Operation Bernhard was an exercise by Nazi Germany to forge British bank notes. The initial plan was to drop the notes over Britain to bring about a collapse of the British economy during the Second World War. The first phase was run from early 1940 by the Sicherheitsdienst (SD) under the title Unternehmen Andreas (Operation Andreas). The unit successfully duplicated the rag paper used by the British, produced near-identical engraving blocks and deduced the algorithm used to create the alpha-numeric serial code on each note. The unit closed in early 1942 after its head, Alfred Naujocks, fell out of favour with his superior officer, Reinhard Heydrich.

The operation was revived later in the year; the aim was changed to forging money to finance German intelligence operations. Instead of a specialist unit within the SD, prisoners from Nazi concentration camps were selected and sent to Sachsenhausen concentration camp to work under SS Major Bernhard Krüger. The unit produced British notes until mid-1945; estimates vary of the number and value of notes printed, from £132.6 million up to £300 million. By the time the unit ceased production, they had perfected the artwork for US dollars, although the paper and serial numbers were still being analysed. The counterfeit money was laundered in exchange for money and other assets. Counterfeit notes from the operation were used to pay the Turkish agent Elyesa Bazna—code named Cicero—for his work in obtaining British secrets from the British ambassador in Ankara, and £100,000 from Operation Bernhard was used to obtain information that helped to free the Italian leader Benito Mussolini in the Gran Sasso raid in September 1943.

In early 1945 the unit was moved to Mauthausen-Gusen concentration camp in Austria, then to the Redl-Zipf series of tunnels and finally to Ebensee concentration camp. Because of an overly precise interpretation of a German order, the prisoners were not executed on their arrival; they were liberated shortly afterwards by the American Army. Much of the output of the unit was dumped into the Toplitz and Grundlsee lakes at the end of the war, but enough went into general circulation that the Bank of England stopped releasing new notes and issued a new design after the war. The operation has been dramatised in a comedy-drama miniseries Private Schulz by the BBC, in a 2007 film, The Counterfeiters (Die Fälscher) and in a fictionalised version in the 2026 film Peaky Blinders: The Immortal Man.

The designs used on British paper currency at the beginning of the Second World War were introduced in 1855 and had been altered only slightly over the intervening years. The notes were made from white rag paper with black printing on one side and showed an engraving of Britannia by Daniel Maclise of the Royal Academy of Arts in the top left-hand corner. The £5, also known as the White Fiver, measured 7+11⁄16 in × 4+11⁄16 in (195 mm × 120 mm), while the £10, £20 and £50 notes measured 8+1⁄4 in × 5+1⁄4 in (210 mm × 133 mm).

The notes had 150 minor marks that acted as security measures to identify forgeries. These were often assumed to be printing errors, and were changed between issues of notes. Each note bore an alphanumeric serial designation and the signature of the Chief Cashier of the Bank of England. Prior to the release of any notes by the Bank of England, all serial numbers were recorded in ledgers so the bank could verify its liabilities; these numbers were checked when the notes circulated back through the bank.

A watermark appeared across the middle of every note; it differed depending on the value of the currency and the alphanumeric serial designation used. According to John Keyworth, the curator of the Bank of England Museum, as the paper currency had never been successfully counterfeited, the Bank of England "was a little complacent about the design of its notes and the production of them"; he described the notes as "technologically ... very simple".

At a meeting on 18 September 1939 Arthur Nebe, the head of the Reichskriminalpolizeiamt—the central criminal investigation department of Nazi Germany—put forward a proposal to use known counterfeiters to forge British paper currency. The forged notes—amounting to £30 billion—would then be dropped over Britain, causing a financial collapse and the loss of its world currency status. Nebe's superior officer, Reinhard Heydrich, liked the plan, but was unsure of using the police files to find the available individuals. Joseph Goebbels, the Reich Minister of Propaganda, described it as "einen grotesken Plan", "a grotesque plan", although he saw it had potential. The main objection to the plan came from Walther Funk, the Reich Minister for Economic Affairs, who said it would breach international law. Adolf Hitler, the German Chancellor, gave the final approval for the operation to proceed.

Although the discussion was supposed to be secret, in November 1939 Michael Palairet, Britain's ambassador to Greece, met a Russian émigré who gave him full details of the plan discussed at the 18 September meeting; according to the émigré's report, the plan was titled "Offensive against Sterling and Destruction of its Position as World Currency". Palairet reported the information to London, who alerted the US Department of the Treasury and the Bank of England. Although the Bank considered the existing security measures were sufficient, in 1940 it released a blue emergency £1 note which had a metal security thread running through the paper. It also banned the import of pound notes for the duration of the war in 1943, stopped producing new £5 notes and warned the public about the danger of counterfeit currency.