A counterfeit banknote detection pen is a device used to apply an iodine-based ink to banknotes in an attempt to determine their authenticity.
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Background
Counterfeit banknote detection pens are used to detect counterfeit Swiss franc, euro and United States banknotes amongst others. Typically, genuine banknotes are printed on paper based on cotton fibers, and do not contain the starches that are reactive with iodine. When the pen is used to mark genuine bills, the mark is yellowish or colourless. Counterfeit pens are most effective against notes printed on standard printer or photocopier paper. The chemical properties of US banknotes prior to 1960 are such that marking pens do not work.
Reception
Pen manufacturers claim such pens will detect a great majority of counterfeit bills, and are an easy counterfeit detection method that does not require expensive gadgets.
Critical reception
Critics suggest the effectiveness is much lower. Critics claim that professional counterfeiters use starch-free paper, making the pen unable to detect the majority of counterfeit money in circulation. Magician and skeptic James Randi has written about the ineffectiveness of counterfeit pens on numerous occasions and uses a pen as an example during his lectures. Randi claims to have contacted a United States Secret Service inspector and asked whether the pen works as advertised, to which the inspector replied "it is not dependable." The Secret Service does not include such pens in their guidelines for the public's detection of counterfeit US currency.
US counterfeiters bleach small denominations and print more valuable bills on the resulting blank paper to evade this test, although changes to the currency since 2004 have made this method easier to detect. This is one reason that many currencies use different sized notes for different denominations.
Design Flaw
The effectiveness of the pens may be skewed- one way or the other. Simply having a banknote pass through laundry, depending on the soaps and bleaches used, can cause a bill to fail the test when it is otherwise OK. Additionally, it was discovered almost immediately that changing the acidity of a note, or most any other piece of paper, a napkin, typical typing paper, cardboard, et cetera, with lemon juice, will cause a false positive, that is, a place mat in a restaurant with lemon juice on it will appear to be a valid banknote.