Unfortunately, fake money in Peru is a real problem and most people travelling here will probably fall victim to being scammed out of some cash at least once.
The issue is chronic mainly in the heavily tourist-populated area of Cusco and the attractions that surround it; Machu Picchu and rainbow mountain.
One thing to note: fake bank notes cannot be dispersed from ATMs.
Therefore the money is coming into your hands from sellers.
The place to really watch your cash is on the street; markets, people selling stuff on the road and small tourist shops all around the main square in Cusco. Taxis are also a common source of fake notes.
While it is important to keep an eye on the change you get back from hotels, hostels and restaurants, the problem is really prevalent in the smaller enterprises.
No matter how pleasant a person can seem, and the people are generally extremely friendly in Peru, receiving fake notes as change is something I experienced myself and witnessed nearly every day during my time in Cusco.
One friend, who was at this stage used to the scam, was given a fake twenty as change from a seemingly nice market seller. When she asked for a new note, the woman at the stall as well as her friends started laughing.
I received a note that I think was change I got from a pair of earrings. I only noticed when we tried to use it in a supermarket that it was in fact a fake (Peruvians can tell the fake money immediately and will not accept it).
If you compare a fake note to a real note, you can usually see the difference, though some fakes are surprisingly deceptive.
One good way to tell if a note is fake is to feel it.
Fake cash feels like actual paper you would use in a printer whereas real money feels like… well… money. Though some brand new crisp notes can also feel somewhat paper-like, this is generally a good indicator for detecting fake notes.
If you receive a note and are undecided as to its authenticity, take out your wallet and see if you can compare it to a note you already have. If you are unhappy, ask the seller directly for a different note.
Most sellers are happy to give you a new note even if they have been caught out.
If you are the unfortunate recipient of a fake bank note, there is not much you can do. However do take the time to study it and compare it to real notes so as to prevent this scam from happening to you again.
If you find yourself in the company of a friendly tour guide or hotel receptionist, you can even ask them for a quick demo on how to detect the fake notes.