Criminal Counterfeiting - How Dangerous is it?


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The WAITO Foundation’s 2011 report provides an international reference in the fight against organized crime and dangerous counterfeiting (Counterfeiting-crime©) prejudicing the stability of States and the security of their populations, and industrial sectors, whose responsibility it is to guarantee the protection of consumers. For more information visit -

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Criminal Counterfeiting - How Dangerous is it?

  1. 1. A Criminologist’s Perspective (Xavier Raufer) President of the WAITO Foundation Scientific Committee A. Counterfeiting as a criminal activity Firstly, let us consider the scale of this problem taking the example of the two Californian ports of Los Angeles and Long Beach. Together, these two ports see more than 50,000 ships a day, and manage 1 billion US$ of goods. Each 40-foot long containers can hold up to 12,300 boxes of shoes, 20,000 dolls or 6,000 dresses on hangers. One container full of contraband cigarettes, sold on the American black-market, means a loss of 350,000 US$ in fiscal income for the federal budget and for the US States concerned. As outlined in further detail below, mass criminal counterfeiting is dangerous and harmful for societies on both sides of the North-South divide. Both in the real and virtual worlds, and in various converging ways: • Criminal counterfeiting seriously harms public health (adulterated products, counterfeit medicines, etc.); • Criminal counterfeiting also constitutes a societal threat (falsification of identity or official documents, and social, economic and financial certificates); • Finally, it constitutes a social threat (job loss, etc.) Therefore, transnational organized crime no doubt sees criminal counterfeiting as a major st “cash cow” for the first part of the 21 century – and perhaps soon its main source of revenue, as is explained in the second part of A Criminologist’s Perspective, “Drugs and counterfeiting: a domino effect?”. Geopolitical approach: the Gulf awash with counterfeited object Let us take a look at the wave of counterfeit material goods that is flooding the countries of the Arab Persian Gulf States, in particular the United Arab Emirates (UAE). Two reasons for this are that: • It is a society of well-off, or wealthy, consumers; • In geopolitical terms, the region is a unique crossroads for trade, half-way between Asia, Sub-Saharan Africa and Europe, and close to the Middle East; Moreover, the European Union observes that the United Arab Emirates are often used as a transit port for large shipments of counterfeit products arriving from Asia. Thus: • In 2008, 12.3% of counterfeits seized in Europe came from the Emirates; • In 2009, 14.6% of counterfeits seized in Europe also arrived from this region. In 2009, the Emirates were also the last identified ports of transit for 73% of counterfeit medicines, 30% counterfeit CD/DVDs and 15% counterfeit cigarettes seized in the 1 European Union. In the UAE themselves, except for the Emirate of Abu-Dhabi , counterfeit products in the following sectors are available on mass:  Copyright-­‐  This  confidential  report  is  the  Intellectual  property  of  the  WAITO  Foundation  all  rights  reserved.  No  part  of  this  publication  may  be  reproduced  or  diffused  under  any  form  or  by  any  means,  including  photocopies  and  recordings,  or  by  any  information  storage  or  recovery  system.    
  2. 2. • Industrial sector Counterfeit refrigerators, ventilators, air-conditioning units, computers, printers, car batteries, chargers or telephone and computer batteries, neon strips, spare car parts, 2 counterfeit accessories, pieces and consumables (ink cartridges) HP or other cooling cylinders for refrigerators and air-conditioning units. • Pharmaceutical, healthcare, cosmetics and herbal sector Counterfeit erectile dysfunction products, antibiotics, body lotions, shampoo, soaps, slimming products, etc. • Luxury sector Watches with different trademarks and origins, handbags, suitcases, sunglasses, perfumes, clothes. • Electronic sector Mobile phones such as the fake Blackberry Curve, know as BB China (10 times cheaper than the genuine product), identical to the original, iPods, DVDs, hands-free sets, and fake earphones. • Food sector Packets of saffron, chocolate bars, fizzy drinks, etc. • Sportswear sector Clothes, gloves, shoes, etc. New and worrying: everyday consumer goods Not all these counterfeits are dangerous in practice. However, in the predatory world of crime, where professional specialization is not necessary, counterfeiting everyday consumer goods goes hand in hand with other abuses and trafficking, and helps to finance other criminal activities. Therefore there is an evident continuum between the phenomenon as a whole and each of its individual branches. In Australia, according to the customs authorities, the volume of counterfeit products constitutes a full-scale consumer product “black market”, operating from discount shops, street markets, etc. This includes products such as alcohol, batteries, toothbrushes, tobacco, nappies, household appliances, toys, shaving razors, spare vehicle parts, washing powder, soaps, mobile phones, etc. Trading losses are estimated at 635 million US$ a year, for the sportswear market alone. However, Australia is a minor target country when compared with the sportswear sector in Mexico, which suffers losses of 10 billion US$ a year. In the area of household products, US Customs is concerned by the development of a fake detergent market. In September 2010 alone, 25,000 packets of fake Ariel were seized. However, the greatest concern is for products that endanger consumers.Copyright-­‐  This  confidential  report  is  the  Intellectual  property  of  the  WAITO  Foundation  all  rights  reserved.  No  part  of  this  publication  may  be  reproduced  or  diffused  under  any  form  or  by  any  means,  including  photocopies  and  recordings,  or  by  any  information  storage  or  recovery  system.    
  3. 3. The Indian government estimates that, in the spare vehicle part sector, beyond the financial injury evaluated in 2009 at 340 million euros, these counterfeit products are directly or indirectly responsible for the deaths of 25,400 people and the injuries of 93,000 others. In the food sector, it is difficult to distinguish between the health risks of counterfeit products caused by the products themselves and their industrial environment, and those caused by the storage of these products.Counterfeiters have no qualms about adding forbidden antibiotics and sometimes even steroids to counterfeit products. But mostly, products are already contaminated with mycotoxins or heavy metals, not to mention the animals that absorb counterfeit veterinary or phytosanitary substances. And the list continues. Counterfeit medicines, in particular, are highly profitable, generating a turnover of approximately 200 billion US$ a year, according to the World Customs Organization, killing tens of thousand of patients. The official experts do not hesitate in comparing the drug market with the pharmaceutical crime market: 1000 US$ invested in the manufacture of heroine generate a 20,000 US$ return. The same sum invested in counterfeit medicines generates 450,000 US$. In the space of 4 years, from 2003 to 2007, one internet counterfeit medicine supplier alone sold 9 million US$ of counterfeit Viagra. The tobacco industry is not far behind the high profits generated by pharmaceutical crime. Counterfeit cigarettes and fake cigarettes together generate approximately 50 billion US$ a year. However, these counterfeit cigarettes are a highly toxic: they contain up to 30 times more toxic agents than legal cigarettes, capable of turning tobacco-hooked teenagers into a generation lung cancer victims under the age of 40. B. Drugs and counterfeiting: a “domino effect”? Does one swallow a summer make? No, but it is interesting to see that, for two years now, there has been a significant decrease in the use of drugs in the United Kingdom, home to the “Swinging London” of the 1960’s, which saw the start of the “fashion” for drugs in Europe. This was a disaster for the United Kingdom. While in 1960 only 5% of young Britons confessed to having taken drugs at least once, the figure had risen to almost 50% in 2005, the year when drug consumption peaked. Therefore, over 40 uninterrupted years, an increasing number of Britons consumed an increasing amount of drugs more often. Now, however, the trend seems to have become inverted, particularly among younger generations. According to the British National Health Service, only 20% of 16-24 year olds took some kind of drug in 2010 (22.6% in 2009)- an all-time low since the study began (1996: 30%). The same goes for the decrease in the consumption of the most toxic drugs (heroine, cocaine): 8.1% of young users in 2009, 7.1% in 2010.    Copyright-­‐  This  confidential  report  is  the  Intellectual  property  of  the  WAITO  Foundation  all  rights  reserved.  No  part  of  this  publication  may  be  reproduced  or  diffused  under  any  form  or  by  any  means,  including  photocopies  and  recordings,  or  by  any  information  storage  or  recovery  system.    
  4. 4. This trend was confirmed by a survey carried out regarding the consumption of drugs in nightclubs (Mixmag magazine, March 2011). At the beginning of 2011 (year-on-year) results showed that, in clubs, the consumption of cocaine had fallen by 20% and cannabis and ecstasy by 5%. This is a significant decrease given that, while in 2000, 9 out of 10 clubbers took drugs, today the figure has dropped to no more than 50%, 40% less drug users in a decade! The same goes for the youngest age group (11-15). In 2008, 85% had not taken drugs and in 2009 this had risen to 88%. This covers all temporal variants: taking drugs “at least once in your lifetime”, “in the last year” and “in the last month”. So even if, for the time being, this decrease only concerns the United Kingdom and although drug addiction continues to be a major and vicious problem on the continent, especially in France and Germany, this significant insular decrease- over several years now- is nevertheless, and our words are weighted, of considerable geopolitical importance. This is for two reasons: • The drugs market, starting with cannabis, is a mass market in our continent: according to the European Monitoring Centre for Drugs and Drug Addiction, there are 23 million cannabis consumers in Europe, of which 4 million consume various times a week. • According to the UN, this is, above all, because the international drugs market- worth a yearly 235 billion dollars for wholesale operations (enriching the cartels and st mafias)- is the third largest market in the world, after the (legal) petrol (1 ) and the arms nd (2 ) markets. Therefore, the decrease of drug-use in the United Kingdom is a trend that should be followed closely, and which raises two important questions: • Why has there been such a decrease among young people? This reversal of the trend is, of course, too recent to be able to give a proper explanation. But here is a first attempt: in a generation that increasingly operates “horizontally”; constantly linked to its peers via countless electronic means of communication (mobile phones, text messaging, Facebook, Twitter, etc.), currents of opinion develop rapidly and can win over a whole age group. One of these major currents says that drugs- at least those sold by drug-dealers- are “not cool”. In short, young people have no wish to resemble haggard zombies of the Pete Doherty or Amy Winehouse ilk, constantly shown by celebrity magazines staggering from one overdose to the next. • Does this decrease only affect the demand for drugs? In other words, is this decrease only produced by a younger generation, previously fascinated by drugs but now rejecting the “trashy” lifestyle of fallen celebrities? No, the drugs supply in the United Kingdom has also decreased for two different reasons: - In recent studies, young people say that they are less often offered drugs on the street, or in the normal dealing grounds (clubs, etc.); - When they do find some, the drugs are of a very poor, sometimes appalling, quality; e.g. highly diluted cocaine and ecstasy without any ecstasy! However, this quantitative and qualitative decline in supply among dealers, is the result of police work. The UK now has an effective criminal intelligence tool in the “Serious Organised Crime Agency” SOCA, which delivers stronger and increasingly precise blows against drug traffickers.  Copyright-­‐  This  confidential  report  is  the  Intellectual  property  of  the  WAITO  Foundation  all  rights  reserved.  No  part  of  this  publication  may  be  reproduced  or  diffused  under  any  form  or  by  any  means,  including  photocopies  and  recordings,  or  by  any  information  storage  or  recovery  system.    
  5. 5. Drug trafficking is increasingly controlled, the penalties against drug traffickers are heavier and confiscations are better targeted and more effective. However, we also know that when criminals consider that one cash source is too risky, or too complicated to mine, they switch to another. The displacement effect is an intangible law of criminology. No matter when or where, criminals with a predatory instinct relinquish prey that put up too much resistance, are too well protected or are sufficiently-equipped to defend themselves, for other, more fragile and more naïve targets. For example, if there is too much protection around banks, they will move on to supermarkets, and so on. Criminals do not aim to achieve great exploits or beat any records; they simply want to get rich as quickly as possible, running the least possible risk. The recipe for this is agility, opportunism, and a basic cost-benefit analysis. Although, there is no material evidence so far, this suggests that certain sectors of organized crime are leaving drug trafficking (too risky, less lucrative) for another source of revenue, just as lucrative and hardly and poorly controlled: mass counterfeiting. Is this theory justified? In any case, it is worth exploring, assessing and seeing whether it holds water in the long term. Conclusion- Looking to the future In terms of counterfeit-smuggling, the worst is yet to come. Particularly, in two particular areas: counterfeiting/identity theft, and the criminal colonization of e- commerce. Identity theft kits In April 2011, Customs at the Airport of Chicago seized 1700 high-quality American driving license falsifications, most probably ordered in China by Chinese students living in the United States. These falsified licenses claimed to have been issued in the States of South Dakota, Florida, Georgia, Illinois, Ohio, Pennsylvania and Wisconsin. This could herald the falsification of a whole range of ID and social documents, and bank cards. The invasion of e-commerce Bogus websites are flooding the Internet. They appear, operate and disappear in a short space of time- making them difficult to control. Often, these sites are used to sell counterfeit products and goods: CD/DVDs, luxury brands, toys, vehicle parts, mobile phones, wines, food products, software, beauty products and sportswear. They also sell medicines. Experts say that most of the medicines currently sold on the internet are counterfeits. In 2004, French customs’ seizures of products sold online accounted for 2% of all the products seized. In 2010 this had risen to 10%. Currently, out of 6.2 million counterfeit products seized, 1 million are sold online. What can be done? Firstly, we need to become aware of the gravity of the problem. Public opinion and the media need to demand that political leaders and professionals reveal the real state of play, including precise figures. Without such figures, we have no way of identifying any lack of figures. There should be more international conferences on this subject, with reports and publications.Copyright-­‐  This  confidential  report  is  the  Intellectual  property  of  the  WAITO  Foundation  all  rights  reserved.  No  part  of  this  publication  may  be  reproduced  or  diffused  under  any  form  or  by  any  means,  including  photocopies  and  recordings,  or  by  any  information  storage  or  recovery  system.    
  6. 6. The global economy must encourage and help those who are focusing on the real problem - counterfeiting as a criminal activity - instead of losing time and money on those who just want to bury their heads in the sands of “intellectual property”. First, thought, the official services in charge of controlling criminal counterfeiting must be unified, harmonized, simplified and given precise mandates and clear instructions. The example here is taken from the United States, which in 2003 merged the Immigration and Naturalization service, the US Customs, the Border Patrols and the Federal Agriculture Inspectors. As a whole the US Customs and Border Protection (CBP) is a force of approximately 58 000 employees, the main preventive/control service in the country. In fighting criminal counterfeiting, Europe and large European countries, will also benefit from unifying their ranks and simplifying their administrations. Sources - Interviews with professionals concerned, - Recent media sources: 2001 Le Monde, 8/06/2011 “Contrefaçon : le fléau se propage dans l’e-commerce” Bellingham Herald, 22/05/2011 “Mexico’s crime groups grabbing lucrative market for pirated goods” AFP, 19/05/2011 “US companies losses to counterfeit goods in China” The National, 15/05/2011 “Brands urge big fines for fakes” The National, 15/05/2011 “Fakes prompt genuine concern” CBS News, 11/05/2011 “Counterfeiting threat looms over drug industry” Gulf Today, 10/05/2011 “Police deal with 198 fake cases in 4 months, 825 000 HP items seized” Le Figaro, 4/05/2011 “La déferlante des contrefaçons” The Age (Australia), 1/05/2011 “Fake detergent a new face on dirty money laundering” Associated Press, 14/04/2011 “Customs: fake US licences being sent from China” Los Angeles Times, 8/04/2011 “Los Angeles and Long Beach ports are on the font lines of a crackdown on counterfeit goods” EFE, 30/03/2011 “Piracy soars 500% in Mexico, security firm says” The Herald, (Ulster) 23/03/2011 “Warning over number of crime gangs” Gulf News, (& Department of Economic Development Dubai) 8/03/2011 “International anti- counterfeiting coalition” Khaleej Times, (Emirates) 3/03/2011 “ UAE - Fake drugs, a dangerous choice” CNBC, 25/02/2011 “Gangs, terrorists, mafia make huge profits selling… cigarettes” The Economic Times, (India) 22/02/2011 “Counterfeit auto parts costing government Rupees 2 200 crore per annum”Copyright-­‐  This  confidential  report  is  the  Intellectual  property  of  the  WAITO  Foundation  all  rights  reserved.  No  part  of  this  publication  may  be  reproduced  or  diffused  under  any  form  or  by  any  means,  including  photocopies  and  recordings,  or  by  any  information  storage  or  recovery  system.    
  7. 7. Report RSSFeed/Zach Bowman (Automotive News China), 16/02/2011 “Counterfeit parts overwhelm China, include fake airbags, oil seals” Khaleej Times, (Emirates) 21/01/2011 “Fake Blackberries proliferate in Sharjah, Dubai” Reuters, 20/01/2011 “Nokia: out of five cell phones sold is one unlicensed copy” Scotland TV, 19/01/2011 “Investigation reveals true danger of counterfeit cigarettes” Seattle Times, 15/01/2011 “Port sleuths on the trail of counterfeit goods” The Hill, 2/01/2011 « Study: 24% of web traffic involves piracy » Emirates 24/7, 2/01/2011 “Abu Dhabi destroys 3 000 kilos of fake cosmetics” World Economic Forum - Global Risks 2011 - Table 3, Rough estimated market size of illicit goods based on public sources HAVOCSCOPE specialized site 2010 Emirates News Agency, 30/12/2010 “Economy ministry organises first conference on combating commercial fraud and counterfeiting” Korea Times, 21/12/2010 “Counterfeit Vuitton bags - distorted status symbol” Emirates 24/7, 13/10/2010 “Largest watchmaker ‘fed up’ with Gulf fakes” Le Monde, 7/10/2010 “L’agroalimentaire, source mondiale de trafics“ Le Figaro, 4/10/2010 “La contrefaçon sur Internet, fléau européen” International Herald Tribune, 21/08/2010 “Inside a factory making knockoff shoes” European Commission, Brussels - IP/10/995 - 22/07/2010 “Fight against fakes: Commission publishes Annual Report on EU Customs actions to enforce intellectual property rights” International Herald Tribune, 10/07/2010 “Pfizer sends its own agents on the trail of counterfeit Viagra” Reuters, 11/06/2010 “Customs group to fight $ 200 billion bogus drug industry” The Star, 11/06/2010 “UN - Illicit cigarette trade funds terrorism, organised crime.           1  The   authorities   of   this   Emirate   routinely   carry   out   inspections   and   raids   of   workshops,   warehouses,   etc.   Specific   sanctions  (10,000  dirhams,  approx.  1900€)  are  imposed  for  each  infraction  and  shops  are  closed  after  the  third  offense.   In  total  and  for  the  whole  of  the  UAE,  some  444,000  counterfeit  products  were  seized  in  2008,  900,000  in  2010  from   the  2.4  million  products  seized  in  the  l arger  M iddle  East  region.     2  In  the  first  quarter  of  2011,  825,000  HP  products  alone  were  seized  in  the  E mirates.     v v v  Copyright-­‐  This  confidential  report  is  the  Intellectual  property  of  the  WAITO  Foundation  all  rights  reserved.  No  part  of  this  publication  may  be  reproduced  or  diffused  under  any  form  or  by  any  means,  including  photocopies  and  recordings,  or  by  any  information  storage  or  recovery  system.    
  8. 8. Copyright-­‐  This  confidential  report  is  the  Intellectual  property  of  the  WAITO  Foundation  all  rights  reserved.  No  part  of  this  publication  may  be  reproduced  or  diffused  under  any  form  or  by  any  means,  including  photocopies  and  recordings,  or  by  any  information  storage  or  recovery  system.