Error And Fraud Prevention In Currency And Bonds


THE question is often asked how the Treasury is able to protect the money that flows into and out of the Treasury and how it is possible for those responsible for the safe-keeping of the public funds to be assured that the currency is, in fact, present in the vaults as the records disclose it should be.

A complete reply to that question would make a lengthy narrative, for it would include a description of the means utilized to safeguard each of many materials that the Bureau of Engraving and Printing employs in the manufacture of the money as well as a large number of subsequent verifying steps taken after those materials have been converted into currency.

A description of the safeguards employed as protection while the currency is being manufactured will not be given here. This chapter will be confined to the description of the safeguards employed from the time completed currency reaches the Treasury from the Bureau of Engraving and Printing to the point when it leaves the Treasury to go into public circulation. The story will also be told of how the officials receive the worn-out currency, prove it, and protect it through the various processes to the final act—which is the destruction of the worn-out, useless paper that was money before it was redeemed and canceled. The paper used in producing the currency, the engraved plates, and the completed notes are all fully safeguarded during the entire manufacturing process.

The Treasurer’s responsibility for the new currency begins when the Director of the Bureau of Engraving and Printing accomplishes delivery at the doors of the vaults that are located in the Treasury Building.

The gold certificates, silver certificates, and United States notes (greenbacks) are delivered to the Treasury in paper-wrapped, Bureau-sealed packages that contain 4,000 notes each.

The inscription on each package brief discloses the class and denomination of the currency and also the first and last serial number of the notes.

The notes are tightly bound within the package in regular numerical sequence and each one hundred notes is under individual strap.

The unbroken seal protects the package, and it is accepted by the Treasurer as conclusive after a pack-age count has disclosed that the number of packages under each class and denomination agrees with the in-voice and the receipt that acknowledges delivery.

The packages are stored in the Treasury Building in vaults that are under double combination and time lock. It requires two authorized individuals to open the vault and those two must always accompany each other and be present when anyone is in the vault. Such double protection is the practice in all the Treasurer’s reserve security vaults.

When currency is required for issue to the Treasury Cashier or for shipment to the banks, it is a simple matter to withdraw and transfer even a great sum from the vault, for the operation simply means a count of packages, with inspection to see that the package seals are intact.

When delivered from the reserve vault to the Cashier’s working-cash-balance vault the packages are issued to the various tellers that deal with the public. The vault teller exacts a receipt from the teller concerned. The latter assumes individual responsibility for the sum he accepts and is accountable for it to the vault teller just as any bank teller is responsible for currency similarly accepted by him.

Each teller balances and records his cash daily. Each has a metallic container in which he stores his balanced cash. He alone can unlock that container. It is protected overnight by vault time lock.

The Treasurer has an employee representing him, who very frequently verifies each teller’s cash after daily settlement has been reported by the teller. That audit, which occurs without the teller’s knowing when it will take place, is accomplished approximately once a week or ten days.

Shipments of currency to the banks are covered in transit by insurance for full value. Each bank is required to receipt both to the company on arrival at destination and also to the Treasury direct. If a report of delivery should not be received at the Treasury on the day it is due to arrive, a telegraphic inquiry and an immediate investigation would be instituted.

Thus, the Treasurer’s task as to the issue of those three classes of currency is but a simple clerical operation. It requires no more than integrity and care on the part of the employees who actually handle the packages and on the part of those who keep the book records that relate to the currency that is received and issued.

The redemption process after currency has been in circulation is a very different matter. That process requires the most painstaking care as well as a most care-fully worked out plan of procedure in order to prevent error and fraud. Every step must be guarded with the most scrupulous observation or losses would inevitably result.


The redemption process starts at the Federal reserve banks and their branches or at the Treasury. As related previously, those banks honor the currency that the member banks, state banks, or trust companies present to them. It is through the cooperation of the Federal reserve banks that the Treasury is able to keep the currency fit for circulation.

Of course, unfit notes are honored at the Treasury whenever presented by a holder, but the great volume of them comes in from the Federal reserve banks. The notes they receive that should be withdrawn from circulation are charged by the banks to the Treasurer’s account with the bank and are sent to the Treasury. The Federal reserve banks handle great sums in cash, and it is their practice to sort out the mutilated, worn, and soiled currency and to refrain from paying it back into circulation.

They prepare such unfit notes for remittance to the Treasury by first segregating each class and then assembling each denomination under 100-note straps. The next step is to cancel the notes by perforating them.

The strapped notes are then bisected longitudinally.

The lower halves are shipped to the Secretary of the Treasury. The arrival of the shipment at the Treasury is announced to the bank by telegraph, whereupon the bank ships the upper halves to the Treasurer. The employees of the Secretary’s office and of the Treasurer’s office each verify the notes and establish harmony with the bank’s claim for credit.

After proof of accuracy, the notes are destroyed by macerating machinery.

The corresponding halves are never brought in con-tact after leaving the remitting bank—hence the two halves could not possibly be reunited and be wrong-fully circulated. The perforation in every note would forestall their being redeemed anyway—even if the two parts should be reunited.

Of course, the purpose of the transmission of the halves separately is to prevent loss if a shipment should go astray, be stolen, or destroyed. The half-note procedure eliminates temptation from the minds of all who handle the redeemed currency, for its condition renders it useless to any individual.

During recent months some highwaymen attacked some registered-mail employees at the Union Station in Washington and took three of the sacks of mail by force. They made their escape hurriedly. Knowledge that the sacks were addressed to the Treasurer and that they contained currency evidently had become known to the thieves. The Treasury, the Postal authorities, and the Secret Service were notified immediately. An immediate check-up disclosed just what had been taken. It caused but very little trouble to the Government and no loss whatever, for the rule against whole-note shipments had provided full protection. The thieves got half notes that were perforated and they were of no value to them. They abandoned them the following evening in an out-of-the-way alley. The net result to the thieves was no profit at all, but they acquired a term in the penitentiary, which they are now serving.


Those who verify the receipts of the currency that is received at the Treasury not only have the duty of accurate count, but they must also see that the assortment by class and denomination is correct, and, most import-ant of anything they are required to do, to see that each note is genuine. The counter must not permit a counterfeit to pass undetected.

Every currency clerk is informed regarding what the genuine notes should look like—must know not only the details of the printing that should appear on every outstanding certificate and note of each of the many denominations, but must also be so thoroughly familiar with them that any variation in appearance will at once attract his attention.

It requires a force of several hundred employees to scrutinize and count the currency to pass it through the honoring process, and each must be expert.

One of the methods of training (and it seems a harsh schooling) is the regulation mentioned in a previous chapter that requires a counter who causes loss through passing of a counterfeit to make good the amount. That rule is imperatively necessary in order that it be assured that each counter has scrutinized each note and has been sure that the count was correct and the notes genuine.

With one clerk counting the upper halves and another, serving in a distant office, counting the corresponding lower halves of the same notes, accuracy is pretty well assured. If one of the counters should pass an error, it is unlikely that the clerk who happens to be assigned the corresponding strap of halves to verify will also make the same error.

It sometimes occurs that a very expertly executed counterfeit is discovered to be in circulation. Each counter is notified and afforded an opportunity to ex-amine the spurious note as soon as it reaches the Treasury. Every counter is thus immediately on notice as soon as the first one is detected.

Any counterfeit that appears dangerous, that is, one that it seems might deceive a counter, causes every note of that particular print that comes in to be turned over to certain particularly expert examiners.

There are several of those especially fine currency examiners. Two of them are women who have had very long experience and are said to be the most expert in the world in that particular line. Their ability to detect the spurious is astonishing. They can detect it oftentimes by the sense of touch alone, but their most expert work is through an observation of each detail of the printing. They can see immediately any variation in the design, in the portrait, in the shading of the delicate lines, etc. If anyone will observe a note critically it will be quite apparent that each detail of the printing is a remarkable exhibition of the engraver’s art.

No matter how skilled an engraver may be, no one was ever expert enough exactly to duplicate his own work. Many can engrave a plate satisfactorily, and of course an expert can make another plate that is just as good as the first expert made, but he could not make the second one an exact counterpart of the first. There would at least be some slight differences—some slight variations that a magnifying glass, under the eye of one of those experts, would be certain to reveal. Any difference proves fraud, because the same engraved plate cannot produce differences in the design of the note printed from it.

It is a part of the engraving rules that no one man shall engrave an entire plate. One engraver will produce the portrait, another the square letters, another the script, etc.

A number of wrongdoers have at times attempted to deceive Uncle Samuel by undertaking to counterfeit his paper money. They all come to grief, for their production is always detected and it is but a short time until they find themselves in the law’s clutches. The Government’s very efficient Secret Service sees to that. Experience has taught a good many who have attempted currency fraud that it leads to a loss of liberty.


Uncle Samuel keeps his promises to the letter. That rule applies to the honor of the paper money just as it does to all the other promises he makes. If a holder of a Federal certificate or a note is so unfortunate as to have it partially destroyed—a portion torn off and lost or even burned—it will be honored on presentation if enough of it is presented to establish the genuineness of the fragments. There are certain general rules governing such redemptions, however. The primary rule is that there must be three-fifths of a note present in order to redeem it at full face value. If less than three-fifths but clearly more than two-fifths of the note is present, redemption is made at half the face value. The rule as to three-fifths and as to two-fifths applies even if a note be burned to a crisp carbon, but it must be recognizable both as to its particular class and its denomination: It is of no detrimental consequence that a note be torn in many pieces or that the carbon fragments be broken into many parts. The currency experts can piece them together.

Many remittances of damaged currency are received at the Treasury for redemption daily. Bills come to the Treasury in various states of mutilation—burned, water soaked, moldy from having been buried in the earth, in tiny pieces as a result of having been eaten by rodents, chopped by sausage mills, etc. No matter how small the pieces, the redemption clerks can identify each and can arrange them in proper restoration order. Their skill is truly astonishing. Sometimes paper that was not money has been intentionally burned and sent in for redemption with an allegation that the carbon pieces submitted were the remains of burned currency. Such attempts at deception are easily detectable and do not deceive those clerks a single moment, as such claimants have promptly found out.

The fact that there are nearly nine hundred millions of notes and certificates in circulation and that they are not only in every community and in every store and dwelling, but also in nearly everyone’s pockets in our wide land, makes it obvious that much of the currency gets burned, lost at sea, rotted in the ground, and otherwise destroyed. The thought readily occurs to one’s mind—to whom does the gain belong when notes are destroyed and therefore cannot be presented at the Treasury and redeemed? The answer is that your Uncle Sam is the ultimate beneficiary.