Counterfeit pharma provides slush funds to global terrorist organizations – drugs are the proximate source of financing.

Intelligence experts have made a connection concerning organized crime and terrorism. Financing is the primary connection in this relationship. Terrorists use several methods of financing because strategic regional locations offer some groups an advantage in one market over another. For instance, Al-Qaeda is most known for deriving funds from the profit of heroine in European markets. Their relationship with Taliban controlled poppy plants in Afghanistan is a major source for the opium needed in heroine production. Narcotics offer terrorists a major advantage based on a high consumer demand for these illegal drugs. Within narcotic rackets, the connection has been established between organized crime and terrorism. Money needed in order to execute attacks, and the means of gaining such money must go undetected. The nature of organized crime allows it to extort certain markets for money, making crime highly attractive to terrorist who must keep their funding confidential and untraceable. Narcotics are not the only form of funding. Terrorists use a large number of criminal activities in the effort to acquire funds. Narcotics and human trafficking are the most commonly noticed. Because their trafficking patterns are often unique and identifiable, criminal trafficking routes tend to be under heavy surveillance. Al-Qaeda as well as the Iranian backed terrorist group Hezbollah has begun looking for non-conventional m ethods of funding in order to become more unnoticeable and in order to acquire more funds.

The crime-terror relationship has always been a concern but not until the 1990’s did policy makers become concerned.32 The relatively new association may be in due part that crime was once viewed as a “self-limiting” source of funding. Discoveries were made during this time suggesting terrorists were entering the drug trade and also exploiting natural resources such as diamonds, ores, and oil.33 The nature of their relationship still bewilders some though. Their interests seem entirely separate; criminals possessed by profit, terrorists by belief. If there relationship is be successful, it must be stunted—as to avoid government detection—and it must provide a significant profit in order to be advisable. These two groups act as any business partnership would; both must have a mutual agreement in which both parties believe they will profit from the partnership. This illegal partnership may appear best suited for terrorists because, “Proceeds from criminal enterprises… allow terrorists to diversify financial sources and to diffuse risk across multiple sources of financing.”34 This appears to be the most prevalent motivation as to why terrorists look to illegal activity for financing. The other is because security and law forces are always investigating legitimate business sources. Crime can also aid in operational logistics such as providing fraudulent documents and weapons. What will organized crime members achieve from this relationship? Criminals provide the resources and logistical transfers, while the terrorists provide the network and the possibility of destabilizing a policing government.

Counterfeit goods—and counterfeit pharmaceuticals in particular—offer a great source of diversifying a terrorist’s financial sources. As a $75 billion dollar market, counterfeit medicine is a large financial pool that would attract any illegal group interested in large profit. Globalization in natural business markets have also helped in diversification, meaning profit trends in counterfeit pharmaceutical sales will mirror the legal pharmaceutical sales trend. Having observed a positive return in the global pharmaceutical market for the past six years, it can be hypothesized that counterfeit pharmaceutical sales are likely to have a positive return as well. Terrorists have utilized the market of counterfeit goods in the past. Counterfeiting of intellectual property comes in all forms; clothes, perfumes, computer software, compact disks, shoes, designer handbags, and even shampoos, but counterfeit pharmaceuticals—while most likely the most difficult to replicate—offer the largest sum.

American Threat

With the crime-terror relation having been established, it is important to see which terror groups could be specifically profiting from this illegal business. It is more likely that criminal groups are to be found in direct possession of counterfeit pharmaceuticals, making it very hard to find an uninterrupted link with terrorist groups. It goes unsaid that organized criminal groups such as the Russian mafia, Chechen rebels, the Chinese Triad, and Columbian drug cartels all have a stake in counterfeit pharmaceuticals. Previously established relationships in other sources of illegal income lead intelligence officials to believe a relationship with criminals and terrorists can be found in the counterfeit pharmaceutical profits.

In the United States, Hezbollah has shown signs they intend to involve in crime directly. Cigarette smuggling has been a staple business practice by the Iranian backed terrorist group— Hezbollah. They have also ventured into fraud and scams. Credit card fraud is a continued practice, and the funding for the 1993 bombing of the World Trade Center by Al-Qaeda were aided by finances in a retail coupon scam.35 Hezbollah has also found their way into Canada: The Royal Canadian Mounted Police (RCMP) has reported that Hezbollah leaders tapped into the trade of automobiles and vehicles stolen and smuggled from North America by criminal groups. Ten percent of the profits of this illegal trade were contributed to the cause. The terrorists can do this smuggling alone or in conjunction with crime groups.

The ability for terrorists to work alone or in crime groups could be seen as a shrewd tactical move to create flexibility, and it has been a deadly play against intelligence officials. Hiding behind a crime group gives terrorists time to flee their established criminal partnership. In the instance of counterfeit pharmaceuticals, Hezbollah once again has proven they would like to be in direct contact with the crime and profit scheme. In 2006, two men were uncovered and plead guilty to accounts of federal racketeering when their illegal cigarette-smuggling ring was exposed.36 These men avoided $200 million in cigarette taxes by buying the cigarettes in low-tax states and smuggling them into higher cigarette tax states. They would resell the cigarettes on the black market and even add a “resistance tax” to the cigarettes in an effort to raise money for Hezbollah activities. After their arrest, it was found that the two men had serious connections to higher-level Hezbollah officials. The two men are Imad Hamadeh of Dearborn Heights, Michigan and Theodore Schenk of Miami Beach, Florida.37 The arrest of the two men stemmed from a federal indictment of eighteen men in March 2006. In addition to cigarettes, the group the two men belonged to was also in the business of selling counterfeit Viagra.38 Direct connection between a foreign terrorist group and the sale of counterfeit pharmaceuticals has now been made and it happened within the United States’ borders.