What new US banknotes mean for banks counterfeit prevention

Even though we are only a few months into 2025, banks, credit unions, and other financial institutions (FIs) in the US must already be looking ahead to a major shift in cash security.

Starting in early 2026, the US Federal Reserve will begin rolling out a new series of banknotes every two years, first with the $10 bill. These redesigned bills are designed to introduce enhanced security features aimed at combatting counterfeiting and maintaining public confidence in cash transactions. While this marks an important step forward for currency security, it also presents a critical challenge for FIs: ensuring that their cash-handling systems are prepared to recognise and authenticate the new banknotes.

For many FIs, this transition may not be as seamless as expected, since legacy cash processing equipment, outdated authentication software, and a lack of awareness about new security features could leave FIs vulnerable to counterfeit risks, operational disruptions, and customer friction.

To mitigate these vulnerabilities, FIs must start preparing now by evaluating their infrastructure, upgrading detection systems, and training employees to recognise the new notes while safeguarding themselves against fraud in an increasingly complex US financial landscape.

The growing threat of counterfeiting in a changing economy

In the US today, counterfeiting remains a significant challenge with criminals constantly adapting their methods to bypass security measures, as the estimated amount of counterfeit US currency in circulation ranges from $15m to $30m, representing approximately 1 in 80,000 to 1 in 40,000 genuine banknotes.

While law enforcement agencies, such as the United States Secret Service continue to crack down on counterfeit operations, both organised crime groups and independent fraudsters are using increasingly sophisticated tactics to produce and distribute counterfeit currency. Advanced printing technologies and digital tools have made it easier than ever to replicate legitimate banknotes, making counterfeiting a persistent threat to FIs.

Beyond traditional counterfeiting methods, artificial intelligence (AI) is now a new factor in the evolution of financial fraud, creating highly realistic forgeries, analysing existing security features, and identifying weaknesses in authentication processes. This intersection of AI and financial fraud presents an unprecedented challenge, underscoring the need for banks to stay ahead of emerging threats by investing in advanced detection systems and fraud prevention strategies.

Many FIs still rely on cash-handling and authentication equipment that operates on outdated technology, and these legacy systems are not designed to process the updated security features that will be incorporated into the next generation of US banknotes.

Without necessary upgrades and staff training, FIs risk an increased likelihood of rejecting valid banknotes, and/or accepting counterfeits, resulting in transaction disruptions, unhappy clients and financial losses. For commercial clients, lengthy delays in depositing cash—stemming from outdated currency counters rejecting new notes—could drive them to adopt alternative payment methods or switch to a different financial institution.

Steps for FIs to upgrade cash-handling systems

The new banknotes will introduce advanced security features designed to improve both public and machine-based authentication. While specific details about the redesigned security elements have not been fully disclosed, it is expected that the Federal Reserve will integrate updated anti-counterfeiting measures to stay ahead of evolving threats.

With these anticipated changes, FIs must ensure that their cash-handling equipment is capable of detecting and processing the new features. ATMs, currency counters, and teller authentication devices will require software and hardware updates to accurately recognize the redesigned banknotes.

To prepare for the transition, FIs should begin by conducting a thorough assessment of their existing cash-handling infrastructure, including ATMs, currency counters, and teller-based authentication devices to determine whether they are compatible with the upcoming banknotes. Furthermore, FIs should identify which systems require firmware or software updates and whether any outdated machines need to be replaced entirely to ensure seamless cash authentication and processing.

Once potential gaps are identified, necessary updates should be implemented. Software and firmware patches should be installed to enhance counterfeit detection capabilities, ensuring that cash-handling systems are equipped to recognise the redesigned security features. In cases where existing equipment is no longer viable, investing in modernised currency processing solutions may be necessary to maintain security and operational efficiency.

Moreover, employee training is also a critical component of successful implementation. Frontline staff, including tellers and cash handlers, must be educated on the new security features and trained to identify potential counterfeit currency. FIs should even establish fraud response strategies that outline steps for reporting and escalating potential counterfeit incidents to law enforcement agencies.

The future of secure cash transactions

Despite the increasing prevalence of digital payments, cash remains a vital component of not just the US, but the global financial system. The upcoming introduction of enhanced US banknotes reaffirms the importance of maintaining strong security measures to protect the integrity of physical currency.

As counterfeiting methods become more sophisticated—particularly with the rise of AI-driven fraud techniques—FIs must remain proactive in upgrading their cash-handling infrastructure, implementing robust fraud prevention strategies, and staying informed about emerging security threats.

By taking these steps now, FIs can ensure that they are well-prepared for the transition to the new banknotes, running their cash operations smoothly while maintaining consumer trust in cash transactions.

As cash security continues to evolve, FIs that are prepared and innovative will be best positioned to navigate the future of secure cash transactions.