Peru became more attractive to counterfeiters as Washington's decade-long Plan Colombia program tightened the screws not just on drug traffickers in that neighboring Andean nation but other criminals as well, he speculated.

Counterfeiting in Peru, meanwhile, got better.

"It's much more profitable than cocaine," said a top investigator on Portocarrero's team, noting another of Peru's illegal exports.

U.N. crop estimates suggest Peru has also overtaken Colombia as the world's leading cocaine producer. But the investigator, who spoke on condition of anonymity for security reasons, said counterfeiting is a better business since cocaine production has much higher overhead and transport and processing are far more complicated. Criminal penalties tend to be much higher as well.

Counterfeiters earn up to $20,000 in real currency for every $100,000 in false bills they produce after expenses, the investigator said.

He described the process:

First, design: Software such as Corel Draw or Microsoft Office is used. Then comes photolithography, the etching of metal plates, offset printing and finishing.

Finishing is next: A sheet of bills is lightly coated with varnish. Individual bills, typically 12, are then cut from the sheet.

Security strips are inserted with needles and affixed with glue applied with medical syringes. (Hold a $20 bill up to the light and you can see a strip with "USA TWENTY" printed repeatedly across it).

The bills now pass through what counterfeiters call an "enmalladora," or netting machine: Two rollers covered with coarse fabric to give them a rough texture.

The last step: Sand down the bills with fine sandpaper.

"It takes four or five days to make $300,000" in counterfeit notes, the investigator said.

Well-crafted bills are easily introduced into circulation in the United States in retail stores, where clerks are less vigilant, the Secret Service agent said.

Only $100 bills get shipped by counterfeiters to the United States, while $10s and $20s are sent to Peru's neighbors, Portocarrero said. Demand is particularly great in Argentina and Venezuela because currency controls make the dollar so coveted and they mostly circulate on the black market.

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