counterfeiting, piracy & smuggling - growing threat to ... · page 7 counterfeiting, piracy...

Counterfeiting, Piracy & Smuggling -Growing Threat to National Security

Counterfeiting, Piracy & Smuggling - Growing threat to national security

Agenda► Menace of Counterfeiting, Piracy & Smuggling

► Terrorism’s links with Counterfeiting, Piracy & Smuggling

► Framework for Preventing Financing of Terrorism

► The Road Ahead


Source: FICCI CASCADE Report 2013, Havocscope, Pollinger, Harvard University 2008, Union des Fabricants

MENACE of COUNTERFEITING, PIRACY & SMUGGLING

0

50

100

150

200

250

Valu

ein

$B

illio

n

Pharma. Drugs

Electronics

Purses

Foods

Auto Parts

Toys

Batteries

Clothing

Size of counterfeiting invarious goods - worldwide

IncreasedInternatnl.

Trade

Advances inTechnology

EmergingMarkets

EmergingProducts

DemandSide

Factors drivinggrowth in

Counterfeiting,Piracy andSmuggling

Type of losses

Economic lossto industry

Economic lossto government

Indirect loss –Financing ofcrime / terror

Economic /health loss to

citizens





► The Road Ahead


Source: Indian Express, Wall Street Journal, Washington Post, Euromonitor, BSA

Cigarette smugglingconnected to major

terror groupsRecent law enforcement

investigations have directlylinked those involved in illicittobacco trade to infamous

terrorist organizations such asHezbollah, Hamas and Al

Qaeda

Pirated CDs funded 2004Madrid train bombings

According to Police Commissioner of NewYork, the Madrid train bombing incident wasfunded through the sale of pirated CDs.Chechen rebels have also known to financethrough pirated CDs

IN THE NEWS

Fake German brakepads financed HezbollahInterpol seized US$1.2 million worthof counterfeit German brake pads in2004 that were revealed to be usedto support the Lebanese terrororganization Hezbollah

Strong links betweenterrorists and drug, armsand migrant smuggling

Colombia, Kenya, Kyrgyzstan, Myanmarand Turkey among others, reported

direct links between terrorism & illegaldrug trade, arms trafficking & migrant

smuggling

Counterfeitingentrenched in AlQaeda recruits

Al Qaeda training manualsrecovered in 2002 reveal thatthe organization recommendsthe sale of fake goods as ameans of fundraising for cells


PERPETRATORS of COUNTERFEITING, PIRACY & SMUGGLING

Source: Pollinger, Harvard University 2008, Union des Fabricants

Perpetrators of Counterfeiting,Piracy and Smuggling

Ø Small-scale businesses haveadopted it as a primary business,investing heavily in technology andcapital infrastructure

Ø Organized Gangs involved in drugsand arms smuggling have beenincreasingly involved in counterfeitingand piracy both to make profits and tolaunder money

Ø Terrorist organizations, due todecentralization post cold war, havebegun to see these activities as anexcellent source of local funding

Incentives for TerroristOrganizations in Counterfeiting,

Piracy and Smuggling

Ø Counterfeiting can be used as bothsource of funding and means ofattack

Ø Enormous Profit Potential: Can bringin huge returns (~ 900% returns onpirated CDs)

Ø Low risk of prosecution: E.g., InFrance, convicted counterfeit retailersface 5 times lesser sentencescompared to drug dealers


LINKS OF TERRORISMWITH COUNTERFEITING, PIRACY & SMUGGLING

LOGISTICALTerrorist

organizations useestablished

networks setup bycriminal groups

OPERATIONALNatural

relationshipbetween terror and

criminal groups,but likely to be

limited due to lackof trust

FINANCIALLocal Arms ofterror groups

receive financialassistance bybeing part of

criminal activities

IDEOLOGICALPolitically like-

minded criminalgroups merge with

terror groups

Smugglingpipelines arethe 2nd most

preferredmethod usedby terrorists toenter the US

IRA floodedIreland withcounterfeitcigarettesfunding

US$100mover 5 years

Afghanterrorists

finance fromcredit cardsduplicates &counterfeitdesignergoods

Foreignterrorists

worked withsympathetic

Indiansmugglers for1993 Mumbai

blasts

Foreignterrorists

worked withsympathetic

Indiansmugglers for1993 Mumbai

blasts

Dubai basedsmugglers

operating inIndia provided

logistics for2008 Mumbai

attacks

S. Amer.traffickers aidHezbollah inlaundering

money citingUS and Israelas a common

enemy

Source: UNODC, Interpol, RAND Corp. India Today, Union des Fabricants


Direct involvement

OriginalGoods

Set upproductionunit to fake

originalgoods

CounterfeitGoods

Sellcounterfeit

goods

Proceeds ofcounterfeiting

throughvariousmodes

Terroristorganization

s

Criminalorganization

s

SleeperCells

Direct involvement for self financing

Indirect funding

Dire

ctfu

ndin

g

HOW COUNTERFEITING SUPPORTS TERRORISM





► The Road Ahead


DIMENSIONS OF REFORMS IN COUNTERING THE TERRORFINANCING THROUGH COUNTERFEITING, PIRACY ANDSMUGGLING

Governance Laws andRegulations

Technology CapacityBuilding

Whether adequate governance system inplace. What is the extent of coordinationbetween enforcement agencies and degree ofinternational collaboration ?

1

Outreach and span of laws to counter the saidactivities. Extent of enforcement and coverageof institutions ?

2

Are the technology solutions in place toidentify instances of counterfeiting andsmuggling? Are there integrated IT systems toprevent these acts ?

3

Is the govt and industry taking adequatecapacity building measures to contour thecurse of these activities involved in financingterrorism ?

4


2

GOVERNANCE

Governance

1

3

1

FIU develops financial intelligenceand provides assistance to EAs

Financial Institutions generateperiodic reports for FIU

Governance structure of regulatory andenforcement agencies

Overall evaluationNeedsimprovement

Progress being made On Track

FIU was setup in 2004 to monitorand analyze suspect transactionsFIU has linkages with other bodies -

regulators, banks, Enforcement Agenciesetc to generate and share financial

intelligence

India is member of1.Eurasian Group on Combating Money Laundering2.Terrorist Financing and the Asia/Pacific Group

India adheres to the Egmont principlesof free exchange of information

Collaboration with foreign FIUs onexchange of information


1

2

LAWS AND REGULATIONS

Laws & Regulations

Laws to combat financing ofterrorism

2

Enforcement and compliance reporting forthese acts needs improvement

Several acts are enacted coveringvarious sectors for preventing

counterfeiting, piracy and smuggling

Overall evaluation

Needsimprovement


Laws to combat counterfeiting,piracy & smuggling

Prevention of Money LaunderingAct, amended in 2009 to enhance

countering of terror financing

Unlawful Activities Prevention Act(UAPA), amended in 2004, criminalised

financing of terrorism

Outreach of these acts to non-financial institutions needs

enhancement


1

TECHNOLOGY

Technology

3

Lack of coordination and collaborationamong industry players on R&D

of such technologiesAuthentication Packaging and

Track and Trace packaging. e.g.(RFID),holograms, etc

Lack of incentive by Government to investin development of such technologies

2Adoption of technology byGovernment

Adoption of technology byIndustry

3Technology to prevent proceedsgoing to terror financing

Overall evaluation

Needsimprovement


Mandate by Govt necessary forTechnology to be effective

Amendment to Drugs andCosmetics Act, mandating Unique

2D Identifier Code on drugs

IT systems by Directorate of RevenueIntelligence (DRI) of CBEC to

analyse relevant data

FINnet by FIU

IT solutions being implemented inFinancial Institutions to identify

suspicious transactions

Proposed initiativesby NATGRID and NIA


1

CAPACITY BUILDING

Capacity building

Capacity building tocontrol Counterfeiting,Piracy & Smuggling

2Capacity building to prevent proceedsof counterfeiting to terror financing

4

3

India - founding member ofthe Global Counterterrorism forum

outsourced

INTERPOL and CBI– Joint capacity building exercise

International Cooperation

FIU conducts training forBanks, Financial Institutions

FIU supports professionals,industry associations in

capacity building

Overall evaluation

Needsimprovement


Larger industry players are active,need to sensitize MSMEs

Need to train Police and otherEnforcement Agencies to take

additional responsibilities

Very few initiatives on training andawareness of citizens. e.g. “Jaago

Grahak jaago”


FINANCIAL INTELLIGENCE UNIT - INDIA

Reporting Entities FIU-IND

Law EnforcementAgencies

IntelligenceAgencies

Regulators

Foreign FIUs

CTR / STR Intelligence

Financial Intelligence Unit – India (FIU-IND) was set up in 2004 to “coordinate andstrengthen collection and sharing of financial intelligence through an effective national,regional and global network to combat money laundering, financing of terrorism andrelated crimes”

Collection of cashtransaction and

suspicious transaction reports

Analysis of Suspiciouscases related toterrorist financing

Exchange of informationwith

LEAs / IA / Foreign FIUs

► Collect information frombanks, financial institutions,intermediaries

► Analyze suspicioustransactions and comparewith watch lists containingnames of terrorists

► Detect relationships withexisting names / groups

► Create cases of financing ofterrorism

► Disseminate cases to LEAs/ Intelligence agencies andForeign FIUs to takeappropriate action

With adoption of advanced technology system as Project FINnet,FIU-IND can efficiently detect the cases of financing of terrorism





► The Road Ahead


FRAMEWORK TO EVALUATE THE CURRENT MATURITYLEVEL

Basic Intermediate Good Advanced

► No or very limitedagencies to deal withcounterfeiting, piracyand smuggling

► No or limited laws► Small penalties► Limited confiscation

according to the law

► Very limitedtechnology adoptionby industry and govt

► No means of goodsauthentication

► Citizens notsensitized

► Lack of awareness &training in industryand govt

► No separateagencies

► Uncoordinatedagencies placing lowpriority

► Laws in place butwith limited control

► Risk of convictionlower

► Limited or nogovernment support

► Low penetration andadoption oftechnology

► High level trainingto enforcementagencies

► Capacity notdiffused

► Prioritized actions► Time-bound

investigations► Engagement with

international bodies

► Confiscation ofassets

► Nationaljurisdictions

► Zero Piracy policy

► Industriesemploying advancedtechnical solutions

► Mature govt ITsystems

► Industry and govtwide efforts todevelop capacity

► Active engagementof citizens

► Collaborationbetween industryand government

► Formation ofNational agencies

► Laws to empowerseizure of assetsfrom other countries

► Non-conviction-based confiscation

► Harmonious effortby industry & govt

► Significantgovernmentcontribution to R&D

► Adoption ofinternational bestpractices

► Tie-ups - foreign anddomestic institutes

Gov

erna

nce

Law

and

Reg

ulat

ion

Tech

nolo

gyC

apac

itybu

ildin

gMaturity Levels


Strengthen governance mechanism to prevent counterfeiting, piracyand smuggling and prevent its proceeds from financing terrorism

1

Strengthen technological collaboration between industry &Government on anti-counterfeiting and anti-piracy measures

2

Establish inter-agency coordination mechanism to coordinate effortsfor preventing counterfeiting, piracy and smuggling

3

Institute robust capacity-building mechanism to increase awarenessamong industry, consumers and enforcement agencies

4

PLAN FOR THE ROAD AHEAD…

THANK YOU

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