Winnipeg Free Press - PRINT EDITION

Melting bills stir up secrecy by central bank

Cites national security, foreign relations

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OTTAWA -- Disclosing details of behind-the-scenes discussions about tales of melting banknotes could endanger national security or international relations, says Canada's central bank.

In response to a formal request from The Canadian Press, the Bank Of Canada released 134 pages of internal records -- almost completely blanked out -- concerning allegations its new polymer bills melted in the scorching summer sun.

The bank began issuing $100 polymer banknotes in late 2011, saying they are tougher to counterfeit than paper notes and would last much longer.

It has since released $50 and $20 notes, with $10 and $5 ones due this year.

Unconfirmed reports of cooked currency emerged in July when a Kelowna, B.C., bank teller said she had heard of cases in which several bills had melted together inside a car. Soon after, a photo of scorched $100 bills surfaced in Ontario -- purportedly after they were stored in a metal can next to a baseboard heater.

The bank swiftly denied its new bills could be affected by heat in these ways.

The records released under the Access to Information Act show the reports stirred up not only a flurry of media interest but a series of emails over more than a week among bank officials, including Gerry Gaetz, the chief of currency, and Erik Balodis, a scientific adviser.

The bank declined to make Gaetz available for an interview.

In an emailed response to questions, bank spokesman Jeremy Harrison said the institution has seen nothing since the reports first emerged to change its initial assessment.

"The bank stands by its statements made this summer that polymer bank notes cannot be affected by the types and levels of heat as has been suggested in last summer's news reports, and has seen no evidence to the contrary," Harrison said.

He noted the bank had performed "extensive and rigorous tests" prior to issuing the notes, including exposing them to extremes of 140 C and -75 C.

But the bank isn't willing to reveal much about its internal deliberations concerning the allegedly baked bills. Almost all of the pages released under the access law -- with the exception of some email headers and previously processed media lines -- were blank.

The bank invoked eight sections of the Access Act to withhold this material, invoking exemptions relating to:

-- confidences obtained from another government;

-- injury to international relations, defence or security;

-- facilitation of an offence;

-- injury to the financial interests of a government institution or the ability of the government to manage the economy, or provision of an undue benefit to someone;

-- personal privacy;

-- confidential information supplied by a third party;

-- advice from officials or accounts of deliberations;

-- testing and auditing procedures.

Harrison would not say how release of the information might endanger national security or international relations, or how it could interfere with the government's ability to manage the economy.

"That information is confidential," he said. "I cannot provide you any more detail than the explanation for the exemption applied."

The bank acknowledges notes can be mutilated or damaged, including through exposure to fire or water, and offers a redemption service. "The notes are carefully examined by a specially equipped team at our Ottawa laboratory, and all claims are assessed in accordance with the Bank's reimbursement policy," Harrison said.

Since the polymer series began circulating in November 2011, there were 232 cases of mutilated polymer notes submitted to the bank through last October, says the bank.

That compares to an average of 3,000 total cases of mutilated notes per year.

"While we do not provide a breakdown of those 232 cases as to the type of damage or mutilation, number of notes, or denominations, we have seen nothing from experience with the new notes that challenges our previous statements," Harrison said.

"For context, as of October 2012, there were more than 220 million polymer notes in circulation," he added.

Harrison refused to say whether the bank consulted another government in response to reports of melting currency, as suggested by the exemptions applied to the records.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition January 2, 2013 A10

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