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 Page 2 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 Page 3 Counterfeiting, Piracy & Smuggling - Growing threat to national security
MENACE of COUNTERFEITING, PIRACY & SMUGGLING 250 Pharma. Drugs Increased Internatnl. Electronics 200 Value in $ Billion Trade Purses 150 Foods Factors driving Auto Parts Demand Advances in 100 growth in Side Technology Toys Counterfeiting, 50 Batteries Piracy and Smuggling Clothing 0 Size of counterfeiting in various goods - worldwide Emerging Emerging Products Markets Type of losses Economic loss Economic loss to government to industry Economic / Indirect loss – health loss to Financing of citizens crime / terror Source: FICCI CASCADE Report 2013, Havocscope, Pollinger, Harvard University 2008, Union des Fabricants Page 4 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 Page 5 Counterfeiting, Piracy & Smuggling - Growing threat to national security
IN THE NEWS Fake German brake Cigarette smuggling pads financed Hezbollah connected to major Interpol seized US$1.2 million worth terror groups of counterfeit German brake pads in 2004 that were revealed to be used Recent law enforcement to support the Lebanese terror investigations have directly organization Hezbollah linked those involved in illicit tobacco trade to infamous terrorist organizations such as Pirated CDs funded 2004 Hezbollah, Hamas and Al Madrid train bombings Qaeda According to Police Commissioner of New York, the Madrid train bombing incident was funded through the sale of pirated CDs. Counterfeiting Chechen rebels have also known to finance through pirated CDs entrenched in Al Strong links between Qaeda recruits terrorists and drug, arms Al Qaeda training manuals and migrant smuggling recovered in 2002 reveal that the organization recommends Colombia, Kenya, Kyrgyzstan, Myanmar the sale of fake goods as a and Turkey among others, reported means of fundraising for cells direct links between terrorism & illegal drug trade, arms trafficking & migrant smuggling Source: Indian Express, Wall Street Journal, Washington Post, Euromonitor, BSA Page 6 Counterfeiting, Piracy & Smuggling - Growing threat to national security
PERPETRATORS of COUNTERFEITING, PIRACY & SMUGGLING Incentives for Terrorist Perpetrators of Counterfeiting, Organizations in Counterfeiting, Piracy and Smuggling Piracy and Smuggling Ø Small-scale businesses have adopted it as a primary business, Ø Counterfeiting can be used as both investing heavily in technology and source of funding and means of capital infrastructure attack Ø Organized Gangs involved in drugs Ø Enormous Profit Potential: Can bring and arms smuggling have been in huge returns (~ 900% returns on increasingly involved in counterfeiting pirated CDs) and piracy both to make profits and to Ø Low risk of prosecution: E.g., In launder money France, convicted counterfeit retailers Ø Terrorist organizations, due to face 5 times lesser sentences decentralization post cold war, have compared to drug dealers begun to see these activities as an excellent source of local funding Source: Pollinger, Harvard University 2008 , Union des Fabricants Page 7 Counterfeiting, Piracy & Smuggling - Growing threat to national security
LINKS OF TERRORISM WITH COUNTERFEITING, PIRACY & SMUGGLING IRA flooded Smuggling Ireland with pipelines are counterfeit the 2nd most cigarettes Afghan preferred funding terrorists method used US$100m FINANCIAL by terrorists to finance from LOGISTICAL over 5 years enter the US credit cards Local Arms of duplicates & Terrorist terror groups counterfeit organizations use receive financial designer established assistance by goods networks setup by being part of Dubai based criminal groups smugglers criminal activities operating in S. Amer. India provided OPERATIONAL traffickers aid logistics for Natural IDEOLOGICAL Hezbollah in 2008 Mumbai laundering relationship attacks Politically like- money citing between terror and minded criminal US and Israel criminal groups, groups merge with as a common Foreign but likely to be terror groups enemy terrorists limited due to lack Foreign worked with of trust terrorists sympathetic worked with Indian sympathetic smugglers for Indian 1993 Mumbai smugglers for blasts 1993 Mumbai Source: UNODC, Interpol, RAND Corp. India Today, Union des Fabricants blasts Page 8 Counterfeiting, Piracy & Smuggling - Growing threat to national security
HOW COUNTERFEITING SUPPORTS TERRORISM Direct involvement Terrorist organization s Indirect funding funding Set up Proceeds of production Sell counterfeiting Criminal Original Counterfeit unit to fake counterfeit through organization Goods Goods Direct original goods various s goods modes Sleeper Cells Direct involvement for self financing Page 9 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 Page 10 Counterfeiting, Piracy & Smuggling - Growing threat to national security
DIMENSIONS OF REFORMS IN COUNTERING THE TERROR FINANCING THROUGH COUNTERFEITING, PIRACY AND SMUGGLING 1 Whether adequate governance system in place. What is the extent of coordination between enforcement agencies and degree of international collaboration ? Laws and Governance 2 Regulations Outreach and span of laws to counter the said activities. Extent of enforcement and coverage of institutions ? 3 Are the technology solutions in place to identify instances of counterfeiting and Capacity Technology smuggling? Are there integrated IT systems to Building prevent these acts ? 4 Is the govt and industry taking adequate capacity building measures to contour the curse of these activities involved in financing terrorism ? Page 11 Counterfeiting, Piracy & Smuggling - Growing threat to national security
GOVERNANCE 1 Governance FIU was setup in 2004 to monitor and analyze suspect transactions FIU has linkages with other bodies - regulators, banks, Enforcement Agencies etc to generate and share financial Governance structure of regulatory and intelligence 1 enforcement agencies Collaboration with foreign FIUs on exchange of information 2 India adheres to the Egmont principles India is member of of free exchange of information 1.Eurasian Group on Combating Money Laundering 2.Terrorist Financing and the Asia/Pacific Group Financial Institutions generate periodic reports for FIU FIU develops financial intelligence and provides assistance to EAs 3 Overall evaluation Needs Progress being made On Track improvement Page 12 Counterfeiting, Piracy & Smuggling - Growing threat to national security
LAWS AND REGULATIONS 2 Needs Progress being made On Track improvement Laws & Regulations Unlawful Activities Prevention Act Outreach of these acts to non- (UAPA), amended in 2004, criminalised financial institutions needs financing of terrorism enhancement Laws to combat financing of 1 terrorism Prevention of Money Laundering Act, amended in 2009 to enhance countering of terror financing Several acts are enacted covering various sectors for preventing counterfeiting, piracy and smuggling Laws to combat counterfeiting, 2 piracy & smuggling Enforcement and compliance reporting for these acts needs improvement Overall evaluation Page 13 Counterfeiting, Piracy & Smuggling - Growing threat to national security
TECHNOLOGY 3 Needs Progress being made On Track improvement Technology Lack of coordination and collaboration Authentication Packaging and among industry players on R&D Track and Trace packaging. e.g. of such technologies (RFID),holograms, etc Mandate by Govt necessary for Adoption of technology by Technology to be effective 1 Industry Lack of incentive by Government to invest Adoption of technology by 2 Amendment to Drugs and in development of such technologies Government Cosmetics Act, mandating Unique 2D Identifier Code on drugs IT systems by Directorate of Revenue Intelligence (DRI) of CBEC to analyse relevant data FINnet by FIU Technology to prevent proceeds going to terror financing 3 Proposed initiatives IT solutions being implemented in by NATGRID and NIA Financial Institutions to identify suspicious transactions Overall evaluation Page 14 Counterfeiting, Piracy & Smuggling - Growing threat to national security
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