Bearer bond

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A nineteenth-century bearer bond

A bearer bond is a bond or debt security issued by a business entity such as a corporation, or a government. As a bearer instrument, it differs from the more common types of investment securities in that it is unregistered—no records are kept of the owner, or the transactions involving ownership. Whoever physically holds the paper on which the bond is issued is the presumptive owner of the instrument. This is useful for investors who wish to retain anonymity. Recovery of the value of a bearer bond in the event of its loss, theft, or destruction is usually impossible. Some relief is possible in the case of United States public debt.[1] Furthermore, while all bond types state maturity dates and interest rates, bearer bond coupons for interest payments are physically attached to the security and must be submitted to an authorized agent, in order to receive payment.[2]


Bearer bonds have historically been the financial instrument of choice for money laundering, tax evasion, and concealed business transactions in general. In response, new issuances of bearer bonds have been severely curtailed in the United States since 1982.[3]

In the United States all the bearer bonds issued by the US Treasury have matured. They no longer pay interest to the holders. As of May 2009, the approximate amount outstanding is $100 million.[4]

Chiasso financial smuggling caseEdit

From 2009-2012, a series of incidents involving the forgery and smuggling of U.S. bearer bonds in Italy and Switzerland occurred, beginning with the Chiasso financial smuggling case in June 2009, in which Italian financial police and custom guards seized documents purporting to be U.S. bearer bonds, totaling $134.5 billion in Chiasso, Switzerland, on the Italian border.

The bonds were in $500 million and $1 billion denominations, although the highest denomination ever issued by the US Treasury was $10,000, and each individual bond seized far exceeded the sum total of all outstanding bonds combined. It was unclear what the purpose of the fake bonds was; the two men carrying them were not detained after the bonds were seized due to the fact that the extent of their crimes was unknown until after their release.[5]

Several similar instances followed over the next three years, including:

  • On September 18, 2009, an incident was reported[6] by the Italian financial military police Guardia di Finanza, this time involving two (apparently) Philippine nationals smuggling U.S. Treasury bonds (valued at approximately $180 billion) at Malpensa Airport (the largest airport in Milan, Italy). The two were detained and the assessment of this case is on-going.[7]
  • In 2009, it was reported that Italian financial police seized $742 billion of fake U.S. bearer bonds in Chiasso.[8]
  • On January 26, 2011, an incident was reported[9] by the Italian military police Carabinieri, this time involving six smuggling U.S. Treasury bonds (valued at approximately €20 billion and said to be counterfeit) at a highway rest stop. The six are under investigation for receiving stolen goods.
  • On February 17, 2012, it was reported that Italian police had seized $6 trillion in counterfeit U.S. bonds.[10] 8 Italian citizens were arrested for attempting to defraud several Swiss banks using the phony bonds as collateral for loans. They were also accused of counterfeiting bonds, credit card forgery, and loan-sharking in the Italian regions of Lombardy, Piedmont, Lazio and Basilicata.[11]

United States policy and practiceEdit

In the United States, the Tax Equity and Fiscal Responsibility Act of 1982 substantially curtailed the issue of debt in bearer form. The act disallowed a tax-deduction of interest paid on any such bonds issued after 1982 by the issuer in the case of corporate bonds, and removed the tax-exemption of the interest to the holder in the case of municipal bonds. In contrast, registered bonds retained the tax-exempt treatment.[12] A challenge to this tax treatment by the US state of South Carolina was heard by the US Supreme Court in the case of South Carolina v. Baker (1988), which upheld the law and brought to an end the further issue of virtually all US municipal bearer bonds.

See alsoEdit


  1. ^ "Loss, Theft, Or Destruction Of United States Bearer Or Registered Securities Assigned As Payable To Bearer" (PDF). U.S. Treasury. February 2007.
  2. ^ Farley, Alan. "Bearer Bonds: From Popular to Prohibited". Investopedia. Retrieved December 12, 2019.
  3. ^ "Bearer Bonds: From Popular to Prohibited". Investopedia.
  4. ^ "Bearer and Registered Securities Balances as of May 31, 2009" (PDF). U.S. Treasury.
  5. ^ Povoledo, Elisabetta (June 26, 2009). "Mystery of Fake US Bonds Fuels Web Theories". The New York Times. p. B2. Retrieved October 3, 2013.
  6. ^ "Il mistero dei bond falsi Miliardi verso la Svizzera - Corriere della Sera". Retrieved November 7, 2010.
  7. ^ "Libero Quotidiano - Filippini con 180 miliardi nel trolley. Mistero alla dogana di Malpensa". Archived from the original on April 29, 2011. Retrieved November 7, 2010.
  8. ^ Powers, Phoenix (2012). Great Gold Swindle : Yamashita's Gold- 75 Years of Philippine Corruption. Lulu Com. p. 99. ISBN 978-1-105-58311-7.
  9. ^ "Italy confiscates euro20 billion in fake US bonds". January 26, 2011. Retrieved February 21, 2012.
  10. ^ Blackden, Richard (February 17, 2012). "Italian police seize $6 trillion of fake US bonds in Switzerland". The Daily Telegraph. London.
  11. ^ Forte, Elisa and Jones, Gavin (February 17, 2012). "Italian police seize $6 trillion of fake U.S. bonds". Reuters. Retrieved December 12, 2019.
  12. ^ "Section 11- Role Of The Transfer Agent". Trust Examination Manual. Federal Deposit Insurance Corporation. May 10, 2005. Retrieved October 3, 2013.

External linksEdit