The arrival of the new $100 bill has been pushed back, perhaps to late June, but money-counting and note validation technology vendors are already on notice.

When a redesigned $5 bill was introduced a year ago, there was not the same sense of urgency and anticipation. For one thing, not many counterfeiters bother with denominations as low as $5. More important, perhaps, the upward swing in counterfeiting activity was not as well defined as it is now.

Lower-denomination forgeries are turning up mostly in places where it's rare to see any kind of currency validation, says Ed Grondahl, executive vice president of sales and marketing for Tidel Engineering, a Carrollton, Texas-based maker of cash-handling systems. (By way of unsolicited corroboration, a Papa John's driver in Myrtle Beach, S.C., reported he was paid off with four counterfeit $10 bills; police in Santa Cruz, Calif., confiscated $5,000 worth of phony money in denominations of $5, $10, $20 and $100; and bogus $10 and $20 bills turned up in a Huntsville, Ala., Walmart till during one 10-day period earlier this year.)

                   
An earlier generation of counterfeit detection technology focused on authenticating the unique paper on which U.S. currency is printed. In response, thieves developed the "super bill" — a $1, $2 or $5 note bleached and refashioned with a scanner and high-quality printer as a $50 or $100 — and now, it seems, a $20. The end product passes the paper test — or so the forger thinks. It's all about what is embedded in paper used for currency.

Each denomination is printed with unique watermarks and thread placement, some of which are visible to the naked eye when viewed in front of strong light: A sharp-eyed cash handler can snag a fair amount of bad bills, Grondahl says, but not all of them. That's why top-quality currency validators combine optical scanning (to read what is printed on the surface of the face of the bill) with technology that detects components (threads and watermarks) embedded in the paper itself.

Moved to point of sale
Retail LP executives note that arrests involving counterfeiting rose 28 percent in 2008, and the amount of counterfeit currency in circulation rose 5 percent, to $64.4 million. Both were at their highest level in five years, and the trend has continued into the first quarter of 2009. In response, cash-intensive retailers are moving currency validation technology from the cash-counting backroom to the point of sale.

7-Eleven was an early adopter, putting validators at "knee-cap level" where cashiers can insert bills as received. If a bill is rejected, the cashier will ask for a replacement or another form of payment. If the customer presses him on why the bill was unacceptable, he can say there was writing on it, or that it was torn, repaired with tape — or that the machine is just plain oversensitive. No one has to mention funny money.

Bill readers are also being rolled out at Speedy Stop convenience stores in Texas, with the units placed between registers. Company procedures call for every $50 and $100 bill to be inserted into a safe equipped with a currency validator. "Since we've started using these, we haven't taken in a single counterfeit bill," says Mike Squillace, the chain's vice president of loss prevention and risk management.