Of all the threats that India tries to keep from spilling across its borders, one has been particularly difficult to block: fake Indian rupees printed in Pakistan.

Bank transactions involving counterfeit currency increased 400 percent in the past year, according to India's Finance Ministry, and officials in the capital made a record seizure of fake cash during a search of fabric shipments from Pakistan this year.

Officials say Pakistani groups produce the high-quality fake notes and use them to fund terrorism and drug networks in India. Counterfeiting is also a form of economic sabotage, the officials say, that could deter global investors if left unchecked.

The high quality of the notes indicates that sophisticated machines are used to make them, the officials say, adding that such equipment is available only to governments. The fakes typically have security features found in genuine notes, such as watermarks, silver security threads and micro-lettering, intelligence reports say.

Under Indian law, carrying and using counterfeit currency is punishable by up to seven years in prison. But security officials are now debating a proposal that would make currency counterfeiting an offense related to terrorism that could carry a life sentence.

Counterfeit currency is smuggled into India along with weapons or drugs, or is hidden in legitimate cross-border trade, officials say. In the New Delhi seizure, for example, police found about $460,000 in fake money in a search of two truckloads of fabric from Pakistan. The notes were hidden in cardboard boxes that the fabric was wrapped around, police said.

To read the complete article, see:India faces flood of counterfeit cash from Pakistan(www.washingtonpost.com/world/asia_pacific/india-cracks
-down-on-counterfeit-cash/2012/02/24/gIQA3T0DuR_story.html)