POLICE investigating the use of counterfeit banknotes in York say they have discovered a 'small factory' responsible for the notes.

A few days ago, North Yorkshire Police warned that fake Scottish notes were being passed in York.

Police tweeted on Saturday evening that two people had been arrested, and that a 'small scale factory' had been found.

TUESDAY UPDATE: The two arrested men, aged 31 and 37, have been released on bail while the investigation continues.

Officers have told The Press today that the men were arrested when their car was stopped at Whitley on the A19, south of Selby.

Police then searched a property in South Yorkshire, and found printing equipment and notes.