On September 18th the Second World War was in its opening stages, and in Berlin Arthur
Nebe, the head of the Reichskriminalpolizeiamt- the central criminal investigation department
of Nazi Germany- considered how he could help his nation win this war.
Germany was strong, stronger than it had been in decades, but it faced the considerable
might of Britain and France both, and perhaps the biggest obstacle to any victory in Europe:
Britain's formidable economy.
With an empire that stretched around the world, Britain's economic might surpassed that of
Nazi Germany, and its ability to outspend the Third Reich in a protracted conflict could
spell defeat.
To make matters worse, the British Pound was also the world's reserve currency at the time,
meaning that the British enjoyed the same economic advantage negotiating trade deals
that America does now with the dollar as the global reserve currency.
Not only could Britain outspend Nazi Germany, it could outhaggle it as well.
Something had to be done, and Arthur Nebe had a brilliant idea on what that something
was.
Meeting with his superior, Reinhard Heydrich, Nebe laid out an ambitious and out-of-the-box
plan: for years the Reichskriminalpolizeiamt had investigated, tracked down, and imprisoned
counterfeiters and scammers- why not put those same criminals to work on the war effort?
If the British pound could be counterfeited, then billions of them- 30 billion worth of
fake currency to be exact- could be air dropped all over Britain, causing a complete financial
collapse of the mighty empire through hyper inflation, and the loss of its status as the
world's reserve currency.
Heydrich carefully considered the plan and decided he liked it, although he was cautious
about using police resources to find these counterfeiters- their job was to investigate
crime, not create it after all.
Nevertheless Nebe's plan was relayed up the chain of command until arriving at Joseph
Goebbels' desk, the Reich's Minister of Propaganda, who immediately called it “a grotesque plan”,
though he liked the potential he saw in it.
Convening a meeting of the Reich's top ministers and leadership, the plan to counterfeit British
pounds was put forward and debated.
There was serious concern over this ambitious plan, as engaging in the counterfeiting of
another nation's money was against international law, and Germany could face stiff repercussions
if it lost the war- with the reparations forced on Germany after the first world war still
fresh on many German's minds, this was a risk not taken lightly.
Furthermore though even if Germany won the war, or if word got out while the war still
raged that Germany was counterfeiting another nation's currency, then neutral nations may
choose not to trade with Germany at all, fearful of being paid with counterfeit money.
Germany's reputation would be ruined, and its ability to conduct the vital international
trade needed to keep the war effort going could be jeopardized.
Despite all these considerations, the main objections to the plan came from only one
man: Walther Funk, the Reich Minister of Economic Affairs.
The discussion quickly became a one-sided affair, with Funk increasingly isolated in
his objections.
The matter was ultimately settled with Adolf Hitler himself gave final approval for the
plan.
Thus Operation Bernhard was a go, and the British economy stood in dire risk
Yet just a month after this secret meeting, details of the plan had already leaked to
Russian intelligence officials.
With workers around the world having deep sympathies to Russia's socialist movement,
the reach of Russia's intelligence agencies was formidable and penetrated nearly every
country on earth- even into the heart of the Third Reich itself.
An unknown agent, likely a secretary or assistant to one of the Reich's ministers, got word
of the plan and its full details- meaning this agent was highly placed indeed- and immediately
leaked it to their Soviet handlers.
Carefully considering the value of this explosive intelligence, the Soviets decided to go ahead
and warn the British, and a month later a Russian agent met with Michael Palairet, the
British ambassador to Greece, and briefed him on the full details of the plan.
While the Soviet Union and Germany had signed a non-aggresion pact, it was feared that a
belligerent Germany would eventually turn on the Soviet Union, and even if it didn't,
it would be best if Germany's military successes against Britain and France were limited at
best.
If Germany could be sufficiently weakened, it would pose little threat, but if it was
successful in defeating or at least overpowering France and Britain, then an emboldened Germany
could mean serious trouble for the Soviet Union.
It was thus hoped that leaking the details of this plan to the British would ensure that
Germany didn't too easily overcome its enemies.
Alarmed at the serious threat posed by Germany's counterfeiting operation, Palairet immediately
notified London, who in turn alerted the US Department of the Treasury and the Bank of
England.
Surprisingly there was some small reluctance to believe Germany's plan could be successful
from officials at the Bank of England, after all British notes had changed little since
1855 and seen little successful counterfeiting.
As John Keyworth, curator of the Bank of England Museum, would go on to say, the Bank of England
“was a little complacent about the design of its notes and the production of them”,
going on to describe British notes as “technologically... very simple.”
Nevertheless the threat posed to the British economy was severe, a flooding of its domestic
market, or even the world market, of billions of counterfeit pounds would usher in hyper
inflation, completely devaluing the currency.
It would also ruin global confidence in the British pound, resulting in not just the loss
of status as the world's reserve currency, but in the possible refusal to engage in trade
deals even with legitimate notes being used for fear of counterfeiting.
The German plan was truly insidious, and could not be allowed to succeed.
In a bid to thwart the Germans before they could get fully started, the Bank of England
immediately released an emergency 1 pound note with a metal security thread running
through the paper.
Meanwhile back in Germany, Reinhard Heydrich put the plan into action, using police resources
to locate and bribe or coerce the nation's best counterfeiters into working for him.
In a perverse copy of an Oceans 11 movie plot, Heydrich put together a team of Germany's
best crooks and scammers to try and crack the British note and bring the Reich's enemies
to their knees.
The task would be broken down into three stages:
1.
Produce paper identical to that on which British notes were printed, copying not just all security
features on the paper notes, but even going so far as to get the exact chemical composition
of the British water used in their manufacture.
Only then could a copy be perfect and foolproof.
2.
Prepare printing plates that were identical to the ones used to stamp out British notes,
a task which would require the very careful copying of the most minute details to include
hidden 'flaws' that were actually secret security features.
3.
Duplicate the British serial numbering system, a coded alphanumeric arrangement of letters
and numbers that made each note unique and could immediately give away a fake.
Heydrich decided that they would concentrate their efforts on the notes with the largest
circulation in order to make fakes harder to spot, and thus chose the 5 pound note.
Samples of authentic notes were sent to technical colleges around Germany to identify their
exact chemical composition, with the results coming back indicating that the materials
used were rag paper with no additional cellulose.
The Germans thus realized that the paper would have to be handmade, a process which would
be physically intensive and time consuming.
Meanwhile Britain had gotten word that the German counterfeiting operation was underway,
and in response stopped printing additional 5 pound notes.
The general public was also warned about counterfeits and how to spot a fake bill versus a real
one.
With a public now aware of the threat of counterfeit notes, the Germans would have to get theirs
exactly right, or the entire plan would have been nothing more than a very expensive waste
of time and war resources both.
Inspecting the first batches of German paper to be used in the fake notes, the color between
real notes and the samples was noticeably different.
The Germans thus turned to the Hahnemühle paper factory which experimented with the
process until the color between the counterfeit notes and the real one matched.
However though the first notes made looked identical in color under normal light, under
ultraviolet light they looked dull when compared to originals.
This was hypothesized to be because of the chemical composition of British water used
to make the paper and ink, thus experimentation began to precisely copy the exact composition
of British river and tap water.
Eventually the colors finally matched, and the first major hurdle was cleared.
Meanwhile banking experts and mathematicians worked on the coded arrangement of the alphanumeric
serial designation on British notes, while German engravers worked painstakingly to replicate
the exact details present on British notes.
Examining currency records from the past 20 years and using techniques borrowed from military
cryptanalysis, the Germans successfully broke the serial designation code present on real
British pounds.
The engravers meanwhile labored to replicate the most minute of details of the printed
British notes, struggling to accurately replicate the vignette of Britannia which appeared on
the left side of all British notes.
The seal was so elaborate and difficult to replicate that the German counterfeiters took
to calling it “Bloody Britannia” in frustration.
However, after seven months of operation, the Germans finally had their first note believed
to be a perfect copy- although a very close inspection showed that Britannia's eyes were
incorrect.
A year into the war Germany began mass producing fake British notes, creating anywhere from
between 3,000,000 pounds to 500,000 pounds worth of fakes- yet with the war going swimmingly
in Germany's favor, the notes were never actually used.
Instead, the entire operation was revamped in 1942, with Heinrich Himmler ordering SS
major Bernhard Kruger to create fake notes with which to fund German intelligence operations.
By the time the war turned against Germany, Britain and the US's preparations to fight
counterfeit British notes were so thorough that they were simply not worth using at all.
At the end of the day what might have been a brilliant stroke to destroy the British
economy was delayed, forgotten, and remembered far too late to have any effect on the outcome
of the war.
After the war Major Kruger hide in his home from Allied officials until November 1946
when he surrendered to British authorities.
Yet forging an enemy’s currency was not a war crime, so therefore he faced no charges.
Instead he was detained until 1947 when he was handed over to the French who tried to
persuade him to forge passports for them.
Refusing, he was eventually released in November 1948 when he underwent a denazification process,
during which statements were produced from concentration camp inmates forced to work
as forgers who’s lives Kruger had saved.
Ultimately the faked british notes were either destroyed or dumped into lake Toplitz and
Grundlsee.
A 1958 expedition located several cases of the counterfeit money along with a book detailing
the secrets of the Bank of England’s numbering system.
After the death of a diver in the lake in 1963, the Austrian government undertook an
extensive search of the lake, recovering more boxes of notes.
The last notes to be recovered were discovered in 2000, and upon seeing the quality of the
notes one Bank of England official described them as “the most dangerous ever seen”.
Germany’s fake British notes could have severely undermined the British economy, if
not outright destroyed it, yet they were never implemented in time to do any actual damage,
and their potential wasted while Germany was winning the war, and ultimately useless when
Germany began losing and became desperate enough to think about using them.
Even if Germany had been successful in destroying the British economy through counterfeits,
do you think the damage to its international reputation would have been worth it?
Let us know in the comments!
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