Encyclopedia of Money: OPERATION BERNHARD

The scale of Operation Bernhard dwarfs all other counterfeiting operations in the history of paper money. Nazi Germany counterfeited British £5 banknotes and, later, £50 banknotes to fund its foreign intelligence operations. Operation Bernhard got its name from Bernhard Kruger, who headed a workshop in which Germany’s security service forged passports, motor licenses, university degrees, and other personal documents.

Counterfeiting as a weapon of war stretched well back into the 19th century, and at the beginning of World War II, Britain had dropped forged German food and clothing coupons over Germany and had made awkward attempts to counterfeit German marks. Germany’s technical mastery of counterfeiting, however, far

surpassed all preceding operations.

The decision to counterfeit money went all the way to Adolf Hitler, who approved counterfeiting British pounds in his own handwriting but with the proviso that “dollars, no. We’re not at war with the United States” (Pirie, 1962, 6). Germany stuck to counterfeiting Bank of England banknotes even after the United States entered the war, but toward the end of the war German apparently prepared plates to counterfeit French francs and U.S. dollars.

The practical problem of counterfeiting British banknotes was broken down into three separate parts: (1) production of paper identical to paper in British banknotes, (2) construction of plates identical with Bank of England plates, and (3) devising a numbering system.

After finding that rags made from Turkish flax produced paper almost identical to Bank of England banknotes, the Germans hit on the expedient of sending the rags to factories to get dirty first, and then cleaned the used rags before using them to make banknote paper. Engravers spent seven months making plates that matched the original prints even when enlarged 20-fold. The numbering problem was the last to be solved. Apparently,

the necessity of developing a numbering system that would blend in with the British numbering system posed the most troublesome obstacle. The finished plates were among the most closely guarded secrets in Germany.

Later in the project, the German counterfeiters attacked the problem of making the notes age. As printed notes age, the oil in the printing ink begins to seep into surrounding areas, blurring the quality of the print. German counterfeit notes were not aging properly until the Germans learned to treat their printing ink with

chemicals to make it seep into surrounding areas, producing an aging effect.

After the technical problems were solved, the Germans sent an agent to the Swiss, carrying a bundle of counterfeit notes and a letter from the Deutsche Reichsbank asking the Swiss to find out if the notes were forged. When the Swiss replied that the notes were genuine without a doubt, the agent feigned a lingering

suspicion and asked the Swiss to check with the Bank of England. The Bank of England also returned a reply that the notes were genuine.

At first, the German government planned to use an infusion of counterfeit notes to ruin the British economy, but efforts to inject large quantities of notes into circulation led to diplomatic embarrassments, and the German government dropped the plan. Then Germany’s secret intelligence service decided to use counterfeit notes to finance its operations, and that is how the counterfeit notes were put into circulation.

The Bank of England banknotes were counterfeited at the Sachsenhausen concentration camp. Three hundred prisoners, some of them experts in forgery, took part in the project, and for a time these prisoners produced 400,000 notes per month. About £130 million were counterfeited in banknotes. As the demand for counterfeit money increased, the Germans began to counterfeit £50 notes.

Both the Germans and the Allies kept Operation Bernhard a secret. Because of the circulation of counterfeited banknotes, the Bank of England withdrew all notes of £10 or above in 1943 and changed the paper of the £5 note in 1944. In May 1945, notes from £10 to £1,000 ceased to be legal tender.

Toward the end of the war, the Germans dumped counterfeiting supplies and a vast quantity of notes into the

Toplitzee, a lake in Austria. Large numbers of floating notes fueled rumors of the dumping, and the Allies sent divers into the lake, but no banknotes were recovered. The first public knowledge of Operation Bernhard came in 1952 when Readers Digest carried an article about it, and gradually more knowledge of the operation came to light. Only in 1959 did divers finally recover the vast quantities of notes and printing supplies. Notes

recovered from the lake were indistinguishable from genuine Bank of England notes.

Apparently, some of the notes continued to circulate until 1955, when the Bank of England went to colored notes, and its older notes ceased to be legal tender. Some evidence suggests that as late as 1961 these notes were sold behind the Iron Curtain to people looking for a store of wealth until the communist regimes fell.