Jurisdiction - China
Reports and Analysis
Asia Pacific – Navigating The World Of Counterfeit Syndicates And Transnational Organised Crime: What You Need To Know.
18 July, 2013
Legal News & Analysis – Asia Pacific

Many brand owners see their brand protection problem as epitomised by low level standalone targets, and ROI is often judged by the number of fake products seized. Companies spend more and more resources and money on attacking the problem at a “street cleaning” level, but do little or nothing to confront the causation factors.

Unfortunately, they often continue to ignore the ever increasing body of evidence that counterfeiting is an organised criminal activity with transnational characteristics, which is particularly the case in China. Brand owners continue to ignore the fact that since China became a full member of World Trade Organisation (WTO) in 2001, PRC counterfeiters have moved from local to global and the capacity for China-based production to disrupt markets halfway around the world is an ever increasing phenomenon.


The Scene of the Crime: Taking a look at today’s counterfeiting landscape


There is no shortage of evidence to demonstrate the growing trend and nature of counterfeiting and transnational organised crime:


  • The International Criminal Court (ICC) initiative, with the support of its Business Action to Stop Counterfeiting and Piracy (BASCAP) endorsed studies conducted by the Organisation of Economic and Cultural Development (OECD) in 2011, which estimated international and domestic trade in counterfeiting and piracy was between US$425 and US$585 billion in 2008 and projected this could rise to between US$1.14 and US$1.53 trillion by 2015.
  • In 2011, US Customs and Border Protection reported a 24 percent increase in counterfeit seizures over 2010 (retail value in excess of US$1 billion).
  • European Union Customs seized over 103 million counterfeit items at its external borders in nearly 80,000 detentions in 2011.


Australian Customs seized over 1.1 million counterfeit items in 2011, which was more than double the seizure volume of 2010.


In November 2011, The United States’ National Intellectual Property Rights Coordination Centre (IPR Centre) commissioned a report entitled Intellectual Property Rights Violations: A Report on Threats to United States Interests at Home and Abroad, which stated amongst its key findings that:


“The global counterfeiting threat is quickly shifting from the secondary market, where consumers know they are purchasing infringing goods, to the primary market where retailers deceive them into believing they are buying genuine goods”.


Rapid economic growth across Asia has led to the proliferation of criminal networks profiting from alternative money-making schemes. A recent report by the United Nations’ Office on Drugs and Crime (UNODC) (Transnational Organized Crime in East Asia and the Pacific: A Threat Assessment, April 2013:


_web.pdf) examined international organised crime across much of the APAC region, and found an increasingly diverse range of illicit flows supporting these networks, with counterfeit goods now assessed to be as profitable as illegal drug trafficking. The report goes on to state the emergence of increasingly sophisticated criminal enterprises alongside the development of legitimate commerce in Asia, which is often reflected by the major income streams of Asian criminal gangs now being similar to the key growth industries of each respective country. Indeed, the UNODC report assessed that about a third of the illicit trade flows in the East Asia and Pacific region were accounted for by counterfeit goods between 2008 and 2010.


Over this period, China was reported to be the source of almost 60 percent of the counterfeit pharmaceutical products seized worldwide, while other fake branded products originating from China include handbags and clothing, health care products, electronic consumer goods, amongst a variety of other merchandise are increasingly trafficked. More recently, fake cigarettes manufactured in China have been found in global markets through similar networks. These examples show the extent to which Chinese counterfeit syndicates are enabling Asia’s criminal gangs to expand, developing complex supply chains in order to avoid the regulatory red tape faced by legitimate business. But the greatest concern is the increasing sophistication adopted by these syndicates to mirror branded products: a recent trend has shown high quality counterfeits deliberately being fed into the legitimate supply chain, often with dire consequences. No more evident (and dangerous) is this phenomenon seen than in the global pharmaceutical industry where the threat to health is all too obvious.


A Global Problem That Requires Global Action


 On 14-15 February 2012, the UNODC held a conference in Vienna to discuss the production, distribution and trafficking of fake drugs by organised crime networks. The conferencegathered an international group of experts from governments,

law enforcement agencies, NGOs and the private sector to share information about the scale of the problem, which has a significant impact worldwide. UNODC found that in parts of Asia, Africa and Latin America more than 30 percent of all available drugs are fake, and that the trafficking of unsafe or ineffective medicine is rampant.


UNODC has now put in place plans to fight the counterfeit drug trade through collaborative efforts. Coordinated by the UN and the UN Convention on Transnational Organised Crime, which provides for the exchange of information, the application of investigative powers and information sharing is the Global Container Control Programme, which was founded to assist in the detection of illegal narcotics, but has now been applied to the detection of counterfeit medicines.


The UNODC and other detailed studies have concluded a variety of types of offenders participating in intellectual property violations, increasingly this includes organised crime groups and supporters of terrorist organisations. These groups are involved in various phases of the manufacturing, distribution and sales of infringing goods on a global scale. The substantial increase in worldwide use of the Internet has

fuelled the threat, giving counterfeiting syndicates increased access to customers, facilitating deception regarding the nature of the goods offered and altering the ways in which infringing goods move from their source to the consumer.


The role of criminal organisations, including organised crime syndicates, has expanded along with the increasing sophistication of the counterfeiting business, and easy access to profits. Offenders in many countries pose a threat, but many experts conclude that China-based offenders are the most dominant threat and dwarf all other international threats. Mr Ron Noble, Secretary General of Interpol has gone on record as stating:


“The link between organised crime groups and counterfeit goods is well established. But Interpol is sounding the alarm that Intellectual Property (IP) crime is becoming the preferred method of funding for a number of organised crime and terrorist groups… There are enough examples now of the funding of terrorist groups (through intellectual property crime) for us to worry about the threat to public safety. We must take preventative measures now.”


Khoo Boon Hui, former President of INTERPOL recently stated, at a gathering of member countries, that organised criminals play a central and omnipresent role in every aspect of transnational IP crime. Mr. Khoo reported that 145 of INTERPOL’s 188 member countries (77 percent) are now affected by organised IP crime, whilst 48 percent of all IP crime cases are transnational, with a significant percentage of cases linked to other areas of organised crime.


But why should brand owners be concerned with fake brands bearing their trademarks being used to fund organised crime?


It is a fact that brand owners can only do so much, and it is the involvement of conventional law enforcement agencies that must inevitably position themselves at the forefront of fighting organised crime. While this is true, brand owners who spend millions protecting their brands and fighting the counterfeit trade have in their possession a key ingredient to helping law enforcement take on the counterfeiting syndicates, and that ingredient is known as “intelligence”. We so often observe brand owners conducting standalone investigations and raid actions, then making no efforts to process the intelligence and information they inevitably obtain from such activity: in other words, there is no attempt made to ‘join the dots’. Significant key intelligence goes to waste and sits unprocessed in investigation and raid files.


Looking to the Future


At FTI Consulting, we support brand owners to put in place a mechanism that allows the capture and processing of intelligence from their anti-counterfeiting programmes. This protocol aides the identification of strategic targets, uncovering the interdependency of syndicated activity and interrelated entities involved in the counterfeit supply chain – rather than focusing on the single target approach. This can be implemented as an in-house capability or outsourced to a service provider that is equipped and experienced in the skills and tactics of intelligence capture and analysis.

The next step for brand owners is to develop partnerships with law enforcement to share the intelligence they develop, thereby greatly assisting enforcement agencies as they look to identify and target transnational organised counterfeiting syndicates.


Again turning to INTERPOL, Mr Ron Noble has affirmed that the support of international business partners to assist enforcement agencies, including the World Customs Organization (WCO) and EUROPOL, amongst others, will enhance their ability to collect intelligence, develop strategic analytical reports, engage in capacity building and launch joint interdiction operations to target organised crime groups that are involved in the production and trafficking of illicit and counterfeit products. Further to this, Khoo Boon Hui has stated:


“The need for police, customs and the private sector to work together to combat the global counterfeiting crime problem has never been more important than now”.



For further information, please contact:


David Holloway, Senior Managing Director, FTI Consulting

[email protected]


Robert Youill, Managing Director, FTI Consulting

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