A 1945 report, newly-released by the National Archives of the UK, asserts that during World War II the Nazis almost destroyed the credibility of the British pound sterling by producing near-perfect forgeries, The Telegraph reports.
By the end of the war the forgeries were so rife that Bank of England notes would not be accepted by any neutral country on the Continent "except at a very large discount”, the report quoted Sir Edward Reid of MI5’s section B1B as saying.
The government ultimately had to issue two recalls of all pound notes — fake and genuine — bigger than £5 and issue fresh notes, which had an added security feature: a metal strip.
In total, the Nazis (or rather, prisoners at the Sachsenhausen concentration camp) produced counterfeit sterling notes with a face value of £134 million, equivalent to ten percent of all sterling in circulation at that time, according to the BBC.
The Germans first began forging British currency in 1940 as part of its plans to invade Britain.
But while Hitler was forced to abandon that plan after losses in the Battle of Britain, German forgers carried on perfecting their techniques to devastating effect.

Initially the fake notes were circulated in neutral Portugal and Spain with the objective of raising money for the Nazi war effort and creating a lack of confidence in the British currency. Soon they began turning up in Egypt as well, and after D-Day and the Allied invasion of France, they began to appear all over Britain, mainly due to the fact that Allied troops were selling Army stores on the blackmarket for British pounds.
But the Nazi plot backfired when German intelligence chiefs, unable to detect the forgeries, gave the fake notes to their own spies heading for the UK, leading to the easy capture of some.

One of Germany’s top spies, codenamed ‘Cicero’, amassed some £300,000 for a retirement fund during the war, only to later discover the currency was all fake.