in the security substrate and/or by separate application during
the production process. In 2005 DOVIDs were being used by about 30% of banknote
issuers, and this is forecast to increase to 45–60% by 2011 (Table 3.5). DOVIDs have also
become more sophisticated.

TABLE 3.5 Technology transition table: DOVIDs, 2005–11

Estimated use in 2005 Drivers for change Forecast use in 2011
Used by 30% of banknote issuers Increased sophistication as defence against counterfeiting Used by 45–60% of banknote
issuers
Increase in holograms on wider threads Simpler appearance for quicker, easier public recognition
DID colour-shift holograms Increased complexity of manufacture to counteract proliferation
More patch and stripe holograms DOVID manufacturers undermining security of product
embedded in substrates
Costs are likely to be €0.10 to €0.25 (depending on volumes and
sophisitication
Source: Pira International Ltd

The number of DOVID manufacturers has grown exponentially over the past 15 years and
is now close to 1,000. Many excellent DOVIDs are produced in countries where there is
a lack of regulation and control, such as Taiwan, Hong Kong and South Korea, which
has led to fears that they could be used for counterfeiting, without the knowledge of
the DOVID producers. There continues to be a rapid introduction of low-cost, desktop

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machines capable of producing DOVIDs. The use of DOVIDs on everything from branded
products to magazines, coupled with the rapid growth in producers and the widespread
availability of desktop production equipment, caused the security industry to become
concerned about whether DOVIDs were losing their impact with the general public, hence
losing their effectiveness in document authentication.
The DOVID manufacturers responded in the 1990s by producing more complex
devices, with ever-increasing levels of sophistication. They introduced higher-definition
image elements, second-level controls (e.g. microletters and laser-viewable images)
and machine-readable features. More and more security features were introduced into
documents, but the counterfeiters always overcame them, and the same was true of
DOVIDs. Were the increasingly complex images and the second-level features undermining
its public recognition? And would their unit costs become uneconomic in the long term?
The DOVID producers were acutely aware of these problems and were actively seeking
more effective security devices with a high public awareness and long-term viability.
And in 2002 they came up with the diffractive identification device (DID). Originally
developed by a Swiss laboratory in the early 1990s, a study for the US Bureau of Printing
and Engraving (BEP) described the DID as ‘the most secure optical effect for use in
devices to be used for currency in the next century’. It dispenses with complex images and
substitutes a simple, straightforward and complete colour switch from red to green, which
is the most extreme colour switch of all.
It was first taken up by Hologram Industries of France, which had cooperated with
the trials laboratories. Hologram Industries was also the first to invest in production
machinery and supply it to the security printing industry. All the other major companies
have invested in the machinery and offer their own versions of the product, developed to
different levels of sophistication. Because DID technology is so much more complex than
DOVID technology, they claim that DIDs are virtually impossible to counterfeit.
DIDs are machine-readable, can be produced for a desktop verification system and
can also be used with fibre-optic systems built for machines made by original equipment
manufacturers (OEMs) or in high-speed currency sorting and verification machines such
as in the banking industry. It is also a match for the existing DOVID products when used
as a registered discrete image applied by hot transfer or by high-speed hot-transfer tapes
similar to those used on the euro banknotes. But its most important advantage is that it
is easily recognised by the general public.

Microperf Microperf was developed and patented by the Swiss company Orell Füssli Security
Printing Ltd. It uses laser technology patented in 2003 as Laserperf. Some security printed
products, such as passports and stamps, have contained perforation features for many
years. Orell Füssli used them on high-denomination Swiss banknotes for a long time, and
Microperf is soon to be introduced on all denominations. Table 3.6 shows the technology
transition for Microperf.

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TABLE 3.6 Technology transition table: Microperf, 2005–11

Number of countries using Drivers for change Forecast use in 2011
Microperf in 2005 (% of world volume)
1 Possible adoption by the ECB for the euro indent 10–15*
Number of EU member states joining the eurozone
Effective, simple defence against counterfeiting
Ease of public recognition
*This mainly depends on whether the ECB adopts it for the euro
Source: Pira International Ltd

Before Microperf, the perforations were created mechanically, which was notoriously
difficult and created considerable waste. The comb or pin-cylinder mechanical systems
regularly suffered from worn, broken or missing pins. Microperf’s computer-controlled
precision technology is much less susceptible to mechanical error and can produce much
finer perforations. It can create more complex patterns of optically variable features that
are easily visible to the human eye when viewed in daylight, which makes them popular
with the general public and professional cash managers. The patterns are invisible to
digital reproduction equipment.
Microperf uses laser light to produce oval perforations having different sizes.
They cannot be replicated mechanically or by any printing process. Orell Füssli has an
agreement with KBA-Giori for marketing and selling Microperf. Orell Füssli promotes the
security system to central banks, and KBA-Giori produces and sells the equipment. The
manufacturing technology for Microperf can be implemented on a stand-alone transport
manufactured by KBA-Giori or integrated into one of the main KBA-Giori production
machines.
The latest development is Microperf Latent Image. This combines two Microperf
patterns, one hidden within the other. The unhidden pattern is visible when the banknote
is held up against a light source. The hidden pattern, concealed in the same place, only
appears when the note is tilted backwards from the vertical.

Suppliers Four companies have dominated the available banknote paper market for many years.
They also supply some of the SPWs. Crane & Co. of the US is the exclusive supplier to
Paper substrate the BEP; it exported very little banknote paper until it acquired Tumba Bruk, the former
Swedish SPW and papermaker. The other three companies are Portals, part of De La Rue;
Papierfabrik Louisenthal, part of Giesecke & Devrient; and Arjo Wiggins Appleton, part of
the Worms Group. The largest banknote paper supplier is Portals. It supplies over 50% of
the available world market. The companies do not produce separate financial statements
for banknote papermaking. They lump it with other security papers and security printing
segments.
Many of the countries with SPWs also have state papermaking operations. This is true
of countries with the largest populations and greatest banknote production indents, such
as India, China, Indonesia and Russia. Crane & Co. produces all the paper for the BEP.

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Private banknote paper suppliers are sometimes involved in supplying the SPWs when the
state papermakers cannot meet demand, but these are always one-off orders even if they
are sometimes very large. Table 3.7 lists the banknote paper suppliers in order of market
share, but these positions can be affected by winning a single large contract, such as
when Portals and Louisenthal became filled to capacity when they won orders from India
to meet an accumulated shortfall in its banknote paper.

TABLE 3.7 Banknote paper suppliers

Company Parent company Country of origin
Portals De La Rue Plc UK
Papierfabrik Louisenthal Giesecke & Devrient GmbH Germany
Arjo Wiggins Arjo Wiggins Appleton Plc (Worms Group) France
Crane & Co./Crane AB Crane & Company Inc. US
Gianasso Graphic Group International* General Graphics Ltd Belgium, Italy
*This is a trade name of General Graphic Ltd, a papermaking joint venture with Gruppo Cordenons
Source: Pira International Ltd

Long-life paper All the papermakers have introduced ‘long-life’ papers. These are cellulose-enhanced
products that, according to claims, can compete with the durability of the polymer
product, are more cost-effective and feel like conventional banknote paper to the end user.
A proper banknote feel is considered vital for public recognition of genuine banknotes.
Polymer manufacturers dispute these claims, which are now part of an ongoing debate.
The four major banknote paper manufacturers have added more linen and silk fibres
to the conventional 100% cotton mix to obtain these products (Table 3.8). The Domtar
Corporation of Canada has produced Luminus, a similar long-life paper. All these products
are essentially the same, but each manufacturer claims that its product is the best on the
market. They perform essentially the same functions. The makers all claim that these long-
life papers are almost as durable as polymer. The polymer manufacturers dispute it. The
cost of the long-life papers falls roughly between the cost of conventional substrates and
the cost of polymer substrates.

TABLE 3.8 Suppliers of long-life banknote papers

Product Produced by Country of origin
Platinum De La Rue/Portals UK
Stronglife Giesecke & Devrient/ Germany
Papierfabrik Louisenthal
Diamone Arjo Wiggins France
Marathon Crane & Co. US
Source: Pira International Ltd

Polymer substrate Introduction of polymer substrate in place of conventional banknote paper was a
profound technological change. Even after DuPont’s difficulties with Tyvek during the
1970s, the search continued for a polymer alternative that would be more durable than
conventional banknote paper and provide greater security against counterfeiting. To

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date, the only polymer substrate that has been sold and successfully used on banknote
production has been Securency’s Guardian, first used in 1988 on Australian banknotes.
The substrate was developed by Note Printing Australia, the printing arm of the Reserve
Bank of Australia (RBA), in conjunction with the Commonwealth Research Institute and
UCB of Belgium.
The development costs were high, but RBA was extremely satisfied with the results.
The polymer banknotes had a much longer life than conventional paper substrates.
Counterfeiting, considered a real problem by the bank, fell by over 80% and this success
continued as Australia moved to exclusively polymer-based currency by 1996. So far there
has been no successful polymer-based counterfeit, only easily recognised paper attempts.
To recoup the development costs, RBA established Securency to market the product to
other countries and HSPs. Securency is now a joint venture between RBA and Innovia
Films, and the Guardian banknote substrate is now used by 24 countries; some countries
use it for all their denominations.

DOVIDs In spite of the proliferation of DOVID producers, there remain nine major companies that
supply the banknote printing industry and its substrate suppliers:
 OVD Kinegram, now part of Leonhard Kurz
 Hologram Industries
 Hueck Folien
 De La Rue Holographics
 ABN Holographics
 Applied Optical Technologies
 API Holographics
 Light Impressions
 CFC Banknote Holographics.
DOVIDs, including holograms, have seen rapid development since the 1970s. Holograms
were swiftly adopted on banknotes after Visa and MasterCard introduced them in 1982
for card validation and to combat counterfeiting. Holograms are subdivided into reflection
holograms and transmission holograms. The difference depends on the orientation of
the hologram’s microscopic structure. Here are some DOVIDs in common use on security
documents and cards, and in the packaging industry:
 Transmission holograms
 Reflection holograms
 Diffraction gratings
 Embossed gratings and holograms
 2D images
 2D/3D images
 3D images
 Stereograms
 Photopolymer holograms.

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The proliferation of hologram and security foil producers worldwide and easier access
to cheaper, smaller and more convenient production machinery has driven the main
banknote industry suppliers to research and develop ever more sophisticated and
secure DOVIDs. They have made significant advances and some new systems are aimed
specifically at the banknote printing market. Here are some of the most effective:
 OVD Kinegram has produced ‘novel surface gratings’ that display a complete change
from red to green when rotated through 90°.
 Hueck Folien’s Colour Switch is available in eight colourways and provides
immediately identifiable change of colour when the viewing angle is changed.
 The Hologram Industries DID is a diffractive identification device that can incorporate
a red–green or green–red shift as a patch, stripe or thread.
 Motion from Crane & Co. is a micro-optic security thread embedded in the substrate.
 The WinDOE feature of Securency Guardian polymer substrate is a light-diffracting
structure embossed into the surface of the substrate in a clear window area. It is
visible when the note is held up to the eye and a point source of light is brought into
the line of sight.
There has been strong and steady growth in the use of DOVIDs on banknotes, and they
are now used on around 30% of all banknotes. Growth forecasts indicate that 45–65%
of banknote issuers will have adopted them by 2011.
The world has hundreds of DOVID producers, but only a few have the technical
expertise, security and confidentiality to be direct suppliers to the banknote printing
industry. For example, the ECB was stringent in its selection of companies to produce
DOVIDs for the launch of the euro in 2002. Only five companies qualified. Table 3.9 lists
the major suppliers to the banknote industry. They have quite small sales to the banknote
industry; most of their DOVIDs go on other security products such as cards, brand
protection, and other more commercial products. But their eligibility to produce DOVIDs
for banknotes validates their security status and enhances their reputation in all the other
fields. Consequently, they like to be recognised as banknote industry suppliers.

TABLE 3.9 DOVID suppliers to banknote printers and papermakers

Company Country of origin
Leonhard Kurz GmbH Germany
Hologram Industries France
API Holographics UK
Applied Optical Technologies UK
De La Rue Holographics UK
Hueck Folien/Giesecke & Devrient Germany
OVD Kinegram, formerly owned by Landis and Gyr, now part of Kurz Switzerland
ABN Holographics US
Light Impressions UK
CFC Banknote Holographics US
Source: Pira International Ltd

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The latest DOVID developments are too numerous to list individually, but together with
DID technology, they grow rapidly more sophisticated. Fundamental questions are their
cost and whether having too many on the market impairs public recognition, crucial to
their use as a security feature.

Banknote ink There are hundreds of ink manufacturers in Europe alone, many more throughout the
world, but only a handful compete in the security printing market. It is such a specialist
market and order volumes are often extremely small, so in the past 20 years all the major
international ink makers have sold their operations to more specialist companies that
supply the specific requirements of security printers. These companies produce inks used in
other non-banknote security printing operations, but non-banknote inks are not covered in
this report. The banknote ink market has an even smaller number of suppliers, as the main
ink volume is for intaglio printing (Table 3.10). Some of the SPWs have ink makers that
make ink exclusively for them.

TABLE 3.10 Ink suppliers to banknote printers

Company Products Country of origin
Sicpa Intaglio banknote inks Switzerland
OVI inks
Wide range of other security inks
Authentication inks
Huber Group/Gleitzman Wide range of security inks Germany
Luminescence Wide range of security inks UK
Gans Wide range of security inks US
Source: Pira International Ltd, company reports and technical literature

Sicpa of Switzerland has dominated the ink market for many years and continues to
do so. It supplies over 85% of the world’s intaglio banknote printing inks and holds
the patent for OVI. It supplies many of the SPWs. No other company in the world has
equivalent expertise in producing intaglio inks for banknote printing or has equivalent
production facilities. A few other companies supply the HSPs and SPWs with their litho
and letterpress inks, which are the same as inks used by general commercial printers.
Sicpa has plants in 14 countries, 22 primary manufacturing sites, 20 applications
centres and 44 colour centres. It supplies countries in all five continents, with locations in
Switzerland, the UK, the US, Canada, Argentina, Australia, Brazil, China, Germany, India,
Spain, Indonesia, Malaysia, Mexico, Nigeria, Pakistan and South Africa. Sicpa is a private
company and does not publish detailed financial results. Its most recent figures reveal
it has sales of over €650 million and about 3,500 employees. Sicpa’s Swiss intaglio ink
plant produces around 6,000 tonnes per year. The sales value of banknote inks is not
recorded separately by Sicpa, but of the companies in Table 3.10, only Sicpa produces
intaglio inks, mainly for banknotes, and its intaglio ink sales are estimated at around
€105 million per year.

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4
See page 42 for full descriptions and diagrams of all the main printing processes,
including those used in banknote printing.
All the banknote printers can increase their capacity by installing additional banknote
printing lines. Each new line can produce around 1 billion banknotes per year. But the
banknote printing lines are expensive and capital expenditure commitment can usually
be justified only by advance notice of orders. Yet advance notice is rare, as these orders
originate from national central banks under government control. The lines are usually
built to customised order, so notice is also required by the machine manufacturers. The
lead times are measured in years not months.
There are two major suppliers of banknote printing machinery in the world, but
one of them accounts for over 98% of the machines used to print banknotes. The two
companies have limited capacities to produce banknote machinery. Their capacities could
be expanded but it is likely they would need advance notice before expanding capacity.
Lead times would be measured in years not months.
There are seven stages in sheet-fed banknote printing, eight if you include precoating:
 Simultaneous two-sided multicolour litho printing usually by the dry litho process
 Printing of OVI
 Application of diffractive optically variable image devices (DOVIDs) such as
holograms and foils
 Printing the intaglio backs
 Printing the intaglio fronts
 Numbering
 Examining and finishing the banknotes.

Sheet-fed intaglio Machinery supply is dominated by one major company. The complete banknote
production line used by all the banknote printers is manufactured by KBA-Giori, which
supplies over 98% of the banknote printing industry. Here is an ideal configuration using
KBA-Giori’s inline production control process and automated sheet-form final inspection
machinery.

Litho Simultaneous double-sided printing in perfect register using a Super Simultan IV,
capable of 10,000 sheets per hour, fitted with the InkCheck automated invisible feature
management system, which measures and controls the invisible or machine-readable
properties of ink such as infrared positive or negative, ultraviolet-sensitive elements and
magnetic inks. It is also fitted with a ColourCheck automated colour management system
to ensure there is no deviation from colour or ink specifications and for closed-loop
corrective action at this first stage.

OVI The NotaScreen printing OVI machine can do 10,000 sheets per hour and is fitted
with ScreenCheck to monitor the presence and position of multiple OVI-type print features
such as colour shift or iridescent inks. The completeness and precise registration of the

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OVI image is critical as the image may be overprinted or embossed at later production
stages.

OVD The OptiNota H foil application machine can do 10,000 sheets per hour and is
fitted with FoilCheck that inspects every note on every sheet to ensure the completeness
and position of the OVD.

Intaglio Super Orlof intaglio printing machines can print 10,000 sheets per hour and are
fitted with InkCheck to measure and control the invisible or machine-readable properties
of ink such as infrared positive or negative, ultraviolet-sensitive elements and magnetic
inks. By the time the printed sheet receives its second intaglio printing, over 85% of the
cost has been incurred, and it is critical that the intaglio stage is controlled not only in
isolation but in relation to all previous stages. The machines should therefore also be
fitted with NotaSave III, which acquires the image of every note on every sheet at high
resolution and in full colour. It then inspects the entire image for every print feature
present and in relation to the totality of the printed design, and detects foreign objects
or marks, checks portrait quality and substrate quality and integrity. Any deviation from
specified parameters is highlighted on the central screen and the operator alerted. If
quality standards drop below a certain level, the machine is automatically stopped so
corrective action can be taken and no further costs are incurred on defective work.

Final sheet inspection NotaCheck II does automated inspection at normal production

speeds of 10,000 sheets per hour. It inspects all visible and invisible features on both
sides of every banknote in full colour, marks defective notes and segregates them. This
enables good notes to go straight to the numbering stage. Partially good sheets can
be diverted to one of the next stages in the production line (see below), allowing 100%
good recovery from partial waste sheets and sending totally rejected sheets for immediate
destruction on the NotaShred Destruction machine. NotaCheck is now integrated with the
Super Numerota numbering machines and KBA-Giori markets them as the Super Check
Numerota, which inspects, marks, segregates and sequentially numbers in one continuous
process.

Numbering Before the introduction of the Super Check Numerota, the Super Numerota
212 high-speed numbering machine would have been the next step in the KBA-Giori
process, and is still widely used by companies yet to re-equip with the combined
inspection and numbering systems.

Finishing The CutPak automated cutting, counting and packing system is also a major
security system. All operations take place in one enclosed machine that requires no
manual intervention or human contact with the finished notes. Within the machine the
ScanDisc counting system not only counts sheets or single notes at high speed but also

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inspects the cut quality of the notes. The system involves a double-counting fail-safe,
and the notes are finally delivered from the machine shrink-wrapped in packets in any
programmable numbering sequence ready to be packed for shipment.

Komori The only alternative banknote machinery supplier is Komori Corporation of Japan. It
makes super-size sheet-fed intaglio machines and dry offset simultaneous litho printing
machines. It is a direct competitor to KBA-Giori. Three SPWs use Komori machinery. Japan
uses them for all its banknote production. India and Nigeria use them for some of their
production requirements, as they also print on KBA-Giori lines.

Main suppliers Table 4.1 gives the main suppliers of banknote printing machinery. All the banknote
printers use ancillary machinery for counting, checking and waste destruction. Table 4.2
gives the main suppliers. It also gives the main suppliers of DOVID application machinery
and foil stamping equipment used by the banknote industry. KBA-Giori makes both types
of machinery but is omitted from Table 4.2 as it appears in Table 4.1.

TABLE 4.1 Main banknote printing machinery suppliers

Manufacturer Type of machinery Country of
origin
KBA-Giori Intaglio, sheet-fed Switzerland,
Dry litho, sheet-fed Germany
Letterpress numbering machines
Intaglio platemaking equipment, including
CTIP technology
Banknote cutting and packing machinery, CutPak
NotaSave III
NotaNumber II
NotaShred Destruction
OptiNota H OVD application
NotaCheck automated banknote examining system
Super Check Numerota, combined automated
banknote examining and numbering system
Komori Intaglio, sheet-fed Japan
Dry litho, sheet-fed
Letterpress numbering machines
Drent Goebels Web intaglio Germany
Wet offset, web with infrared drying
Dry litho
Miller Dry litho perfecting Germany
Solna Dry litho perfecting Sweden
MAN-Roland Dry litho perfecting Germany
Heidelberg Dry litho perfecting Germany
Letterpress numbering machines
Source: Pira International Ltd, technical publications

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TABLE 4.2 Banknote ancillary machinery suppliers

Company Product Country of origin
Kusters Engineering BV Currency disintegration and briquetting systems Netherlands
Security Engineered Machinery Currency, card and other security documentation US
destruction and briquetting systems
Vacuumatic Counting equipment and machinery UK
LedaVision, part of Vacuumatic Banknote and cheque number verification systems UK
Artfoil Graphic Machinery Ltd, Foil stamping equipment and cylinders, UK
with Artfoil Services hologram printing
Gianasso Graphics Group/ Hologram application machines, Belgium, Italy
Gruppo Condenons varnishing machines
Dimuken Hologram application machinery UK
Source: Pira International Ltd, technical publications

Enhanced intaglio Intaglio printing is the main banknote printing process and this will continue for the
foreseeable future. Only SPWs and HSPs have true intaglio equipment. It remains
extremely expensive and there are careful controls on who it is sold to. The SPWs and
HSPs carefully monitor who buys second-hand equipment. Most counterfeits produced
in large quantities by serious criminals are litho copies; opportunistic counterfeiting by
colour photocopying was a growing threat but the copier manufacturers appear to have
stopped it. Litho and photocopy counterfeits are rarely produced on the correct substrate.
The wrong substrate and the absence of intaglio printing mean that counterfeits do not
have the tactility of genuine banknotes – they do not feel right to the general public. This
is an important security feature. If a banknote feels wrong, it arouses suspicion, people
will examine it more carefully and ask questions, even though many cannot say why it
feels wrong. The European Central Bank (ECB) highlighted this feature in its ‘Feel, look,
tilt’ campaign for the euro launch on 1 January 2002.
According to ECB research following the campaign, here are some of the other main
security features and the fraction of the public that knew about them: watermark 64%,
hologram stripe 57%, optically variable ink 34%. The average level of awareness was
54%, and only 11% of people questioned said they could recall no security features in the
euro notes. This compared well with research carried out by the US Bureau of Printing and
Engraving (BEP), which showed that 30% of the US public were aware of certain security
features, chiefly security threads and watermarks, and 15% were aware of none at all. The
BEP is spending $50 million on a publicity campaign to launch its new banknotes. The
ECB campaign cost €80 million.
At the end of the 1990s, some people doubted whether intaglio would remain
the central feature of high-security printing. American Express dropped intaglio on its
traveller’s cheques and opted for other security features that it thought the public could
identify more easily. It said that people did not notice the tactile feel of intaglio unless it
was heavily printed. Counterfeiting dropped dramatically. HSPs and SPWs were concerned
this might be the beginning of a trend, but there is no evidence yet. At about the same
time, other organisations such as the Japanese State Printing Bureau, the Bank of England
(BoE), the ECB and various other central banks were arguing the opposite case. The BoE

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abandoned web intaglio at the end of the 1990s and lack of tactility was one of the
reasons it gave.
The BoE and its allies argued that they should try to maximise the 3D effect and
produce the heaviest tactile feel on banknotes. The way to do this would be to return
to intaglio printing at its most fundamental level with heavily hand-engraved security
origination (or CAD that produced the closest effect), metal plates instead of plastic
plates, the continued use of sheet-fed intaglio presses instead of web presses, and the
abandonment of some ink-saving devices that are regularly used to reduce the cost of
expensive intaglio ink. The basis of their argument is that people recognise the tactile feel
of banknotes without any special equipment or separate optical devices. In fact, it often
happens subliminally. The latest computer-to-intaglio-plate (CTIP) systems and intaglio ink
technology, including enhanced drying and ink-saving systems, could even lead to double-
sided intaglio banknotes for added security on high denominations.
Since the late 1980s, computer-aided design (CAD) systems have rapidly become
much cheaper and more powerful. CAD has replaced the time-consuming and costly
design and hand-engraving elements of banknote production and plastic plates are
increasingly used instead of the traditional nickel plates. Many in the industry believe
that the plastic plates do not produce the same definition, quality and 3D effect as the
metal plates. This is disputed by the plastic plate users. Many companies retain craftsmen
designers and engravers to cater for specific customer needs such as portraits, where
hand engraving is still considered superior, but most of the other design elements are now
produced by CAD systems.
All the HSPs and many SPWs have their bespoke systems built from hardware and
software commonly used in the printing industry, but customised for banknote printing.
There are only a few major CAD systems purpose-designed by specialist companies and
sold to the banknote printers as the market is relatively small. KBA-Giori of Switzerland
and Jura of Hungary are the leaders and both produce CTIP systems where the CAD
package links directly to a plate-maker. CTIP systems have gained a major place in the
industry and have recently got much better at reproducing the user’s exact requirements
for light, shade and depth. CTIP can speed up engraving without sacrificing quality. It
adds dimension to the printing by controlling the depth and width of each pixel, so
it allows a much wider dynamic range to be captured on a plate. Table 4.3 shows the
technology transition for CTIP.
Most banknote producers have adopted KBA-Giori’s CTiP, a CTIP system specifically
for use with sheet-fed presses. It allows a designer to design and assemble a banknote
then output it directly in a format ready for galvanic plate reproduction. Jura has recently
developed a direct laser engraver with cooperation from Komori of Japan. Many in the
industry considers Jura’s CAD system to be the best on the market. The laser engraver is a
logical step and a major development. By engraving directly onto a trilayer metal plate it
eliminates the galvanic processes that can take up to one week per plate. It could greatly

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TABLE 4.3 Technology transition table: CTIP, 2006–11

CTIP types in 2006 Key drivers for change Development by 2011
Sheet-fed intaglio Lower labour costs A 90% take-up by the six largest HSPs, which produce 96% of
KBA-Giori’s CTiP Shorter time to press available banknotes
Increased throughput Introduction into all new HSP joint ventures
Two-sided intaglio print Increasing take-up by SPWs as they re-equip
New equipment installed at SPWs
Building of new HSPs
Rotary or web intaglio Lower labour costs An 80% take-up by the web banknote printers
Drent Goebel Shorter time to press
Tech Epikos Increased throughput
Two-sided intaglio print
New equipment installed at SPWs
Building of new HSPs
Prices Continuing reductions in computer costs A 10–15% reduction in prices by 2011
Not finalised on any system Economies of scale
Source: Pira International Ltd

increase plate production rates and cut costs substantially. The first of its kind, it is so new
it has yet to be taken up by any HSP or SPW.
Orell Füssli of Switzerland has also developed a laser-based CTIP system in
cooperation with KBA-Giori, but this is currently for litho plate-making. It is being
developed further for intaglio platemaking and this version is not yet on the market. Tech
Epikos of Italy markets a system for use with rotary web intaglio presses. It has supplied
over 20 rotary intaglio presses to the security printing industry, mainly for printing
stamps. These machines can print other high-security products but not banknotes. Tech
Epikos developed the Epikos 4000 CAD system and has now produced the Epiplate CTIP
system to link with it. The system uses laser engraving to produce plates up to 1,000mm
× 1,000mm. It can be used with any other CAD system. With the increased use of web
intaglio for banknote printing (see below), it could well find opportunities in the banknote
market alongside the main web intaglio presses made by Drent Goebel.

Web intaglio Web intaglio printing for banknotes is used by Denmark, France, Algeria and Finland.
Drent Goebel is the major producer of web intaglio machinery and supplies web intaglio
presses all over the world for other security printing production operations as well as
banknotes, notably postage and other stamps. Algeria has the world’s latest web intaglio
operation for banknote printing, installed in 2005.
There have always been three main reservations about web intaglio banknote
printing:
 It cannot match the tactility of sheet-fed intaglio. Although it can deliver fine lines
plus some depth in portraits and vignettes, it does not leave enough ink on the paper
to produce the highly tactile feel of sheet-fed intaglio, or the 3D effect so difficult to
replicate by any other process.

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 Because of the way the presses have to be manufactured, web intaglio cannot provide
the wide range of cut-sheet sizes required by HSPs serving different countries with
widely different banknote sizes.
 Engineering reasons dictate a narrow web width and the narrow width limits
production output.
Web intaglio is widely used to produce postage stamps, tax stamps, tax banderols, bonds,
cheques and other security documents. Tech Epikos, which also produces a CTIP system,
has supplied over 20 rotary presses to countries such as Italy, France and Latvia; Drent
Goebel (Goebel Graphic Machines GmbH) is the world’s largest supplier of intaglio web
presses. But the use of web intaglio as a banknote production process has been confined
to SPWs that continually produce standard-sized banknotes for the countries they serve.
Denmark, Finland, Algeria and France currently use web intaglio. The BoE used it
until the 1990s to produce its lowest-denomination note, the £5 note, on presses built by
Baker-Perkins of the UK. At that time, the BoE was also working with Banque de France to
develop SNOW – single note on press. Banque de France wanted to continue the research
and develop the double note on web press, but BoE considered it would be too expensive
so it backed out and returned to sheet-fed production. The French developed the double-
note press, which suited their banknote design until it was superseded by the euro.
The latest Drent Goebel press has been installed at the Hôtel des Monnaies de la
Banque d’Algerie. This is the third working production line at Algeria’s SPW. The existing
Goebel presses were installed in 1975 and have been producing Algerian banknotes ever
since. The latest press is equipped with the most up-to-date web intaglio technology:
 Reels are spliced at full production speed from a non-stop reel unwind unit. This gives
automatically controlled perfect register to the watermark pattern.
 All subsequent printing and processing is automatically controlled to be in precise
register with the watermark.
 A silk screen printing unit applies OVI and has an ultraviolet (UV) and hot-air
drying system. This obviates the need for separate OVI application, as in sheet-fed
production.
 A four-colour wet offset printing tower uses the Orlof principle to apply four different
colours on one wet offset plate. This is claimed to be superior to the normal dry offset
used in banknote printing, producing perfect intercolour register and advantages in
fine-line printing.
 A four-colour intaglio station uses the Orlof principle to apply four different colours
on one intaglio cylinder.
 The intaglio cylinder has a quick-change sleeve system for fast make-ready. The sleeve
can be created by physical engraving, chemical etching or galvanic electrodeposition.
 Intaglio and offset are printed then cured in an infrared (IR) curing system. There is
no need for intermediate drying between offset and intaglio units and this improves
registration accuracy.

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 Double-sided intaglio printing in the same line means that a banknote is printed on
its reverse side, passes the relevant IR drying system and chill unit then it is turned
over and goes through the same operations on its front side.
 There is an inline numbering system.
 The online control system stores a master print of the front and reverse sides then
uses it as a master reference sample. Deviations from the master reference sample
can be monitored and recorded.
 Final delivery can be in reels, sheets or stacks.
 All process and inspection systems can be monitored and controlled from the main
control panel.
There would be greater use of web intaglio if the three main reservations could somehow
be addressed. The trend towards heavier intaglio printing to increase tactility and 3D
effects appears to go against web intaglio. Its adoption by more countries will depend on
how governments, central banks and national banks decide to re-equip SPWs and whether
their printing operations will be exclusively dedicated to one currency. These decisions are
impossible to forecast.

Automated Once the Holy Grail of all banknote printers, full-sheet banknote examining systems do
examination away with the labour costs of manual examination before cutting and packing, once a
large fraction of the total production costs. Increasingly sophisticated optical character
recognition (OCR) systems became available by the mid 1990s and ultimately KBA-Giori’s
NotaCheck II separated good sheets from flawed sheets. The Super Check Numerota was
introduced at the numbering stage to inspect, mark, segregate and sequentially number
sheets in one continuous process. Only the good sheets are numbered; the flawed sheets
are diverted to the NotaNumber II, which automatically salvages partially good sheets.
KBA-Giori so improved the software and hardware for the Super Check Numerota
that it led to a complete reappraisal of waste reduction and now automated checking
devices are placed in the early stages of banknote production to reduce waste early on
and improve quality in the later stages. Other companies provide some of these elements
on their machines, but KBA-Giori dominates the banknote market; 95% of the world’s
banknotes are printed on its machines.

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The different elements of an automated examining system can be introduced gradually

as SPWs and HSPs re-equip and replace, and production lines can operate one or more
elements of the complete system. Table 4.4 estimates percentage usage of automated
examining equipment in 2005 and gives forecasts for 2011.

TABLE 4.4 Automated examining systems: part or complete usage, 2005–11

HSPs SPWs
Estimated use in 2005 (% of total number of HSPs or SPWs)   80 40
Forecast use in 2011 (% of total number of HSPs or SPWs) 100 60
Driver for change Lower labour costs Lower materials
costs
Source: Pira International Ltd

Giesecke & Devrient markets a single-note inspection system, ideal for euro banknotes
as the ECB is the only major issuer not to demand consecutive numbering. The Stevens
Company of the US developed a system with BoE, but financial problems caused it to sell
the idea to Joh. Enschedé. The system has not been put on the market.

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 Developments in Banknotes
Appendix
Processing developments C: The basic printing processes

The basic printing This brief

This brief section
section has
has been
been included
includedfor
forthe
thebenefit
benefitofofreaders
readerswho
whomaymaybebe considering
processes brand-protection
considering strategies
security and
strategies have
and nono
have prior knowledge
prior knowledgeofofthe
theprinting
printingindustry and
its processes.
industry and its processes.

Letterpress
Letterpress Letterpress is the oldest of the printing processes. It depends upon an image area that is
raised above the non-image area (see Figure 4.1).
A.1). The raised image area is ‘inked’ with a
‘paste’ ink before it is brought into contact with the paper or board to be printed.

A.1 The letterpress forme

FIGURE 4.1

Source: Pira
ChrisInternational Ltd
H. Williams Associates/Pira International Ltd

With offset letterpress – more often known as ‘dry offset’ – the ink is first transferred to a
rubber-surfaced blanket before being ‘offset’ on to the paper. Letterpress is most widely
used for numbering, as ‘numbering boxes’ will allow the number to be increased by one
for each impression. Dry offset is widely used to print water-fugitive inks on cheques etc.

Litho
Litho The litho printing plate has both image and non-image areas in the same plane, but the
image is chemically treated to readily accept oil-based printing ink and the non-image area
is treated to accept water (see Figure 4.2).
A.2). As oil and water do not readily mix, the plate on
the printing press is damped with water which wets the non-image area and prevents the
ink from transferring from the ink roller to the wet area. The ink will only transfer to the
non-image area. Most litho printing is offset from a blanket to the paper being printed.

FIGURE 4.2
A.2 The litho printing press

Source: Pira
ChrisInternational Ltd
H. Williams Associates/Pira International Ltd

The litho (or offset litho) process is widely used for both security and commercial printing.

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FIGURE A.3
4.3 Intaglio printing

Source: Pira International Ltd

Intaglio
Intaglio The intaglio process uses an engraved metal printing plate in which the image is formed
by lines and channels cut into the plate. The lines can be very fine and the engraving very
deep so that the ink film can be felt on the print. Very high viscosity paste inks are applied
to the plate and a pad is wiped across the plate to remove surplus ink from the surface,
leaving the ink in the engravings. The ink is then transferred directly to the paper under
high pressure (see Figure 4.3).
A.3).
The intaglio process is widely used for the security printing of banknotes,
passports, postage stamps and cheques, because it is hard to copy by the other processes.
It is used rarely for commercial printing other than for some fine art prints.

Screen
Screenprinting
printing Screen printing utilises an open mesh (e.g. nylon or polyester) stretched tightly on a frame
(see Figure 4.4).
A.4). A photo-sensitive emulsion has been selectively exposed through a
positive to create the image projected on to the screen. The emulsion is solidified in the
non-image areas and the rest is washed out. The ink is forced through the screen by a
flexible blade (the squeegee) on to the substrate that is supported under the screen.

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FIGURE A.4
4.4 Screen printing frame

Source:
Source: Pira
ChrisInternational Ltd
H. Williams Associates/Pira International Ltd

This process is used where the heavy film that is deposited (see Figure 4.5)
A.5) is of value.
Examples include plastic cards and security labels as well as point of sale displays, posters,
road and other exterior signs, bottles and containers, printed electronic circuit boards and
textile printing.

FIGURE A.5
4.5 Ink film thickness

Source: Pira
ChrisInternational Ltd
H. Williams Associates/Pira International Ltd

Gravure
Gravure Gravure printing is similar to intaglio in that the image is recessed below the non-image
surface, but the image is broken up into a series of cells of varying depth. The image
cylinder runs directly in a tray of very low viscosity ink and the surplus ink is removed with
a ‘doctor blade’ (see Figure 4.6).
A.6).

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FIGURE 4.6
FIGURE A.6 Gravure
Gravure printing

Source: Pira International

Source: Chris Ltd
H. Williams Associates/Pira International Ltd

The use of the gravure process for security printing is largely limited to postage stamps as
it is only economic for longer production runs. It is also widely used in flexible packaging
and in long-run magazine production.

Flexography
Flexography Flexo printing is similar to letterpress in that it uses a raised image and a recessed non-
image on a flexible photopolymer plate. It differs in that the printing press is substantially
simpler, it uses ‘liquid’ inks and is usually web fed (see Figure 4.7).
A.7).

A.7 The flexo printing press

FIGURE 4.7

Source:
Source: Pira
ChrisInternational Ltd
H. Williams Associates/Pira International Ltd

Apart from label and ticket printing, the security printing applications of the process are
limited. The major use of flexo is in packaging applications and newspaper printing.

Inkjet
Inkjet The inkjet processes operate by projecting a stream of very small droplets of a very low
viscosity ink on to the item to be printed (see Figure 4.8).
A.8). The key to the process is that the
stream of droplets is controlled by the digital data from a computer. This means that,
unlike the other processes, the image to be printed can be varied for every print and the
documents can be individually personalised.
There are a number of other variations on the technique but continuous inkjet
(CIJ) is the most widely used for date, code and batch numbering.

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Appendicesdevelopments

Other digital
Otherprocesses
digital The majority of the other digital processes are based upon electrostatic printing technology
processes which uses the principle that opposite charges attract and like charges repel (see Figure
4.9).
A.9). A latent image of electrostatic charge is formed on a photo-conductive surfaced drum
and the latent image is ‘developed’ with a powder or liquid toner. The image is then
transferred to the material to be printed and fused to the substrate.

FIGURE 4.8
FIGURE A.8 Inkjet printing

Source: Pira International Ltd

These electrostatic processes are used in colour photocopiers as well as in

Xeikon/Chromapress short-run printers, Indigo demand printing systems and high-speed
printers such as DocuPrint and Nipson.

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FIGURE 4.9
A.9 The electrostatic principle

Source: Pira International Ltd

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 Regulation and legislation
5
Strange as it may seem, the production and issuing of banknotes are not governed by
any legislation or regulations. The same was once true of passports, identity cards, driving
licences, visas, travel documents, temporary residence permits, border control papers
and shipping documents. There were no internationally agreed specifications. Groups
of countries such as the EU did move towards standardising passports, identity cards
and driving licences, but mainly because the technology allowed. The atrocities of 11
September 2001 and the subsequent ‘war on terror’ focused attention on the security of
border documents such as passports. The International Civil Aviation Organisation (ICAO),
part of the United Nations, regulates international air travel documents and, after almost
five years, it is well on the way towards standardising all the world’s passports so they will
be machine-readable, secure, historically traceable and designed to prevent undesirable
movements across all borders.
It has taken five years of international cooperation to get close to a passport
standard. Imagine the difficulties of standardising national currencies. At least 232
countries issue their own currency, and each currency comes in different denominations
having different designs and demanded in different volumes to suit the national economy
at a given time. Approximately 1,180 banknote denominations go into circulation each
year. It would be impossible to standardise such a diverse set of documents.
National currency specifications have evolved in the past 200 years, largely based on
the development of promissory notes issued by gold merchants, governments, banks and
other organisations. The technical specifications were adopted and adapted by different
countries at different times to protect the notes against illegal copying, counterfeiting
and forgery. The countries with the most successful economies were the most concerned
about the security and authenticity of their currencies. Their technical innovations were
progressively adopted by other countries and, in the past 50 years, a set of fundamental
requirements have evolved for secure banknotes.
No country has passed legislation that controls the technical specification of any
banknote. Governments simply choose the denominations for their currencies and leave
the technical specifications to the issuing authorities. These issuing authorities are
advised by their banknote suppliers, which could be state printing works (SPW) or high-
security printers (HSPs). SPWs and HSPs work closely with the machinery and materials
suppliers to improve the security of their products against counterfeiting and forgery.
There is a large market in machinery for automated counting, checking and dispensing
of banknotes, especially in developed countries. But machinery suppliers deal with the
existing and planned banknote designs and have no influence on what they will be.
The banknote printing and materials supply industries are governed by regulations
and legislation on effluent disposal, waste destruction, solvent handling, health and
safety, fire safety, etc., just like any other printer or materials supplier. Effluent disposal is
a particular problem for intaglio printing and so are waste ink disposal, solvent disposal
and solvent handling. Nevertheless, banknote printers must still adhere to the regulations.
Printed and unprinted banknote paper waste is usually incinerated as it would have

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real value if it fell into the wrong hands. Incineration of banknote paper waste is closely
controlled by the clean air and emissions regulations that apply to all incineration.

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