A counterfeit money pen contains a solution that detects starch in counterfeit paper money. In the United States, legitimate paper currency is not bound with starch in the manner that standard paper is and, therefore, contains either little or no starch at all. When the solution in a counterfeit money pen is applied to American paper currency then, it will do one of two things: react to starch in the counterfeit paper money and turn the tested area a deep blue-black color, or simply mark the tested area of legitimate paper money a light golden-brown color.

The solution in a counterfeit money pen is made up of various solvents, one of which is iodine. Iodine is the ingredient that is responsible for detecting counterfeit paper money. This is because when iodine and starch interact, they result in the development of a deep blue-black color. This deep blue-black color indicates that the money being tested was made on paper containing starch, signifying that the money is counterfeit. On the other hand, if a light golden-brown color shows up instead, the money is seen as legitimate since that is the actual color of the solution and it indicates that the iodine did not come into contact with any starch.

Many places such as stores and banks use counterfeit money pens to test paper money before accepting it. This is probably because a counterfeit money pen is small, easy to use and will provide quick results. It should also be of note that in some cases, the solution will not leave permanent markings on the money. If the solution in the pen contains hydrogen peroxide, the mark made on the money will go away eventually. Since the iodine has interacted with the starch in counterfeit paper money, though, the deep blue-black coloring will not do the same.

As long as there has been currency, there has been counterfeit money, which is dangerous for an economy. A counterfeit money pen checks the paper that the money is made of, but there are visual ways to distinguish between counterfeit and authentic American paper money. For instance, blue and red fibers are embedded within the paper used for making American money while counterfeit money will try to imitate the look by printing red and blue lines onto the paper. In addition, the quality of authentic American paper money is higher than that of counterfeit paper money; details are much clearer, even and sharp.