Counterfeit, unapproved or otherwise substandard COVID-19 products seized by U.S. Customs and Border Protection. (CBP photo)

COVID-19 and Illicit Trade: When Organized Crime and Terrorists Profit from the Pandemic

The global COVID-19 pandemic has tragically impacted the lives, health and wellbeing of many around the world. It has led to deep economic recessions, compounded business losses, increased unemployment and reduced consumer incomes. Often overlooked is the fact that the dire impacts of COVID are being worsened by illicitly traded goods such as fraudulent personal protective equipment (PPE). Transnational criminal organizations and global terror groups use illicit trade to facilitate crimes in local communities, disrupting civil society and cultivating corruption. The pandemic is a new business opportunity to finance their nefarious activities.

Global Impact of Illicit Trade

With or without a pandemic, the illegal global trade continues to grow. According to the World Economic Forum, $2.2 trillion will be lost due to diversions of illicit trade funds in 2020. The illicit trade economy is equivalent to the economies of Mexico and Indonesia combined, and dwarfs those of Brazil, Italy and Canada.

COVID-19 lockdown restrictions have boosted the key drivers of illicit trade:

Criminals have been quick to capitalize on these opportunities, perpetuating illicit activity when governments, industry and the general public are most vulnerable.

Criminal Networks Quickly Adapt to Profit During the Pandemic

The pandemic has also exposed weaknesses in governing structures. Across the world, when criminal groups have stepped in to deliver real aid packages and other necessities, they do so with the sole intent of currying political capital and favor from the public to exert further control over communities.

In some cases, the pandemic has constrained the illicit activities of organized criminal networks. However, this has been more than offset by bad actors with more structured and complex foundations using the crisis as an opportunity to strengthen their control of illegal markets and territories. Groups have used the crisis to supply markets with illicit services and products that are in high demand during the pandemic. These include substandard and falsified face masks, disinfectants and medicines associated with COVID-19.

Astounding Growth in E-Commerce

Globally, the shift to e-commerce over the past decade has been immense and COVID-19 has greatly accelerated the shift from brick and mortar stores. According to eMarketer, global e-commerce sales grew from $1.3 trillion in 2014 to over $4.2 trillion in 2020. E-commerce is projected to accelerate with sales expected to surpass $6.5 trillion by 2023. 

As people are spending more time online, the attack vectors have increased and various types of cyber-attacks, fraud schemes and other activities are being launched by these criminals. A lot of these goods are offered on online marketplaces we use every day, which have made it easier and cheaper for counterfeiters and other criminals to access a broad customer base. Creating virtual and obscuring real identities is easier online than in offline interactions, which significantly aids criminals using aliases and creating front companies on the web.

Recently, the U.S. Department of Justice (DOJ) seized $2 million worth of cryptocurrency from members of ISIS. This network sold counterfeit masks and other PPE, with the goal of turning their profits into cryptocurrency to buy weapons. This is another clear example of how criminals and terrorist groups are taking advantage of the pandemic with counterfeit goods and using online marketplaces to conceal nefarious sellers. They were quick to adapt after years of trading in other illicit forms.

“The complaint highlights a scheme by Murat Cakar, an ISIS facilitator who is responsible for managing select ISIS hacking operations, to sell fake personal protective equipment via FaceMaskCenter.com,” said the Justice Department announcement.

The statistics are staggering: According to the Federal Trade Commission, over 173,000 consumers have reported fraud cases related to the purchase of products or services related to COVID-19. The Department of Homeland Security reports $7.9 million seized in illicit proceeds and close to 1,000 seizures associated with prohibited COVID-19 test kits, prohibited pharmaceuticals, and counterfeit masks.

Looking Ahead – Collaboration is Key

The pandemic has already had far-reaching consequences on society, governments and businesses. When there is a market and a big profit, organized crime and terrorist networks will seize on profitable opportunities and that is exactly what has happened. Illicit trade activities have increased virtually across every industry.

And, while COVID-19 has been a catalyst to drive new and increased illicit trade, it’s also brought more attention to the issue and furthered collaboration – a critical element in dismantling the networks that facilitate this trade. There are already good examples of collaboration between the public and private sectors. In May, Homeland Security Investigations partnered with Pfizer, 3M, Citi, Merck and others to protect consumers from COVID-19-related fraud. In July, a coalition of 11 private-sector partners launched a public service awareness campaign to spotlight resources available to help consumers combat the trade in fraudulent goods. Indeed, more needs to be done, but the partnerships and infrastructure to combat illicit trade are growing.

Private and public partnerships are essential to combat illicit trade and to bring all relevant stakeholders together to address key issues. It is more important than ever for NGOs, law enforcement agencies, governments, academia, media and other sectors of civil society to continue coming together and exchanging expertise, ideas and opinions around our common goal: winning the fight against illicit trade and related crimes.

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Hernan Albamonte is head of Illicit Trade Prevention U.S., Philip Morris International, Inc. Albamonte has been with Philip Morris International, Inc. for 13 years. He started with the company in his native country of Argentina, worked in Mexico, Central America and Switzerland before coming to Washington D.C. to head PMI’s illicit trade prevention efforts domestically.

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