The Bank of Canada expects "dangerous levels" of currency counterfeiting to continue for up to three more years.
Since 2001, counterfeiting has exploded in Canada, breaking historical records and making the country one of the worst in the world for the circulation of funny money.
Internal documents obtained under the Access to Information Act show that counterfeiting has for years exceeded a little-known benchmark used by the central bank to signal when the problem has reached "dangerous levels."
The current threshold is 120 phony bills for every million banknotes in circulation, or 120 PPM, parts per million.
The benchmark, originally set at 100 PPM in 1988, was raised to 120 in recent years just as the proliferation of inexpensive, high-tech copying equipment made Canadian bills a ripe target for counterfeiters.
'Well above the level of other countries'
"All denominations except the $5 continued to be above our historical threshold of 120 counterfeits detected per million genuine notes in circulation," says an internal report from December 2005.
"This threshold is now considered high by Canadian standards and is well above the level of concern used in other countries."
In 2004, the worst counterfeiting year in Canadian history, there were 470 phony bills for every million genuine notes circulating.
The number declined to 326 in 2005 as the bank introduced new bills with security features that were tougher to fake and as it stepped up education programs among retailers.
This year so far, the central bank has wrestled the number down to 277, still more than twice the benchmark as the currency remained well in the danger zone.
Central banks around the world, fearful of undermining faith in their currencies, are typically coy about revealing actual counterfeit levels and precisely what thresholds they use to determine when counterfeiting problems are getting out of hand.
The information is rarely made available publicly, making international comparisons almost impossible.
However, the Bank of Canada surveyed 15 central banks last year, including those in Australia, the United States and China, to provide it with a global perspective on its own funny-money problem.
Major security overhaul
The detailed findings were censored in a release under the access law, but the bank acknowledges Canada has one of the worst counterfeiting problems in the world.
"We are relatively high compared with other countries," said Monica Lamoureux, a spokeswoman for the bank based in Mississauga, Ont.
The central bank last week completed a major overhaul of Canada's currency with the introduction of a new $5 banknote, featuring security features designed to thwart counterfeiters.
The Bank of Canada is hoping the new banknotes, along with efforts to educate retailers and more aggressive prosecution of counterfeiters, will pare back the number of phony notes to tolerable levels.
"We still use the PPM as a measure of performance, and we have set a goal of bringing counterfeit levels down to below 100 PPM by 2009," Lamoureux said in an interview with the Canadian Press.
The new, unpublicized target was set this summer as part of the central bank's medium-term plan.
Lamoureux said 100 PPM is no longer regarded as a trigger for the bank to take action against counterfeiters when the threshold is exceeded, but has become a performance measure instead.
The bank weighs a group of factors — including the quality of the counterfeits, the regions where they appear and bank surveys of public confidence — when deciding whether to take action, she said.
One of Canada's worst counterfeiting episodes occurred in 1973-74, when the number of phony $50 bills reached 900 for every million genuine bills in circulation — or almost one bad bill for every 1,000 genuine notes.
"This level of counterfeiting made an impression on the general public that lasted for many years," says an internal bank study.
But for all denominations, counterfeits remained well below the 100 PPM threshold from 1976 until about 2001, when levels started to rise dramatically.
Lamoureux said Canada has been particularly vulnerable to counterfeiters because the country has a relatively high level of personal computer ownership which, together with high-tech colour reproduction equipment, allows for more sophisticated copies. Also retailers tend to verify money at the counter less frequently than in other countries.