How Counterfeit Currency Fuels Money Laundering?

Counterfeiting currency is a serious global crime that not only funds criminal networks but also impacts the economy and its victims. Law enforcement bodies have repeatedly found operations that are performing counterfeit currency on a large scale. As INTERPOL observes, fake banknotes “fuel the underground economy and finance the activities of organized criminal networks and terrorists”.

Certainly, a lot of law enforcement agencies across the globe have experienced numerous instances of counterfeit currency. The following are two notable cases:

• The United States Customs and Border Protection (CBP) officers working in Philadelphia seized a large amount of counterfeit money valued at up to $14.37 million in May 2023.
• According to European Union Agency for Law Enforcement Cooperation (Europol) stats, between October 2024 and March 2025, a collaborative effort by 18 EU countries, including Austria, Portugal, and Spain, disrupted counterfeit currency worth approximately €66 million.

There are several ways to purge counterfeit currency from the system. Efforts usually start with governments and then the businesses that reinforce their laws and safety measures against fake payment cases. By doing ongoing audits, financial institutions can then stop the international transfers of counterfeit money. For instance, the Bank of England removed 116,000 counterfeit notes in 2023, equal to 25 fake notes for every million.

Very often, the authorities in charge take action against counterfeit networks and fake money. Another example of this is where Italian police dismantled a sophisticated print shop in Naples, believed to have produced 27% of all seized fake euro bills in 2023; nearly €3 million worth.

Many of these operations use off-the-shelf technology: for example, criminals import money used in films from China or Turkey and add hologram strips themselves. Authorities work on disrupting this kind of money as well. A recent example of this is the case where German authorities blocked more than $103 million face value counterfeit US bills in April 2024. These notes were movie props from Turkey that were being smuggled into the U.S.

In short, counterfeit cash is widely distributed among international smuggling networks. When this cash reaches the public, it can mislead the public. To combat this serious global threat, it is important to understand its direct association with worldwide security and organized crime.

What is Counterfeit Currency?

A counterfeit currency refers to money generated without the legal authorization of a government or central bank. It can be of any form, either coins or banknotes, as long as it is made to resemble official currency.

As the Kansas City Police Department states, “Counterfeit money is currency that is produced without the legal sanction of the state or government to resemble some official form of currency closely enough that it may be confused for genuine currency. Producing or using counterfeit money is a form of fraud.

This means that counterfeiters aim to create fake bills so convincing that an unsuspecting person or business might accept them as real, thereby defrauding the recipient. The production, distribution, or use of counterfeit money is illegal in virtually all countries, given its harmful effects on commerce and security.

Money Laundering Risks of Fake Currency

The circulation of counterfeit notes can result in significant compliance risks compared to other predicate crimes. Counterfeiters are exploiting cross-border transactions and e-banking to move the fake money by multiple accounts and countries, making detection more difficult.

When a bank or retailer unknowingly accepts counterfeit money, it is effectively handling illicit proceeds. Criminals then try to “clean” these funds like any other illegal cash: for example, making numerous small ATM deposits (“smurfing”), layering transfers through multiple accounts, or using shell companies to disguise origins. Critically, international AML standards classify counterfeiting as a predicate offense for money laundering.

The Financial Action Task Force (FATF) has clearly listed counterfeiting currency under the “designated categories of offenses,” which means they can be considered as predicate offenses that enable money laundering.

This means all proceeds from printing or distributing fake currency must be treated as illicit. The failure to report the suspicious activities can result in hefty penalties, audits, and names on sanctioned lists. Banks are required to apply the same due diligence and reporting (e.g., suspicious activity reports) to these funds as they would for drug or fraud money. If a financial institution fails to detect inflows from counterfeit currencies, it can result in fines and reputational damage.

In effect, AML regulators expect banks to catch laundering schemes even when the original predicate crime is counterfeiting. For this, authorities are expecting the banking sectors to implement adverse media checks and enhanced analytics for early detection of fake money. As the U.S. Treasury and other authorities emphasize, robust AML/CFT frameworks must block all routes used by illicit actors.

Use of Counterfeit Currency To Fund Terrorism

Fake cash has long been a funding source for terrorism. U.S. authorities have documented that Iran’s Islamic Revolutionary Guard Corps–Qods Force (IRGC-QF) invested in huge counterfeiting schemes: in one case, agents used front companies to print fake Yemeni rial banknotes worth “hundreds of millions” of dollars for the IRGC-QF. In South America and the Middle East, Hezbollah and affiliated militias have run counterfeit rings.

For instance, a Hezbollah operative in Paraguay, Assad Barakat, ran a ring distributing millions of fake U.S. dollars to fund Hezbollah’s activities. U.S. agencies warn that currency forgery is often tied to larger crime-terror networks. In practice, fake money can be sold to underworld buyers who then channel the proceeds to armaments or operatives.

Any illicit profit from fake currency, whether from fraud, drugs, or direct terror sales, can enter banking channels and must be caught by AML controls.

Challenges for Compliance Teams

Compliance officers face a complex puzzle with counterfeiting. Criminals in contemporary society use international networks to produce counterfeit currency. They often print fake bills in other countries and then smuggle them in shipments or luggage.

These fakes get mixed in with real cash. By the time someone finds a hidden stash of forged bills, the counterfeiters may have already laundered the money they made from it. Red flags can be subtle. Criminal patterns to watch out:

• Multiple small cash deposits into one account, especially if inconsistent with the customer’s profile.
• Unusual international transfers immediately after a cash deposit (suggesting layering).
• Rapid currency exchanges or purchases of high-value assets with little logical basis.

These signs can suggest that someone is trying to legitimize their counterfeit currency. However, many of these warning signs, like several $20 deposits, also happen in legal situations, such as in cash-heavy businesses. This overlap can lead to many false alarms.

A manual compliance system processing through millions of transactions may miss the hidden network behind the noise. Meanwhile, overly strict checks can inconvenience real customers or stall business. In short, teams must sift through huge volumes quickly, hunting for rare crime links without tying up innocent people.

How Can You Fight Counterfeit Money Crime with Advanced AML Solutions?

To meet fake money crime, modern AML technology has evolved significantly. Leading AML/CFT platforms now integrate multiple tools and data sources in real time:

• Watchlist & PEP Screening: Every customer or transaction should be checked against hundreds of global sanctions lists, Politically Exposed Persons (PEP) lists, law enforcement databases, and leaked adverse media sources. Any link (even a mention in a counterfeit arrest report) triggers an alert.
• Intelligent Transaction Monitoring: Integrate ML models to understand how each customer typically behaves. It can identify unusual activities, like sudden large deposits, quick transfers between accounts, and some unusual transactions from customers.
• Adverse Media Scanning: Continuous news monitoring and open records surfaces any negative information on customers or related entities. For example, if a client’s alias appears in a story about a seized printing press, the system flags all associated accounts.
• Rule Automation & Case Management: Advanced platforms use AI to check names associated with counterfeiting currency on watchlists and adverse media. With this they can generate clear alerts and case files so that compliance officers can review them quickly instead of searching through fragmented data.

AML Watcher as Your Defense Against Counterfeit Risks

Meeting AML compliance today is challenging due to evolving regulations and massive data flows. Organizations must simplify workflows and cut false positives to manage risk effectively.

That’s where AML Watcher steps in by offering:

• Adverse Media Screening: Counterfeiting is a predicate offense and can be assessed as it appears in adverse media and watchlists. That’s how with AML Watcher’s effective adverse media screening regulators and compliance officers can catch counterfeiters before the risk arises.

• All-in-One Screening: All critical compliance checks (watchlists, sanctions, PEP, adverse media) on one platform; eliminating gaps and multiple tools.
• Global Coverage: Up-to-date data across 235+ countries, which includes more than 1,300 official watchlists and over 200 sanction regimes that ensure no high-risk entity or news is missed.
• High Accuracy, Low False Positives: AML Watcher’s rich database includes millions of profiles and 415+ risk categories updated every 15 minutes, which improves match precision and drastically reduces false alerts.
• Automated Workflows: AI-driven monitoring with built‑in case management automates investigations, minimizing manual work and speeding up responses.

Ready to fortify your AML defenses against counterfeit threats? Get guidance from our expert team and see how AML Watcher can help today.