Brandon Sullivan, Steve Chermak, Jeremy Wilson and Joshua Freilich, 2014

Terrorists have increasingly been linked to product counterfeiting, but evidence for this connection has been mostly anecdotal and speculative. We use the Extremist Financial Crime Database and the Michigan State University Center for Anti-Counterfeiting and Product Protection’s Incident Database to provide an overview of both the schemes and the individual suspects in ten product-counterfeiting schemes related to terrorism. The vast majority of suspects involved in these particular schemes are non-extremist collaborators motivated by profit, not extremist ideology. These findings indicate the need to focus on criminal networks broadly, beyond restrictive efforts only targeting terrorists.

Terrorists, like other individuals, groups, and crime syndicates, may rely on product counterfeiting for several reasons. First, there are few entry barriers to product counterfeiting, Second, terrorist groups are well aware of the demand for counterfeit products and potential profits—profits that can exceed even those of the illegal drug trade. Third, terrorists know product counterfeiting is unlikely to be detected, as product counterfeiting is a low-priority offense for law enforcement, and, even if caught, usually results in minimal sanctions. Fourth, because product counterfeiting is generally a cash-only business, it offers some degree of anonymity.

Many reports point to the involvement of terrorist organizations in the manufacture, sale, and distribution of counterfeit products in networks of criminal enterprises. Yet very little empirical work has been conducted on this nexus. Product counterfeiting has received minimal attention from scholars, and virtually no studies examine the nexus between terrorism and product counterfeiting.

Research Methods

To explore the nexus between terrorism and product counterfeiting, researchers at the Michigan State University (MSU) Center for Anti-Counterfeiting and Product Protection (A-CAPP) identified relevant cases from the Extremist Financial Crime Database  (EFCDB) as well as incidents from their own Incident Database. The EFCDB assembles open-source information on financial crimes, such as tax avoidance, money laundering and dirtying, and terrorist financing, committed by extremists. The A-CAPP Incidents Database assembles open-source information on crimes involving counterfeit products committed in the United States.

Findings: Schemes

Altogether, the researchers uncovered ten (10) product counterfeiting schemes related to Jihadi or far-right extremists in the United States from 1990 to 2013. Characteristics of these schemes included

Extremist Group Connection. Hezbollah was involved with six of these schemes, JamaatulFuqra with two, and Hamas and a neo-Nazi organization one each. Put another way, nine of these ten schemes involved Jihadi, and only one involved a far-right extremist.

Product Type. Cigarettes were the most common product in these schemes, including two schemes which involved trafficking in counterfeit cigarettes by a Charlotte (N.C.) Hezbollah cell. Other counterfeit products figuring in the schemes included apparel, compact discs or digital video discs,  luxury items, and Viagra.

Scheme length and revenue. The schemes lasted from one to eight years, with an average length of less than three years. Revenue of the schemes ranted from $5 million to $55 million, with five of the ten schemes having an unknown total revenue.

Scheme purpose and suspects. Terrorism financing was the exclusive purpose of only three of the ten schemes. Five of the schemes sought financing for both ideological purposes and personal profit, while two of the schemes were exclusively devoted to profit. The number of suspects in each scheme ranged from 1 to 16.

Findings: Suspects

Altogether, the ten product-counterfeiting schemes involving terrorist organizations had 89 suspects involved. Most of these suspects were non-ideological, i.e., they were collaborators outside the terrorist organization whose primary motive for participating in the scheme was personal greed rather than purely ideological or even mixed ideological and greed motives.

Other characteristics of the suspects were perhaps more predictable, given the prevalence of Jihadi organizations in these schemes. The suspects were 92 percent male, 91 percent foreign-born (typically from Lebanon or Pakistan), and 75 percent Arab. Most suspects were smugglers, buyers, or intermediaries.

Conclusions and Implications

This study supports prior research demonstrating the collaboration between terrorists and non-ideological collaborators is motivated by the desire for financial gain, rather than politics or religion. These findings have implications for strategies to disrupt criminal enterprises. Focusing only on suspects with known links to terrorism ignores the profit motive involved in each of these schemes. While many product counterfeiting schemes saw some money funneled to terrorist groups, most suspects involved had no apparent links to these movements and appeared to operate as in any other profit-motivated criminal enterprise.

By targeting those in different areas of a product-counterfeit enterprise not linked to terrorism, officials may obtain information useful for further identifying and exploring the parts linked to a terrorist organization. Those who are in product counterfeiting only for monetary gain may be more willing to provide information on suspected terrorists involved in their schemes in an attempt to maintain their illicit activities or in a bargain for lenient punishment.

Alternatively, given the greater attention in the United States to terrorist organizations, terrorist suspects involved in product-counterfeiting schemes may be more readily identified by law enforcement officials involved in counterterrorism. Once a terror link is established in a product-counterfeiting scheme, resources can be devoted to targeting the remaining network connections.

For more information, please refer to our full study: Sullivan, B.A., Chermak, S.M., Wilson, J.M., and Freilich, J.D. (2014). “The Nexus Between Terrorism and Product Counterfeiting in the United States“, Global Crime, first published online May 23, 2014.

 

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