HOW THE UK COUNTERS
FINANCIAL LINKED CRIME
Detective Sergeant, Police Intellectual Property Crime Unit, City of London Police
The Landscape of Counterfeiting
The counterfeit goods industry has expanded over the past few years. Organized criminal groups tend to view intellectual property infringement as a low-risk and high-reward crime. Counterfeiting can often be linked to “poly-criminal” groups, which operate in multiple illegal trades such as the import and supply of drugs, money laundering, and human trafficking.
Intellectual property crime has a far-reaching impact on businesses, rights holders and, subsequently, the wider economy. According to the United Nations Commission on Crime Prevention and Criminal Justice, counterfeiting is now the second largest source of criminal income worldwide, second only to drugs (OECD, 2019).
In the UK, the sale of counterfeit goods is estimated to contribute to over 80,500 job losses each year by diverting funds away from legitimate traders (UK Intellectual Property Office, 2020). The current cost-of-living crisis has presented an opportunity for counterfeiters to take advantage of consumers who are experiencing financial pressures by offering fake goods and pirate services at a lower price.
It is almost certain that the profits generated from intellectual property crime are being used to support and expand criminal businesses and, inadvertently, legitimate businesses in the UK and abroad. At a time of economic challenge, these practices are becoming increasingly attractive to people who are keen to improve their financial position.
Established criminal networks continue to invest laundered profits in property, which enables them to gain even more money through rental and portfolio growth. It also enables these networks to improve their resilience to the disruption efforts of law enforcement.
Methods include currency conversion operations, international transfers bolstered by fictitious or inflated contracts and invoices, and alternative payment systems. Records can also be created to hide the existence of taxable assets, legitimizing large amounts of illicit funds.
Dismantling these networks will almost certainly become more difficult over time without joint effort between key partners.
How to Attack?
So, what can be done? Disruption of financial flows, service access, and confiscation of assets almost certainly have more impact on network capability and resilience than the seizure of physical goods or suspension of illicit streaming mechanisms. The Criminal Finance Act, launched in 2017, resulted in the introduction of “Account Freezing Orders”, which enabled the state to freeze money in bank accounts considered to be criminally tainted, and then apply for this to be forfeited.
The Police Intellectual Property Crime Unit (PIPCU) at City of London Police endeavours to use this legislation and the Proceeds of Crime Act 2002 (“POCA”) help recover the proceeds of crime wherever possible.
A key aspect of PIPCU’s strategy to disrupt serious and organized crime is to target the proceeds made by the sale of illicit goods, and our dedicated Financial Investigators help us do so. Last year, we confiscated £413,000 worth of assets, with a further £315,000 worth of assets currently frozen.
To assure the best outcomes at court PIPCU works closely with the Serious Economic, Organised Crime and International Directorate (SEOCID) from the onset of cases and suitable identified possibilities into the use of POCA legislation is discussed throughout. This close working partnership is key to the positive results PIPCU has had.
In January 2023, PIPCU secured confiscation orders with a combined total of £269,000 for two members of an organized criminal group involved in the sale of counterfeit footwear. Xiao Guang Xia, 42, of Kempsters Gardens in Salford, Manchester, was sentenced to two years imprisonment at Manchester Crown Court on February 9, 2021. He was given three months to pay £178,023.13 or face a further two-and-a-half-years imprisonment. His partner Jian Lin, 39, of the same address, was sentenced to eight months imprisonment, suspended for two years, and was given three months to pay £91,076.46 or face a further 15 months’ imprisonment (PIPCU, 2021).
Another recent case saw the company director of a technology repair shop, who imported counterfeit batteries, sold them worldwide and used his criminal earnings to get a mortgage, ordered to pay £127,000. Irfan Patel, 40, of St Annes Close, Dewsbury, West Yorkshire, was sentenced at Leeds Crown Court to 28 months’ imprisonment, suspended for 18 months, in August 2021. Financial investigations revealed that he had made £26,231 a year from selling the batteries (PIPCU, 2021).
Although it is impossible to predict the future, it is anticipated that the recruitment of individuals struggling with the increased cost-of-living, and the use of their personal accounts by criminal networks to launder money and conduct business transactions, is likely to develop into an established trend. It is highly likely that the layering of financial transactions involving cryptocurrencies, digital services and digital assets will become increasingly popular amongst those aiming to conceal the connections between individuals, businesses, and networks. Growing interest in the use of cryptocurrencies is also likely to continue.
THE BRAND PROTECTION PROFESSIONAL | JUNE 2023 | VOLUME 8 NUMBER 2
2023 COPYRIGHT MICHIGAN STATE UNIVERSITY BOARD OF TRUSTEES