Counterfeits and organised crime

Twelfth edition

Welcome to the twelfth edition of the Dark Global Matters.

This month, our focus is on organized crime and counterfeiting. 

We anticipate you will familiarise yourself with how the two vices take shape and operate.

Counterfeiting is a fraudulent imitation (a forgery) of a trusted brand and product, as defined by the International Anti counterfeit Coalition.

The United Nations Office on Drugs and Crime (UNODC) notes that Counterfeiting originally referred specifically to the falsifying of currency, but its usage has expanded to all types of forgeries, which involve manufacturing or trading of a document or product without the permission of the lawful owner of the patent, trademark, copyright, or license.

Counterfeiting affects different business entities not only causing losses to the businesses involved but also endangering the lives of the consumers.

According to UNODC Counterfeiting is a very lucrative business that takes advantage of unwitting consumers and people's appetites for cut-price brands or simply exploits their financial position.

Counterfeiting is a very lucrative business that takes advantage of unwitting consumers and people's appetites for cut-price brands or simply exploits their financial position.

In recent years, counterfeiting has expanded rapidly into products of all kinds, including DVDs, watches, electronics, software, pharmaceuticals, foodstuffs and tobacco. In addition, as licit online sales increase, so do the opportunities for more digital sales of counterfeit goods. The phenomenon of trafficking online counterfeit products is coupled with added challenge of digital piracy of film, games, music and other digital products.

When it comes to Counterfeit pharmaceuticals, these are products with the greatest potential of harm for consumers’ health.

Counterfeit medicines have become a highly profitable criminal industry run by transnational criminal organizations. The issue has affected international communities in terms of growth, industrial and commercial turnover, social development, improvement of people’s living conditions, and human security according to .

Counterfeiting presents a very favorable ratio between potential profits and assumed risks compared to other criminal activities such as drug trafficking. It also facilitates money laundering by providing a front into which the criminal organizations can invest the proceeds of their other illicit activities. For these reasons interest in it has grown exponentially amongst organized criminal groups.

Counterfeiting is now ranked amongst the highest income sources for organized criminal activities according to the United Nations Interregional Crime and Justice Research Institute (UNICRI)

Corruption and bribery are inherently linked to the illicit trafficking of counterfeit goods, especially when these are shipped internationally. Trafficking in counterfeit goods also offers criminals a complementary source of income and a tool to launder proceeds derived from various crimes. In a similar fashion, proceeds from other crimes have been used by organized criminal groups to finance their counterfeiting businesses (UNICRI / ICC BASCAP, 2013).

The counterfeit business is a global operation spread across numerous countries and organized by cross-border criminal networks. 

The UNODC further highlights the challenges of the vice noting that counterfeiting presents an additional challenge, connected to the fact that it is often perceived as a "lesser crime." Buying a counterfeit handbag, for example, might not be regarded by the consumer as an illegal transaction - simply a cheaper way to wear the latest fashion goods. Nonetheless, often little thought is given to how the money spent on counterfeit goods may ultimately end up in the hands of organized criminal groups or how the industries that rely on legitimate sales suffer.

The negative impact produced by counterfeiting affects everyone.

Counterfeiting undermines employment, as products are copied and produced illegally, and it has a considerable impact on the rights of workers around the globe. 

The lack of control of working conditions and respect of employment rights places workers who produce counterfeit goods in a very vulnerable position. Often, they are underpaid, have no benefits and are not granted any form of protection. These severe labour abuses often occur in conjunction with threats of violence, exposure to hazardous materials, and deadly working conditions.

Counterfeit products represent an enormous drain on the economy. They create an underground trade that deprives governments around the globe of revenue for vital public services thus imposing greater burdens on taxpayers.

Finally, counterfeiting has a significant impact on the environment, since the production of counterfeit goods does not follow regulations. 

Chemicals disposed of unlawfully and unregulated air pollution are just some of the ways in which counterfeiting contributes to environmental harm (Bate, 2010; Hetzer, 2002; McEwen and Straus, 2009; WHO, 2010).

According to the Anti counterfeiting report a global guide, Transnational organised crime groups scrutinise legal systems and then work to infiltrate legal supply chains and legitimate intermediary businesses

transnational, serious and organised crime groups have had a significant impact on the global trade in counterfeit goods. Such groups have adapted and become more localised, decentralised and specialised. This has enabled them to engage professional facilitators outside of their domains to quickly move products in the developing global environment. Working in this way eases the prospect of detection. Further, they have more capacity to conceal their ill-gotten money and assets.

According a fact sheet by UNODC on The Illicit Trafficking of Counterfeit Goods and Transnational Organized Crime, Evidence suggests that criminal networks use similar routes and modus operandi to move counterfeit goods as they do to smuggle drugs, firearms and people.

There have been reports of authorities uncovering operations where proceeds from drug trafficking were channelled into counterfeiting, and where profits from the sale of counterfeit goods were used to further criminal’s other illicit operations.

The trading of illicit goods for other illicit items is another trend which is seemingly intensifying. Whereas in the past, illicit commodities were bought with cash, organized crime groups are increasingly exchanging goods, such as swapping drugs for counterfeit items and vice-versa.