Illicit Trade, link to Organised Crime and How to Tackle It

Illicit Trade and the nexus with organized crime
WCO Knowledge Academy
Industry Perspective on Illicit Trade and How to Tackle It
3 July 2014
Business Action to Stop Counterfeiting and Piracy
Policy & Legal adviser
1. The scale of illicit trade
- Trends of illegal trading activities
2. Impact, harms and risk of illicit trade
- Organized crime linkages
- Consumer health and safety risks
- Costs to legitimate businesses
- Costs and loss of revenues to states and corruption
3. Drivers enabling illicit trade to thrive
3. How to tackle illicit trade
- Recommendations and ICC/BASCAP’s work
The scale and trends of illicit trade: a serious
global threat
• Estimates of the global retail value of illicit trade vary but have
been recently estimated by Global Financial Integrity (GFI) at
$650 billion for goods and at $2 trillion if illicit financial flows
are included (2011-2012 report on illicit trade)
• WCO Illicit Trade Report 2013 findings:
- drugs seizures considerably higher than in 2012;
- excise goods seizures grew substantially;
- both an increase of the reporting countries and cases on
counterfeit goods was observed => in 2013 one of the striking
features was that more than half of the reported interceptions
were illicit pharmaceutical products, followed by counterfeit
electronic appliances and illicit foodstuffs – all of which threaten
consumer health and safety.
Impact, harms and dangers deriving from illicit
Organized crime linkages, money laundering and terrorist financing (I)
• From illicit trade to organized crime networks. Specifically, illicit
trade in counterfeit/substandard products attract criminal networks
due to high profits and low risks associated with modest penalties of
IP crime.
• Criminal networks do not distinguish between different types of
illicit goods; trafficking networks switch seamlessly from narcotics to
counterfeits to weapons, depending on expectations for abundant
and easy profits.
• Tobacco and alcohol smuggling is a prime example of lucrative illicit
trade, which allows criminals to avoid high taxes, sell goods cheaply
and reap huge profits.
Impact, harms and dangers deriving from illicit
Organized crime linkages, money laundering and terrorist financing (II)
• Illicit trade inter-linkages with money laundering and terrorist
• Illicit trade in counterfeit/substandard products serve a dual function
for the organized criminal groups: as a source of financing for other
illegal activities, and as a tool to launder proceeds derived from
various crimes.
• Furthermore, illicit trade in drugs, counterfeits and arms have been
one of the major direct sources of funding of several terrorist
Impact, harms and dangers deriving from illicit
Consumer health and safety risks
The Word Health Organization estimates that the counterfeit and
substandard medicines market constitutes a $431billion market across the
globe and has witnessed a 300% growth since 2000.
700.000 people per year are killed by counterfeit malaria and tuberculosis
medications (Global Financial Integrity)
64% of counterfeit electrical goods in legitimate stores.
Perfume, cosmetics and body care products, fake tobacco, alcohol and food
Vehicle and other spare parts.
Military and airplane components – missile guidance systems, aircraft,
weapons, etc.
Impact, harms and dangers deriving from illicit
Costs to legitimate businesses
• Illicit traders use the infrastructure of the legitimate economy to
conduct their business, which induces various costs and risks onto
legitimate business.
• Organized crime groups thriving on illicit trade often exacerbate a
weakened or corrupted state, thereby creating a hostile
environment for legitimate business and discouraging investment.
Costs and loss of revenues to states and corruption
• Loss taxes: illicit trade in cigarettes alone costs states an
estimated $50 billion per year (Global Financial Integrity).
• Organized crime adopts all forms of corruption to infiltrate
political, economic and social levels to facilitate a lucrative illicit
Drivers enabling illicit trade to flourish
• Misuse and criminal exploitation of Free Trade Zones (FTZs) and
shipping intermediaries due to relaxed oversight, softened
Customs controls and lack of transparency.
• Cross-fertilization of organized crime networks and distribution
channels (e.g. the same supply chains used for counterfeits are
also used for other types of illicit trade).
• The low risk, high reward dynamic – suggesting that strong
penalties are needed.
• Loopholes or ambiguity in national legislations.
How to Tackle Illicit Trade
Addressing problems in FTZs
• Strong legislation and regulatory measures should be applied
within FTZs.
• ICC/BASCAP report on FTZs calls for several legislative measures
to be put in place:
• Give Customs authority over goods in transit and free zones.
• Ensure close cooperation between national Customs authorities and
the special authorities of FTZs.
• Give Customs ex-officio power to detain goods they suspect of
infringing intellectual property rights.
• Provide for a simplified procedure for the destruction of infringing
How to Tackle Illicit Trade
Proceeds of Crime (POC) legislation
• Shift the balance between risk and reward.
• Depriving criminals of their illicit profits can have a much greater
punitive effect than imprisonment.
• ICC/BASCAP’s Proceeds of Crime (POC) report calls for the
confiscation of criminal assets to be reinvested into law
enforcement programs to further prevent illicit trade and IP
• POC report’s recommendations on:
- Legal framework to effectively implement POC legislation
- Institutional framework to effectively administer POC legislation
- International cooperation mechanisms
How to Tackle Illicit Trade
Strengthening International Cooperation
• The illicit trade and its nexus with organized criminal activities is
often transnational in nature: the assets of criminal groups are
increasingly invested in countries other than those whether the
crimes take place.
• Crime operates without borders and requires international
cooperation to facilitate mutual legal assistance in response to
requests by foreign states.
• A systemic approach is warranted not just because of the varieties
of illicit trade but, even more importantly, because of its:
- health and security risks; and
- inter-linkages with organized crime, corruption, money
laundering and terrorism.
• A systemic approach to addressing illicit trade requires:
- coordinated action at bi-lateral, multi-lateral and international
levels and cooperation among law enforcement, Customs, the
judiciary, and other stakeholders across borders, including the private
• ICC/BASCAP is actively engaged with WCO in tackling illicit trade
For more information please visit:
Jeffrey Hardy
[email protected]
+1 239 267 4488
William Dobson
Deputy Director
[email protected]
+1 513 878 2630
Tracy Faustin
Project Manager
[email protected]
+33 1 49 53 28 27
Alexandra Iliopoulou
Policy & Legal Adviser
[email protected]
+ 32 489 97 01 43

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