Legal Framework

Credit institutions and any other institutions engaged in the sorting and distribution to the public of banknotes and coins are obliged – under the threat of a penalty (Article 79a Nationalbank Act) – to take measures to prevent the distribution of counterfeit or fraudulently altered euro currency. They must thus withdraw from circulation, after issuing a confirmation of receipt, all fit euro banknotes which they know are counterfeit or of which they have sufficient reason to believe that they are counterfeit and submit them to the OeNB.

The technical and statistical data on counterfeit banknotes and coins detected in the Member States are collected and registered by the competent national authorities. These data are subsequently submitted to the European Central Bank, where they are stored and processed (Article 3 Council Regulation (EC) No 1338/2001).

The European Central Bank (ECB) and the Eurosystem national central banks are responsible for issuing euro banknotes; they ensure that the public’s trust in the single currency is preserved, among other things by ensuring the integrity and fitness of euro banknotes.

The possibility of recycling euro banknotes enables credit institutions and other professional cash handlers to perform their role in the currency supply in a more effective and more cost-efficient manner. The ECB adopted a framework for the detection of counterfeits and fitness sorting by credit institutions and other professional cash handlers to ensure the integrity and fitness of euro banknotes.

This framework guarantees that banks and other professional cash handlers recycle euro banknotes to customers only if these banknotes have passed fitness and authenticity tests. Such checking may be done either by using banknote processing equipment that has been tested by a national central bank or by appropriately trained experts. After the banknote processing machines have established the fitness and authenticity of the banknotes, these notes may be dispensed by cash dispensing machines or other customer-operated devices.

Under the framework for the detection of counterfeits and fitness sorting, banks and other professional cash handlers are obliged to regularly provide national central banks with relevant data. The aim is to ensure the regular monitoring of the banknote recycling activities of credit institutions and other professional cash handlers and in this way to assess the quality of euro banknotes in circulation, and to take appropriate measures if necessary.

By collecting data, the ECB and the national central banks are able in particular to

• Determine who is involved in banknote recycling;
• Compare the ratio of unfit banknotes among cash handlers; and
• Recognize problems that require clarification by the national central banks, e.g. in the form of on-site inspections.