Counterfeiting is used for terrorist financing – many empirical examples

As illustrated in the previous section, the trade in counterfeit products appears to be particularly suitable for terrorism financing, both for structured groups seeking large incomes and for individuals or local/decentralised cells in the need of relatively small budgets. In the last decade, several studies acknowledged the existence of this nexus (e.g. Basra et al., 2016; Bindner, 2016; FICCI & EY, 2014; Schneider, 2016; Sullivan et al., 2014; Treverton, 2009; UNIFAB, 2016). Despite this, the topic is still understudied, and there is a lack of empirical research aimed at acquiring in-depth and sound-methodological knowledge (Sullivan et al., 2014). As pointed out by Spink (2017), several reasons lie behind this gap, such as important challenges linked to data gathering and analysis (lack of information and historical data, information uncertainty, absence of widely shared definitions, etc.), and difficulties in distinguishing cases in which terrorists commit crimes to support their activities from those in which criminals support terrorist groups. Indeed, even if terrorist groups may not be directly involved, there exists an array of sympathisers, supporters, militants, and profit-oriented collaborators who are involved in illicit trade and remit a portion of their revenues to the terrorist organisations to allow them to accomplish their ideological objectives (Sullivan et al., 2014).

Notwithstanding the existing limitations in the state of the art, several cases demonstrate that the proceeds of the trade in counterfeit products are used to finance terrorism, as illustrated by the examples below.5

Hezbollah

Hezbollah is probably the organisation that has been most associated with the trade in counterfeit goods. Just for example, in the early 2000s, the Lebanese authorities and Interpol seized a container filled with counterfeit German brake pads and shock absorbers for a value of around 1 million EUR: investigations revealed that the profits stemming from the sale of these fake products would be intended to finance Hezbollah (FICCI & EY, 2014; Lowe, 2006). Again, in the same period another financial investigation carried out by the US intelligence found that a cell of the organisation participated in a counterfeit trade scheme in Paraguay (UNIFAB, 2016). More in general, there exist several concrete episodes about the involvement of the group in the fake market all over the world (FICCI & EY, 2014; Lowe, 2006; Treverton, 2009; UNIFAB, 2016). Not surprisingly, the study carried out by Sullivan and colleagues (2014), probably the only existing empirical research on this issue, revealed that the “most prevalent organization involved in product counterfeiting in the United States is Hezbollah.”

Al-Qaeda (And Affiliated Groups)

Al-Qaeda recommended the sale of counterfeit goods as a source of fundraising for their affiliates within a training/propaganda manual recovered in 2002 (FICCI & EY, 2014). The links between Al-Qaeda and the trade in fake products have been highlighted by several cases involving its affiliated groups. For example, 13 members of the Takfirist branch (who supplied weapons and false documents to Algerian terrorists) were arrested in 2003 for their participation in the trafficking of counterfeit items between France and Italy (UNIFAB, 2016). In 2007, US authorities tackled a fake clothing scheme based in New York in which participated also three affiliates of Jamaat ul Fuqra. Furthermore, according to New York’s Police Commissioner, the Madrid train bombers financed their attacks also by selling pirated CDs (UNIFAB, 2016). Finally, it must be noted that the analysis of the existing studies citing the nexus between Al-Qaeda and products counterfeiting (e.g. Lowe, 2006) reveals that often cases reported supporting the hypothesis are not strictly linked to counterfeiting tout court (i.e. they do not refer to the violation of intellectual property rights, such as in the case of forged documents or counterfeit payment cards).

The Islamic State (And Its Alleged Affiliates and Sympathisers)

After reaching its peak and acquiring greater internal financial skills, the Islamic State has begun (likewise other terrorist groups) to diversify its fundraising activities: illicit trade, including counterfeiting, is considered one of the main (UNIFAB, 2016). The profits from this illicit market have been also used by some foreign fighters to acquire the funds necessary to reach Syria (UNIFAB, 2016). Of particular interest is the fairly recent case of the subjects involved in the terrorist attacks in Paris in January 2015. Said Kouachi, one of two brothers who organised and carried out the attack on Charlie Hebdo editorial staff, was deeply involved in the trade of counterfeit shoes from China, and the revenues have been used for purchasing the weapons used during the shootings (Basra et al., 2016). The illegal trade carried out by Kouachi was discovered by French agencies around two years before the attacks: however, this resulted only in a fine from the customs authorities (Basra et al., 2016; UNIFAB, 2016). His connection with a broader network of jihadists was never discovered since investigators decided to stop surveillance activities, considering the involvement in the counterfeiting only a minor offence (Schneider, 2016). Such an example demonstrates the importance of small-scale schemes in financing terrorists’ activities, especially when requiring low budgets.