by Peter Followill, Contributing Author
When good or services appear to originate from a legitimate source but are in fact unauthorized reproductions, the crime of counterfeiting has likely been committed. The offense can include not only creating fraudulent documents and goods, but also altering legitimate items.
Because trafficking counterfeit goods is an interstate and international business, it is a crime largely regulated by the federal government. Although states have the authority to enact laws criminalizing activity related to counterfeiting, the power to punish the act of counterfeiting itself belongs exclusively to the United States Congress. To learn about different types of fraud, read our article Fraud Laws and Penalties.
COUNTERFEITING: AN OLD CRIME
Counterfeiting is a problem that has plagued both governments and consumers for centuries. It has been used as a weapon by those seeking to create economic instability: When counterfeit money is introduced into a market, both the currency and people’s faith in the government become devalued. Recognizing the government’s need to protect the integrity of its currency, America’s founding fathers included in the Constitution a clause granting the new government the power to punish counterfeiting. Lawmakers passed the first federal anti-counterfeiting laws in 1790, and since then Congress has regularly introduced new legislation as counterfeiting techniques have grown more sophisticated.
Counterfeiting and Currency
The anti-counterfeiting laws passed by Congress begin rather tersely: “[w]however, with the intent to defraud, falsely makes, forges, counterfeits, or alters any obligation or other security of the United States, shall be fined…or imprisoned not more than 20 years, or both.” The terms “obligation or other security” include United States currency. (18 U.S.C.A. § 471.) In order for a bogus bill to be counterfeit, it must be similar enough to the authentic bill so as to confuse an ordinary, unsuspecting person.
In addition to prohibiting the counterfeiting of U.S. currency and other securities, the law also prohibits possessing tools (including modern digital technology) used in counterfeiting. Furthermore, it is illegal to buy, sell, exchange, transfer, receive or deliver counterfeit securities.
People can also alter goods, by copying the item's trademark (think "fake Gucci"). For information on counterfeiting merchandise and other goods, see Counterfeiting Trademarks and Other Intellectual Property.
Counterfeiting done outside the United States
The law’s reach is not confined within the nation’s borders. Counterfeiting that occurs outside of the United States is punished identically to counterfeiting that occurs inside the nation’s borders. Similarly, the foreign possession of tools for counterfeiting U.S. securities is illegal, as is foreign transacting in counterfeit U.S. securities.
Counterfeiting foreign securities
In addition to the counterfeiting of U.S. securities and obligations, federal counterfeiting law also prohibits counterfeiting obligations and securities issued by foreign banks or corporations, if the act occurs within the United States.
Counterfeiting Items Other Than Securities and Currency
Federal counterfeiting law is not limited to currency. Other forms of counterfeiting specifically prohibited by federal law include:
- documents issued by certain lending agencies, such as insured credit unions, land banks, the Reconstruction Finance Corporation, and the FDIC
- bonds, bids, contracts, proposals, public records and affidavits made or altered for the purpose of defrauding the United States
- documents pertaining to imports and the collection of customs duties
- federal court documents
- seals of federal agencies, and
- U.S. postal stamps and meters.
Penalties for Counterfeiting U.S. Currency
Several of the provisions in the federal counterfeiting law provide for a fine of up to $250,000 and a prison sentence of up to twenty years for the counterfeiting of U.S. obligations and securities. The counterfeiting of foreign obligations and securities within the United States carries identical penalties, while possession of plates, stones, and other things used in the production of counterfeit foreign obligations carries a maximum of 25 years in prison and a $250,000 fine. A defendant may be subject to an even greater fine if the crime results in a financial gain or loss to someone other than the defendant. Where such gain or loss occurs, the defendant may be fined an amount up to double the amount gained or lost.
Defendants who have put parts of two or more notes together to create a fraudulent note face up to ten years in prison. Someone guilty of counterfeiting gold or silver bars, or coins over 5 cents, faces a maximum prison sentence of fifteen years (but a person who passes or attempts to pass counterfeit bars or coins faces only five years in prison).
Possible Defense to Counterfeiting Currency Charges
Defendants who have been charged with counterfeiting U.S. securities and obligations (not foreign instruments) may argue that they’re not guilty because they lacked the intent to defraud. For example, a person accused of altering currency might argue that the currency was altered as part of a joke that would not result in defrauding anyone.
A defendant charged with creating a copy of a Treasury plate would likely not be successful in arguing a lack of intent to defraud, as the provision outlawing copies of Treasury plates does not require the intent to defraud.
A defendant might also argue that the bogus currency’s quality is so poor that it does not meet the legal definition of counterfeit. The law does not require bogus bills to be so similar to authentic bills that only an expert can tell the difference, but crude copies that lack major identifying characteristics of real currency (such as the bill’s denomination) may not qualify as counterfeit for the purpose of criminal prosecution. Thus, a person who attempts to reproduce currency may nevertheless be innocent of counterfeiting if the fake currency is such a poor imitation that it would likely not fool an ordinary person into believing that it was authentic. But this defense has its limits—it is possible to be convicted of counterfeiting currency when only one side of a bill has been copied, leaving the other side blank.
To learn more, see our article, Can I be charged with using counterfeit money if I didn't know it was fake?
Speak With an Attorney
Federal law prohibits a variety of activities related to counterfeit currency. A conviction for counterfeiting currency can result in a lengthy prison sentence and a substantial fine. An experienced criminal defense lawyer can evaluate a case’s strengths and weaknesses. A lawyer can also seek a dismissal or reduction in the charges, as well advise you on an effective defense strategy if the case goes to trial.