Near-perfect counterfeit copies of millions of pounds' worth of electronic money could trigger an international financial collapse, Britain's National Criminal Intelligence Service warned yesterday.
"The potential damage to the financial sector and nations is phenomenal, as the fraudulent creation of electronic monetary value ... would, unlike traditional counterfeiting, be indistinguishable", conference delegates were told.
Gareth Maclachlan, of the service's organised crime unit, said "smart card" electronic money, such as the British Mondex, could be replicated or tampered with by "loose confederacies such as hacking groups and software pirates". He said that up to 500 companies had the necessary equipment to photograph in sufficient detail for counterfeiting the chip used in smart cards.
"It would be virtually impossible to trace the source of the counterfeit currency", Mr. Maclachlan said. "And so that would theoretically lead to the collapse of the payment-scheme currency."
Mr. Maclachlan told a conference discussing the dangers of fraud and money laundering on the Internet: "The history of computer-security products that claim to be impenetrable shows that such systems are frequently compromised."
He said that the growth of both electronic money systems on the Internet and electronic purses (where the value is stored on the card) posed serious problems for law enforcement and the proposed ability for smart-card users to transfer money units without going through a bank would make the task of laundering drug and other criminal proceeds far easier.
He said law-enforcement agencies ought to be involved in designing the new electronic cash systems. All electronic purses, he said, ought to generate an "audit trail" to show who had passed money to whom.