I also find that in the case that just occurred, for whatever reason PMG did not know or catch the issue and this note amazingly became better with age (and a little cleaning) leaving an unsuspected buyer with a bitter taste in their mouth once the history of the note is discovered.
Actually, PMG got the assessment of "previously mounted" correct whether or not they saw the note's before picture with the stain. The stain is consistent with mounting. The removal of the stain got rid of the discolouration but likely left behind evidence of the former mounting. How the note was treated would likely be guess work.
Collectors react with solicitude at the mention of cleaning notes. However, a very experienced dealer told me years ago that the MAJORITY of old notes in the collector market have been altered in some way. That includes not only washing/cleaning/pressing, but also rubbing out pencil marks, repairing tears, and trimming. I think his estimate was 80% or 90%. Certainly, with the 1935 series, I can believe that. Every 1935 series note is worth a strong premium over face value, so even the low grade $1 notes get their share of enhancements. The point I'm trying to make here is that most people in the hobby are oblivious to this fact, or they are pretending to be oblivious. If grading companies rejected notes that appeared enhanced, they would be rejecting more than half of all notes they receive, and that's not a good way to do business. It stultifies me to learn how many people, even with decades of experience, profess to not be able to recognize alterations to notes. I think most of you are pretending to be ignorant and have at least some ability to tell when there is something "fishy" about a note in hand. Maybe you can't fully comprehend why a note comes across as fishy, but certainly most of you would be able to tell the difference between an original note and an enhanced note in a side-by-side comparison with a high success rate.
Grading companies grade notes that are presented to them, meaning they grade the note based on what they see, not what they know. It's not their business to investigate the provenance of every note like it's a genealogical research project or an episode of CSI. That's a wise approach to grading because, technically, a note never really stops circulating after it is released to the public. The first half of a note's life is spent being redeemed for face value, and its condition declines with time. Then, if it does not get destroyed, the note stops being redeemed for face value and enters the collector's realm where it gets exchanged for above its face value, and that's when its condition magically starts improving with time. Many will argue that notes can't "improve" with time, and that's partially correct. Enhancements to notes to make them seem better are rarely perfect, but it is our inability to recognize evidence of these enhancements that make it seem like notes improve with time. So if a note that grades VF is washed and lightly pressed to make it appear AU, and you cannot tell that the note is washed and pressed, it's an AU note to you. Even if you correctly discern that the note is altered, it is next to impossible to know what the original grade was prior to being altered. Grading companies are no more psychic than the rest of us; they can't tell what the note's grade was 6 months ago. All they can do is grade what is in front of them, assessing grade then and there. They are not responsible to anyone for what the note looked like in the past. How can they be? They are not responsible for what happens to notes before or after slabbing. All they can really do is recognize when some notes exhibit definitive signs of originality and give those notes a special designation (like "EPQ" or "original"). Notes that lack distinct signs of originality may or may not be original, but even in cases where tampering is obvious, there is no way to know the extent of the tampering.
It is not the responsibility of grading companies to police the numismatic marketplace, to do research on note rarity and publish this research, or to educate collectors on how to protect themselves. Suggesting that they should be responsible for any of these things is implicitly assuming that grading companies are WAY more important than they really are.
