Operation Bernhard

Operation Bernhard was the name of a secret German plan devised during the Second World War to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes.

The plan was directed by, and named after, SS Major Bernhard Kruger, who set up a team of one hundred and forty-two counterfeiters from among inmates at the Sachsenhausen concentration camp. Beginning in 1942, the work of engraving the complex printing plates, developing the appropriate rag-based paper with the correct watermarks, and breaking the code to generate valid serial numbers was extremely difficult, but by the time Sachsenhausen was evacuated in April 1945 the printing press there had produced 8,965,080 banknotes with a total value of £134,610,810. The notes are considered the most perfect counterfeits ever produced, being extremely difficult although not impossible to distinguish from the real thing.

Although the initial plan was to destabilise the British economy by dropping the notes from aircraft, on the assumption that while some honest people would hand them in most people would keep the notes, in practice this plan was not put into effect. Instead, from late 1943 approximately one million notes per month were transferred to a former hotel near Merano in northern Italy, from where it was laundered and used to pay for strategic imports and to pay German agents. It has been reported that counterfeit currency was used to finance the rescue of the arrested former Italian dictator Benito Mussolini in 1943.

The Bank of England detected the existence of the notes during the war, when a clerk recording a bundle of returned notes in the banks' ledgers (every banknote issued by the Bank of England as late as the 1940s was recorded in large leather-bound ledgers, as the notes were a liability of the bank) noted that one of the notes had already been recorded as having been paid off.

Following the evacuation of Sachsenhausen, the counterfeiting team was transferred to Redl-Zipf in Austria, a sub-camp of the Mauthausen-Gusen concentration camp. At the beginning of May 1945 the team was ordered to be transferred to the Ebensee sub-camp, where they were all to be killed together; however their SS guards had only one truck to convey their prisoners, so it was necessary for the truck to make three trips. On the third trip the truck broke down, and the last batch of prisoners had to be marched to Ebensee, where they arrived on 4 May. By this time, the guards of the first two batches of prisoners had fled because of the approach of the American army, and the prisoners had disappeared among the other sixteen thousand prisoners in the camp. Thus, because of the order that the prisoners all be killed together, none were actually killed. They were liberated from Ebensee by US forces on 5 May 1945. It is believed that most of the notes produced ended up at the bottom of Lake Toplitz, near Ebensee, from where they were recovered by divers in 1959, but examples continued to turn up in circulation in Britain for many years, which caused the Bank of England to withdraw all notes larger than £5 from circulation, and not reintroduce the denominations until the early 1960s (£10), 1970 (£20), or 1980 (£50).

The counterfeiting team also turned its attention to US currency, producing its first 200 $100 bills on 22 February 1945 with full production scheduled to start the next day, but the Reich Security Main Office ordered the work halted and the press dismantled.

German spy Elyesa Bazna (codename "Cicero") was paid with counterfeit notes, and unsuccessfully sued the German government after the war for outstanding pay.

After the war, Major Kruger was detained by the French for three years, and spent the time forging documents for the French Secret Service. In the 1950s he went before a De-Nazification Court, where statements were produced from the forger-inmates that he had been responsible for saving their lives. He later worked for the company which had produced the special paper for the Operation Bernhard forgeries. He died in 1989.

Operation Bernhard was the topic of a comedic drama serial called Private Schultz broadcast by the BBC in 1981.