Thursday, August 11, 2016

Detection and Impounding of Counterfeit Notes

Detection and Impounding of Counterfeit Notes
Authority to Impound Counterfeit Notes
(i) All branches of Public Sector Banks.
(ii) All branches of Private Sector Banks and Foreign Banks.
(iii) All branches of Co-operative Banks & Regional Rural Banks.
(iv)All Treasuries and Sub-Treasuries.
(v) Issue Offices of Reserve Bank of India.

Detection of counterfeit notes

Ø Banknotes tendered should be examined for authenticity through machines.
Ø No credit to customer’s account is to be given for counterfeit notes.
Ø Counterfeit notes should not be returned to the tenderer or destroyed.
Ø Failure of the banks to impound counterfeit notes will be construed as willful involvement of the bank concerned, in circulating counterfeit notes and penalty will be imposed for violation.

Impounding of counterfeit notes

Notes determined as counterfeit shall be stamped as "COUNTERFEIT NOTE" and impounded in the prescribed format. Each such impounded note shall be recorded under authentication, in a separate register.

Issue of Receipt to Tenderer

When a banknote is found to be counterfeit, an acknowledgement receipt must be issued to the tenderer, after stamping the note. The receipt, in running serial numbers, should be authenticated by the cashier and tenderer. The receipt is to be issued even if the tenderer is unwilling to countersign it. Notice to this effect should be displayed at the branches.

Detection of Counterfeit Notes - Reporting to Police and other bodies

For cases of detection of counterfeit notes upto 4 pieces, in a single transaction, a consolidated report should be sent by the Nodal Bank Officer to the police authorities or the Nodal Police Station, along with the counterfeit notes, at the end of the month. For 5 or more pieces, in a single transaction, the counterfeit notes should be forwarded for investigation by filing FIR.

A copy of the monthly consolidated report / FIR shall be sent to the Forged Note Vigilance Cell constituted at the Head Office of the bank.

Acknowledgement of the police authorities has to be obtained for the counterfeit notes submitted to them. In case, any difficulty is faced due to reluctance of the police to receive the statement or file FIRs, the matter may be sorted out in consultation with the Nodal Officer of the police authority designated to coordinate matters relating to investigation of counterfeit banknotes cases.

Banks are advised to cover the banking hall / area and counters under CCTV surveillance and recording and preserve the recording for future use in case of detection of counterfeit notes.

Banks should monitor the patterns of such detection and suspicious trends should be brought to the notice of RBI /Police authorities immediately.

The progress made by banks in detection and reporting of counterfeit notes and problems thereof, should be discussed in the meetings of various State Level Committees viz. SLBC, SCCM, SLSC, etc.

The data on detection of counterfeit Indian notes should be included in the monthly Returns forwarded to RBI.

The definition of 'counterfeiting' in the Indian Penal Code covers foreign currency as well. In case of suspected foreign currency note is received for opinion from the police and government agencies, etc., they should be advised to forward the case to the Interpol Wing of the CBI, New Delhi after prior consultation with them.

The Government of India has framed Investigation of High Quality Counterfeit Indian Currency Offences Rules, 2013 under Unlawful Activities (Prevention) Act (UAPA), 1967. The Third Schedule of the Act defines High Quality Counterfeit Indian Currency Note. Activity of production, smuggling distribution and circulation of High Quality Counterfeit Notes has been brought under the ambit of UAPA, 1967.

Examination of the Banknotes before Issuing over Counters, Feeding ATMs and Remitting to Issue Offices of the Reserve Bank

Banks should ensure that cash receipts in the denominations of 100 and above are put into re-circulation only after being machine processed for authenticity. Any non-compliance will be construed as violation.

It is imperative to put in place adequate safeguards before loading ATMs with notes. Dispensation of counterfeit notes through the ATMs would be construed as an attempt to circulate the counterfeit notes by the bank concerned.

Detection of counterfeits in chest remittances is also liable to be construed as willful involvement of the chest branches in circulating Counterfeit Notes and may attract special investigation by police authorities, and suspending the operation of the chest concerned.
Penalty at 100% of the notional value of counterfeit notes, in addition to the recovery of loss, will be imposed under the following circumstances:

a) When counterfeit notes are detected in the soiled note remittance of the bank.
b)  If counterfeit notes are detected in the currency chest balance of a bank during Inspection by RBI

The responsibility of ensuring the quality and genuineness of cash loaded at White Label ATMs would be that of the Sponsor Bank.

Designating Nodal Bank Officer

Each bank should designate Nodal Bank Officer, district-wise and notify the same to RBI and Police Authorities. All cases of reporting should be through such an Officer. He will also serve as the contact point for all counterfeit note related activities.

Establishment of Forged Notes Vigilance Cell at Head Office of Bank

Each bank shall establish at its Head Office, a Forged Note Vigilance Cell to undertake the following functions:

i.           Dissemination, monitoring and implementation of instructions issued by RBI. Compilation of data, and its submission to RBI and FIU-IND. Follow-up of cases, with police authorities and designated nodal officer.
ii.           Sharing of the information with bank’s CVO and report all cases involving counterfeit notes.         
iii.           Conducting periodic surprise checks at currency chests where shortages/ defective /counterfeit notes etc. are detected.
iv.          Ensuring operation of Note Sorting Machines at the currency chests / back offices and monitoring the detection of Counterfeit Notes and maintaining record. Ensuring that only sorted and machine examined banknotes are fed into the ATMs / issued over the counters and to put in place safeguards.

The Cell shall submit quarterly status report covering the aforesaid aspects to RBI within a fortnight from the conclusion of the quarter. The said report should only be sent by mail.

Banks shall furnish the particulars of the Forged Note Vigilance Cells  to RBI every year, as on 1st July by mail.
Provision of Ultraviolet Lamp and Other Infrastructure
All bank branches including currency chest and identified back offices should be equipped with ultra-violet lamps, sorting and detection machines.

The banks shall maintain a daily record of the notes processed through the Note Sorting machines and the counterfeits detected.

The banks should consider providing a counting machine (with dual display facility) for public use at the counter.

Reporting of Data to RBI

By Bank branches
A statement showing the details of counterfeit notes detected shall be compiled and forwarded RBI on a monthly basis so as to reach them by 7th of the next month.

Principal Officers of banks are also required to report transactions involving forged notes to The Director, FIU-IND, Financial Intelligence Unit- India, within 7 working days.

A “nil “report may be sent in case no counterfeit has been detected during the month.

Preservation of Counterfeit Notes Received from Police Authorities

All Counterfeit Notes received back from the police authorities/courts may be carefully preserved in the safe custody of the bank and a record should be maintained by the concerned branch. Forged Note Vigilance Cell of the bank shall also maintain a branch-wise consolidated record of such Counterfeit Notes.

These Counterfeit Notes at branches should be subjected to verification on a half-yearly basis. Such notes should be preserved for a period of three years from the date of receipt.

These notes may thereafter be sent to the concerned Issue Office of RBI.

Counterfeit notes, which are the subject matter of litigation should be preserved with the concerned branch for 3 years after conclusion of the court case.

Detection of Counterfeit Notes - Training of Staff

It is necessary to ensure that the cash handling staff in banks and treasuries / sub-treasuries is fully conversant with the security features of a banknote.

The design and security features of banknotes are to be displayed prominently at the branches. Posters of the 2005-06 series of banknotes are also to be displayed at branches. Details of security features of the New Design banknotes of 2000 and 500 along with other bank notes are available at the link

The banks should ensure that all bank personnel handling cash are trained on features of genuine Indian bank notes. The Reserve Bank will also provide faculty support and training materials.
Based on RBI Master Circular Dated 20/07/2017. For further clarification please refer …….. Poppy