I have watched many movies where people who want to rob a load of money, Just wait until the federal reserve pulls money back to them and right in between them removing the serial numbers from their records, and burning the bills, they go in and take it all. My question is, Are the movies accurate? Do they really put the bills in an incinerator, or do they do something else to dispose of them?
The authorization to destroy currency was given to the Federal Reserve Banks by the Treasury Department in 1966. At EROC, unfit currency is separated at the high-speed currency processor, where the notes are cut into confetti-like shreds and sent to a disposal area.
All destroyed currency is replaced with new currency ordered by the Federal Reserve from the Bureau of Engraving and Printing. Reserve Banks provide the BEP with an estimate of new currency needs for the coming year based on the past year's usage. Roughly 26 percent of all notes replaced are $1 notes, which have a life expectancy of 5.9 years. Other denominations remain in circulation longer. A $100 bill, for example, usually lasts seven years.
You can even buy the shredded currency in small amounts at certain locations:
Shredded currency is available through the BEP. Small amounts, as pre-packaged novelty souvenirs, are available for sale in the Washington, DC and Fort Worth visitor centers.
To emphasize, they do not remove the serial numbers before destroying the bills. The bills are fed directly into a shredding machine (at some Federal Reserve banks you can see this as part of a tour).
Michael A's answer is great, but because the question asks about incineration, I wanted to add some historical information.
Prior to the early 1980's, the Federal Reserve did, indeed, use incineration as the method of destruction for unfit bills. In the early 1980's they switched to shredding, because it was easier to put in the proper controls (weight in equals weight out, for example) to ensure that no bills were pilfered in the process.
(Source: my father, who was in charge of the currency destruction unit of the Omaha Branch from about 1977 to about 1980.)
There is still some incineration happening, but it is only after the shredding happens. The shredded remains used to go to landfills, but now the various Federal Reserve branches dispose of the shredded bills in a variety of ways, in addition to selling packages as souvenirs. Examples include:
- New Orleans -- compost
- Salt Lake City -- burned as part of cement manufacture
- Los Angeles Boston -- burned for electricity generation