How To Rob A Central Bank And (Almost) Get Away With It
Story of a thrilling currency counterfeiting conspiracy by a criminal mastermind
It was December of 1925 when Alves dos Reis was arrested for pulling off the most audacious heists known to mankind. He had injected millions of dollars worth of counterfeit Portuguese Escudo currency notes into the economy and conspired to take over the Central Bank of Portugal, all in one brilliantly engineered conspiracy.
A successful counterfeit currency scheme involves 3 steps:
1. Print currency notes that are indistinguishable from the original.
2. Layering forged notes in the economy or Laundering.
3. Avoid detection.
Let us see how Reis pulled off all these three phases with panache.
Picture: Alves Reis (1896–1955)
Reis was born in 1896 to working-class parents in Lisbon, Portugal, and had an ordinary childhood¹. His ambitions though were anything but ordinary. After enrolling in engineering school, he decided life is too short and his plans too grand to waste time actually going through the course. He forged a diploma in Engineering from a non-existent polytechnic school and even forged a notary’s signature to seal the deal. Armed with this spurious degree and the confidence that this was indeed the path chosen for him, Reis immigrated to Angola, a Portuguese colony at the time with his wife. His forged degree earned him a government job as well as a job as a Senior Engineer in a Railway maintenance workshop. Even though his diploma was forged, his aptitude for engineering job was prodigal. By the time he was twenty-two, he was already Chief Engineer at the workshop.
At the height of his career at the workshop, he quit and ventured into enterprises that involved buying broken machines, repairing, refurbishing, and selling them to unsuspecting buyers in the interior of Angola as brand new machines. Profits made from his dubious ventures were invested in taking control of a Mining company that quickly ran into troubles. To solve this problem, Reis took control of a Railway Company and used company money to honour his personal cheques. His financial misdemeanors were soon discovered and he was imprisoned in 1924 on charges of embezzlement at the age of twenty-eight. While in prison, Reis hatched his biggest plan yet.
Reis used the 2 months that he spent behind bars studying the monetary operations of the Bank of Portugal. Portugal’s Central Bank was a privately owned institution which had a monopoly over the issuance of the Escudo paper notes. In 1891, the Escuado had moved away from the Gold Standard. Since the currency was no longer convertible to Portugal’s Gold reserves, the bank was free to issue notes that exceeded its capital. This meant that if every single note was to be exchanged with the bank for its value, the bank did not have enough money in its reserve to fulfill its obligation. But that is not at all uncommon in Fiat currency standard and almost all central banks today issue currency which far exceeds the country's reserves(That is a topic for another day).
Reis discovered that the Bank also did not have a very efficient means of controlling the serial numbers of the notes and there were often notes with duplicate serial numbers in circulation. He calculated the amount of total currency in circulation and derived the limit to which counterfeit currency can be injected in the economy without causing inflation and as a result tripping any alarms.
Once out on bail, he set out to execute his plan. But he had to do so while taking care of the 3 phases of counterfeiting.
1. Print currency notes that are indistinguishable from the original.
Reis used his three accomplices, Jose Bandeira, Gustav Adolf Hennies, and Karel Marang to achieve a near-perfect solution to this problem. The idea was to convince an authorized printer of Portuguese currency to print a special batch of notes on Reis’s request and instead of sending them to the Bank of Portugal as usual, they should deliver them to the Reis and his motley crew. This way the notes would be indistinguishable from the authentic Bank approved notes as they would be printed using the same printer and same plates as the original.
But why would the printers agree to this? For this, Reis spun up a story that he represented a syndicate of financiers who were secretly working with the Bank of Portugal to print notes in order to save the struggling economy of Angola. The currency notes of Angola and Portugal were identical with only one difference being that the ‘Angola’ was overprinted on the Bank of Portugal notes when used in the colony.
Reis forged a contract and a letter from the Governor of the Bank of Portugal which authorized the creation of a special batch of notes for this specific purpose. Jose Bandeira obtained a letter of introduction for Marang from his elder brother Antonio Bandeira, who was the Portuguese minister to Hague. Marang went to London with this letter and convinced Sir William Waterlow, Managing Director of printers ‘Waterlow and Co.’ which was already an authorized Bank of Portugal security printer.
Picture: One of Reis’s fraudulent banknotes. The printer Waterlow’s name can be seen at the bottom
He also convinced Sir Waterlow that because this was a confidential project, he was to be the only intermediary between the printer and the Bank. Waterlow was keen on securing this contract as his firm desperately needed the commission but was also naturally cautious and wanted to send a letter to the Governor of the Bank of Portugal requesting confirmation. Marang convinced him to send the letter via the elder Banderia brother instead of sending the letter directly to the Governor, in order to ensure the secrecy of the whole project. Jose Bandeira intercepted this letter and with Reis’s help forged a confirmation from the Governor which helped pacify Waterlow’s suspicions.
In February 1925, the first batch of these ‘special notes’ was delivered to Marang. The consignment was brought to Lisbon under a Liberian laissez-passer or Diplomatic immunity sponsored by Antonio Bandeira. The second phase of the plan was now about to start.
2. Layering forged notes in the economy
Normal counterfeiters usually use petty criminals to slowly introduce forged notes on the streets. But Reis was anything but normal. Secondly, the scale of his operation would have meant that this kind of layering would have taken them years to dump so much money. So initially he hired people to deposit his counterfeit currency notes in their bank accounts and make withdrawals of real notes later for a small commission. During this operation, a bank teller got suspicious and sent a note deposited by one of Reis’s men for inspection. The results indicated that the notes passed every single security test. For the second and third batch of these notes, Reis bribed Venezuelan minister to Portugal, Simon Suarez to use his Diplomatic immunity to transport the consignments. The Minister had no idea what he was transporting. The game was on. It was time for phase three.
3. Avoid detection
Reis had a grand plan in mind. He chartered a new bank by the name ‘Bank of Angola & Metropole’. The purpose of this bank was to circulate these notes ‘officially’ to the public. This gave him the platform to dump his large load of notes at scale. The Bank of Portugal was privately held and Reis’s end game was to buy a controlling stake of the central bank in order to legitimize the forged orders placed to Waterlow by him and in the process legitimize the whole operation.
The scheme pumped millions of dollars worth of fake notes, which was roughly five percent of Portugal’s GDP into the economy. This provided a liquidity injection to the economy as it was lent out to companies and as a result, productivity jumped in Angola as well as Portugal². The Escudo’s exchange rate against the Pound Sterling improved from $127 in 1924 to $113 in 1925.
While a lot of banks were failing at this time, only Bank of Angola & Metropole appeared to be succeeding. Reis was getting richer by the day. He bought several properties and businesses across Portugal and Angola using his newfound wealth.
The unique success of his new bank and his own rise to affluence attracted the attention of a Portuguese newspaper O Sêculo who raised questions about how this particular new bank was flourishing when other incumbents failed. But they couldn’t prove anything because other the source of their capital, all other aspects of their operations were in order.
Manuel de Sousa, a teller working for a Money changer read the O Sêculo articles and was convinced that the notes were somehow fraudulent. He sent the notes to Bank of Portugal with his suspicions. A team was sent to raid the money changer and other establishments who had dealt with the notes. To their utter embarrassment, the notes were squeaky clean. Out of sheer desperation, they began to compare the serial number of the notes, and that's when they realized what was wrong. Slowly but surely, the whole plot unraveled.
Reis got a whiff of the investigation when he was with Hennies on a ship on their way back to Portugal from Angola. Hennies knew the game was over and escaped to Germany. Reis stayed the course and was confident that he could somehow avoid blame and in fact use this situation to his advantage and gain control of the Bank of Portugal. That plan did not work for him and he was arrested and sentenced to twenty years of imprisonment.
Hennies was eventually captured and he died in 1932, ruined and a pauper.
Marang got eleven months in prison, after which he moved to the South of France, started a legitimate business, and died in 1960 as a French national and a respected, wealthy businessman.
Their leader and mastermind served his term and died penniless in 1955.
Bank of Portugal sued Sir Waterlow for negligence and the central bank eventually won the case.
Thus ends the story of Alves Reis. The man who pulled off an audacious and genius plot to game the Monetary operations of the Central Bank of Portugal.
References
[1] Andrew Bull (1997), ‘Alves Reis and the Portuguese Bank Note Scandal of 1925,’ The British Historical Society, №24: 22–57
[2] Henry Wigan — The Effects Of The 1925 Portuguese Bank Note Crisis
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