Congressmen seek answers on anti-counterfeiting
- Published: Nov 3, 2017, 6 AM
The U.S. Mint, Secret Service and other federal government agencies are being asked by two congressmen what efforts are being undertaken to stem the infiltration of counterfeit U.S. coins, primarily precious metals bullion coins, into the nation’s economy.
Reps. Alexander X. Mooney, R-W.Va., and Frank D. Lucas, R-Okla., sent a letter Oct. 27 addressed to Acting Principal Deputy U.S. Mint Director David Motl and U.S. Secret Service Director Randolf D. Ailes, while copying Kevin K. McAleenan, acting commissioner for the U.S. Customs and Border Protection, and Maureen Ohlhausen, chairman of the Federal Trade Commission, seeking answers.
Lucas is an avid coin collector.
Three rarities are identified among the smallest American Eagles. Also in our Nov. 13 issue, columnists dissect a few poor attempts at counterfeiting American rarities and explain an obsession to search for surprise coins.
Both Mooney and Lucas are members of the House Committee on Financial Services.
Accompanying the letter was a plated tungsten counterfeit of a 1995 American Eagle 1-ounce gold bullion coin.
“We are sending it to you because it’s our understanding that the Department of Homeland Security’s U.S. Secret Service was not inclined to investigate the origin of this and a related batch of these counterfeit gold American Eagle coins when the matter was recently brought to its attention,” according to Mooney’s and Lucas’ Oct. 27 letter.
“Given reports of the growing problem of high-quality counterfeits of U.S. precious metals coins entering the country from China and elsewhere, we wish to learn more about the U.S. Mint’s actions with respect to counterfeits of its current-issue U.S. gold and silver coins.”
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Mooney and Lucas are seeking detailed explanations involving:
??The nature and quantity of complaints — and resulting investigations — regarding counterfeit U.S. gold, silver and platinum coins within the past two years.
??Whether, and to what extent, the U.S. Mint has reviewed the anti-counterfeiting measures that have been implemented by other sovereign and private mints — and whether the U.S. Mint is preparing to implement any technologies to protect the integrity of America’s coins minted of gold, silver, platinum and palladium.
??What anti-counterfeiting programs, if any, are in place to protect the integrity of U.S. coins minted specifically of gold, silver, platinum and palladium.
??The expected roles of the Secret Service, U.S. Customs and Border Enforcement (Protection), and other federal law enforcement agencies in detecting and investigating counterfeits of U.S. coins minted of precious metals and the extent of their coordination with the U.S. Mint.
Coin World queried the U.S. Mint for the bureau’s reaction to the congressmen’s request for information.
Mint spokesman Michael White provided the following response Oct. 31: “It would be premature to comment on the letter, as the Mint has not finalized its response to the representatives’ request for information.”
David J. Ryder, who served 14 months as the 34th U.S. Mint director and whose nomination by President Trump as the 39th Mint director is being considered by the U.S. Senate, indicated during his Oct. 24 nomination hearing before the Senate Banking, Housing and Urban Affairs Committee that anti-counterfeiting measures would be his top priority as director.
Ryder has spent the past 25 years, since his Mint tenure, involved with anti-counterfeiting measures dealing with coins and paper money, including consulting on the development of anti-counterfeiting details for the current British £1 coin.
The Secret Service is responsible for investigating any counterfeiting of United States coins and securities, while prosecutions are handled by the Department of Justice. (The Secret Service is also tasked with providing security for the president and extended family members as well as cabinet and other designated government officials.)
The bureau’s primary function when established in 1865, the year President Abraham Lincoln was assassinated, was counterfeiting investigations. It wasn’t until after the assassination of another president, William McKinley, in 1901, that the security detail for the president was added.
While the Secret Service today still investigates acts of counterfeiting, the dollar value and extent of the counterfeiting determines whether an investigation is opened. The Secret Service also addresses fraud involving other forms of currency and monetary exchange, including digital currency.
The counterfeiting of coinage is as old as coinage itself. However, during the past 10 or more years, the distribution of counterfeit 18th and 19th century U.S. coins traced to production in China has increased exponentially, with the quality of such issues becoming more sophisticated.
Adding to the impact in recent years, not only on the numismatic community, but the public at large, is the production of plated base metal versions of U.S. bullion coins, primarily American Eagle gold $50 and silver $1 bullion coins and gold American Buffalo $50 coins.
Hobby leaders have voiced growing concerns over the problem, but government agencies in general have shown little interest in combating the counterfeiting of coins. Hobby efforts in this area have increased of late.
A face-to-face dialogue was opened earlier this year between Beth Deisher, former Coin World editor and now director of anti-counterfeiting for the Industry Council for Tangible Assets Anti-Counterfeiting Task Force, along with other task force members, and lower level Secret Service and U.S. Customs and Border Protection personnel.
Secret Service officials indicated an investigation often would not be opened unless the face value of the counterfeiting totaled a minimum of $100,000. Officials took notice when ICTA representatives informed them that the intrinsic value of a single American Eagle 1-ounce gold bullion coin at the time was roughly $1,300 per coin, not the $50 legal tender face value the Secret Service was using to determine whether to investigate.
“[The] ACTF has focused its efforts on assisting federal, state, and local law enforcement in the investigation and prosecution of counterfeiters,” Deisher said. “The most responsive federal agency has been Customs and Border Protection. ACTF has provided experts to identify counterfeits seized during a number of investigations and it is in the process of developing training materials and educational sessions for agents in the CBP’s 35 regional centers and also for ICE agents in Homeland Security’s special investigative units. ACTF stands ready to assist the U.S. Mint and the Secret Service.”
Philip N. Diehl, president of U.S. Money Reserve and ICTA’s current chairman, succeeded Ryder as the 35th director of the U.S. Mint. Diehl said the Oct. 27 letter from Lucas and Mooney came shortly after the second of two meetings ICTA and its Anti-Counterfeiting Task Force held with Lucas, who Diehl described as “no doubt the most knowledgeable member of Congress on coinage issues.”
“We shared with Rep. Lucas our concern that the Mint and Secret Service must become more active on the anti-counterfeiting front,” Diehl said. “The threat is bigger than they realize and extends to all US Mint products — bullion, numismatic, and circulating coinage. Secret Service and the Mint have the authority and resources to do much more than they’ve done to date.
“We also described how the strong partnership we’ve forged with Customs and Border Protection is a showcase for what cooperation between law enforcement and industry can achieve.
“We are optimistic that the Mint will step up to the challenge under the leadership of David Ryder, once he is confirmed by the U.S. Senate as Director. The Secret Service will take longer to mobilize, and we’ll probably need more help from Congress.”
Diehl explained that Chinese counterfeiters today can accept an order from a U.S. distributor over the internet, produce massive quantities of high quality fake bullion, numismatic, and circulating coins, and deliver the fake coins to the buyer’s doorstep in a matter of weeks.
“The same is true around the world, but other national mints have taken countermeasures and other nations’ law enforcement agencies have taken more aggressive action against counterfeiting networks,” Diehl said. “We must do the same.”
He added, “Coin counterfeiting was not on our radar when I was [Mint] director. The design, production, and distribution systems of counterfeiters today are far beyond what they were 20 years ago, and the financial rewards are far higher.”
Websites advertise and take orders for highly sophisticated struck counterfeits whose sole purpose on the secondary market is to defraud buyers.
Diehl said not only are U.S. Mint-produced bullion and numismatic products at risk, so is circulating coinage.
Other world mints are light-years ahead of the United States in counterfeit protection by embedding electronically recognizable material in each coin the respective mint produces, so that each coin can be identified as genuine, Diehl noted.
Deisher said when Coin World published a series of articles in December 2008 detailing the threat Chinese counterfeits posed to the numismatic marketplace, some within the hobby dismissed those concerns.
“They did not believe the Chinese capable of producing counterfeits deceptive enough to fool the experts,” Deisher said. “We predicted it would be only a matter of time. Unfortunately, our predictions have proven to be accurate.”
Deisher said the ICTA task force believes the Oct. 27 letter of inquiry to the U.S. Mint and to the U.S. Secret Service is timely and was needed to get the two bureaus to work together on the joint problems the counterfeits pose.
“Seven years ago, during a congressional oversight hearing, Rep. Lucas and other members of Congress asked Mint officials and Secret Service representatives about counterfeiting and the possible threats,” Deisher said. “The Mint admitted then it had not paid attention to the problem and had not begun to look at ways to protect our coins. So far as we are aware, the Mint has not developed any anti-counterfeiting technology since that hearing. We will be very interested in the Mint’s and the Secret Service’s responses.”
“We commend Representative Mooney and Representative Lucas for their actions in defending sound money and for beginning to exercise Congressional oversight duties in accordance with Article I, Section 8, Clause 5 of the U.S. Constitution,” Gleason said. “We look forward to a meaningful explanation from the U.S. Mint and the Secret Service for what appears to be a lackadaisical attitude toward protecting the only constitutional currency that is currently even produced by the federal government.”
Gleason says the counterfeiting issue is an ever-increasing problem.
“We have several different types of testing equipment which is used on everything that comes in,” Gleason said. “Without that testing equipment and proper use thereof, fakes can be hard to detect. Fortunately, we have run across exceedingly few fakes, but we expect the problem to increase.
“If people buy from a reputable dealer, then they should be confident they are getting the real thing. But the average person probably does not have this equipment themselves.”
The counterfeiting of numismatic or “rare” coins is another issue, Gleason said.
“That’s because it’s relatively easy to detect whether something is actually gold or silver — or not,” Gleason said. “But fake graded coins that are made of the real metal may be more tricky.”
Donald Herres, president of Dollartowne in Bellbrook, Ohio, said his firm has discovered its share of counterfeits from bullion products offered for sale, requiring each piece to be checked for authenticity.
“Local law enforcement, the United States Secret Service and the U.S. Mint are overwhelmed with other activities,” Herres said. “The counterfeit problem, in my opinion, is just not ‘sexy.’ For the feds, I believe, it’s low priority, a single victim crime or a crime that only affects a few.
“However, counterfeiting does affect every single American and our money.”
Herres contributed the following insights:
“It would be nice if the U.S. Mint would partner with the bullion dealer to help with counterfeit detection, education and prevention. This would include educational materials provided to the dealer for the customer.
“I would like to see the U.S. Mint to put a committee together, like they have with the Citizens Coinage Advisory Committee, to get input from bullion dealers on counterfeit detection and reporting.
“The Royal Canadian Mint sends out counterfeit detection materials to subscribed customers. They keep an open line of communication with the bullion partners. The new coins also have anti-counterfeiting technology that is embedded in the GML [gold Maple Leaf] and SML [silver Maple Leaf].
“Most importantly, stricter penalty for possession and sale of known counterfeits.”
Terry Hanlon, president of Dillon Gage Metals, one of the U.S. Mint’s authorized purchasers of bullion coins, says the wholesale bullion firm tests for authenticity each and every bullion piece it acquires.
“We see counterfeit coins,” Hanlon said. “There are devices to measure volume, magnetism, specific gravity and metal content.”
Hanlon notes that some online websites offer counterfeits of U.S. bullion coins as “reproductions.”
“Why would anyone want to own a reproduction other than to cheat someone?” Hanlon asks.
Hanlon says the U.S. Mint needs to step up its game on the anti-counterfeiting front.
“The U.S. Mint has kind of ignored any aggressive action or proactive approach like that taken by other mints to at least make it look like they are doing something,” Hanlon said. “There needs to be political pressure exerted to stop these counterfeits from entering the country, many from China. The sleeping bear needs to wake up.”
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