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Buying knock-off consumer goods this Christmas could be a serious threat to the health of you and your loved ones

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buying knock-off consumer goods this Christmas

Much as it does for retailers, the Christmas period presents huge opportunities for counterfeiters and fraudsters. Keen to take advantage of shoppers looking to save money over the holidays, rogue traders who sell fake items are particularly active over the holiday season, seeking to cash in on the spending bonanza that takes place in the weeks and months prior to the big day. The growing popularity of pre-Christmas sales such as Black Friday and Cyber Monday both in the US and in an increasing number of other western countries has only added to the rich pickings available to counterfeiters at this time of year.

The importance of festive season sales to fraudsters is often exemplified by a major upticks in the number of counterfeit goods that are seized at ports and airports on both sides of the Atlantic in the final quarter of the year, a high number of which originate from countries such as China and Hong Kong. Many consumers consider the purchase of counterfeit products to be a victimless crime, but while it may be the case that buyers of fake items rarely face punishment for doing so, the consequences of trying to save money by picking up knocked-off consumer goods can be severe. Apart from depriving intellectual property rights holders of revenue, buying fake products to give as gifts at Christmas could pose a serious health risk to the recipients of your presents, and in some cases could prove deadly.

Fake electrical items are among the most dangerous counterfeit products available at this and any other time of year. While picking up a knocked-off Apple iPhone or Samsung Galaxy handset might save you a sizable sum of money, the potential for counterfeit electronics to do serious harm is high. Fraudsters are able to sell counterfeit electrical items for such low prices because they do not have to put their products through the types of rigorous safety testing that genuine manufactures are required to carry out by law. While this helps keep the cost of fake electricals down, it also means they are very much an unknown quantity from a health and safety perspective.

At the end of November, police in the UK launched a campaign to raise awareness of counterfeit electrical goods being sold in the run-up to Christmas, warning consumers to only buy such items from reputable retailers. As well as the chance that counterfeit electrical products could cause injury or damage to property by blowing up or starting a fire, anybody who suffered injury or loss as a result of owning such an item would have little opportunity to seek redress if something did go wrong, mostly on account of the fact that it would likely prove all but impossible to trace the manufacturer of the product in question.

Children’s games and toys are another major money-spinner for counterfeiters over the Christmas period. As is the case with fake electrical items, knocked-off kids’ toys and games may be cheap, but will not have been through safety testing. Some fake children’s toys have been found to contain unsafe levels of carcinogenic chemicals, while others are often made up of parts that could cause kids serious injuries or pose a choke risk if swallowed. High-end cosmetic products are another favourite of the criminal gangs behind the global counterfeiting trade during the festive season. Fake beauty products will almost without exception be of an inferior quality to the genuine items they are intended to mimic, but more worryingly could contain a range of harmful substances including lead, arsenic, mercury, cyanide, paint-stripper and even faeces. Some of these ingredients could cause problems ranging from mild skin irritation, to chemical burns, and even long-term damage to the central nervous system and brain, which may be permanent.

Aside from the possibility that buying fake items could put you or somebody you care about in danger, any counterfeit products you purchase may have been produced in an overseas sweatshop, or by victims of modern slavery. On top of this, profits made from the sale of bogus consumer goods are routinely reinvested in other forms of criminality, including terrorism. In other words, the money you use to purchase a knocked-off item could end up funding groups such as al-Qa’ida and Daesh. Then there’s the chance that your banking details could be stolen while buying a fake item.

Consumers are frequently advised that they can avoid buying counterfeit products by being wary of deals that appear too good to be true, and by thoroughly inspecting an item that could potentially be fake. While this is sound advice, the best way of protecting yourself is to only buy from reputable sellers you know and trust. While it can be tempting to allow yourself to become seduced by the prospect of a bargain, especially at Christmas, the consequences of knowingly or inadvertently buying counterfeit products can be devastating.

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Opinion

An almost endless supply of vulnerable victims makes it all but impossible to stamp out vishing fraud

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stamp out vishing fraud

Despite the fact that western consumers have long been warned to be on their guard when divulging personal information over the phone, vishing fraud remains a major money spinner for organised criminal networks across the globe. At the beginning of this month, new data released by the US Federal Trade Commission (FTC) revealed that vishing scams targeting American taxpayers rocketed more than 20-fold in 2018. Over the course of the year, the agency received 63,000 reports of scammers contacting members of the public by phone pretending to be calling from the Social Security Administration (SSA) regarding a tax issue, which was up from 3,200 similar incidents in 2017. While only 3% of those who reported being targeted in this type of scam admitted to suffering a loss in 2018, the total amount paid out to fraudsters over the year was $16.6 million, which worked out to $1,484 per victim.

Vishing, a term that refers to the practice of contacting potential fraud victims by phone in much the same way that cyber scammers use email during phishing campaigns, shows little sign of declining in the US or elsewhere. While it may be the case that law enforcement agencies all over the world have run numerous awareness-raising campaigns about the threat vishing fraudsters pose, there will always be victims vulnerable enough to fall prey to such scams. As such, it is only a numbers game for the organised criminal gangs behind this type of fraud. It is true that more people are alive to the risk of vishing fraud than were a decade or so ago, but this just means vishing scammers simply need to make more calls in pursuit of victims who will be likely to fall for their spiel.

Indeed, vishing scam fraudsters have been caught describing their ideal victims on a number of occasions. Only this week, reporters from the UK’s Daily Mail investigating a vishing call centre in India captured some of its “workers” on film saying their preferred targets are old and rich, or immigrants to the UK with a less than perfect grasp of English. Members of the gang behind the call centre said new immigrants to the UK could be threatened with deportation if they failed to pay bogus tax demands. Some victims of vishing and other types of fraud even have their names added to so-called “mugs’ lists” if they hand money over. Their details can then be passed to other fraudsters conducting different types of scams, who can then attempt to con more money out of them.

It is typically the case that call centres from which vishing operations that target victims in western nations are based in developing countries, meaning that the gangs behind them can pay operatives low wages. This also makes it less likely that they will attract the attention of law enforcement authorities, not least on account of the fact that they operate outside of the jurisdiction of police in the countries in which they target victims. The fact that many of the workers who staff these types of operations speak poor English can often be a giveaway for potential victims, but might not be sign something is wrong for vulnerable people.

While vishing might be a relatively low tech form of fraud, the ruthlessness with which its perpetrators successfully target society’s most vulnerable make it an incredibly effective and profitable one. Information campaigns about vishing are all well and good, and have been effective when it comes to educating general populations about the threat. The fact of the matter is though that they often fail to reach vulnerable sections of society. Sadly, in many countries around the world, vishing fraud victims have little protection, and once they lose their money, it is gone forever. This seems inordinately unfair, and lets banks that facilitate payments or transfers to fraudsters off the hook.

Financial institutions should have a legal responsibility to monitor the accounts of vulnerable customers for suspicious activity. Some vishing scam victims are conned into transferring huge sums of money to fraudsters, sometimes losing their life savings in these types of scams. While it may not help when it comes to smaller amounts, banks should be compelled to put a hold on large payments being processed through the accounts of vulnerable customers, and investigate the veracity of any such transfers before they are processed. If they fail to do so, it should be incumbent on the financial institution in question to reimburse victims for any resultant losses. If measures such as these are not put in place, vishing scammers will be able to carry on targeting the vulnerable with near impunity, resulting in thousands of lives being ruined as a consequence.

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Opinion

Western governments have a responsibility to prevent paedophiles abusing children in countries such as the Philippines

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Relatively speaking, western law enforcement agencies have made great progress when it comes to targeting paedophiles in recent years. While the example of “Asian” street grooming gangs avoiding punishment for decades in countries such as the UK might suggest otherwise, along with the seemingly never-ending abuse scandal in the Catholic Church, on the whole, police in western nations now take the issue of child sexual exploitation a lot more seriously than they did as recently as 10 years ago. As a consequence, paedophiles living in the west who wish to act on their sexual interest in children must now do so with a great deal more caution than they once did. For those unwilling to seek treatment to stop them from acting on their urges, the answer to this problem often involves turning to nations where child protection laws are not as effective as those in their home countries.

Unfortunately, it has long been the case that western paedophiles have sought to abuse children in poorer parts of the world such as Southeast Asia, but with the widening availability of low-cost air travel and high-speed internet access, doing so has become easier than ever, either in person or remotely over the internet. This has led to a burgeoning child sexual exploitation industry in countries such as the Philippines that has continued to grow as western law enforcement agencies have sought to do more to target paedophiles both on and offline domestically. As a result, an illicit trade has emerged that involves impoverished Filipino families accepting money from organised criminal gangs in exchange for allowing their children to be abused in front of webcams to satisfy the desires of western paedophiles, many of whom have become wise to the threat of being arrested by police in the countries in which they live.

In an attempt to clamp down on the growing problem, a coalition of law enforcement agencies last week opened a new centre in the Philippines designed to help local investigators better deal with the online sexual exploitation of children across the Southeast Asian country. Launched partly in response to local gangs livestreaming bespoke sex shows featuring local children over apps such as Skype, the Philippine Internet Crimes Against Children Centre (PICACC) is intended to equip local law enforcement agencies with the skills and technology they require to locate and bring to justice the gangs behind these types of crimes. Official government figures demonstrate the scale of the problem, showing that in 2017 alone there were almost 45,700 reported incidents of child online sexual exploitation in the Philippines, with around half of victims rescued by investigators aged 12 or younger. The true number of incidents is almost certain to be much higher, with anecdotal evidence suggesting the Philippines remains a mecca for western paedophiles.

At the end of February, a female member of a Filipino child-snatching gang explained from behind bars how she and her associates kidnapped minors from the streets to sell onto paedophiles from the west. Speaking from her prison cell after being caught by police attempting to abduct a 10-year-old girl in Paranaque City, Lilibeth Bustamante told reporters how she was paid the equivalent of just $20 to carry out the kidnapping, and that the children she and other gangs members procured would be sold on for as little as $3,550. She said: “I only take them, they sell. They only give me one thousand pesos. I send it to my family in Mindoro. We have a quota of two children per week. Our target age is 10-years-old and above.” Bustamante’s evidence suggests there remains a high demand for children in the Philippines from western paedophiles such as Australian Peter Gerard Scully, who was sentenced to life in the country last year after being dubbed one the world’s most depraved child rapists, and Briton Douglas Slade, who is being sued while in a UK jail by his alleged Filipino victims.

It is encouraging that that the likes of the UK National Crime Agency (NCA) and the Australian Federal Police (AFP) are helping authorities in the Philippines target the organised criminal gangs that are profiting from procuring and exploiting children for western paedophiles, but the establishment of the PICACC should form the basis of a wider effort to tackle the issue. Western governments have a responsibility to ensure that paedophiles from their countries are not able to harm children in poorer nations. As well as funding more initiatives such as the PICACC, this means taking greater steps to prevent child abusers from travelling to these countries, as well as limiting their access to the internet to make sure they are unable to pay to view children being abused in developing nations.

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Illicit Tobacco & Alcohol Trade

“Legal and illegal trade in tobacco products are often intertwined”

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multi-million dollar tobacco smuggling gang

Illicit Trade News Networks has interviewed Benoît Gomis, research associate at the Global Tobacco Control Research Programme at Simon Fraser University who has recently published a study on the illicit trade in South America. From the beginning of the illegal trade seeded by British American Tobacco and Philip Morris International to the ongoing trade organised by Tabesa, Benoît Gomis gives a clear picture of how legal and illegal are intertwined as long as tobacco products are involved.

Illicit Trade News Network: You recently published a study on illicit tobacco trafficking in South America and more specifically in Paraguay. Can you go back over the figures from this study in a few words?

My colleagues and I just published two papers in Globalization and Health on Paraguay’s illicit tobacco trade.

In the first paper, we demonstrate how the trade was originally seeded by British American Tobacco (BAT) and Philip Morris International (PMI), who from the 1960s onwards used Paraguay as a transit hub to smuggle their cigarettes to the then protected markets of Argentina and Brazil. Two developments later led to a boom in Paraguayan production: 1) the transnational tobacco companies (TTCs)’ switch from high-end to cheap smuggled brands in the late 1980s and early 1990s – products with which local manufacturers could now compete, and 2) Brazil’s introduction of a 150% export tax to end the TTC scheme – by which cigarettes were sent to Paraguay and then re-smuggled to Brazil. Based on our estimates, between 1989 and 1994, Paraguayan cigarette production was below the annual domestic consumption of three billion cigarettes. It grew to 12 billion sticks by 1998 and 27 billion by 2003 despite stagnating consumption.

In the second paper, we document how Tabacalera del Este (most commonly known as Tabesa) capitalized on the conditions created by BAT and PMI and a permitting regulatory environment. Created in 1994, Tabesa is now one of Paraguay’s largest companies. It was founded and is still owned by Horacio Cartes who was President of Paraguay between 2013 and 2018. Based on data on the company’s imports of cigarette components, we estimate that Tabesa imports enough to produce 25-36 billion cigarette sticks per year. Given domestic consumption and legal export figures, this means that between 19-30 billion cigarettes produced by Tabesa annually end up on the illicit market. An estimated 70% of that is smuggled to Brazil, and our research finds that Tabesa has been exploring other international markets.

Tabesa executives notably told Paraguayan journalists that the company legally exports to a number of countries, including Bulgaria, Curaćao, the Netherlands Antilles and the Netherlands. However, our analysis of UN Comtrade data shows significant discrepancies, suggesting illicit trade. For instance, between 2001 and 2016, there were no cigarette exports reported by Paraguay to Bulgaria, nor any cigarette imports reported by Bulgaria from Paraguay. In that same period, Paraguay reported exports of 1.4 billion cigarettes to Curaçao, 481.2 million cigarettes to the Netherlands Antilles, and 111.4 million cigarettes to the Netherlands, yet none of those countries reported any cigarette imports from Paraguay. In total, between 2001 and 2016, 5.7 billion cigarettes officially shipped by Paraguay to 10 markets where Tabesa exported to were unaccounted for.

 

What are the major findings of your study on the modus operandi of tobacco trafficking?

Our findings suggest that the legal and illegal trade in tobacco products are often intertwined. BAT, PMI, and Tabesa have all had legal sales and legal exports, and yet have also used the illicit trade – in particular through free trade zones (FTZs) and other areas of weak governance – to enter new markets and increase their revenue. We also argue that Tabesa has used its legal exports to the US as a defence against smuggling accusations. More broadly, these papers – and other research we have conducted – suggest that the illicit tobacco trade is changing its nature. There are still signs of TTC complicity in the illicit trade, but other non-TTC actors are increasingly involved as well. Meanwhile, TTCs are attempting to recast themselves as responsible partners to governments by providing intelligence, training, equipment, financial resources and even influencing budget decisions in various countries across Latin America, while also commissioning and funding studies on the illicit trade and framing the issue in the media. It is of course in their interest to do so. Through these activities, TTCs aim to undermine competitors and fight against tobacco control measures that have been effective in reducing smoking rates (e.g. higher taxes, plain packaging).

 

In your study, you mention tactics allegedly used by Tabesa, PMI and BAT tactics in terms of illicit tobacco trafficking. What are these tactics?

These include: 1) creating new brands, manufacturing them domestically, exporting them illegally, using the revenue to reinvest in product development and production facilities to produce more cigarettes to a higher standard and thus compete for new markets overseas; 2) using free trade zones as transit hubs for smuggling; and 3) selling to a large number of domestic distributors and later arguing that subsequent illicit exports are not their responsibility.

 

What measures could countries plagued by illicit tobacco trafficking take at the national level?

The first measure is to tackle industry interference with policy making. TTCs are attempting to circumvent international guidelines to reclaim influence in tobacco control by supporting governments to tackle the illicit tobacco trade. But as the WHO warns, “There is a fundamental and irreconcilable conflict between the tobacco industry’s interests and public health policy interests.”

Second, governments would do well to increase resources dedicated to relevant law enforcement and customs departments – including adequate training independent of the tobacco industry.

Third, more data should be collected and analyzed independently of the tobacco industry. Very often there is much we do not know about the illicit tobacco trade in any said country, meaning that policy responses often rely on potentially misleading seizure figures and industry-funded data.

More broadly speaking, the more fundamental issues of weak governance, institutional capacity, political will, transparency, accountability, and corruption need to be tackled for any substantial progress to be made.

 

What measures could be taken at the international level and in terms of traceability?

Governments should fully implement the WHO Framework Convention on Tobacco Control and its Protocol to Eliminate Illicit Trade in Tobacco Products.

Our research played an important role in the Paraguayan government’s decision to sign the Protocol, a step in the right direction. The Protocol features a number of useful action points, including Article 10.1.b which notes that Parties shall “take the necessary measures” so that companies “[supply] tobacco products or manufacturing equipment in amounts commensurate with the demand for such products within the intended market of retail sale or use”.

Article 8 on Tracking and Tracing is perhaps the most central one, however. It notes that “the Parties agree to establish within five years of entry into force of this Protocol a global tracking and tracing regime”. Under the traceability system of the Protocol, detailed information on the entirety of the tobacco supply chain is for instance required, including “the name, invoice, order number and payment records of the first customer not affiliated to the manufacturer”, “the intended market of retail sale”, “any warehousing and shipping”, “the identity of any known subsequent purchaser”, and “the intended shipment route, the shipment date, shipment destination, point of departure and consignee” (Article 8.4.1). This system is intended to “further [secure] the supply chain and to assist in the investigation of illicit trade in tobacco products”. However, it is currently at risk of being controlled by the tobacco industry. Further research on this development and caution from governments are required to ensure that the track and trace measures put in place across the world effectively mitigate the illicit tobacco trade, rather than promote the commercial interests of TTCs at the expense of public health and good governance.

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