High-Value Recycling

Bruce Schneier has a post at his Schneier on Security blog (link in the side bar) that refers to another instance of a security problem created by good old-fashioned human error.  As is the case with virtually every currency, the monetary authorities responsible for the Euro, the official currency of the Euro-zone (the majority but not all of the members of the European Union), have a process in place to remove worn-out or damaged coins from circulation.  The coins are then “destroyed” (as coins), and the materials sold to scrap metal dealers.  (This of course assumes that the materials are worth less than the face value of the coin; this is usually, but not always, the case.)

This is fine in principle; however, as the linked article from Der Spiegel relates, the implementation of the process left something to be desired in terms of security.  The problem stems, in the first instance, from the design of the €1 and €2 coins.   As you can see in the photo below, these coins are bimetallic, made up of an inner disc, surrounded by an outer ring.  (The photo shows the side of the coins that is common to all issues, regardless of nationality.)

Illustration of Euro Coins

 

Apparently the “destruction” procedure used for these coins sometimes just separated the inner disc from the outer ring.  The resulting pieces were then sold to dealers in China for recycling.   Apparently some of the Chinese firms carried out the recycling by putting the pieces back together (Krazy Glue, anyone?), and then sending them back to Germany via accomplices among Lufthansa flight crews.  The accomplices would then turn in the reconstructed coins at the German Bundesbank, in exchange for new ones.  The Bundesbank was not chosen as a redemption point at random.

According to a Thursday statement by the Frankfurt public prosecutors, the German Bundesbank is the only place in Europe which exchanges damaged coins for free. The bank accepts such coins in bags containing up to €1,000 worth of coins. They are weighed rather than counted and only periodically checked.

Apparently, the scam was finally uncovered when a German customs officer noticed an airline employee struggling with a very heavy suitcase, which, when opened, turned out to contain thousands of re-assembled coins.

 

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