Detecting Counterfeits: Visual Inspection

This is part 2 of a 6 part series:

An example of a Morgan Dollar cut in half to match a date with a mintmark to have the coin appear something it is not.

An example of a Morgan Dollar cut in half to match a date with a mintmark to have the coin appear something it is not.

Any coin may be subject to counterfeiting if it has value and the counterfeiter thinks that money can be made on the transaction. Most counterfeit coins entering the United States attempt to recreate older collectible coins.

Although laws are being proposed to help combat the problem, you should take the time to examine the coin, especially if you question its authenticity. Remember, none of these tests are fool proof and failing any one does not mean you have a counterfeit coin. You have to take all the evidence in its entirety to determine if the coin is real or not.

Before you look at the coin, you should be very familiar with the type or have a version of the coin you know to be authentic to compare with it. Although it would be easier of the coin was not in a grading service holder for visual comparison, at least you have a reasonable certainty that an encapsulated coin is authentic.

It helps to have a good magnifier to use to inspect your coin and cotton gloves to prevent the oils from your skin sticking to your prized collectibles.

Orientation

As you look at the coin, flip it over and look at both the obverse and reverse. How is the alignment of the coin? If you are looking at United States coins, you should be able turn it over and the reverse are in the opposite direction of the obverse. This is called “coin alignment.” Some countries produce coins in what is called “medal alignment” where the top of the obverse and reverse designs are in the same direction.

Just because a coin’s alignment is off does not mean the coin is a counterfeit. It is possible that the coin is genuine but was struck by misaligned dies to cause this error. Otherwise, keep the information in the back of your mind as you examine the rest of the coin.

Examining the Edge

The edge of the coin is also known as the coin’s third side and the most underestimated area to look. Check the edge for a possible seam that could be the sign of a counterfeit that was cast in a mold rather than struck by a press. Also look for filing or other marks that would suggest the seams were smoothed.

Detecting counterfeit £1 coins

Detecting counterfeit £1 coins, the genuine coin has edge lettering (left), the counterfeit does not.

What does the edge look like? Is the coin supposed to have reeds? While it may not be practical to count the reeds, you can check the formation against a similar coin. Usually, the reeds are not as sharp on a counterfeit, they appear more rounded, and the overall density of reeds may be less than on a genuine coin. While mistakes happen, the number of reeds created by the collar in the coining press during the striking process is standard for each coin. If there is something wrong or the coin does not have reeds although it is supposed to be reeded, the coin is likely to be counterfeit.

With the recent rash of counterfeit British £1 coins, we learned that an easy way to tell the fakes from the real coins is to check the edge. If the coin’s edge does not include lettering, the coin is likely a counterfeit.

Surface Examination

Another clue to look for is if there seems to be a surface added to a coin. It will appear like someone put a veneer on top of a metal core. Coins should appear to be solid disks of metal. Even bimetallic coins look and feel like solid coins, even though they are made of two different parts. If you see this veneer-like effect, it is likely that the coin is a counterfeit.

Does the coin supposed to have edge lettering? Remember, some early varieties have coins that have edge lettering, while a later variety has reeds. Make sure you know which version of the coin you are examining and if the lettering on the edge matches the style of a genuine example. Collectors of Presidential dollars know that the lack of edge lettering can be an error by the U.S. Mint and not the sign of a counterfeit.

Some foreign coins have small tooth-like extensions on the surface near the coin’s edge called denticles. While the look of denticles could be different as the die wears, denticles on genuine coins have a sharp, consistent design. Denticles on counterfeit coins may be rounder, more inconsistent, and less dense on the coin—similar to reeded edges. This is where having a good knowledge of the coin you are examining will help you tell the difference between worn denticles produced by worn dies and a counterfeit coin.

Examine the legends and other features of the coin. Do the fonts look right? Is the image proper? Are these elements in the right places? While mistakes happen, it is extremely rare, if not impossible, for many of these elements to be off because of the way all mints make the dies. If the features are consistently incorrect, then the coin is likely to be a counterfeit.

What does the surface look like? Is it dull or have a dull appearance even though the coin is supposed to be of a higher grade? Are the features sharp or do they look rounded? Does the relief of the design look right or is it too flat? If the coin is supposed to be of a higher grade, the sharpness of the detail is important. Although there are coins that were not struck very well, called weak strikes, they will have sharper details than most counterfeit coins.

Click image to read my reviews of PCGS Photograde

Click image to read my reviews of PCGS Photograde

It is also important to understand how a coin wears to know whether the appearance is dull from being circulated or counterfeit. All coins show a specific pattern of wear, and it is important to understand your coin’s wearing patterns. There are several visual reference guides that can help you in this area including PCGS Photograde which is available online and via an app for your mobile device.

On some coins you can see the evidence of the metal flow from the striking process. For some coins, it gives the coin a distinct look—like large silver dollars whose surface gives what is described as a “cartwheel effect” when examined under bright light. Be careful with this test because a lower grade coin has had its surface worn and will not show the cartwheel effect.

If the coin is a cast counterfeit, the surface may look bubbly. While there are examples of planchet (the coin blank) errors where the surface may bubble, these are usually in a small area and looks like small pimples on the coin. A bubbly surface from a cast coin may look similar to the gelatin mold you made where air became trapped inside.

Another sign of a counterfeit coin would be the showing of a different metal under a worn area. If the coin is supposed to be silver but a different color is showing through on a worn area, then it is likely that the coin was plated to give the appearance of silver but was made of a less expensive metal.

Check for Alterations

Finally, check for date and mintmark altering. On a genuine coin, the date and the mint mark looks like it is part of the coin and appears to be “growing” out of the surface. On a counterfeit coin, there are many ways to alter these elements by carving the date, called tooling, or physically cutting the elements from another coin and attaching it to a real coin. This type of alteration is common to change or add a mintmark to a coin.

Use your magnifier to look carefully at the date and mintmark. If there are too many sharp edges or looks damaged from being cut, I would be wary of the coin. Look at the mintmark and the potential grime around it. Does the placement of that grime look like it could have been accumulated over the years of circulation? Or does the pattern of grime not look natural and could be covering up a possible alteration?

Also, know the difference between altered coins and genuine coins where the date was altered in the dies or the mintmark was repunched. Before express travel and fast package shipments, there were times when a branch mint needed to alter dies from another mint or alter dates on the dies so they can continue to strike coins. Rather than filling the die and punching the new date, the coiner would use a punch with the proper number and try to strike it in a way to eliminate most of the previous date. Repunched dates, also called over dates, were more common for coins struck outside of Philadelphia, but have happened in Philadelphia. When you see a catalog listing about a coin with a repunched date, it is written as the date of the coin followed by a forward slash followed by the digits that was previously on the coin. For example, in 1942, the Philadelphia Mint accidentally pressed a 1942 hub with 1941 dies creating the 1942/1 over date that were used in Philadelphia and Denver. Finding one in the lowest grade is worth a lot of money giving counterfeiters a good reason for counterfeiters to try to make one.

If you find a coin that looks like one mintmark is on top of another, or a mintmark looks doubled or tripled, it may be because it is a repunched mintmark. In addition to branch mint sharing dies, dies were shipped from Philadelphia without mintmarks. It was the job of the chief coiner in each branch mint to punch the mintmark into the dies. Sometimes the punch moves when struck giving it a doubled or tripled look. Other times a mintmark filled on the dies and another mintmark is punched over. Re-punched mintmarks are written the same as over dates in the catalogs.

One of the more famous re-punched mintmarks is the 1900-O/CC Morgan dollar. In this case, after the Carson City Mint was closed (CC mintmark), the reverse dies were shipped to the New Orleans Mint (O mintmark). The dies were filed and filled so that the “O” mintmark could be punched on the reverse but whoever did the work did not completely remove the “CC” mintmark. Looking under magnification, you can see the shadow of the original “CC” mintmark that was on the die.

Re-punched dates and mintmarks occurred more often than the U.S. Mint would like to admit. If the coin you are examining has one of these errors, check a reference to see if the it is known. While not finding it in a reference does not mean the coin is counterfeit, it is enough evidence to question whether the coin is genuine of counterfeit.

In the next installment, we discuss what to look for in weight and measurements.

Credits

Detecting Counterfeits

Detecting Counterfeits

This is first article of a 6 part series:

Historic, genuine 1803 Draped Bust design U.S. silver dollars in Very Fine condition are currently valued at about $3,000.  This counterfeit 1803-dated dollar was recently offered in a Hong Kong flea market for less than $3.

This counterfeit 1803-dated dollar was recently offered in a Hong Kong flea market for less than $3.

Counterfeiting has been a problem since the beginning of money. It has been tried by people of all skills and even tried by nation states. The quality of the counterfeit depends on the talent of the counterfeiter, the amount of time and resources the counterfeiter has to create the counterfeit, and their access to the technology.

There has been a rise in counterfeiting of both collectible and circulating coins. The biggest source of counterfeit collectable coins has come from China. In some cases the counterfeiters had purchased the presses and other machines from the U.S. Mint and other government mints after they were replaced with more modern machines through government surplus sales, providing a supply of machines that could strike high quality coins.

To add to the problem, at one time the U.S. Mint did not fully deface used dies after its useful life. Rather, they would carve an “X” in the surface leaving large areas of the design showing. These cancelled dies made it out of the various branch mints as souvenirs and have been available on the open market. Counterfeiters have purchased these dies, mostly Morgan dollars, and use them as the basis to create their own dies that have fooled even the most experience numismatist.

Today, the U.S. Mint grinds the design completely off of all cancelled dies.

Starting in 2010, Great Britain began having problems with counterfeit £1 coins entering circulation. Even though the British law enforcement community has explained how to detect counterfeit £1 coins, they continue to fool the public. Although arrests were made in the rural areas of Great Britain in 2012, it is estimated that one in 30 £1 coins in circulation are counterfeit.

In 2017, the Royal Mint will issue a bi-metallic 12-sided £1 coin with anti-counterfeiting micro-engraving and milled edges to deter counterfeiting.

Detecting counterfeit &pound coins, the genuine coin has edge lettering (left), the counterfeit does not.

Detecting counterfeit &pound coins, the genuine coin has edge lettering (left), the counterfeit does not.

In 2017 the Royal Mint will issue a bi-metalic 12-sided coin with microprinting to combat counterfeiting.

In 2017 the Royal Mint will issue a bi-metalic 12-sided coin with microprinting.

Throughout the rest of Europe, they have been fighting against counterfeit €2 coins. Counterfeiters in Greece and Turkey had access to surplus presses and other material to strike a coin that looked very similar to standard €2 with the standard Greece reverse. News reports speculate that the coins were made with stolen material.

Counterfeit €2 coins were found in Italy.

Counterfeit €2 coins were found in Italy.

The problem with the counterfeit Greek €2 coins is that the lighter metals and presses they use cause the coins to separate. The €2 coin is a bimetallic coin with a yellow center made of nickel-brass and a silver-colored ring made of copper-nickel. If the press cannot strike the coin with enough force to fuse the inner core with the outer ring, the parts will separate. The counterfeit €2 coins will separate.

To prevent counterfeiting, the Royal Canadian Mint (RCM) has introduced laser micro-engraving to their new $1 (Loonie) and $2 (Toonie) coins. On the $1 coin, a circle above the image of the common loon on the reverse is micro-engraved with an image of a maple leaf. On the reverse of the $2 coin, there are two circular micro-engraved images of a maple leaf and a virtual image using an angled design at the top of the design. The RCM hopes these fine details added to the Loonie and Toonie will prevent them from being counterfeited.

New anti-counterfeiting features of the Canadian dollar coin.

New anti-counterfeiting features of the Canadian dollar coin.

New anti-counterfeiting features of the Canadian two-dollar coin.

New anti-counterfeiting features of the Canadian two-dollar coin.

The U.S. Mint does not have plans or the legal mandate to include anti-counterfeiting measures on coins. This may be because the dollar coin does not circulate in the United States and the cost of counterfeiting lower denominations are too expensive to be profitable. However, that does not mean that it will not be a possible to profitably counterfeit United States coins in the future.

There are ways to do your own testing to see whether the coin you are questioning is real or counterfeit. In the next installment, we discuss what to think about when visually examining your collectible coins.

Credits

  • Image of counterfeit 1803 dollar courtesy of Donn Perlman.
  • Image of counterfeit UK pound coin courtesy of BBC News
  • Image of the new £1 coin to be issued in 2017 courtesy of the Royal Mint
  • Image of counterfeit €2 coin courtesy of The Daily Mail
  • Images of the Canadian coins courtesy of the Royal Canadian Mint

Counterfeiting of collector and circulating coins on the rise

Europe is experiencing a rise in counterfeiting circulating coins that governments are saying is causing additional damage to economies. Coins that are experiencing a rise in counterfeiting include the British one-pound coin that will be replaced in 2017, the Swiss 5 franc coin, and the 2-euro coin. While the source of the British counterfeits remain a mystery to law enforcement, reports suspect that Swiss and euro coins are being manufactured in Italy.

In the United States a new wave of collector coins and bullion have been seen in the market. The Professional Numismatic Guild is reporting that following a survey of its member dealers the number of counterfeit coins now on the market is on the risk. In addition to the counterfeit coins many are appearing in counterfeit grading service holders. While an experienced collector may be able to detect most counterfeit slabs, there have been novices who have been fooled by these fakes.

Front of a counterfeit 2012-dated American Eagle $50 denomination one-ounce gold bullion coin.

Obverse of a counterfeit 2012-dated American Eagle $50 denomination one-ounce gold bullion coin.

Reverse of a counterfeit 2012-dated American Eagle $50 denomination one-ounce gold bullion coin.

Reverse of a counterfeit 2012-dated American Eagle $50 denomination one-ounce gold bullion coin.

According to PNG, two members who recently were in Asia say they saw counterfeits of Draped Bust, Seated Liberty, Morgan and Peace silver dollars being sold in flea markets in China and Hong Kong for $1 to $3 each. Some are brought back to the United States where they are submitted to third-party grading services where they are returned as counterfeit.

Historic, genuine 1803 Draped Bust design U.S. silver dollars in Very Fine condition are currently valued at about $3,000.  This counterfeit 1803-dated dollar was recently offered in a Hong Kong flea market for less than $3.

Historic, genuine 1803 Draped Bust design U.S. silver dollars in Very Fine condition are currently valued at about $3,000. This counterfeit 1803-dated dollar was recently offered in a Hong Kong flea market for less than $3.

Historic, genuine 1803 Draped Bust design U.S. silver dollars in Very Fine condition are currently valued at about $3,000.  This counterfeit 1803-dated dollar was recently offered in a Hong Kong flea market for less than $3.

Historic, genuine 1803 Draped Bust design U.S. silver dollars in Very Fine condition are currently valued at about $3,000. This counterfeit 1803-dated dollar was recently offered in a Hong Kong flea market for less than $3.

Many of these counterfeit coins have flaws that someone with experience with these series would easily detect. PNG advises everyone that if you are not sure about the coin, collectors are advised to consult with a PNG dealer who can provide a proper analysis.

While I am not an expert in detecting counterfeit coins, one thing that I notice is that counterfeit modern coins always look too sharp. Their lines are very sharp giving the coins a nearly plastic look. The problem is that gold is a ductile, softer metal which lends to a rounder, more flowing designs when struck. Harder metals can be struck with very sharp edges.

For older coins, aside from design mistakes made by counterfeiters, these coins always have a mushy look to them. While worn coins do not have the struck look to them, they do not wear to where it appears that they were originally struck underwater.

If there are any questions about the authenticity of a coin, always consult a trusted dealer!

Here is the press release issued by PNG:

Use Caution To Avoid Gold And Silver Counterfeits,

Advises Professional Numismatists Guild

 
(Temecula, California) – Beware of counterfeit vintage rare coins and fake modern gold and silver bullion items now being offered in the marketplace. Purchase only from reputable dealers, cautions the Professional Numismatists Guild (www.PNGdealers.org).

The PNG is a nonprofit organization composed of many of the country’s top numismatic experts.

“It is clear there is an increase in the types of fakes sold by unscrupulous dealers. These sales of counterfeit coins are potentially a multi-million dollar problem for the public. There’s an old saying that can help buyers avoid problems: If you don’t know coins, you better know your dealer,” stated Professional Numismatists Guild (PNG) President Dana Samuelson.

“We conducted an informal inquiry of PNG members and PNG Accredited Precious Metals Dealers (APMD) about what they’re encountering now in the marketplace. They have seen everything from counterfeits of vintage rare coins to modern precious metal items. These include fakes of popular century-old U.S. Morgan and Peace design silver dollars to current gold and silver American Eagles, gold U.S. Buffalo coins, silver and gold Chinese Pandas, and Canadian silver and gold Maple Leaf coins. We’re also seeing spurious gold and silver ingots,” said Samuelson.

“Professional dealers who look at classic U.S. coins and bullion items all day long are usually not fooled by these spurious items, but to the untrained eye they often look like the real thing,” he explained.

“Many of the fakes apparently are originating in China and then offered online by various sellers. It is imperative that collectors, investors and the general public deal only with reputable, knowledgeable experts who offer a guarantee of authenticity,” emphasized Samuelson.

Two PNG members who recently were in Asia say they saw counterfeits of early 19th century Draped Bust, mid 19th century Seated Liberty and late 19th and early 20th century Morgan and Peace silver dollars being sold in flea markets in China and Hong Kong for $1 to $3 each.

Unsuspecting buyers have submitted counterfeit modern bullion coins to Numismatic Guaranty Corporation (www.NGCcoin.com) for authentication and grading. NGC, the official grading service of PNG, earlier reported submissions of counterfeit 2012-dated gold American Eagle $50 denomination coins.

Those particular counterfeits exhibit poorly defined details around Liberty’s face and hair, different fonts for lettering and the date compared to genuine coins and the color is different because the fakes are not composed of gold, according to Max Spiegel, a Vice President of Certified Collectibles Group, NGC’s parent company.

PNG and PNG Accredited Precious Metals Dealers must adhere to a strict Code of Ethics in the buying and selling of numismatic merchandise including bullion coins, precious metal rounds and ingots, and they offer a guarantee of authenticity for the numismatic items they sell.

For a list of PNG-APMD members visit www.PNGdealers.org and click on the APMD navigation link.

Credits

Beware of Frighteningly Deceptive Counterfeits

The counterfeit quarter-ounce Krugerrand in a counterfeit NGC holder that was purchased in Fullerton, California.

The counterfeit quarter-ounce Krugerrand in a counterfeit NGC holder that was purchased in Fullerton, California.

As I have evolved this blog, I consistently receive requests to post contributed articles and press releases. While I turn down most contribution requests, I will publish relevant press releases with my take on them. This is one time that I will publish the press release as it was distributed.

The biggest threat to the numismatics industry is not the lack of participation by younger people, women, or people of color, all of which are problems, the threat that counterfeits pose will drive away potential collector and investors. Anyone that collects scarce or rare coins should be very concerned about counterfeits.

Industry heavyweight Dwight Manley issued a statement after his company was fooled by a counterfeit Krugerrand in a counterfeit third-party grading service holder. Here is the statement:

Beware of Frighteningly Deceptive Counterfeits
Statement By Dwight Manley

Prominent rare coin dealer and collector Dwight Manley, owner of Fullerton Coins & Stamps in Fullerton, California and Managing Partner of the California Gold Marketing Group, who assisted a quarter-century ago in breaking up a counterfeit coin and counterfeit holder scheme, has issued the following statement.

“A frighteningly deceptive counterfeit has been encountered, and the world needs to be told about it. We recently realized that a 2005-dated quarter-ounce South African Krugerrand labeled NGC Proof 70 is not only a counterfeit coin, it is housed in a counterfeit Numismatic Guaranty Corporation holder that has the same certification number on the label as a genuine 2005 PF 70 one-quarter ounce Krugerrand listed in the NGC data base.”

“The fake was purchased on October 23, 2015 by a knowledgeable employee of Fullerton Coins & Stamps over the counter from a semi-regular customer. Before making the purchase, the employee checked the NGC website to see if the certification number and coin description matched. They did: cert number 3676849-006.”

“I recently examined the coin, and it just didn’t look quite right. I did a side-by-side, inch-by-inch comparison between the encapsulated coin the store purchased and the obverse and reverse photos on the NGC website. The reproduction of the NGC hologram on the fake is almost dead on the same; however, there is one distinct difference between fake and genuine on the left side of the front insert label. On the fake coin, the circle in the NGC logo (an encircled balance scale) goes almost entirely around the P in the grade PF 70. On the genuine coin’s label, the P is outside the logo circle.”

“An amazing amount of effort obviously went into creating a fake coin and a fake holder with a cert number and description that match a genuine coin. I’ve notified NGC, but in the meantime, I caution collectors and dealers to watch out for any similar, deceitful and dangerous counterfeits.”

How easy is it to pass counterfeit currency

How an iodine pen reacts depends on the type of paper used.

How an iodine pen reacts depends on the type of paper used.

Regular readers know that in real life I work in information security as a contractor to the federal government. My knowledge of security and understanding what has gone wrong with the various merchants that experienced attacks has had me reconsider the use of electronic transactions. While I do not know the exact details of every system, I know that the state of current practices makes using a credit card more dangerous than carrying cash.

As I was waiting to checkout, the person running the cash register was having difficulties with someone whose credit card was not being accepted. It did not matter what the problem was, the issue was holding up the line. While waiting, the gentleman next on line turned to me and said, “This is why I pay in cash.”

Apparently, my fellow line waiter and I had one thing in common, we both visited the bank prior to doing our shopping. He paid for his purchase with crisp, new currency. Just like my new currency, they were mostly $20 Federal Reserve Notes in serial number order fresh from a pack that was opened in the bank.

When the cashier counted the money, she picked up a pen and drew a line on each note. The pen was a counterfeit detection pen that contains an iodine-based ink used to determine whether the paper used is counterfeit.

These iodine pens test whether the paper is legitimate by checking if the iodine reacts with the starch that is used in commercial paper to make them look brighter. If the paper contains starch, then the ink turns dark indicating the paper is not real currency paper. Otherwise, the mark stays amber on the normal cotton bond paper.

There are two problems with this method of counterfeit detection. First, it is relatively easy to defeat the iodine pen by washing and bleaching a low denomination bill and reprinting a higher denomination on the same paper. By using legitimate currency paper, testing it with the iodine pen will not detect that it is counterfeit.

I remember there was a story on one of the television networks about how counterfeiters bleached $5 notes and passed them off as $20 notes after reprinting them. While searching, I found the following video of NBC’s Chris Hanson as he reported about this on Dateline:

Another problem with using iodine pens is that merchants that use them put their customers in danger who have iodine allergies. Those of us with severe iodine allergies can experience anaphylaxis, a serious reaction whose rapid onset can be so severe that it can cause death. As one of those people with severe iodine allergies, I watched this scene in horror.

Following a discussion with the manager, I consented to using a credit card since this was not one of those retailers that have been in the news for being hacked.

After all the Bureau of Engraving and Printing does to ensure that the new currency is more difficult to counterfeit and how the criminals are getting around these iodine pens by using real currency paper, it is incredible to think that these stores are still using tried but untrue measures for counterfeit detection.

In the meantime, the more serious counterfeiters are bleaching and overprinting $5 notes because as the criminal in the video says, nobody looks!

Image of iodine pen courtesy of The Calladus Blog.

Beware of fake gold

Fortuna Gold Rectangular Ingot-2.5g

PAMP Gold Ingot

The Numismatic Crime Information Center is reporting that two suspects have been arrested for selling fake Suisse PAMP gold bars. The NCIC report is as follows:

Traveling Suspects Arrested

Two suspects have been arrested for selling fake Suisse Pamp carded gold bars (2.5gm, 5gm,10gm and 1 ounce) at a coin shop in Greenwood, Indiana. Search of the suspects vehicle revealed multiple identification cards, business and pamphlets from different coin shops and an additional 250 fake gold bars and coins. Based upon receipts located in the vehicle the suspects had been selling the fake gold to shops in Illinois, Kentucky, Tennessee and Indiana since September, 2014.
 
The suspects were driving a silver Ford Focus with Missouri license plates. The suspects are being held for Theft by Deception.

Aaron TaylorWestern Union, IL

Aaron Taylor
Western Union, IL


 
Second suspect was identified as Nelson Hernandez (No photo available) alias Benjamin Wade.
 
Anyone having been in contact with either of these subjects should contact:
 
Doug Davis, 817-723-7231, Doug@numismaticcrimes.org

If you have information, please contact Doug Davis. Let’s keep the hobby for both collectors and investors safe!

Credits

New law to protect the hobby

With the midterm elections behind and the anticipation of the changes, congress still had work to do in the lame duck session. Over the last few sessions, congress has been their most productive during lame duck session as polling and focus groups has lead to those running for re-election to fearing the fast moving news cycles. Even the least controversial measures can be side tracked when members think that someone is watching that could misconstrue even the best of intentions.

But good things come to those who wait. Monday afternoon, December 15, 2014, H.R. 2754, the Collectible Coin Protection Act was passed in the Senate. The bill is on the way to the White House for President Obama’s signature, which should be a formality. The Collectible Coin Protection Act was first introduced to in the U.S. House of Representatives on May 7, 2013 to amend and updates the Hobby Protection Act that was passed over 30 years ago. The new law will allow law enforcement to take criminal action and individuals to take civil action against manufacturers, importers, and sellers of counterfeit coins and bullion products. It also allows the enforcement against the unauthorized use of registered trademarks belonging to collectible certification services.

Given the changes in the way we do business today, one of the more significant issues with the Hobby Protection Act is that only the manufacturers of the counterfeits could be prosecuted. In most cases, the manufactures of these counterfeits are hiding behind the Great Wall out of the legal reach of United States law enforcement. The Collectible Coin Protection Act will update the law to add the sellers and distribution of those coins to the targets of enforcement. If we cannot get to the makers of these fakes, then those who distribute that contraband can be prosecuted.

Further expanding the legal net to catch the scofflaws is the new provision to include “any person who provides substantial assistance or support to any manufacturer, importer, or seller” who knowingly engages in any act that violates this law. In other words, this adds the accomplices and those who support any part of the act of production and selling counterfeit United State coins.

If you buy a counterfeit coins, you can now take action against the the counterfeiter, their agents, the seller, and anyone else in the supply chain who was involved in the manufacture and sale of the coin. Even if you unwhittingly buy the counterfeit coin via an online auction and attempt to flip it hoping to recover your money, the buyer can sue you as the seller of contraband. To help fight the counterfeiting of third-party certification service holders, the act extends trademark violation and the ability to sue for remedies.

These new provisions will allow collectors, dealers, and grading services to bring legal actions that are much more effective, with much stronger remedies than previously existed. It will allow those harmed to work with the Justice Department to bring criminal actions where appropriate.

Congress engrossed the bill and sent it to the White House on December 15, 2014. It is currently waiting for President Obama’s signature. It will be a good present to the holiday when he signs this bill into law.

Examples of Chinese Counterfeits

An example of a Morgan Dollar cut in half to match a date with a mintmark to have the coin appear something it is not. Coin was in a counterfeit PCGS slab and caught by one of their graders.

An example of a Morgan Dollar cut in half to match a date with a mintmark to have the coin appear something it is not. Coin was in a counterfeit PCGS slab and caught by one of their graders.

PCGS representatives showed Congressmen counterfeit U.S. coins in counterfeit PCGS holders during their recent meetings in Washington, DC.  (Photo courtesy of PCGS.)

PCGS representatives showed Congressmen counterfeit U.S. coins in counterfeit PCGS holders during their recent meetings in Washington, DC. (Photo courtesy of PCGS.)

It’s Classified!

Prior to the public disclosure of secret documents, administrations have declassified documents at various levels for many different reasons that those of us who worked in these areas did not understand what was to be classified at what levels and for how long. Each department and agency had its own rule. However, everything that was classified was supposed to be declassified after 50 years.

In 2009, President Obama issued Executive Order 13526 to try to create some order out of this chaos. Aside from defining the classification levels, document marking requirements, it also allowed agencies to apply to keep documents classified and for longer periods than previous reviews. The purpose was to protect national interests and security while preventing controversial declassification of documents.

Whenever trying to instill a new policy on the government, there will be many barriers to this change. While there are fewer areas of confusion, chaos remains. Of course the disclosures by Chelsea (neé Bradley) Manning and Edward Snowden did not help.

So what does this have to do with numismatics? Both the U.S. Mint and the Bureau of Engraving and Printing applied and were granted exemption from automatically declassifying documents.

Treasury Department, Procurement Division, Public Buildings Branch, Fort Knox - United States Bullion Depository (1939)

Treasury Department, Procurement Division, Public Buildings Branch, Fort Knox – United States Bullion Depository (1939)

According to a memo released on September 5, 2014, the Information Security Oversight Office of the a href=”http://www.archives.gov” target=”_blank”>National Archives and Records Administration granted the U.S. Mint a 75-year exemption from automatic declassification of documents. They also granted the BEP a 25-year exemption.

What information could these agencies possibly have that would be classified?

According to Steven Aftergood, Director of the Federation of American Scientist Project on Government Secrecy, who interviewed John P. Fitzpatrick, director of the ISOO, the exemption for the U.S. Mint is for “security specifications from the U.S. Bullion Depository at Fort Knox, which was built in the late 1930s.”

In a comedic turn, Mr. Fitzpatrick told Aftergood, “Think ‘Goldfinger’.”

Then why does the Bureau of Engraving and Printing need an exemption from declassification for 25-years? A source familiar with the filing said that the exemption covers counterfeiting information. According to sources, there are anti-counterfeiting measures added to currency that have been planned for many years that have not been advertised. These are used by the United States Secret Service and other law enforcement organizations to detect counterfeiting. Many of the documents cover the planning for the changes that began in the 1990s.

$100 Federal Reserve NoteSources also confirmed that there were other documents that the BEP and Treasury asked to be included in this exemption but not their general contents. Some hint was given that the classified information concerns long term and ongoing operations against international counterfeiters. Although not confirmed, it is suspected that the classified documents discusses enemy foreign governments actively working to counterfeit United States currency. No country was named but it has been rumored that North Korea has been attempting to counterfeit U.S. currency.

And you thought all the U.S. Mint and Bureau of Engraving and Printing did was manufacture money!

Image of Fort Knox courtesy of the Library of Congress.

A frank discussion about China and counterfeits

A persistent question that follows stories about counterfeiting is why do most of the counterfeits come from China and why do they get away with doing this? Unfortunately, the answer lies in differences in our laws, politics, and cultures that may not be as easily resolved as people would like. However, understanding the issues may make it easier to understand how to resolve the problems.

The easiest part of the explanation is the legal standpoint of what we see as counterfeiting versus what the Chinese legal system sees as ordinary commerce. In the United States, every coin ever minted is still legal tender and legally an instrument of the government. Although the Trade dollar was demonetized in 1876, it was remonetized as part of the Coinage Act of 1965 making it legal tender (31 U.S.C. § 5103) for trade in the United States. Even when the United States changes the design of a coin, it remains legal tender.

To protect its currency, the United States has anti-counterfeiting laws that say it is illegal to counterfeit the nation’s money and use in commerce. To protect the collection of collectible coins and currency, the United States created the Hobby Protection Act (15 U.S.C. § 2101 et. seq.) to protect the money supply when it is a collectible and not an instrument of commerce.

In the United States, laws a cumulative. Once passed, they remain the law until repealed or declared unconstitutional by the courts. This is not the way in many other countries. When a new government takes power they are given the authority to rewrite the laws in some form. Not only does this happen with authoritarian governments but in most parliamentary democracies. While new parliamentary governments have restrictions on the changes they make, authoritarian governments do not.

The People’s Republic of China has been run by the Communist Party since 1949. Their rules and laws were changed with the rise of Chairman Mao Zedong and get altered by the party every time a new chairman takes over the party. This includes the control over the money supply. Thus, when the Communist Party took over the country, they demonetized the money produced by the Republic of China and issued renminbi, the “people’s currency.”

In real terms, all coins struck since 1955, the first issued under the current government, are legal tender. Currency printed since 1999, the fifth series are the only legal tender notes. Any other coin or currency note has been demonetized.

Under Chinese anti-counterfeiting laws, it is illegal to duplicate any legal tender coin or currency note for any reason. However, since coinage from previous regimes is no longer legal tender, it is legal strike coins with designs that are no longer legal tender. Chinese laws do not recognize the collection of these coins as a market to protect. Coins are an instrument to facilitate commerce.

Buying and selling coins as an object is just a matter of commerce between individuals under Chinese law and not something that requires protection. While the Chinese buyer can use the obsolete coin as an object of barter, bartering does not hold the same legal status as paying with legal tender currency. Basically, once it is demonetized for new coinage, just about anything goes.

Unlike United States law Chinese law does not recognize the perpetual legal tender status of every coin issued. Chinese law also recognizes that counterfeiting current issues of other countries is also illegal because someone could try to use the coin in commerce where it is legal to use foreign currency. This means that in China, it would be illegal to reproduce a presidential dollar or Washington quarter, but producing Morgan dollars or a set of 1921 Walking Liberty half-dollars is legal in China because these are coins no longer issued in the United States.

When China is asked to assist the United States to stop the counterfeiting of coins, China does not recognize that its people are doing anything wrong. The coins are no longer being made, they are not in circulation, and their laws allow people to make copies of these coins. China does not recognize a collectible coin market. In fact, the only laws they have regarding collectibles are laws protecting antiquities and cultural properties. Under Chinese law, you cannot duplicate the proverbial Ming Dynasty vase and try to pass it off as real but it is legal to reproduce a Rembrandt masterpiece since he is not Chinese and his work was not made in China.

A trade attorney that was consulted for this article confirmed that when it comes to these issues, Chinese law is very protectionist. The claim is that they follow their laws consistently regardless of outside circumstances and they refuse to make exceptions citing the complication with enforcing their laws in a country with a population of more than 1.3 billion people.

Making the problem more difficult, copying and counterfeiting of grading service holders is not covered by Chinese law because they are not government entities. The grading services would have to fight the counterfeiters using Chinese patent and copyright law. A patent attorney confirmed that not only would this not stop the problem, but foreign challenges to alleged patent and copyright violations are rarely successful in Chinese courts.

The Chinese government has no incentive to help the United States or any other country fight counterfeiting in what is perceived by the Chinese as a small market problem. To put the resources necessary into what looks like a petty crime for selling inexpensive, non-circulating duplicate coins that are within Chinese law to manufacture is not worth their resources.

While there is anecdotal evidence that the Chinese government knows about the counterfeit trades and some officials informally support the efforts because they get kickbacks, official Chinese policy denies everything.

A lot has been written about the nature of the relationship between the United States and China since President Richard Nixon’s trip to China in 1972. Neither side trusts each other nor does neither side believe each other. Today, the United States decries the Chinese for buying too much of our debt, allegations of spying, industrial espionage, and cybercrimes. The Chinese say that the United States is trying to bully the world and that these naysayers are making up the stories to scare the world into following them. The United States talks about civil rights violations within Chinese border and the Chinese government tells the United States to mind its own business.

The greater opening of markets between the country and the increase in popularity of bullion coins has made the Chinese Panda a popular coin amongst collectors and investors. Those of us who buy these coins know that even with the production increases since 2010 new issues continue to command a premium greater than other bullion coins.

PCGS representatives showed Congressmen counterfeit U.S. coins in counterfeit PCGS holders during their recent meetings in Washington, DC.  (Photo courtesy of PCGS.)

PCGS representatives showed Congressmen counterfeit U.S. coins in counterfeit PCGS holders during their recent meetings in Washington, DC. (Photo courtesy of PCGS.)

While the Chinese are happy to sell coins and be the factory to the United States, there remains an underlying tone of political and commercial hostility between the nations. A trade attorney said that the Chinese would rather keep the relationship to business between the countries that the United States should stay out of China’s domestic policy. In one example, it was explained that the Chinese central government was upset over how the United States passed judgment over companies in their high tech electronic manufacturing sector because these companies are doing better and is safer than other Chinese manufacturers. To the Chinese government, it is not a problem if a few workers die for whatever reason. There is an ample supply from the population to keep the plants running.

These are the values of the Chinese government. Whether you agree with them or not, Communist Party officials will resent anyone telling them how to manage their domestic affairs. They want advice about how to treat their citizens as much as the United States wants similar advice from China.

All things considered, there is no incentive for China to stop the manufacture of counterfeit collectable coins.

It is not against Chinese law for these people to manufacture coins that are no longer in production. Chinese people who are manufacturing these coins are working in China and many employ other people. It means there are fewer people on what little government assistance the Chinese government provides and they can collect taxes on the incomes.

When a United States trade representatives negotiate with their Chinese counterparts, it gives the Chinese a chance to lecture the United States how they resolved the counterfeiting issues which leads to a discussion on currency handling and management, which is a sore subject in the United States since the United States questions Chinese monetary policies.

Finally, it gives China a measure of moral superiority against the United States. After all, China figured out a way to prevent the impact of counterfeiting of older currency, why can’t the United States do the same?

China has no incentive to help the United States to solve a problem that they perceive does not exist. It is up to the United States to resolve these issues. This is why the industry needs the Collectible Coin Protection Act (H.R. 2754) to allow law enforcement to cut off the supply lines from the counterfeit manufacturers in the United States.

Counterfeiting: Numismatic’s virus

Of all the threats to the numismatics industry one stands out as being the biggest threat: counterfeiting. While thefts and violence of dealers are tragedies, the theft is more localized and easier to deal with because, for the most part, criminals are stupid and leave evidence. Also, since the dealer community is small and there is cooperation from the pawn industry, there is a higher resolution from thefts than expected.

Counterfeiting is worse. Counterfeiting can be a systemic problem that infects the industry in the same way a virus infects your body. To extend the analogy, thefts would be like breaking a finger. It will hurt and cause problems, but the rest of the body will survive. A virus hurts the entire body.

A counterfeit coin is added to the market and is sold to an unsuspecting buyer. The buyer figures out that the coin is counterfeit and is usually embarrassed to admit their mistake. Rather than report the crime or just chalk it up to bad luck, they try to resell the coin, even at a loss, to make up some of the money. The buyer, who is now the reseller, can plead ignorance by claiming buyer’s remorse and say that they decided they did not want the coin.

Overseas counterfeiters, mostly from China, also setup broker networks where they sell their creations to United States-based sellers for them to sell to unsuspecting buyers. While many use online sources to sell these counterfeits, many will try to sell them to low-end coin shops, bullion traders like the ones who setup in hotel rooms, and pawn shops. Unfortunately, they are successful in selling of these items to what should be trusted dealers keeping them in hobby circulation like a virus coursing through your veins.

The problem is not limited to raw coins. Counterfeiters have figured out ways to counterfeiting both the NGC and PCGS holders along with their holographs and seals in order to fool potential customers. Since both companies make it easy to look up serial numbers via their websites, counterfeiters will use the serial number of a real coin and counterfeit that coin for the holder. Both NGC and PCGS have been doing as much as technology allows when upgrading their holders and holographic seals to thwart counterfeiters.

A reminder of the issue landed in Inboxes today from Doug Davis of the Numismatic Crime Information Center. Rather than describe the warning, here it is in its entirety:

COUNTERFEIT SUSPECT

Dealers in Illinois, Missouri, Oklahoma and Kansas should be on the look out for a suspect selling counterfeit coins and bullion within the last ten days. The suspect has been identified as Gabe Owen and sometimes uses the alias Garet or Gabriel Owen. Owen is a white male and uses a Kansas driver’s license or a passport as identification. The vehicle driven by Owen is a white Yukon or Tahoe.

Owen is attempting to sell gold bars, one ounce gold eagles, a 1795 PCGS VF dollar and silver eagles. The same suspect was identified in similar incidents and reported by NCIC approximately one year ago.

We are working with authorities to get a current photo. At the present time there is no outstanding warrant for this subject.

A basic tool against counterfeiting is education. You should know and understand what you are buying. While this sounds basic, you have to think about the coins you are purchasing. For example, collectors of Morgan dollars might think they know what the coin looks like and what to look for, but do you really know? Could that variation in the strike be a known variety, known as VAMs after ground breaking research into Morgan dollar die varieties by Leroy C. Van Allen and A. George Mallis? What if it is a real Morgan dollar that was once cleaned or tooled that would be at least worth its value in silver?

Even if you do not have the education give a definitive answer, how many times have you heard the target of a scam say that something did not seem right or that they questioned a lot of what the seller was saying? More times than not, these instincts are usually right and the few times they are not right, you should feel better knowing that at least you had the sense to listen to that inner voice because you might need it next time.

Always remember, if the deal is too good to be true, it probably is not a good deal!

While counterfeiting is illegal and there are protections under the Hobby Protection Act, the only person that can be prosecuted is the seller. Under the law, the only other person who could be prosecuted is the manufacturer. In most cases, the manufacturer is outside of the United States and beyond the reach of law enforcement.

One tool that can help is H.R. 2754, the Collectible Coin Protection Act. The Collectible Coin Protection Act updates the Hobby Protection Act by allowing law enforcement to target the distributors as well as the sellers. By making the changes H.R. 2754 prescribes, it allows law enforcement to cut off the supply lines from the counterfeit manufacturers.

H.R. 2754 passed the House of Representatives on July 30, 2013 and was sent to Senate for their consideration. However, the bill is sitting in the Senate Commerce, Science, and Transportation waiting to be scheduled. Even if your senators are not a member of this committee, if they hear from constituents that this is a concern, they will speak with the committee chairman Sen. Jay Rockefeller (D-WV) or the ranking member Sen. John Thune (R-SD) to bring this to a vote.

Be part of the antidote to this virus and go to senate.gov, use the pull down menu in the upper-right corner of the page to select the state you live or work. Please contact both of your senators and let them know that you support the Collectible Coin Protection Act. When you contact your senators, tell them that the bill is revenue neutral. It will not add to the deficit and will not require additional appropriations.

In the meantime, please be careful and educate yourself before making that purchase. Buy the book before you buy the coin may be more important now than ever.

The advantage is that almost any book at almost any price is a bargain. You cannot buy them much cheaper. The profits come from knowing what is between the covers. The best collections are built on knowledge, not price sheets.

I could not have said it better!

Last quote from “Aaron Feldman: Buy the Book Before You Buy the Coin,” by Mike Marotta, MSNS 7935.
Image of counterfeit coin and slab was taken by the author at the 2014 F.U.N. Show.

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