Link between counterfeits and organised crime 'clear'

Most criminal activity involving counterfeiting is carried out by increasingly professionalised organised crime networks, says a new report.

The threat assessment study by Europol and the EU Intellectual Property Office (EUIPO) notes that the combination of large profits and relatively low risk of punishment is making counterfeit goods a magnet for organised crime, with the trade spreading to “nearly every product sector imaginable.”

“There is also evidence that many of these groups are also involved in other criminal cases, including – in a limited number of cases – terrorism,” says Europol executive director Catherine De Bolle and her EUIPO counterpart Christian Archambeau in a foreword to the report.

Prior reports by the EUIPO and partners such as the Organisation for Economic Co-operation and Development (OECD) have suggested that imports account for a little under 7 per cent of EU imports, worth around €112bn, leading to direct lost sales of around €56bn per year across 11 industrial categories.

The new study suggests that while the majority of counterfeits in the EU market are produced outside Europe, domestic manufacturing is an increasing trend, and there is a growing trade in fake products which are potentially dangerous to human health, such as counterfeit medicines for the treatment of serious illnesses and fraudulent foods.

Food and drink, which tops the list of seizures by EU customs, are popular targets for counterfeiters with baby milk powder, stock cubes, cheese, coffee, olive oil and pasta all featuring, some of which have ended up on supermarket shelves in EU countries.

It has also become apparent that rather than simply refilling original bottles with counterfeit produce – a longstanding modus operandi – some criminal groups are now setting up their own production lines, “including the packaging and labelling of the product.”

Pharmaceuticals meanwhile are “a growing threat” as criminals offer an increasingly diverse range, adding anabolic steroids, doping substances and even life-saving medicines for serious illnesses like cancer to a ‘traditional’ focus on erectile dysfunction drugs.

The report says that one trend is the importation of raw materials used to support local production, rather than finished products. “In recent years there have been regular seizures of pill presses, mixers, blister machines, bottles and labels,” it notes.

Raw materials are illegally brought into the EU from countries such as India and China, usually using fake documents under a fictitious brand. Illegal medicines are then manufactured in laboratories that have all the necessary infrastructure to produce fake and illicit medicines.

As with food, pharmaceutical counterfeiters are employing workers with higher skill sets to be able to set up their own production lines, according to the report.

Fake goods are increasingly shipped via small parcels and express couriers, making it more difficult for enforcement authorities to detect them, it says. From 2014 to 2017 EU customs have seized a smaller number of counterfeited goods, although the number of items per seizure and their average value has increased.

Online, illegal digital content continues to be distributed through BitTorrent portals and peer-to-peer networks, but increasingly also via cyberlockers, the threat assessment finds. The owners of these platforms generate profit through digital advertisements, which often include mainstream adverts from major brands.

“This threat assessment should feed into the next EU policy cycle for organised and serious international crime for the 2022-2025 period,” says the EUIPO.