LE JOURNAL SEMESTRIEL DU GUARDIAN THE BIANNUAL JOURNAL OF GUARDIAN GUARDIAN 半 年 专 辑 ISSUE 4

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1 L A R E V I S TA S E M E S T R A L D E G U A R D I A N LE JOURNAL SEMESTRIEL DU GUARDIAN GUARDIAN 半 年 专 辑 THE BIANNUAL JOURNAL OF GUARDIAN ISSUE 4

2 Contents 3 Insight Keeping You Notified Films ain t films. Why it s best to stick with polymer material made specifically and exclusively for banknotes. 4 6 Specimen Exclusive A Governor s View of a Currency Transformation Industry Interview PWPW: A Focus on Market-leading Technology Don Brash, who served as RBNZ Governor for 14 years, reveals the forces that compelled the central bank s move from paper to polymer. 12 Banknote Design Feature Story What Does It Take to Design a Banknote? Banknote Security From The Top, Down The concept designer s mind must work at multiple levels to create a work of art that serves many masters. 18 With counterfeiters taking advantage of the explosion of digital technology and other materials available online, a strategic and comprehensive review of banknote performance can create exciting possibilities. Aleksandra Grynkiewicz, PWPW s Director of Banknotes and Security Prints Division, comments on the recent experience of printing Poland s new 20 złoty on Guardian, featuring LATITUDE, AURORA and METALIX. 20 Research & Development A Silver Lining for Counterfeit Resistance R&D scientist Odi Batistatos explains how LATITUDE is taking diffractive optical effects to a new level using silver nanotechnology. METALIX Brilliant sheen. Lustrous colour. Ageless performance. 1

3 INSIGHT From the Editor s Desk Keeping You Notified Editorial Editor Steve Casey Deputy Editor Carlos Fernandez Editorial Consultant Jaclyn McRae Contributors Carlos Almenar Odi Batistatos Chris Catlin Thierry Gavel Gary Power Design Next Brand Strategy & Design Optimal Banknote Management Starts with the Whole System We are new in an industry characterised by constant change, most often driven by security feature innovations and alternate substrate offerings designed to enhance currency performance. In this dynamic environment, with so many options, identifying the best banknote solution for a nation can be greatly assisted by taking a comprehensive strategic view of how the system will approach the future challenge of managing the entire banknote family. This is a powerful perspective as it allows central bankers to take a blue-sky approach to understanding how the country can best address a potential counterfeit threat, while also considering the needs of an entire industry. Taking the time to identify the future performance requirements of a nation s currency enables careful consideration of issues such as: counterfeit threats; banknote production costs; functionality in circulation; industry stakeholder engagement; currency management infrastructure; societal benefits; environmental considerations; the noteusing public s preferences; organisational cost efficiencies, and numerous other factors that will determine the best possible future banknote solution. It is evident that the best approach to addressing professional counterfeiting is a holistic one. It involves everything from substrate and security feature design, to engaging law enforcement, equipment suppliers, the public, the cash handling industry and of course the central bank itself. In this vein, there is huge potential upside for a central bank and its key stakeholders to take the opportunity to step back and consider their monetary system and its operations as a whole. It is from this perspective that foundational changes can be made to how the system operates, which in turn can fundamentally change the performance and role of banknotes in a society. With that vision established, the process of reforming the system in a logical and systematic order becomes an inspiring and visionary exercise. In this, the fourth issue of SPECIMEN magazine, our feature content is dedicated to such high-level considerations. Whether it is understanding which overall banknote security approach best suits the needs of a particular banknote family (Banknote Security From the Top, Down on p12) or how a Governor addresses the challenge of a Minister of Finance capping the bank s operating costs (A Governor s View of a Currency Transformation on p8), I trust this issue will provoke some new thinking and fresh ideas about how to best address the challenges we all face in making the world s currency systems as secure, cost-effective and efficient as possible. Steve Casey Editor Why is Clarity C Such a Unique Film? The technology and associated manufacturing process for the production of biaxially oriented polypropylene (BOPP) has been developed in-house by Innovia Films using a highly secure, proprietary manufacturing process that produces Clarity C film supplied exclusively for use in Guardian polymer substrate. Polymer Substrate: Down For the Bacterial Count Ding! Ding! After releasing a comprehensive 2010 study in which 1280 banknotes were obtained from food outlets in 10 different countries confirming that polymer banknotes on average contain 75 per cent less bacteria than cotton-based notes Dr Frank Vriesekoop continues his work with polymer. On looking back, Frank says the original study came about after a question was raised about food, money handling and bacterial contamination at one of his university microbiology and hygiene lectures. After finding little published information on the topic, I decided to conduct my own research and drafted in colleagues from around the world to broaden the sample size, says Dr Vriesekoop. The study was rigorous and conformed to high standards. The resulting paper, Dirty Money: An investigation into the hygiene status of some of the world s currencies as obtained from food outlets, was a landmark piece of research that examined an apples-to-apples comparison of the bacterial counts on paper and polymer, co-circulating in identical cash handling environments. Technology Platform Clarity C is a unique polymer film that can host complex and highly secure features within its structure Inherently Secure Clarity C has unique optical and structural characteristics that can be verified using a Verus device Water Resistant 100% waterproof and easily survives multiple spins through a washing machine! Process Efficiency Polymer film is significantly cleaner, requiring less maintenance on high-speed BPS sorting equipment and ATMs, & depositing less ink on rollers The gloves are off: Dr Frank Vriesekoop assembled a worldwide independent research team. His original findings inspired Frank to focus his current research at Harper Adams University on why polymer banknotes attract fewer bacteria than cotton-based paper alternatives(see weblink: He says two key reasons have now been isolated: While bacteria probably lands on both types of note at the same rate, it doesn t seem to linger for as long on polymer. This could be due to polymer s non-porous surface the germs don t stick as readily or they may not stay alive as long FEATURES OF CLARITY C 100% Recyclable Once removed from circulation, Guardian polymer is shredded and processed into plastic pellets for use in other useful products Photo courtesy: Harper Adams University Counterfeit Resistant The highly clear and transparent nature of the film creates significant complexities for potential counterfeiters Resists Soiling Due to its non-porous surface, the film is resistant to oil and dirt and can be wiped clean if necessary Strong Tear Resistance The film has high resistance to tear initiation Design Integration The clear film opens up new design possibilities by introducing light transparency as a critical factor in banknote design Highly Durable Virtually indestructible, it retains its form and structure, enabling Guardian substrate to last 3-5 times longer than cotton paper on that type of surface. Also, in determining the effect of bacteria lifespan, Frank and his team found that on polymer notes, bacteria levels decreased after one day, and had all but disappeared after a week. With cotton-based banknotes, however, numbers did not start decreasing until a full week later. A series of further studies have researched this phenomenon. One focused on how well bacteria adheres to the four different substrate types (polymer versus cotton versus linen versus papyrus-based notes), finding that bacteria numbers were significantly lower on polymer notes. The knockout work undertaken for the original study was performed by undergraduate students, and Frank says he enjoyed being able to encourage young researchers to attain valuable hands-on training and see the effects of their work. Have your say: As a regular user of cash, how would you rate the hygiene of your local currency? To register your feedback, scan the QR Code with a QR reader (available free in the App store)

4 BANKNOTE DESIGN What Does It Take to Design a Banknote? When it comes to designing a new banknote, aesthetics are just one aspect to be considered. The challenge goes well beyond the initial concept it is to innovate and compose all the visual elements in perfect harmony while incorporating a selection of complex security features. Banknote designer Carlos Almenar walks us through the process, which at times can be a maze and requires thinking at multiple levels. What is the role of concept design in today s banknote industry? A banknote designer is a person capable of interpreting the culture and identity of a nation, to then translate these semantic concepts into the specific techniques required to build a banknote. The banknote designer is also an architect who works with a team of specialists in the banknote industry. Their thoughts and reflections must focus on the designs, substrates, security features and printing techniques. The banknote designer advises central banks regarding the architecture and manufacturing of a banknote its aesthetics, colours, sizes, security features, substrates, etc. They guarantee that the banknote design will go beyond the aesthetic concept as a true work of art, the design will be adapted to the complex techniques involved in banknote manufacturing. From abstract to concrete: Carlos Almenar s interpretation of the invisible comes alive. Photo: Peter Kotsa Having worked across the banknote industry, Carlos Almenar knows what makes for a great design. In my opinion, today s banknote designer must adapt and transform the design techniques and concepts to a new dimension of our present and future. Should it be a concept or an actual illustration of the final note? A banknote design or concept must be conceptualised with manufacturing in mind. The banknote designer sits between their central bank customer and the manufacturing industry. The design concepts that are created and presented to the central bank must correspond exactly to each step of the manufacturing process. For this reason, there must be fluid and open lines of communication between the banknote designer and all the key groups responsible for the security features. How much detail should the concept contain? The banknote designer must consider many different details, especially since a design cannot just be beautiful. The design must go beyond the aesthetic so it can become a truly functional feature that adapts perfectly to the expectations of the central bank. And above all, the banknote design must be fully compatible with the substrate manufacturing and printing techniques. How much freedom is there to change the concept as the project progresses? Freedom to introduce changes in a concept design will always be present, although the problem is not its freedom but the time it takes to complete these changes in the design. When a design project is at a late stage in its development and the need to change it arises, time plays a very important role. If the proposed changes are based on subjective reasons, work can continue for hours on end and it may never reach any conclusions. However, if the reasons are objective and based on sound logic, a positive outcome can be reached in a short time. How do you cater for the different expectations of various stakeholders? For me it is important to listen to the different views and opinions that participate in the design process towards the creation of a banknote, especially since banknotes are normally made using very complex systems and every note has its own identity and specific security codes. But the most important part is to listen and understand the needs of the central bank. Each country has its own economy and specific needs regarding cash management. It is very important to understand that banknotes are different in each nation or issuing authority of circulating currency. In your experience, are there many differences between designing a concept banknote in polymer versus designing for paper? The basics of banknote design are simple; however today there is a diversity of substrate technologies propelling the evolution of design into more complex effects. Paper substrates have existed for centuries and evolved, not in the raw materials, but in the development of watermarks, security threads and durability. Today there are other substrates such as polymer, and this specifically has made banknote designs a lot more dynamic and complex due to its wide array of alternatives in transparency and opacity integrated in highlydetailed security features and printing. Today polymer has evolved in an incredible manner and the creation of a design has evolved accordingly. The security features and composition of the many design layers that form a polymer substrate inspire the designer to focus their activity in the synchronisation of polymer and the associated security features. But beyond this, all these elements must be adapted to the printing systems and therefore an integrated concept design can be achieved: substrate, design architecture, security features and printing. This enables the design to offer a variety of products adapted to new technologies that whilst highly-secure, pose greater challenges for would-be counterfeiters. How do you deal with these differences yourself? I have had the privilege of designing banknotes on both paper and polymer, which includes working at the Central Bank of Venezuela Print Works, Oberthur Fiduciaire, and now as Banknote Designer at Innovia Security. These experiences have enabled me to understand and appreciate the differences between the processes used to create a banknote in paper or polymer. Currently, my work involves an increased use of technology and therefore I must integrate the concepts developed for the substrate and interact in more detail with the experts in polymer substrate design, as well as with the scientists behind the complex security features. Personally, I think this harmony enables me to create true works of art using leading-edge technology. This is my biggest challenge: to achieve distinct dimensions of effects, transparency and opacity that can be understood by the central bank and accepted by the public. Users must be able to quickly authenticate the note, and banknote accepting machines must also be able to decode security features immediately. 4 5

5 SPECIMEN EXCLUSIVE A Governor s View of a Currency Transformation As Governor of the Reserve Bank of New Zealand for 14 years ( ), Don Brash presided over the central bank during a period of significant reform. One crucial aspect of that reform was the recognition that the seigniorage (the revenue earned from the issue of money) really belonged to the Crown, rather than the bank itself. Former Reserve Bank of New Zealand Governor Don Brash. Photo: Karel Lorier Incredible Luck by Don Brash was published by TROIKA in May

6 SPECIMEN EXCLUSIVE Deal! Finance Minister Richardson and Governor Brash in 1990, embarking on reforms that permanently transformed the central bank s culture and operations. The first New Zealand polymer banknote was the $10 issued in The bank could see the benefit of a whole note family on polymer and the efficiencies it could gain through such a move. Major changes in New Zealand s economic policy were taking place when Dr Don Brash came to office during the fourth Labour government from 1984 to Roger Douglas was an assertive pro-market Minister of Finance who embarked on a range of reforms, cutting tariffs and taxes, and introducing a goods and services tax (GST) with no exceptions. These initiatives were coined by New Zealanders as Rogernomics. One of the most fundamental changes related to monetary policy. At the time, most central banks were either totally subordinate to or totally independent of government. Legislation introduced shortly after Dr Brash became Governor created a new model, where the elected government determined the inflation rate the central bank was required to deliver but then left the central bank s Governor to deliver it with the explicit understanding that failure could lead to the Governor s dismissal. The new legislation also delivered another fundamental change. Most central banks don t require any parliamentary appropriation of taxpayers money because they enjoy the seigniorage income on the currency issue, which is almost always vastly more than is needed to run the central bank. This means that in most countries the central bank is the least efficient part of the government system. With the loss of our entitlement to the seigniorage income, we also had to negotiate with the Minister of Finance how much the bank could spend on its operations over the forthcoming five-year period. Prior to the 1989 legislation, the Reserve Bank of New Zealand paid a dividend to the Treasury equal to whatever the bank had left over after the Governor had spent whatever he felt appropriate. There was no accountability. The 1989 legislation changed all that, says Dr Brash. With the new approach came a dramatic increase in media scrutiny. Rather than being an adviser to the Government and being able to keep out of the public eye, Dr Brash became the Governor who had to explain to the New Zealand public why monetary policy had to focus primarily on inflation, rather than employment or economic growth. Huge numbers of people were unhappy about that focus. I had to take on the role of an evangelist in order to persuade and educate people on the reasons why keeping inflation low was so important. With the loss of our entitlement to the seigniorage income, we also had to negotiate with the Minister of Finance how much the bank could spend on its operations over the forthcoming five-year period. Shortly after the 1989 legislation came into force, the Labour Party lost office and was replaced by the National Party, and I found myself having to negotiate with the new Minister of Finance, Ruth Richardson. She had inherited a difficult fiscal position from the outgoing government, and was determined to deal with that by driving efficiencies throughout the public sector. When Governor Brash met to discuss the matter with Richardson, now the controller of the RBNZ s seigniorage income, the conversation was direct. How much will it cost you to run the bank this year? she asked. $56.7 million, Dr Brash replied. Good, she said. Let s fix it at that for the next five years. What? I was trying to explain that with inflation still running at 5 to 6 per cent a year and by agreement not due to fall below 2 per cent for another couple of years achieving such a task was unprecedented, if not impossible. But she was emphatic, recalls Dr Brash. That figure of $56.7 million is still burned into my mind. It really forced me to re-evaluate how our organisation worked, and it was a great moment in the fifth year of that first agreement when I knew we were going to underspend the limit by 38%. Dr Brash is the first to admit there was some seriously low-hanging fruit. I hadn t been long in the role of Governor when I was called to meet the Minister of Finance and my PA said Your car is waiting for you yet the Minister s office was only 200 metres away! That was the culture then and it was all of those things that my team and I had to cut out. The fiscal tightening of the new funding agreement with the government was fundamental to this culture change and sent a strong message to management. We created a culture of efficiency. As Dr Brash looked at each part of his operation, he recognised there were huge inefficiencies in the system, and one of those included the cost of issuing currency. I recall when we approached our then banknote supplier and said that we wanted to move our banknote supply to a competitive tender previously we had simply negotiated The fiscal tightening of the new funding agreement with the government was fundamental to this culture change and sent a strong message to management. We created a culture of efficiency. what we were assured was a very good price. Our supplier said we couldn t do that because they owned the copyright on the design of our banknotes: someone in the bank had signed away the design of the plates to the supplier many years earlier, recalls Dr Brash. At that point we thought it was about time to look at a new design for our banknotes! We had to go to competitive tender, and although in the end we went with the same supplier, our cost per note was some 30 per cent lower than previously. The loss of seigniorage income was driving much greater efficiency, something that permeates the bank to this day. Dr Brash says that when the bank was contemplating a subsequent banknote redesign during the mid-1990s, polymer made economic sense and addressed security issues in a way that the existing paper substrate could not. With all the reforms, the culture grew into one that began proactively searching for better ways of operating, and the economic benefit of polymer banknotes aligned with the bank s objectives very well, says Dr Brash. Improved security wasn t a hugely important issue in a small country as we didn t have a high level of counterfeiting, but it was a worthwhile additional benefit. The first New Zealand polymer banknote was the $10 note issued in The bank could see the benefits of a whole note family on polymer and the efficiencies it could gain through such a move. Indeed, the introduction of polymer notes led to a further streamlining of the bank s operations, including the closure of the bank s note-processing facilities in Auckland and Christchurch, driven in part by a significant reduction in the need to check for counterfeits. In the end, the objective was realised and the Reserve Bank became a vastly more efficient operation than it had been before we lost the entitlement to seigniorage income in When I became Governor in 1988 there were some 550 staff and when I left in 2002 we had just 185, says Dr Brash. 8 9

7 AURORA Large and obvious visual effects using leading-edge ink technology that delivers multiple colour shifts across the life of the note. METALIX A brilliant metallic sheen and lustrous rich colour creates a dominant visual effect that is entirely resistant to chemical attack or oxidation. Tradition Meets the Future Introducing the Polish 20 Złoty Note LATITUDE Silver nanotechnology that creates high-visibility diffractive optical effects, with the added dimensions of total design freedom and extremely high durability. In commemorating the centenary of Jozef Piłsudski s formation of the Polish Legions an event which ultimately defined modern Poland Narodowy Bank Polski (or NBP, the National Bank of Poland) has chosen to honour this remarkable piece of Polish history with a vision of the future. The Polish 20 złoty polymer banknote, issued on 5 August 2014 by NBP, features the traditional portrait of Marshal Piłsudski on the obverse side and the Grand Cross (with Star) of the Order of Virtuti Militari on the reverse side, yet seamlessly introduces three security features that perfectly complement the note s design theme. The famous Belvedere Palace, home to the Marshal and now the President of Poland, has been designed in LATITUDE, a substrate-integrated diffractive optically variable device (DOVD) that uses silver nanoparticles to create stunning visual effects. Above this imagery, the AURORA feature is designed in the shape of tree leaves and the number 20, and uses angular metamerics to deliver contrasting colour switches. To complete the eye-catching and sophisticated design treatment, METALIX delivers a stunning metallic effect designed in the flowing X-shape of a blue ribbon. A note that is as proud of its past as it is excited about its future, the Polish 20 złoty gives a superb insight into the future of banknote security and design.

8 FEATURE STORY PROTECTING CURRENCY FROM COUNTERFEITERS HAS ALWAYS BEEN A PRIORITY, BUT THE SOPHISTICATION OF FREELY AVAILABLE TECHNOLOGY DEMANDS THAT NOTE ISSUERS BE WELL AHEAD OF THE CURVE. IN OBSERVING ONE OF THE EARLIEST FORMS OF US CURRENCY, THE NATIVE-PRINTED 55 DOLLAR NOTE DESIGNED BY BENJAMIN FRANKLIN IN 1779, A PRINTED STATEMENT SPEAKS from the P, P TOP, DOWN VOLUMES TO THE LEVEL OF TOLERANCE FOR COUNTERFEITING BY THE GOVERNMENT OF THE DAY: TO COUNTERFEIT IS DEATH. THE PENALTY REFLECTS NOT ONLY THE VALUES OF THE TIME BUT ALSO THE 12 VERY REAL THREAT OF COUNTERFEITERS TO UNDERMINE THE FLEDGLING FINANCIAL SYSTEM OF THE DAY. Photo: commons.wikimedia.org/wiki/user:beyond_my_kencom.au

9 FEATURE STORY While the penalties have softened over the past two centuries, the abhorrence for this type of criminal activity remains. Counterfeiters range from amateurs using digital reprographic equipment, to semi-professional counterfeiters combining this equipment with some additional skills to simulate feature effects, to professional operations that involve elaborate hoaxes and skilled techniques in the acquisition or generation of substrate combined with advanced technology that can be purchased online. Security Approach Matrix Security Approach In a nutshell Favoured because Example note family Simple authentication proposition Australia Identical security features across FLAT for the public and a strong, Canada the note family straight-forward security solution Papua New Guinea The availability of technology and raw materials today means there s not one security feature on the market that cannot be attacked. Gary Power In his presentation at the 2014 Banknote Conference held in Washington DC, Gary Power, Innovia Security s Director of Research & Development, explained the steps the company was taking to combat increasingly advanced counterfeiting techniques. He said the team took into account likely technology advances in the coming decade and developed fringe technologies as yet undiscovered by the mainstream. The team works to accelerate the development of those technologies in order to build the largest technology gap possible between his company s security With this long-term technology development in progress, a portfolio of current security features is available to central banks and security printers to build a total security solution across the entire note family. A critical first step in developing a comprehensive approach to security is to ensure that the security framework that supports the note family is well thought through and appropriate for the counterfeit threat that exists in each market and for each denomination, says Chris Catlin, Head of PolyTeQ TIERED SUBSTITUTE Additional security features as the note value increases Increased complexity of security features across the note family while number of features remains constant Sends a strong message to the public about security of currency and maximises complexity for the counterfeiter Balances appropriate levels of security with total cost of security while keeping authentication behaviours the same Romania Vietnam Mexico features and the capabilities of the counterfeiter. Central Banking Services. Gary Power and his R&D team identify long-term technology trends and use proprietary processes to beat emerging threats. There are three possible approaches to structuring security across a note family. Each has its benefits and selection depends on the requirements of each currency market. When carried out with careful planning and precision, each approach can present a strong and effective response to a counterfeiting threat. The first is the flat security approach, in which the same security features are used across the entire note family. The premise of this security set is that features are selected to successfully address security for the denomination most under counterfeit threat, with the rest of the note family subservient to this requirement. This results in a highly consistent appearance across the note family, combined with impressive top-end security and comprehensive protection across the lower denominations. This is the simplest proposition for the note-using public who can authenticate all notes in exactly the same way. The tiered security approach recognises varying security requirements across the note family, and addresses this requirement by strengthening security features across the family, culminating in higher-value denominations that have an aggregated set of security features built from the lower denominations. The approach offers exponential protection with successively higher numbers of security features, with the design integration requirements across the family becoming extremely complex. Further, the user behaviours must modify across the note family to authenticate the additional features. The substitute security approach also recognises the growing threat of counterfeiting as value increases across the note family and structures its security feature set to offer increasing counterfeit resistance while maintaining a constant number of security features. This approach considers cost while offering appropriate levels of security for each denomination, similar to the tiered approach. In keeping the user authentication behaviours the same across the note family, the technology challenge in this approach is to offer similar functioning features that can be substituted across the family yet provide increasing counterfeit resistance. The goal is to build a total security offering across the whole family that can accommodate any of these approaches to meet the specific requirements of a central bank. Innovia Security has built a security feature portfolio for Guardian consisting of its own security features as well as security features from other leading technology suppliers. The goal is to build a total security offering across the whole family that can accommodate any of these approaches to meet the specific requirements of a central bank. Deciding on a security approach and creating a resulting feature framework across the note family is a strategic exercise that must carefully consider numerous issues and constraints

10 FEATURE STORY Chris Catlin, Head of PolyTeQ Central Banking Services. Photo: Simon Casson A total security solution is achieved when a professional counterfeit operation and its activities are suppressed using a whole-of-industry approach that includes central banks engaging with their banknote technology supplier, security printer, commercial banks, CITs, equipment manufacturers and law enforcement.... MILITARY... AEROSPACE... X1... AUTOMOTIVE... X2... CONSUMER... ELECTRONICS... X3 X2 X1 X2 X3 X4 POLYMER BANKNOTE APPLICATION X5 Life in the fast lane: The acceleration of fringe technologies is one strategy used by Innovia Security s R&D team to keep counterfeiters in the rear-view mirror. At the highest level of thinking, banknote security really starts with questions of how security selected for this note family reflects the values of the central bank itself. For example, what role does the nation s currency need to play to assist the country s future aspirations? What level of public confidence in the currency needs to be achieved? And, how will this security approach best support the central bank s organisational objectives? says Mr Catlin. Based on the chosen security approach, the goal of flat-lining counterfeits in the most cost-effective manner will benefit from a strong cost-benefit metric. To that end, the chosen security features must not limit the useful life of the banknote. The durability delivered by the substrate and its features plays a crucial role in minimising banknote production costs, which while extremely valuable for the low-value denominations, also carries important weight for the high-value notes in the family. As is evident when considering the speed of technology development in the market, one of the obstacles to security feature effectiveness is time. Once a feature is developed and issued on a circulating banknote, the clock starts ticking on its ability to suppress counterfeits. An effective security feature will be sufficiently advanced so as to not limit the life of the denomination, which as a rule of thumb should be redesigned every eight to ten years. In some exceptional cases, such as ECLIPSE (a covert feature that is used in Vietnamese and Mexican polymer banknotes), the feature has been circulating since 1999 and to date has never been counterfeited. New variants using a different technology platform have been developed, and this feature continues to offer outstanding Level 2 functionality that guarantees to the user the authenticity of a banknote should they have their suspicions. Thinking ahead of future technology is one very appealing aspect of counterfeit suppression, yet it is just one contributor to a larger strategy around minimising counterfeits. A total security solution is achieved when a professional counterfeit operation and its activities are suppressed using a whole-of-industry approach that includes central banks engaging with its security printer, commercial banks, CITs, equipment manufacturers and law enforcement to engender alignment in support of the banknote technology and its supplier. A whole-of-industry response is valuable because it not only opens up channels of communication between key organisations within the currency system, but it ensures that every group remains united in its understanding of the counterfeit threat and how it is moving, says Mr Catlin. It creates opportunities for innovation and speeds response times to potential threats. There is nothing more powerful in a currency system than an industry in which all parts contribute their expertise and knowledge to supporting the integrity of the banknote family. ANTI-COUNTERFEIT INNOVATION = THINKING BEYOND FUTURE TECHNOLOGY When Gordon E. Moore (who later founded Intel) wrote a brief but seminal article in April 1965 predicting that computer processing speeds would double every 18 months, it must have been difficult for most people to comprehend how such exponential growth could be maintained. After almost 50 years, the ripple effect of what is known as Moore s Law is now well and truly being felt in the banknote industry. Like boats on a rising tide, computer processing speeds have enabled the generation of unprecedented amounts of information. For example, in the year 2000 there were around 20,000 articles published worldwide, which 10 years later grew to more than 200,000 articles published each year. Similarly, in 1991 there were around 100,000 patents filed whereas 20 years later there are now more than 500,000 patents filed annually. This explosion in knowledge and the move to digital technology has raised the bar significantly for banknote suppliers. Innovia Security has an approach to innovation that enables fast lanes of accelerated development to address the growing access to high-tech equipment by counterfeiters. This strategy involves recognising new technologies that are still in the early stages of development and not known to the mainstream and hiving them off for accelerated development in isolation. By hot-housing this technology and engaging in rapid cycles of prototype development, the R&D team are able to develop technologies that are significantly ahead of current counterfeit capabilities. It is important that security features remain fit for purpose and this can be achieved utilising durable features and substrate which complement the objectives of any central bank, says Mr Catlin. The long-term focus of feature innovation is to attempt to extend the effective life of a banknote by crippling the ability of future technologies to simulate or imitate an effect before the technology arrives. In some cases those threats are clearly obvious: the development of 3D printers is being watched closely. In other cases, the technology of the future needs to be unearthed and understood, and again Innovia Security s R&D department has a methodology it uses to understand future directions of technology and the early footprints of the emerging research. Game on! While not currently an economically viable method to counterfeit banknotes, 3D print technology poses a future threat

11 INDUSTRY INTERVIEW PWPW: A Focus on Market-leading Technology Having made significant advances since its establishment in 1919, PWPW continues to grow its profile in the global banking industry. We speak to Aleksandra Grynkiewicz, the company s Director of Banknotes and Security Prints Division. Aleksandra Grynkiewicz: The whole issue of the new Polish polymer note was sold out by the Polish National Bank at a record pace. Can you provide a brief history of PWPW as a business? Established in 1919, Polska Wytwórnia Papierów Wartościowych S.A., known also as Polish Security Printing Works, or PWPW, draws on a long tradition in security printing from shares and bonds to banknotes. Today, the security paper manufactured at its own mill is used to print banknotes, transportation documents and excise tax stamps. It also offers e-passports, payment cards and IT systems including digital tachography. Increasingly, products of PWPW S.A. are reaching foreign markets and passports produced in Poland are being used by the citizens of Bangladesh, Lithuania and Armenia. The company also manufactures electronic identification cards for Armenia and banknotes for Georgia, Paraguay and Guatemala, as well as cards for digital tachographs in Poland, Armenia, Azerbaijan and Georgia. PWPW S.A. is one of the few manufacturers accredited by the European Central Bank to print Euro banknotes and it belongs to a small group of companies eligible to produce polymer banknotes. Our product development departments work hard to research and implement new security features and products. These include antibacterial paper, which is often required for the production of banknotes for tropical countries; or anti-soil paper, which slows down the process of deterioration, to name just a few. Other interesting solutions have been applied in the production of Polish driving licenses, which are now among the most secure documents in the world. Those technologies include PCP, a patented colour polycarbonate card customisation technology, and VERSO ID, a customised see-through feature. The shape of the images on the two sides of a document is generated by specially-developed software. These are only a few examples of the wide range of advanced security features offered by PWPW S.A. Can you provide any details about the press capability you are running? Has there been any major capital investments in the business that you would like to note? PWPW S.A. operates two fully-equipped production lines for printing banknotes. The company constantly invests in upgrading its machinery. In recent years, investments have been made in, for instance, a SPARK screen printing machine and DLE pre-press facilities for laser engraving of intaglio plates. The purchase of banknote varnishing equipment has also been scheduled for the near future. PWPW is gaining a much higher profile in the banking industry worldwide. What does this indicate about the company and its business focus? The statutory objective of PWPW S.A. is to produce banknotes and the company is developing dynamically in this regard. The development consists of acquiring new skills to meet the needs of both domestic and foreign clients, since PWPW S.A. has provided banknotes to other countries for the past few years. The introduction of polymer substrates into the production, due to market demand, expands the portfolio of PWPW S.A. How long have you been working with polymer banknote technology? PWPW S.A. received the Accredited Guardian Printer certificate in The accreditation process took about a year and included a review of both machinery and skills. In preparation, a sample note, the Bee Hive Guardian Note by PWPW, was printed on polymer substrate. How did you find the process of achieving the Accredited Guardian Printer certification? The certification process was very professional. Innovia Security experts were present at PWPW S.A. during the execution of each step of the process and they shared their knowledge with regard to polymer substrate printing. Thanks to the support of the Innovia Security, the certification ran very smoothly and the acquired competence was used this year in the production of the first Polish polymer banknote, commissioned by the National Bank of Poland. Is printing on polymer much different from printing on paper? The process of printing on a polymer substrate is very similar to that on paper. The same equipment is used. The differences in technology result from the substrate properties; they are related to the raw materials used, settings and adjustments of the printing machines and timing of the process downtime necessary for the proper preservation of each phase of printing. Polymer has a tendency to pick up static. Unlike paper, it is of high smoothness and is non-absorbent. All these features are taken into consideration when planning the process. Poland s 20 złoty banknote, commissioned to commemorate the 100th anniversary of the Polish Legions. It was based on the design of an unissued five-million-złoty note designed in 1995 by Andrzej Heidrich. The Polish 20 złoty is a highly-recognised note in Poland did you see a risk in being asked to recreate this design for polymer? The commemorative banknote of PLN 20, issued to celebrate the 100th anniversary of the Polish Legions, is based on the design of the unissued 5,000,000 złoty banknote created by Mr Andrzej Heidrich. The design, developed in the 1990s, was intended to be implemented on paper and required adjustment to the polymer substrate. This was achieved thanks to the excellent co-operation with the author of the design, the National Bank of Poland, the experience gained during note production, and the competence acquired in the certification process. How was the process of working with the Central Bank of Poland to deliver on the desired design? I think that all those involved in the project were interested in making the product exceptional. Innovia Security presented its latest security feature, LATITUDE, and PWPW S.A. proved that it is capable of printing on a plastic substrate too, although it had printed notes only on paper for nearly 95 years. The National Bank of Poland issued the first polymer banknote in Poland. There was excellent co-operation between all the stakeholders involved. What were the biggest challenges in the process? How did you solve them? There were a few challenges. In addition to the pressure of time and the need to implement this project in a few months, the biggest challenge was to adjust a project that dated back to a different era to one with modern security features and the substrate. The banknote had to not only serve the purpose of presenting new security elements such as LATITUDE, AURORA or METALIX, but it also needed to have artistic value. Thanks to the excellent co-operation with Innovia Security and the National Bank of Poland as well as the designer, Mr Heidrich, the emerging obstacles were overcome and thus a product has been created that will appeal to even the most demanding recipient, as collectors obviously are. What has been the public reaction to the note s release? This is the first polymer banknote issued in Poland. Thanks to the large-scale information campaign by the National Bank of Poland, recipients became thoroughly familiar with all the features of the banknote and fully understand its advantages. The whole issue of the note was sold out by the Polish National Bank at a record pace. PWPW is the first printer in the world to work with the substrate-integrated diffractive optically variable device (DOVD), Guardian LATITUDE, both for the Bee Hive Guardian Note and the 20 złoty. What message are you sending to central banks in developing this capability? PWPW S.A. wants to be perceived on the market as a company that keeps developing and implementing the latest developments in the field of security into its products

12 RESEARCH & DEVELOPMENT A Silver Lining for Counterfeit Resistance R&D scientist Odi Batistatos explains how LATITUDE is taking diffractive optical effects to a new level by using silver nanotechnology as a medium that creates not only high-visibility optics but provides the added dimensions of total design freedom and extremely high durability. T he idea of using silver nanoparticles as a medium that could be used on polymer substrate was a light-bulb moment. Up until 2010, we had been working and experimenting with aluminium as a printed medium that had synergy with diffractive gratings. However we felt the results, while showing great potential, could have been better. In a separate project, we were working with radio frequency identification (RFID) technology in 2011, and realised that the silver nanoparticles we were using in that project could be applied to diffractive optically variable devices (DOVDs). From that point on, the potential for LATITUDE took off. On the same banknote, a separate design has been created depicting a bee hive, illustrating how the feature can be applied in any design formation on any location across the note. This capability raises the complexity for potential counterfeiters well beyond the usual challenge; due to the transparent substrate, there are now four locations across the note for counterfeiters to simulate. The diffractive binary structure of LATITUDE is approximately 500 nanometres in height and is covered with silver nanoparticles. A clear varnish is applied on top of both the structure and the silver nanoparticles for protection against physical damage and counterfeit attacks. Pleasingly, focus groups in different markets around the world have responded very positively to the feature. The beauty of this medium is that silver nanoparticles are not restricted to patch or stripe formats of the more traditional DOVD mediums. As opposed to the original aluminium base we were working from, which then had promising but limited reflectivity, the corresponding brightness of the silver base for LATITUDE delivers strong optical effects and quite stunning colour shifts. For example, examine the LATITUDE feature on the Bee Hive Guardian Note by PWPW. You ll notice on the wings and abdomen of the large bee some dramatic whole-of-shape colour shifts. In this instance, rather than a diffractive rainbow effect, a largely red wing becomes a green wing at a slightly different angle. Opacified coatings can also be applied to create a half window on the opposite side of the substrate in which LATITUDE is embedded, enhancing the integration of the feature to the banknote s design. Perhaps one of the most appealing aspects of the feature is the fact that, as a printed feature, it is totally congruent with the opacification ink layers that are printed around LATITUDE, which ensure the DOVD is seamlessly integrated in the note design. LATITUDE offers complete freedom and enormous design possibilities due to manipulation of shape, size and position on the banknote. A wide range of optical effects can be achieved by manipulating the structural characteristics, including a reverse silver effect that is used to increase design integration and security (see the kangaroo figure on the Innovating for 25 Years Concept Note). The use of silver nanoparticles in LATITUDE is a superior solution for hosting DOVDs because it is a printed feature incorporated into the substrate design that unlocks many of the constraints that apply to other DOVD mediums, including production efficiencies. High Durability: The high durability of LATITUDE extends to both the physical structure of the feature, as well as the striking visual effects it delivers. Additionally, LATITUDE is highly resistant to chemical attacks and mechanical damage. 20 Design Freedom: As a printed feature, brilliantly integrated designs are possible with LATITUDE. The feature allows for multiple design possibilities through the manipulation of size, shape and positioning. LATITUDE can even be placed in two positions on the note Instant Authentication: LATITUDE delivers eye-catching effects in both reflection and nondirect light transmission allowing for instant authentication by the user. Counterfeit Resistant: LATITUDE is extremely difficult to counterfeit due to its complex DOVD capability, which becomes even more complex when integrated into the substrate making it beyond the capability of professional counterfeiters. Stunning diffraction. Amazing durability. Total design freedom.

13 Innovia Security - Commercial Services T E commercial.services@innoviasecurity.com