Thursday, September 6, 2018

The Future of Money: Banknotes

Statement of Leonard R. Olijar, Director, Bureau of Engraving and Printing, United States Department of the Treasury,

before the Financial Services Committee, Subcommittee on Monetary Policy and Trade, United States House of RepresentativesSeptember 5, 2018

Good morning Chairman Barr, Ranking Member Moore, and distinguished members of the subcommittee. Thank you for inviting me to testify before you today about transformative initiatives underway at the Bureau of Engraving and Printing (BEP).

As you know, the mission of the BEP is to develop and produce United States currency notes that are trusted worldwide. BEP’s vision is to maintain its position as a world-class securities printer, providing our customers and the public superior products through excellence in manufacturing and technological innovation.

Cash Demand

The demand for United States currency remains strong.
  • There are now more than 42 billion notes in circulation, with a value of more than $1.7 trillion – more than ever before, and cash in circulation continues to grow almost 5% per year. 
  • Approximately 7 billion notes have been ordered annually for the past decade. 
  • According to the Government Accountability Office, “the volume of U.S. currency notes in circulation increased by 43 percent from 2008 to 2016.” 
  • Up to two-thirds of the value of U.S. currency is held overseas, where United States’ currency remains the world’s currency. It is the most trusted international store of value, and serves as a hedge against uncertainties, natural disasters, and political turmoil. Any time there is political instability, the rush is on for United States currency. 
  • Over the past several years, the frequency of cash use remained unchanged; approximately 32% of all transactions, and more than 50% of all transactions under $25 are done in cash, in spite of the availability of other forms of payment.

In the past five years, several small countries have set a goal of going cashless. However, more recently, they have recognized that a cashless society presents a significant economic risk and neglects to account for those who do not have access to smart phones, computers, banks and credit. I believe that 21st century warfare has a significant cyber component, and these countries are now recognizing the risk – if your enemy is able to take down your electronic infrastructure, or if a natural disaster hits, there will be no way to conduct commerce in a cashless environment, and the economy will be crippled. With respect to access to financial institutions, seven percent of U.S. households are unbanked, and almost twenty percent are underbanked. As a result, over 45 million U.S. households do not have access to the payment systems that are used in lieu of cash. Like other nations, our duty to serve this portion of the population is a factor in slowing any move to a cashless economy.


The BEP was established and began producing currency in 1862 through statutory authority conferred upon the Secretary of the Treasury. 31 U.S.C. §§ 321(a) (4) and 5114 authorize the Secretary of the Treasury to engrave and print currency and security documents for the United States Government, and this authority has been delegated to BEP. In addition to printing Federal Reserve notes for the Federal Reserve System, the BEP also produces miscellaneous products and security documents at the request of other federal agencies. As the security printer for the United States Government, we also provide technical assistance and advice to other federal agencies in the design and production of security documents, which because of their inherent value or other characteristics, require counterfeit deterrence. The BEP reviews cash destruction and unfit currency operations at Federal Reserve Banks. The BEP has authority to produce currency, postage stamps, and other security documents for foreign governments as well, per the Intelligence Reform and Terrorism Prevention Act of 2004, (Pub. L. No. 108-458, Title VI, Subtitle D, § 6301(a); 118 Stat. 3638, 3748 (Dec. 17, 2004)). BEP is also seeking authority to provide these secure documents for state and local governments. As a free service to the public, the BEP also processes claims for the redemption of mutilated paper currency (31 CFR, §§ 100.5 – 100.9). In FY 2017, the BEP redeemed 20,602 mutilated currency cases valued at $40,449,496.00. Other BEP activities include manufacturing inks and engraving plates and dies.

BEP operations are financed by means of a revolving fund, which was established in 1950 in accordance with Public Law 81-656. This fund is reimbursed through product sales for direct and indirect costs of operations, including administrative expenses. In 1977, Public Law 95-81 authorized the BEP to include an amount sufficient to fund capital investments and to meet working capital requirements in the prices charged for products, which eliminated the need for annual appropriations.

The BEP has a diverse workforce of approximately 2,000 employees and contractors and two facilities, one operating in Washington, D.C. (DCF) and the other in Fort Worth, Texas (WCF).  Both facilities are capable of producing all banknote denominations. As this nation’s sole currency manufacturer, the BEP produces Federal Reserve notes based on an annual currency order received from the Board of Governors of the Federal Reserve System. On average, the BEP has produced seven billion notes per year for the past five years. The Fort Worth facility typically produces about 60 percent of the annual production order, while the Washington facility produces the other 40 percent and conducts the majority of research and development associated with currency production and security features.

Currency Redesign Program

The primary reason Federal Reserve notes are redesigned is for security. As the world’s currency, we face domestic and international threats, thereby focusing our redesign on addressing and combatting current and emerging counterfeiting threats, not aesthetics. The currency redesign timeline is driven by security feature development; and the redesign sequence for the denominations is driven by the security threats.

Securing U.S. currency requires strong designs, aggressive law enforcement, and an educated public. The BEP works collaboratively through the Advanced Counterfeit Deterrence Steering (ACD) Committee with the Board of Governors of the Federal Reserve System, the United States Secret Service (USSS), and the Department of the Treasury to improve the counterfeit deterrent features in Federal Reserve notes.

When deliberating the various options for the next denomination to be redesigned, the ACD Committee engages in a detailed analysis consisting of a counterfeit threat assessment, the state of security feature development to counter such threats, production capabilities and complexities, societal issues, relative use of various notes in transactional commerce, and impact on consumers and banknote equipment manufacturers. The ACD Committee recommends new Federal Reserve note designs to the Secretary of the Treasury, who then makes final design decisions.

Currency notes contain an array of counterfeit deterrent security features, some of which are visible and easily recognizable to the public (micro-printing, raised printing, watermarks, security thread and color shifting ink) and some of which are covert or machine-readable only.  Notes also include a digital counterfeit deterrent system that was developed under the auspices of the Central Bank Counterfeit Deterrence Group (CBCDG) to thwart digital counterfeiting. The CBCDG digital counterfeit deterrent system, which is being used in a number of countries, relies on a hidden marker embedded in the note’s design that can be read or detected by software deployed in digital printers. Due to these cutting-edge features, the overall level of counterfeiting remains low; less than one one-hundredth of one percent of notes in circulation are counterfeit.

To stay ahead of the threats to our currency from increasingly sophisticated reprographic technology, the U.S. Government must continuously develop new currency designs with state-of-the-art security features. While the level of counterfeiting is low, BEP must continually develop new security features and currency designs to be ready to respond to current and emerging counterfeiting threats.

The most recent redesign series or next generation (NXG) notes, were marked by the reintroduction of color, and introduced into circulation beginning in 2003. On April 21, 2010, the U.S. Government unveiled the last banknote in that series, the NXG $100 note, which included innovative, new public security features, including the 3-D Security Ribbon which has been very successful in deterring counterfeiting of that denomination.

Today, the BEP is developing security features for a new series to continue to deter counterfeiting threats. In 2013, the ACD Steering Committee decided that the $10 note would be the next note to be redesigned (expected completion in 2026), followed by the $5 (2028), $20 (2030), $50 (2032-2035), and $100 (2034-2038) notes pending any new developments in counterfeiting threats or technology issues. The success of the redesigned NXG $100 in thwarting counterfeiting, and the increased use of the $50 note in ATMs, has made the $50 note a more frequent target of counterfeiters. As a result, the ACD Committee has recommended that the $50 note be redesigned sooner than originally planned. The BEP and the Federal Reserve Board are working together to accelerate its redesign, with a focus on security feature development.

Once production is underway, the Board of Governors of the Federal Reserve System, as the issuing authority, will determine the actual issue dates for the redesigned notes.


BEP is officially registered to the ISO 9001:2015 standard for Quality Management Systems for the development and production of US Currency and the ISO 14001:2015 Environmental Management System standard, which means that BEP’s processes and manufacturing operations conform to and/or exceed international quality standards. BEP is consistently thinking outside the box to develop more efficient, cost-effective, and environmentally sustainable solutions for currency manufacturing.

In 2014, BEP successfully moved from printing 32-subject sheets to 50-subject sheets for $1 notes through the installation of custom Large Examining Printing Equipment (LEPE). There is currently one LEPE press in Washington, D.C. and two at the Fort Worth Facility. The LEPE presses significantly increased our efficiency by consolidating four production processes into a single process. This, combined with being able to print a larger number of notes per currency sheet, has resulted in considerable cost savings. The $5 note is currently undergoing validation testing for 50-subject production. Ultimately, additional specialized equipment will be incorporated into the process at BEP and every denomination will be printed on a larger sheet.

Currency production equipment is very unique and takes years to purchase, build, test, and install. Recognizing this, we have increased efficiency by 13% at the DCF by refurbishing, extending the life, and relocating a 30-year-old currency production press from the WCF. The press is now the most productive press of its kind at DCF. Installation of Single Note Inspection (SNI) equipment in 2015 allows BEP to reclaim good notes from defective sheets. This reclamation process has reduced overall spoilage by two-thirds. These efficiencies have saved us more than $100 million since their introduction. In addition, the reduced spoilage eliminated more than 300 tons of non-hazardous waste.

New Facility

The BEP currently operates, without a security perimeter, out of two, six-story, multi-wing buildings across the street from each other in downtown Washington, D.C. While ultramodern 100 years ago, the structure and age of the existing buildings does not allow for efficient production of the technologically-sophisticated, secure currency notes of today. In order to stay ahead of worldwide counterfeiting trends and threats amplified by ever-improving commercial and non-commercial printing capabilities, the BEP must replace the production equipment in the Washington, D.C. facility to support the next generation of currency scheduled for release over the coming decade.

The President’s FY2019 Budget proposes statutory authority to use BEP’s revolving fund to construct a smaller, more efficient, and more secure manufacturing plant, to replace our existing Washington, D.C. facility. Without this authority, BEP would be required to renovate its current facility, which is not well suited for modern manufacturing.

The next generation of currency will include additional overt and covert security features, which will require additional production equipment that will not fit inside the current Washington, D.C.  facility as constructed. This will require extensive and expensive renovations if production is not moved to a modern facility. In fact, the need for additional production equipment has forced the BEP to initiate a 260,000 square-foot addition to our more modern production facility located in Fort Worth, Texas.

The BEP has conducted multiple facility feasibility studies over the past 25 years to determine the best approach to recapitalize the aging Washington, DC production facilities. As reviewed and supported by a recent GAO engagement, the BEP’s recommended facility approach is to reduce our federal footprint, and construct a smaller, more efficient, more secure, single-floor manufacturing facility (akin to a warehouse). Construction of a modern facility would cost an estimated $579 million less than the alternative option of a risky, large, whole-sale renovation of BEP’s existing Washington, D.C. facilities that would not produce operational efficiencies.  Moreover, BEP would reduce its real estate portfolio by 28 percent and save $38 million dollars annually due primarily to staff reductions from increased automation and more efficient operations associated with a new, modern, single-floor production facility.

As noted in the GAO report, the antiquated Washington, D.C. buildings must contend with a number of safety and physical security vulnerabilities currently exacerbated by their location in a congested, urban city center and inflexible structures such as a lack of building setback, blast resistance shortfalls, and minimal vehicle screening capabilities. While certain security improvements, such as blast resistant windows or vehicle barriers, could be installed if the facility is renovated, other standards could only be addressed with a new facility, such as an adequate set-back security perimeter to provide a point of separation between the facility and where an unscreened vehicle can travel or park. Moreover, the current facility’s historic nature also limits BEP’s ability to make changes to meet the necessary level of protection a facility of its security level should have. A new facility, by design, would modernize and enhance BEP’s security profile and limit BEP’s vulnerability and high risk to threats and explosive devices.

No action has been taken on the three facility studies done over the past 25 years, and doing nothing is no longer an option without jeopardizing BEP’s mission and the U.S. Currency Program. It is our hope this Committee will support legislation facilitating the construction of a smaller, more efficient production facility.

Meaningful Access

In May 2011, then Secretary of the Treasury Timothy F. Geithner approved the pursuit of a three-pronged strategy to provide meaningful access to U.S. Federal Reserve notes for the blind and visually-impaired community in assisting them to denominate currency notes: 1) continued use of large, high contrast numerals and different colors on each denomination it is permitted by law to alter; 2) a raised tactile feature unique to each U.S. currency note it may lawfully alter; and 3) a Currency Reader Program.

The BEP has been actively engaged in meaningful access solutions, while also giving appropriate consideration to the interests of domestic and international users of currency, U.S.  businesses, and cash handling and cash-intensive industries.

Large numerals have appeared on the back of U.S. currency notes since 1997 to assist the visually impaired. This feature provides meaningful access to the largest segment of the visually-impaired community. Since the issuance of the NXG notes, the BEP has increased the contrast and color on the large numerals based upon feedback from the visually-impaired community, who have also indicated that it is a preferred method of denominating currency.  BEP intends to continue the practice of placing large, high-contrast numerals on future currency notes.

Currency Reader Program

BEP continues to provide meaningful access to U.S. currency for a large proportion of blind and visually-impaired persons through the U.S. Currency Reader distribution program operated in conjunction with the National Library Service. The distribution program officially launched in 2015 and is the one method that provides virtually all blind and visually-impaired U.S. citizens and legal residents with a means to identify different Federal Reserve notes. Furthermore, it provides virtually 100% accuracy in identifying the denomination of currency. To leverage existing expertise and a pre-existing national distribution system, the BEP contracted for currency reader program support from the Library of Congress National Library Services for the Blind and Physically Handicapped (LOC/NLS). NLS administers a Talking Book Program, a free library program where Braille and audio materials are made available to U.S. residents and citizens living abroad, whose low vision, blindness, or physical handicap makes it difficult to read a standard printed page.

As of August 20, 2018, the BEP has distributed more than 64,000 electronic currency readers at no cost to patrons through NLS and at conferences that cater to the blind and visually-impaired community, such as the American Council of the Blind, the National Federation of the Blind and the Blinded Veterans Association.

If patrons are unable to attend a live distribution event, the currency reader application form is also available for download through BEP’s website in both English and Spanish; interested persons may also request via email or by calling BEP’s dedicated call center that a currency reader application be mailed to them.

As part of its ongoing efforts to promote the distribution of currency readers, the BEP also works with third-party organizations that work with blind and visually-impaired persons, to distribute currency readers directly to their patrons, such as the Association of Assistive Technology Act Programs (ATAP) and the Lighthouse for the Blind.

Meaningful Access (Mobile Applications)

Technology has continued to advance dramatically in terms of mobile devices, Artificial Intelligence, and accessibility. As such, BEP continues to provide meaningful access for a large segment of the blind and visually-impaired community through free mobile device applications, which allow smartphones and similar devices to function as currency readers. The number of downloads of these applications continues to increase. The EyeNote® app for Apple devices, which BEP developed in 2010, has been downloaded nearly 55,000 times. The IDEAL Currency Identifier app, developed in collaboration with the Department of Education in 2012 for the Android operating system, has been downloaded approximately 15,700 times. These applications are providing an immediate accommodation for a segment of the blind and visually impaired population, and may ultimately result in lower demand for currency readers over time.  Furthermore, they denominate currency with near-perfect accuracy.

Tactile Feature Technology

BEP continues to pursue the creation of a durable, usable, and manufacturable tactile feature.  The BEP has now settled on a four-position rectangle shape for the feature as offering the best possibility of success, but has not yet chosen between the two remaining potential methods of application (Intaglio and Coated-embossed). Any tactile feature must satisfy several criteria, each of which is required: it must enable blind and other visually impaired persons to denominate currency effectively; it must be able to function in commerce without interfering with security features; it must be sufficiently durable to remain usable through the extensive handling of currency; and, BEP’s machinery must be able to produce the feature consistently in the large volumes required. Finding a tactile feature that is both durable and allows for accurate denomination remains a great challenge. BEP established a testing schedule to evaluate all of these factors using the rectangle shape and the two remaining potential application methods.  Under that schedule, BEP began conducting durability testing early in the year.

As part of longstanding practices by BEP to ensure quality and acceptance of the nation’s currency in commerce, all U.S. currency must survive a series of durability tests designed to simulate the actual use of currency in circulation. These tests include a Crumble test which crushes currency a number of times, a Laundering test which simulates accidental washing of currency, and Chemical Resistance tests which saturate the bills with chemical substances, all to verify that the Raised Tactile Feature (RTF) remains virtually intact and adheres to the bill. All features of a bill, such as security features and an RTF, must be able to survive these same tests. Additionally, the RTF will be subject to new durability tests to assess functionality, namely a Scrape test simulating abrasion, and a Humidity test with long exposure to hot and humid conditions, both to ensure that the RTF remains intact. It is currently unknown whether any RTF will successfully pass all of these tests. After RTF down-selection and optimization, the feature will also go through the process of integration with the security features into the currency design, which may require additional testing as an integrated currency note. BEP must verify that any potential RTF does not interfere with any security features that are selected for incorporation into the next generation of notes.

BEP continues to conduct end-user, focus group testing to determine feature effectiveness and the preferences of blind and visually-impaired persons. Banknote equipment testing has also begun in order to determine whether the tactile feature will function in high-speed currency processing and handling, and critical manufacturing testing is scheduled later this year to verify manufacturability. Further large-scale testing with blind and visually-impaired persons is scheduled for later this year, and final analysis of the resulting data is expected in late 2018. In 2019, BEP plans to begin a Technology Integration Phase during which it will determine how any potential tactile feature will interact with the rest of the note, including most critically, the security features. By late 2019, BEP intends to make a final decision as to which, if any, potential tactile feature option is able to meet all of the criteria described above.

At the same time the BEP is developing tactile features, it is working closely with the ACD to identify counterfeiting threats and determine appropriate measures to respond to them. Due to the interrelated nature of the various processes, the overall creation of any one Federal Reserve note design is a lengthy and complex endeavor, requiring appropriate progress on several fronts, including changes to the Washington, D.C. facility.

Strategic Human Capital Initiative

The BEP is only as strong as its unique and highly specialized workforce, and I am extremely proud of the over 150-year legacy we have established through craftsmanship, creativity, and ingenuity. In recognizing BEP’s ongoing need to incorporate more sophisticated systems and equipment to produce an increasingly technologically advanced product to combat security threats such as counterfeiting; we established a well-defined, multi-year, strategic Human Capital Plan consisting of five goals and related initiatives targeted to address challenges affecting BEP’s workforce, as a whole, and to guide organizational activities as we work to continuously improve in a number of critical, human capital areas such as hiring, training, engagement, and leadership and skills development.

Workforce Planning helps the BEP make sure the right people are in the right positions at the right time. We are using data to align staffing needs and strategic goals to fiscal resources, which positions us to better create formidable banknotes well into the future.

BEP employees take pride in the fulfilment of BEP’s mission and show great loyalty – we are proud that the average tenure of our employees is 20 years. Employees have indicated that they enjoy job stability, a sense of tangible accomplishment, and work-life flexibilities in progress at the agency. However, with very little turnover and most of our employees retiring through attrition, this also means BEP has an increasingly aging workforce. Therefore, a Knowledge Management Program was developed to stabilize succession planning and facilitate knowledge sharing across the Bureau as we look to capture the unique skills and historical knowledge that many of our long-time employees possess.

In maintaining and building a world-class workforce of the future, it was important to gain buyin and commitment from all levels of the workforce, from front-line employees to senior leadership. The human capital goals and initiatives in this plan were designed as a proactive measure to improve and foster a positive and engaging work environment that results in high levels of job satisfaction and productivity as well as provide a strong foundation for the retention and recruitment of future talent as we become more automated and science driven.

As we can all attest, the world is becoming increasingly technical. Whether building rockets using 3D printers, finding cures for diseases, or developing mechanisms to meet everyday activities like ordering groceries through mobile apps, there is an overwhelming need for people with strong science, computer, and mathematics skills in almost every industry around the globe.  This can also be said of the Banknote industry as technology capable of capturing and reproducing accurate currency images, such as printers and scanners, continue to advance technologically, become more portable, and accessible, financially, to the would-be, everyday counterfeiter. Recruiting in the Science, Technology, Engineering, and Mathematics (STEM) fields is challenging. Competition from the private sector, long lead times to bring people onboard, backlogs for background clearances, a complex hiring process, and a general unawareness of the benefits of careers in public service, etc. all contribute to difficulties in attracting and retaining viable candidates. To keep pace with rapid, technology changes, changes in materials availability, and environmental requirements, the BEP is constantly looking for ways to broaden its own Research and Development and production programs, and acquire appropriate technology and qualified staff capable of taking the agency and its products well into the next century. As part of this initiative, we have developed a separate (STEM) strategic program (anticipated to launch in 2020) to address the specific development and training needs of/for STEM positions at BEP.

In response to a recent call from the Office of Personnel Management, Treasury directly supported BEP’s STEM recruitment efforts by requesting inclusion of Engineers and Physical Scientists in a government-wide Direct Hire Authority for STEM occupations that is currently under consideration. Significant investments have also been made in apprenticeships, trainee programs, and career development to address skill/knowledge gaps, including the formalized development of leadership at BEP.

All of these initiatives make an important impact as BEP continues to focus on being an excellent place to work and deliver a world-class product to our customers.


Mr. Chairman, this concludes my remarks about initiatives at the BEP. I will be happy to respond to any questions you or other members of the Committee may wish to ask. Thank you.


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