The sale of counterfeit consumer goods and pirating of digital content (intellectual property theft) is currently considered the world’s most lucrative organized crime racket. These rackets are illegal businesses operated by criminal organizations to earn cash profits. With the explosion of e-commerce platforms like Amazon, Ebay, and Alibaba, profits earned from the sale of counterfeit goods online have skyrocketed. Consumers unknowingly help facilitate counterfeiting schemes by falling for “too good to be true” online deals on brand-name merchandise. But what happens to all of this money that is spent on fake products? Here is how criminals use money earned from selling counterfeit goods.
Funding More Fake Goods
Money earned from selling counterfeits can be put right back into the operation to produce more fake goods. Criminals feed counterfeit goods directly into the supply chain which provides them with a “clean” money source. This money laundering makes it appear as if large amounts of cash are being earned legitimately. Money laundering is a method to control funds obtained illegally without attracting attention to the underlying activity.
Another measure counterfeiters use to evade law enforcement is to keep little to no extra inventory on hand. According to the World Trademark Review, counterfeiters are cunning businessmen that have adopted this zero-inventory approach business strategy. This involves manufacturing and shipping the exact amount of fake goods needed to fill orders just after production is complete. These techniques make it difficult to track down counterfeiting organizations that would typically retain large amounts of fake goods and illegally-earned cash.
Funding Counterfeiting Schemes
Money earned from selling fake goods can be used to fund counterfeiting schemes that keep getting more sophisticated and require cutting-edge technology. For example, these high-tech schemes are evident in the electronic components industry. Regulations by the Electronic Components Industry Association (ECIA) establish industry standards and guidelines to protect consumers and governments from using fake parts. In response to these regulations, counterfeiting techniques used to produce fake electronic components have evolved.
Counterfeiters are manufacturing blank parts that genuinely imitate authentic products in both appearance and functionality. Fakes are produced without any company logos or trademarks, but these identifying marks can be added on later after products are illegally brought into a country. This is a way to avoid customs regulations. Another sophisticated technique employed by counterfeiters is manufacturing clones. This is a precise method of making electronic components that appear to be genuine upon inspection and will even pass basic laboratory testing. To complicate matters, counterfeit semiconductor components can be tainted with malware, which will compromise the privacy and security of consumer’s computers.
Funding Other Criminal Activities
Money earned from selling fake goods can be used to fund other criminal activities like drug trafficking, illegal arms sales, and forced labor. Counterfeiting provides an easy way for criminals to launder money and then invest this “clean” money elsewhere without getting caught.
According to the United Nations Interregional Crime and Justice Research Institute (UNICRI), the ratio of potential profits versus assumed risks is very favorable for counterfeiting as compared to other criminal activities. As a result, recent interest in counterfeiting schemes has grown exponentially among criminal organizations. Laundered money earned from the sale of fake goods not only funds other criminal activities, but also helps these organizations to disguise their location and circumvent government countermeasures.
The production and sale of counterfeit goods represents a huge problem for businesses. The US Chamber of Commerce estimates that counterfeit goods cost the global economy over $500 billion per year. Companies need to be proactive and employ robust anti-counterfeiting measures to protect their brand.
U-NICA is a leading provider of advanced brand protection solutions that help detect counterfeit products. Their scryptoTRACE suite provides intuitive anti-counterfeiting protection through an easy to use smartphone app. Don’t let counterfeiters damage your brand’s reputation and put your customers at risk. Contact U-NICA today to learn more about their affordable high-tech solutions.