Are counterfeit pound coins actually an issue? The only real security measure they're known for is patterns / text around the rim which dates back to the days when the metal was valuable enough for people to cut slivers off to melt down while keeping the coin roughly circular.
I find it hard to believe that anyone with the inclination to break the law in such a big way, and the resources to do it, would chose pound coins as the thing to counterfeit. I could be completely wrong..?
Edit: Of course I presume I must be wrong by the fact that this coin is being introduced, I guess my question is how wrong am I - how is making fake coins worth the effort?
The Royal Mint regularly conducts surveys to estimate the level of counterfeit £1 coins in the UK. A survey undertaken in November 2013 found that the rate of counterfeit UK £1 coins in circulation at the time had risen from 2.74% to 3.04%.
Ok, so there's a claim I don't understand: ""One in 30 pound coins is counterfeit, and that costs businesses and the taxpayer millions each year," Mr Osborne continued." - but if they take ~2M of them out of circulation every year (which I assume means only a bit more are added), that means we effectively cancel (using £2.2 trillion M4 money supply in 2010) 0.00009% inflation. Since the current inflation is at ~2%, this should not even register. I mean, for others it doesn't matter who produces the new money to regulate inflation (apart from the problem of someone gaining <£2M from it, but if that's spread between many parties... who cares?). 35M 1£ coins were minted in 2013 anyway - I get an impression that the cost to businesses and the taxpayers would be lower if they just subtracted the predictions of fakes from the next year's minting.
Happy to be proven wrong of course
(I couldn't find an official estimate of number of coins lost every year, it would be interesting to look at that too)
Well eventually businesses have to take their money into a bank (or similar), at which point any counterfeits will be removed and destroyed. The business therefore takes the hit and loses income, which means they also pay less tax. For a bus company, for example, I'd imagine it would be a significant problem.
Bus companies in the UK have big coin counting machines. The total cash at the end of the route is tallied off at the end of a route against the charge sheet from the ticket machine which is printed out. Rejected currency is seen as an operating cost and is handed back in crates to be disposed of. It's also why you see lots of bus companies giving huge discounts on pre-paid cards etc.
The annoying bit for is that if they accept a high percentage of bad currency this is tracked and the drivers get disciplined so they tend to try and give it back as change before the end of the route (which is why you'll sometimes see them fumbling around in a pocket for change rather than the coin dispenser fitted to the bus).
Therefore always check the change from a bus driver meticulously!
Also if you know a bus driver as a friend, watch your change too as the total amount handed back to the mint for disposal is usually less than the amount collected. Some of it gets stolen usually and pocketed by staff as it's still pretty easy to use in pubs etc.
Source: I used to write route management and payroll software for bus companies that tracked this sort of thing.
Buses I've been on in disparate areas of the UK [England, Scotland and Wales] have all [so far as I recall] had a coin receiving slot - you put the coins in, they are held between plates to enable counting. The drive activates a lever that deposits the coins (in a safe box behind the drivers security screen I think). The drivers don't get to touch the coins. No change is given.
I don't ride the bus very often, it's a bit too expensive. It seems either these are being phased out or you travel on buses in posher areas than I do.
I also rarely get on a bus, but I've never come across ones where the driver didn't touch coins in either Oxfordshire or Cambridgeshire (does make it sound like a posh area thing, but both have shitty areas that buses operate in too..) nor in London (which I think now requires tickets to be bought before boarding.. but could be wrong as I've only ever used my oyster card).
This was London. They still operate busses with trays almost universally and the driver gets to deal with the cash themselves. I've never actually seen that system in London - I have in Nottingham though. I don't tend to get busses now though :)
I used to work for Almex Control Systems who made bus to ket machines.
One of the problems we had was bus drivers who would push coins into the machine through gaps near the ticket printer.
This would short out something in the machine, allowing them to switch to hand written tickets which made it much easier to steal from the bus company.
I was always pleased that they used £1 coins and not, for example, paperclips.
Cool stuff. I worked with wayfarer kit. Absolutely indestructible by bus drivers by design. Right bunch of sods though bus drivers are. The worst class of "user" I've ever had to deal with.
Are the coins really checked / refused? I mean, I realise why that would happen (to prevent someone simply dumping their fake coins straight into their account), but I never thought the coins go through more than a sorting machine. Maybe there are more checks for businesses taking payments almost entirely in coins...
This provides some interesting incentives though... if you can sort the fake/real coins yourself in some way, you can deposit the real ones and use fake ones to pay all small bills (pay utilities, petrol, etc. with coins only)
Comparing to M4 is somewhat of an apples to oranges comparison. M4 encompasses the money multiplier effect (e.g. assuming a reserve ration of 1:10, a bank receives 10 units of currency, keeps 1 in 10 units in cash, and lends out 9 units; the 9 units in circulation result in 0.9 units - 90% or 1:10) being deposited and still assuming a 1:10 ratio - a further 8.1 units being lent out, ad infinitum, or until they fall down the back of the sofa).
In particular, M4 includes liabilities of non-deposit taking financial companies (Other Financial Companies, or OFCs) which tend to be very active in repo (sale and repossession) markets with billions often in one transaction. OFCs include non-banking subsidiaries of banking groups - a trading subsidiary of a Highly Complex Financial Institution (HCFI, industry term) is likely not to have a deposit taking license (and this subsidiary, in theory, should not be bailed out; practice has proved different).
High powered money, or M0, or roughly Notes and Coin, is the best comparison. The latest edition of Bankstats http://www.bankofengland.co.uk/statistics/Pages/bankstats/de... , the Bank of England's monthly statistical release, shows ~68bn sterling outstanding at end January 2014 seasonally adjusted, and ~67bn non seasonally adjusted.
Still, my 0.015% is not a large number, even compounded over many, many, many years.
I also agree that as MV has to equal PY, perhaps the counterfeiters are doing a service! Monetary Easing for no minting / production costs!
QE finances itself by the government issuing debt purchased by a private buyer - liability issued and asset secured - the balance sheet balances. As purchases, the BoE issue cash (a liability) for purchase of gov't debt (an asset) - balance sheets again balance. Therefore, despite their charitable service, counterfeiters are procreating government debt for coin, and governments tend not to like this.
An interesting quirk in the UK that I'm not sure is present in many other countries or jurisdictions: The Mint (the producer of coins) has minting power independent of the Bank of England i.e. the Bank of England (the UK's central bank) cannot tell The Mint the mix or quantity of coins to, ahem, mint. They are completely different government entities with no power over each other (disclaimer: this was the case, circa 2005, the last time I checked).
My feeling on this particular story: All governments strive for a credible currency, and despite the alternate low % numbers you and I mention, is abhorrent to the idea of the public losing trust in it, even a little bit. Plus the budget could have appeared somewhat underwhelming to some, so why not have an easily digested story thrown into the mix to read with some tea and digestives.
If you have the 'right' connections you can buy counterfeit pound coins, e.g. £60 - £80 buys you 100 of them. The price of the fakes varies, the ones that weigh the correct amount come at a premium as you can just put them in to vending machines and get useful stuff in return. The ones that don't work that way are obviously harder to spend, particularly if the colour is not quite as shiny as the proper ones. With those you really do run the risk of getting caught, particularly if you tried to pay for £50 of grocery shopping in pound coins that happened to be extra heavy, nearer black in colour than shiny gold and all from the same year...
There is a whole other economy out there - think drugs - where fake coins are just another thing to sell/launder. People that buy drugs with a view to selling them in order to make the money needed to pay for their own habit are well placed to 'shift' fake coins and notes. They are not going to snitch either, this is because most people that buy drugs have just the one supplier, perhaps with someone else they can call on in emergency drought situations. To grass on their dealer is just not going to happen - they would lose their supply, possibly get nicked themselves and create lots of enemies in their scene. If fake coins get passed on through that same supply route then nobody is going to tell.
The thing with the coins is that they only have to be passed off once from the 'black' economy to regular-commerce-land whereas the Royal Mint has to make coins that circulate for decades. For the counterfeiters it is easy to get the Queen's head stamped on there with some ridges around the edge, getting the weight and colour finish right has cost implications, hence this is not necessarily done to high-class forgery standards.
I do wonder what the police would view as more serious - selling class 'A' drugs or laundering fake currency. I suspect the latter. Nonetheless, I hope that you now see how counterfeit coins have a route to market, why they don't actually have to be that good and how it is that so many exist without anyone being able to say where they come from.
I have a pot that I throw my change in to - there's £27 in £1 coins, and one is either fake or has turned a very dubious colour.
Some fakes are amazingly real looking, some are so fake looking I find it amazing anyone actually believed it was real. I always seem to get them in small shops, pubs and take aways. Usually from independent traders who deal mostly with cash. I guess this is because the fraudsters can get away with passing them off more easily to those kinds of businesses?
To be quite honest I think we all ignore fake pound coins. Yes the obvious ones are obvious but they simply stay in circulation - you are going to use it soon and that person will pass it on too.
I think one pound is below the "worth bothering about" level, which probably makes it an ideal counterfeit target
Perhaps a more pressing issue is the similarity of any particular coin's characteristics with the wide variety of foreign coins available (numismatic birthday attack)
That used to be more of a problem. prior to the Royal mint resizing the 5, 10 and 50 pence coins, the 10 and 50 were exactly the same size as other international coins of a much lower face value. The Kenyan 1 and 2 Shilling comes to mind. A friend at University from Kenya used to use those coins to phone home in payphones. I don't know the specific exchange rate at the time, but they were worth pennies in Sterling from what I remember. The Irish coins, worth less than UK Sterling, also had similar sizes and some of the Australian and New Zealand too. Usually the coins were small face value, but even so, it was possible to pass them off.
Now it works the other way round (the 10 pence is pretty much the same size as a US quarter). Not much of a saving (25¢ is around 15p), but I used to use them from time to time in college while I was doing my laundry.
I have seen fake pound coins in the wild. My brother who does electronics work on fruit machines (low-stakes gambling terminals) has said he sees them all the time.
I couldn't tell you whether defrauding such machines is the 'killer app' to drive coin counterfeiting on a large scale. The UK has millions of betting machines with small payouts (e.g. £50) but a smaller number with larger payouts, concentrated in betting shops, casinos etc.
I've come across about 5 of them: I mainly discover them by vending machines rejecting them. They circulate around small businesses which deal mainly in cash very easily.
I find it hard to believe that anyone with the inclination to break the law in such a big way, and the resources to do it, would chose pound coins as the thing to counterfeit. I could be completely wrong..?
Edit: Of course I presume I must be wrong by the fact that this coin is being introduced, I guess my question is how wrong am I - how is making fake coins worth the effort?