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India's Fake Currency Note Scandal which resulted in Demonetisation

Fake Indian Currency Note (FICN)

Fake Indian Currency Note (FICN) is a term used by officials and media to refer to counterfeit currency notes circulated in the Indian economy. In 2012, while responding to a question in parliament, the then Finance Minister, P. Chidambaram, admitted that there is no confirmed estimate of fake currency in India. However, several central and state agencies are working together, and the Ministry of Home Affairs has constituted the Fake Indian Currency Notes Co-ordination Center (FCORD) to curb this menace. Nothing happened until 8th November, 2016.

History of FICN

The saga of how the Indian currency was compromised specifically from 1997 onwards is like a thriller. How one letter from some anonymous Finance Ministry employees brought focus on a breach that could have taken the nation down with it? In fact, India was imploding from within.

In 1997-98, during IK Gujral's time as the Prime Minister, India outsourced the printing of Indian currency notes amounting to Rs 1 lakh crore (Rs 1 trillion) to 3 countries. The Parliamentary Committee on Public Undertakings (COPU) brought it up and criticized the RBI and the Union finance ministry at the unbelievable breach in security.

"The committee was informed that 2 billion pieces of Rs 100 denomination and 1.6 billion pieces of Rs 500 denomination of notes were outsourced for printing," COPU chairman V Kishore Chandra Deo said. The committee submitted its report in the Lok Sabha. The printing contracts were given to American Banknote Company (USA) - 635 million pieces; Thomas De La Rue, UK -- 1.365 billion pieces (Rs 100 denomination) & Giesecke & Devrient Consortium (Germany) -- 1.6 billion pieces (Rs 500 denomination), amounting to a sum of Rs 100,000 crore.

The Finance Minister during that time was P. Chidambaram (except for 10 days when IK Gujral had that portfolio).

In 2010, the CBI found an astonishing thing when they investigated the RBI vaults because of the counterfeit notes in the 70-odd branches of various banks on the India-Nepal border. CBI had raided these branches and the bank officials told them something mindboggling, that they had received these notes from RBI itself.

In August 2010 the CBI raids the vault of the RBI and finds the same counterfeit currency that has been smuggled by the Pakistani intelligence agency ISI. But the point is from where did these notes come to land with the RBI? Either the ISI has hands long enough to have even penetrated the RBI or there is something more fishy, a conspiracy deep and dark enough to destabilize the country’s economy. The CBI had questioned 6 bank officials but no one knows what did they divulge or what has come out of the CBI inquiry after so many months.

So the question was How & Why?

Why has the Parliament and Indian Public been kept in dark?

The FM, RBI & CBI must come out in public.

The Indian currency system had been turned against itself from within as the RBI had counterfeit fake currency in its vaults and that RBI was disbursing to the public bank branches itself.

The CBI sent the notes to labs in Japan and Hong Kong. They also returned the same answer. Thereafter they were sent to America for testing. It was here that the lab discovered that they were counterfeit. The lab told that so striking were the similarities with the genuine that it was nearly impossible to tell the difference and the dissimilarities were also injected on purpose only. It could be the work of some state of the art international company dealing with printing currency. The lab also told the CBI how to differentiate the counterfeit from the genuine. Actually only a small path on the notes has been altered. It was this information that triggered the CBI raids on the banks bordering Nepal. Now coming to the question as to how these ISI proffered notes landed in the RBI.

Experts are of the opinion that Indian currency notes are printed in such a way which cannot be faked easily and that Pakistan does not have the technology to support such counterfeiting. This means that currency notes of ISI and RBI have the same source. This can mean only 2 things, that either some officials of RBI are complicit in this conspiracy or that our entire economy has been hijacked by international mafia.

Source: https://www.drishtikone.com/tag/curated/

Now the question is who prints the notes?

The British firm - De La Rue

“This all started, when Chidambaram was the finance minister. He gave the contract for printing currency to a British company, De La Rue, in London, and the same company was also printing currency for Pakistan. So, it became easy for Pakistan to get currency papers.

It appears that the Kashmir agitation was based on the counterfeit currency from Pakistan. (Source: "Subramanian Swamy blames ex-finance minister Chidambaram for ‘fake currency’ in India" / The New Indian Express)

This company - De La Rue - was printing currency for both, India and Pakistan.

Is that a danger to national security?

DE LA RUE is at the centre of this fake currency racket. This company has its biggest contract with RBI and it provides India with special watermark paper for printing currency. The moment RBI was raided the shares of this company plunged.

Europe was abuzz with the news of fakes being doled out by the company to RBI and Indian officials went to England to talk to the company officials. This resulted in the company suspending production and shipment at its Hampshire production unit. The company officials tried to assure Indian officials but to no avail and the Indians expressed serious concerns with regard to the company.

Roberto Giori, a major shareholder of its Swiss partner companies, called De La Rue Giori, was among the passengers of the hijacked Indian Airlines flight IC-814. Following the hijack, intelligence circles were agog with speculation about what impact the presence on board of the “currency king” of Switzerland — Giori had dual citizenship of Switzerland and Italy — would have on events.

Pakistan connection

Pakistan Security Printing Corporation (Pvt.) Limited (PSPC), a wholly-owned subsidiary of the Pakistani Central Bank (State Bank of Pakistan) prints currency notes and security bonds for the Pakistani government. It was established on March 10, 1949.

There’s a joint venture between the Government of Pakistan & M/s Thomas De La Rue International of the United Kingdom. Which means De La Re was not just printing Pakistan's currency; it had a freaking joint venture with Pakistan's Central Bank.

Bedfellows and the Whistleblowers

In a little-known case involving counterfeit currency caught in UP and Bihar, the defending lawyer rather nonchalantly argued that what was the proof that it was fake?

When the currency was sent to the Indian government labs, they indeed confirmed that the currency nabbed from the ISI agents was actually real! When sent to foreign labs, it was found that the currency was so close to real that it was extremely difficult to prove it was counterfeit. In fact, the small difference that helped them prove it was not real was probably inserted on purpose! Such was the confidence and arrogance of the counterfeiters!

Experts are of the opinion that Indian currency notes are printed in such a way which cannot be faked easily and that Pakistan does not have the technology to support such counterfeiting. This means that currency notes of ISI and RBI have the same source. This can mean only two things, that either some officials of RBI are complicit in this conspiracy or that our entire economy has been hijacked by international mafia. Now the question is who prints the notes?

ISI and RBI were together in bed. That is how not only was the Indian currency so perfectly replicated by the ISI, but it found its way to the RBI's vaults!

It was found by the CBI on further investigation that the mischief was happening at the end of De La Rue, a company from whom RBI imported 95% of its currency paper.

In fact, RBI’s purchases accounted for over 30% of De La Rue’s profits.

When De La Rue was blacklisted by the Indian government the company had come to the point of bankruptcy with 2000 metric tonnes of paper lying unused! At that time, the De La Rue CEO James Hussey – godson of Queen Mother herself – resigned over what was called “paper quality issues”, which sounded fishy, to begin with!

In November 2011, some "unnamed officers of the Ministry of Finance" sent a letter to the Central Vigilance Commission (CVC). It was in the aftermath of an Indian Express article that showed how De La Rue, the principal currency paper supplier was compromised. What these FinMin officers had to say was even more significant.

That it was not just De La Rue but other suppliers also who were compromised.

(Source: CVC takes up complaint blaming many suppliers / Indian Express)

BRBNMPL (Bharatiya Reserve Bank Note Mudran Private Ltd) is the organization that signs currency note contracts on behalf of the RBI.

In September-October of 2010, the BRBNMPL wrote to the Directorate of Currency and Ministry of Finance that not only had De La Rue failed to meet the quality specifications but even the paper supplied by Crane AB of USA and Louisenthal, Germany had failed tests in the Indian laboratory in Hoshangabad. But interestingly, and predictably enough, passed a "re-test" at these companies' foreign laboratories.

What was really troubling in that note from the "unnamed officers of the Ministry of Finance" was that BRBNMPL's note had omitted the name of the French company, Arjo Wiggins!

The complaint notes, "BRBNMPL in their letter of 3rd November 2010, concealed the failure of paper supplied by Arjo Wiggins (a French company) from the Ministry of Finance as detected in the tests conducted on Arjo Wiggins paper at Hoshangabad". Documents with The Indian Express reveal that it was in 2002 that the disappearance of 1,217 kg of high-security passport paper from the stock held by Arjo Wiggins in Brazil led to its blacklisting. This was later lifted after intervention of then National Security Advisor J N Dixit and a communication from the Finance Ministry in 2005.

Such a breach of security by this company and all brushed aside?

So, it was on the recommendation of JN Dixit, the National Security Advisor, and P. Chidambaram's Ministry of Finance communication that Arjo Wiggins' blacklisting was lifted.

This is another reason to get more worried. The CBI sent the notes to labs in Japan and Hong Kong. They also returned the same answer. Thereafter they were sent to America for testing. It was here that the lab discovered that they were counterfeit. The lab told that so striking were the similarities with the genuine that it was nearly impossible to tell the difference and the dissimilarities were also injected on purpose only. It could be the work of some state of the art international company dealing with printing currency. The lab also told the CBI how to differentiate the counterfeit from the genuine. Actually only a small path on the notes has been altered. It was this information that triggered the CBI raids on the banks bordering Nepal. Now coming to the question as to how these ISI proffered notes landed in the RBI.

Experts are of the opinion that Indian currency notes are printed in such a way which cannot be faked easily and that Pakistan does not have the technology to support such counterfeiting. This means that currency notes of ISI and RBI have the same source. This can mean only two things, that either some officials of RBI are complicit in this conspiracy or that our entire economy has been hijacked by international mafia. Now the question is who prints the notes?

Post-2014 - Standing on own feet?

In 2015, after Modi sought help in investigations in the fake currency notes from the US, it came out that the German company Louisenthal was also selling raw notes to Pakistan, resulting in a ban on the company.

“We are only keeping our interests in mind,” the official told The Indian Express. “We have proof that high-quality fake Indian currency notes are being produced in Pakistan and pushed into India through Bangladesh, Nepal, Sri Lanka and Vietnam. The availability of a common supplier could be one of the reasons behind such high-quality fake notes.” (Source: Indian Express)

This is how the Indian currency was compromised at every point – RBI, Home Ministry, Finance Ministry, and the Indian and Foreign printing presses.

Why was the sourcing of paper from De La Rue in London such a big issue? Pakistan's modus operandi was to purchase paper far in excess of its needs and hand the extra to ISI for the FICN.

A report in Outlook India shared the details.

CBI report to the Finance Ministry has reiterated the claim that Pakistan government Printing Presses in Quetta, Karachi, Lahore and Peshawar, were churning out large quantities of FICN (but no actions was done). Reports indicate that the paper for the fake notes is sourced from London. Indian investigators also believe that the Pakistani government imports currency-standard printing paper far in excess of official needs. The extra quantum is handed over to the ISI for FICN production. (Source: Currency Of Terror / Outlook India)

The De La Rue saga was closed by India in 2016 when it was part of the Panama Papers. There was evidence that it had authorized a "15% commission" - a euphemism for bribes - to get the banknote contracts in India.

For decades, the company was a major supplier of these sensitive materials to India too, but it has not been able to win any major contract since 2016, when its name cropped up in the Panama Papers with evidence that it had authorised a payment of a 15% commission via its subsidiary company, Portals, to its Indian agent for securing banknote contracts.

CBI raids in 2023

Thus, the CBI raids on the ex-Finance Secretary Mayaram make sense. Although one can quibble on the timing and the delay in the whole thing - and that it should have happened much earlier. The legitimacy of the raids may not be in question.

On January 12, 2023, the Central Bureau of Investigations raided the premises of a former finance secretary, Arvind Mayaram. He had given illegal extensions to the British firm De La Rue, even when it was blacklisted earlier. Today we will go into the whole saga of India's greatest currency scandal that led to many actions which were unprecedented.

Demonetization was the most prominent among them.

After demonetization, things changed.

Since 2016, De La Rue hasn't gotten a major Indian contract for the supply of currency paper, security threads, or security holograms. Even though it had created a company called De La Rue India Private Limited for manufacturing special-purpose machinery, it, however, never got a real contract for currency.

The FIR said the UPA government entered into a five-year agreement with De La Rue in 2004. The contract was extended four times till December, 2015. The extension granted by Mayaram was the fourth. The CBI said prima facie it appears that Mayaram committed offences under sections 120B (criminal conspiracy) read with sections 13 (2) and 13(1) (d) of the Preventions of Corruptions Act 1988.

The security paper is not easy to manufacture.

But for a country that can send a satellite to Mars, how tough could that be?

India's indigenous supply of currency paper

India has only one plant that manufactures paper for new notes. That is in Hoshangabad, MP. Every year, India uses around 22,000 metric tons (MT) of currency paper. The Hoshangabad plant produced 2,800 MT of India's needs. The rest was imported. In 2015, the production lines were increased so that the plant could produce 12,000 MT of paper.

The government will set up two more units of paper mills of 12,000 tonnes capacity at Security Paper Mill in Hoshangabad (Madhya Pradesh) to produce large denomination currency notes domestically.

In 2015, Prime Minister Modi pushed RBI to make paper and ink within India.

PM Modi wants the Reserve Bank to use Indian paper and ink to print currency notes and set a target date for achieving the objective as part of the 'Make in India' campaign while many prominent politicians are busy ridiculing that. Why? One does not know when India will be independent - Atmanirbhar - in this area of end-to-end currency printing. But it is critical to national security.

Did India’s demonetization trigger the downfall of Pakistan's economy?

Was Pakistan's economy dependent on the fake currency printed by them?

If you see the history of Forex reserve of Pakistan, it has been constantly following a downslope ever since November 2016 and it is a sharp downslope.

If you go by Pakistani narratives on downfall of their economy, they would say increased import bills, declining exports, inflation, devaluation of currency and poor condition of their economy have contributed to this mess. But then nothing explains it's sudden and steep downfall despite loans & bailouts from IMF. It is true that infusing FICN into India was to destabilise Indian economy at the same time it served them economically too. Pakistan used to send this fake currency into India, get it exchanged with actual currency and use that money to fund the terrorists and their operations in India and use rest of the money to buy dollars and then deposit the excess in Forex reserves and in Tax heavens into accounts maintained by politicians, Army Generals & bureaucrats. This fact further corroborates the decline in terrorist activities post Demonetisation. The terrorist activities that started after the Burhan wani's death came to a halt just after Demonetisation. Thus, the fake currency infusion in India was a self-sustained operation for continuous support to the terrorists and anti-India activities.

Demonetisation

On 8 November 2016, Prime Minister of India, Mr. Narendra Modi announced that the hitherto existing Rs.500 and Rs.1000 rupee notes cease to be legal tender. He said that the move is taken to curb black money and widespread counterfeit currency in the country. He introduced new Rs.500 & Rs.2000 notes.

In its annual report for 2017-18, the RBI declared that 99.3 % (worth Rs 15.3 lakh crore) of the demonetised notes came back to the banks out of the Rs 15.41 lakh crore in circulation before November 8, 2016.

At that time Government had anticipated that around 70-80% notes will come back to RBI citing logic of Black Money but 99.3% came back and hence logic of black money is incorrect. But FICN (counterfeit notes with striking similarities with the genuine one) sent by ISI of Pakistan came back to RBI.

We as Indians need this truth to be shared with us.

Compiled by: CA Harshad Shah, Mumbai harshadshah1953@yahoo.com

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