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The US trade war with Beijing will do little to prevent counterfeit items flooding out of China

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counterfeit items flooding out of China

While US President Donald Trump has sought to make intellectual property rights (IPR) a major sticking point in America’s ongoing trade war with China, the little progress made in negotiations between the two countries in this area over the past year or so will likely make no dent whatsoever in the huge number of counterfeit and pirated products that are exported out of China to foreign markets every year. For its part, Beijing claims it has made significant progress on IP protection in recent years, with data from China’s State Administration of Foreign Exchange (Safe) showing in April that the country’s external payments of IPR royalties had risen 24% in 2018 to $35.8 billion, resulting in a deficit of $30.2 billion.

Beijing has long promised to improve its IPR protection regime, more as part of efforts to bolster innovation and support its own industries than to placate the US, and has set up a series of specialist IP courts across the nation, as well as increasing penalties for trademark infringement. Although foreign companies have complained that these are often biased towards domestic firms and hand out inadequate punishments, the increased external IPR royalty payments being made by China suggest that the country’s new approach might be producing some positive results.

While this development is to be welcomed, particularly for those businesses that have benefited from increased IPR royalties emanating from the country, it remains to be seen what impact if any China’s new IPR regime might have on the massive amount of fake items that flood out of the  country to overseas markets.

Some experts believe the US/China trade war could even lead to an increase in the number of counterfeit goods coming out of the mainland and Hong Kong, with World Trademark Review reporting in June 2018 that six trade associations had warned US Congress that tariffs levied against Beijing could divert resources away the country’s efforts to fight the counterfeiters that operate from within its borders. In March, CNBC reported that if anything the problem is likely to get worse, not least on account of the fact that Chinese counterfeiters are increasingly able to take advantage of technology such as ecommerce platforms and 3D printers.

It could be argued that it is too early to tell whether the US trade war with China will have any meaningful effect on the volume of bogus goods that are exported from the mainland and Hong Kong to the rest of the world an annual basis, but the direction of travel suggests that an improvement from the current state of affairs looks a long way off.

At the beginning of September, the AFP news agency reported that head of the Investigations Directorate at the EU’s anti-fraud office OLAF had warned that the growth of ecommerce platforms had made Europe’s battle with counterfeiters from China more difficult, noting that gangs of fraudsters operating from within the country were to blame for the problem rather than the state itself. Just weeks later, data released by the European Commission revealed that seizures of fake goods consignments imported into the EU had risen over the previous year, and that the majority of bogus household items smuggled into the 28-nation bloc had come from China.

Back in March, a report published by the Organisation for Economic Co-operation and Development (OECD) and the EU’s Intellectual Property Office revealed that fake goods had grown to account for 3.3% of all global trade, and that most of the counterfeit items seized around the world in 2016 originated from mainland China and Hong Kong. Things seem not to have improved much over the intervening years, with continual reports suggesting that mainland China and Hong Kong remain the source of the lion’s share of all fake items sold around the globe.

At the end of last month, US Customs and Border Protection (CBP) revealed that its officers based at a cargo sorting centre in Kentucky had discovered counterfeit bracelets and other jewellery sent from China that would have been worth some $90 million if they had been genuine. This came after the CBP’s annual Intellectual Property Rights Statistics showed that China remained the main source of counterfeit and pirated goods seized by customs agents across the US in 2018, accounting for 54% of the value of all IPR seizures in the country that year.

All of this suggests that while Beijing’s new IPR regime looks set to improve the lot of businesses that had been losing out on royalties they should have been earning on products sold within China, life looks unlikely to change for the organised criminal networks that are behind many of the counterfeits that are exported out of the country to overseas markets, and that tariffs imposed by the Trump administration might even make things easier for them.

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Video games and gaming platforms are facilitating serious and organised crime

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Back in the 80s and 90s, few could have imagined how the gaming industry would evolve. From what many observers assumed to be a causal pastime if not a fad, gaming has become the biggest form of entertainment on the planet, with some 2.5 billion people across the world expected to spend $152.1 billion on the activity this year, according to data from Newzoo. In cash terms, that would represent an increase of 9.6% compared to 2018. With the growth of mobile games and the rise of streaming services such as Google’s Stadia and Microsoft’s upcoming Project xCloud, it would take a brave investor to bet against the industry experiencing further expansion, particularly with the increasing global popularity of esports.

Such rapid growth and success seldom come without some degree of criticism. For the gaming industry, this has come in the shape of concern about the health issues associated with spending long periods of time in front of a screen. As well as worries over physical health, concern has also been raised about how gaming could impact people’s mental wellbeing, with the World Health Organisation recognising video game addiction as an official illness in May of this year. While many questions need to be answered about the potential health risks associated with gaming, be they physical or psychological, the potential for gaming platforms to be exploited by criminals is an issue that receives far less attention, despite the fact that anecdotal evidence suggests this is becoming more of a problem.

Last month, UK thinktank the Royal United Services Institute (RUSI) published a paper in which it explored how organised criminal gangs are using items purchased or acquired in popular gaming titles to launder their ill-gotten gains. Many games these days allow players to either purchase or accumulate virtual currency and other items that will either aid their progress or make their character more powerful. Some of these can be acquired through the purchase of loot boxes, which many game publishers use to monetise their free titles. Loot boxes have been criticised by some campaigners as a from of gambling, as players who buy them often do not know what they contain. Whether purchased or acquired, these items have value in the real world, and as such can be traded for either cash or cryptocurrency.

At the end of October, US video game developer Valve announced that it had been forced to update its popular Counter Strike: Global Offensive (CS:GO) title as criminals had been using it to launder dirty money. The company said it would now prevent players from trading items while in the game after noticing that “worldwide fraud networks [had] recently shifted to using CS:GO keys to liquidate their gains”.

Back in January, the Independent reported that organised criminals had been using Epic Games’ Fortnite to launder money through its in-game V-bucks currency. Working with cyber security firm Sixgill, the Independent discovered that criminals were buying up V-bucks in bulk before selling them on in large quantities on the dark web, and in smaller number on social media platforms such as Twitter and Instagram.

The popularity of Fortnite has also been exploited by cyber criminals, who have in the past sought to take advantage of players’ keenness to acquire free V-bucks. In June of last year, the UK’s Action Fraud agency warned that cyber scammers were fleecing Fortnite players of cash by tricking them into handing over their Fortnite account details. The hackers placed adverts on social media offering free V-bucks. After clicking through from these, victims were asked to hand over their account details, which the hackers used to log in to their accounts and steal money. Cyber criminals would also offer V-bucks in exchange for victims’ phone numbers, which they would then use to call premium rate lines from which they would profit.

Away from these types of scams and the growing problem of match fixing in esports, perhaps the most worrying ways in which games and gaming platforms are being exploited by criminals relate to grooming. The fact that gamers often communicate with one another anonymously online, and that so many gamers are relatively young, makes games and gaming platforms attractive hunting grounds for sexual predators.

In July of this year, British child protection charity the NSPCC revealed that young people on Amazon’s game-streaming video platform Twitch were among the most likely social media users to report experiencing grooming activity online. Earlier this year, a 41-year-old man was arrested in Florida on suspicion of using Fortnite to initiate sexual activity with children. Anthony Gene Thomas and an accomplice were alleged to have used Fortnite’s voice chat feature to meet minors.

As gaming continues to grow, it is not only likely that these problems will persist, but that criminals will find new ways to exploit the ecosystem of an industry that now dwarfs film, television and music. But just as there is little incentive for games developers to take any real action on gaming addiction, addressing money laundering, fraud and grooming across their products is a low priority.

In much the same way that internet and social media firms have been slow to act on crime facilitated by their platforms, games developers will likely do little to address these issues unless forced to do so through political pressure or legislation. As it makes little difference to their profits if these activities take place across their products or not, investing money in addressing them is probably the last thing on games developers’ minds.

 

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Opinion

The evolving threat posed by sextortion scammers

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threat posed by sextortion scammers

Despite the launch of numerous campaigns to raise awareness of the crime, sextortion scams are on the rise. Back in June, a report from the FBI revealed that complaints relating to extortion increased by 242% to 51,146 in the US last year, with total losses of $83 million, and that the majority of these were part of sextortion campaigns. In the UK, Britain’s National Crime Agency (NCA) warned in 2018 that cases of sextortion reported to police across the country  had risen more than three-fold between 2015 and 2017, noting that it is difficult to arrive at an accurate estimate of how widespread the crime truly is on account of the fact that many victims are too embarrassed to report their experiences to the police.

Sextortion scams typically involve cyber criminals coercing a victim into performing sex acts in front of a webcam and then blackmailing them with the resultant video footage. Scammers will oftentimes threaten to post compromising images and film on public websites or social media platforms, or email it to friends and relatives of the people they target. In many cases, sextortion scams are perpetrated by organised criminal networks that run indusial-scale operations in countries such as the Philippines, where perpetrators can exploit relatively lax local laws and stay largely beyond the reach of law enforcement agencies in the countries in which they target victims. Traditionally, scammers target victims on social media and other online platforms using false identities on the premise they are looking for sex. More recently however, new forms of sextortion scams have been emerging.

These days, it has become commonplace for sextortion scammers to send out phishing emails without having obtained compromising images or film of potential victims beforehand. In these messages, scammers claim to have infected potential victims’ connected devices with malware that has allowed them to take control of their webcam. The scammers go on to claim they have subsequently captured footage of potential victims viewing adult content online, and that unless a ransom is paid in cryptocurrency, this will be distributed to their family and friends. According to cyber security firm Sophos, these types of massage should typically not be taken seriously unless they include evidence that the scammers do indeed possess the compromising material to which they refer. In August, phishing defence firm Cofense published a database of over 200 million compromised email accounts being targeted by a large sextortion scam in which cyber criminals used a “spray and pray” botnet to target potential victims.

In a more targeted variation of this scam, fraudsters use passwords belonging to potential victims compromised in previous data breaches to create the illusion they have more on the people they seek to extort than they do. One example email published by security expert Brian Krebs last year read: “I do know, [PASSWORD REDACTED], is your password. You do not know me and you are probably thinking why you are getting this e mail, correct? Well, actually, I placed a malware on the adult videos (pornography) website and do you know what, you visited this web site to experience fun (you know what I mean).”

But while the scammers behind these types of messages almost certainly do not have the compromising material they claim to possess, the scenario they describe looks likely to become all too real for some adult movie enthusiasts. Earlier this month, US enterprise security company Proofpoint revealed in its latest quarterly report that its researchers had discovered malware that genuinely does allow hackers to capture video from a victim’s webcam. The software, dubbed “PsiXBot”, works on devices running Microsoft’s Windows operating systems, and can be downloaded onto a victim’s computer without their knowledge via dodgy websites or music and video downloads. Once installed, the malware waits for a victim to use a pornography-related search term before activating their webcam and microphone before sending whatever is captured back to its controller.

Law enforcement agencies advise that victims of sextortion scammers never hand over a ransom, even when there is evidence that fraudsters really are in possession of compromising material. Once one payment is made, police say, fraudsters will almost invariably keep coming back for more, and will be highly unlikely to delete any material they do hold. Both the FBI and the NCA have published  advice on what victims should do if they fall victim to a sextortion scam, but in most cases it proves all but impossible to track down perpetrators when cases are reported. While it is of course advisable to make sure that your virus protection software is up to date, with the emergence of malicious software such as PsiXBot, the only real way to stay safe from sextortion scammers is to never do anything in front of a webcam that you would not feel comfortable doing in front of your mother.

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Opinion

Misery, not hedonism, appears to be driving increased drug use among Gen Xers and Boomers

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Over the past few years, numerous surveys have revealed that Millennials and members of Generation Z are less keen on the consumption of illegal drugs and alcohol than their immediate forebears. In fact, the US Centers for Disease Control and Prevention’s most recent Youth Risk Behaviour Survey showed that alcohol, drug and cigarette consumption have been falling consistently among American teens for at least the past decade. The study also showed that young people in the US are having less sex. Until recently, similar trends were being observed in the UK, where alcohol and drug consumption among young people have also been following a general downward trend for several years now.

Yet despite this, the number of drug-related deaths in both countries is on the rise. Back in August, data from the UK’s Office for National Statistics (ONS) revealed that drug poisoning deaths rose by 16% in 2018. Last August, the CDC said that drug overdoses were estimated to have killed just over 72,280 people in the US in 2017, which represented an increase of some 10% on the previous year. All of this suggests that members of Generation X and Boomers are accounting for a growing proportion of both nations’ problem drug use and drug-related overdose deaths; a trend that appears to be being borne out both statistically and anecdotally.

Back in 2017, the UK’s ONS revealed that people aged between 40 to 49 had the highest rate of drug misuse deaths across England and Wales for the first time ever in 2016. This led to people of that age group being dubbed the “Trainspotting generation” after the Irvine Welsh novel that was popular during their youth. According to ONS researchers, the emerging trend of older people suffering a higher a number of drug overdose deaths was down to the fact that many addicts in the 40 to 49 age group were beginning to lose lengthy battles with substance abuse habits that might have been begun decades ago due to poor physical and mental health.

In a more recent assessment released this August, the ONS said that “people born in the 1960s and 1970s… [were] dying from suicide or drug poisoning in greater numbers than any other generation”. The ONS said that while the reasons for rising drug and suicide deaths in this age group were complex, a high number of those who lost their lives lived in some of the most deprived parts of England.

While it might be easy to conflate drug problems among Boomers and Generation Xers with the hedonistic times in which they came of age, other studies have also suggested that this might be too simplistic a view. In a paper published in April, researchers at Vanderbilt University in the US state of Tennessee noted that high levels of depression, suicidal ideation, drug use and alcohol abuse identified among middle-aged white Boomers was beginning to impact the youngest members of Generation X. Lauren Gaydosh, Assistant Professor of Medicine, Health and Society and Public Policy Studies at Vanderbilt, forecast that midlife mortality may begin to increase across a range of demographic groups, adding: “Public health efforts to reduce these indicators of despair should not be targeted toward just rural whites, for example, because we’re finding that these patterns are generalised across the population.”

Earlier this month, new figures published by the UK’s National Health Service (NHS) revealed that the number of English pensioners aged over 90 being admitted to hospital after suffering from psychological and behavioural disorders following cocaine use had risen ten-fold over the past decade. This came almost a year after similar data revealed that the number of over-45s in the UK seeking medical attention after suffering serious mental health problems as a result of drug use had risen by 85% over the previous decade. Speaking with the Guardian at the time, Ian Hamilton, Associate Professor of Addiction at the University of York, said: “[Older people] are more likely to have had longer drug-using careers, so they will need longer in specialist drug treatment. However, unfortunately treatment services are being directed to offer abstinence-based services rather than maintaining this group on substitute drugs like methadone.”

Both ONS studies and the Vanderbilt paper suggest that rising problem drug use and overdose deaths among older people in both the UK and the US have little to do with them being children of the second summer of love or having grown up believing heroin chic was the epitome of cool. Instead, evidence indicates that the growing number of people experiencing problems with drugs in later life appear to be among the most vulnerable in society, suggesting that labelling them with nicknames such as the “Trainspotting generation” might at the very least be treating the problems they face with undue flippancy.

While it may be the case that some Boomer or Gen X drug users might have been living with a habit for decades, it would seem that many are pushed to use illicit substances as a result of the undesirable life situations in which they have found themselves, and not as part of ill-advised efforts to relive the hedonism of their youth.

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