Counterfeiting, Piracy & Smuggling - Growing threat to national security

Terrorism is a well-known problem that is prevailing around the world and poses an imminent threat to civilians, the industry and governments. Terrorist organizations may operate with different operational goals including regional, ideological or economic. However, to carry out their operations, they require large amounts of financing.

The costs incurred by terrorist organizations can be divided into direct and indirect costs. The direct costs incurred by terrorist organizations include those of materials used in attacks, e.g., explosives, vehicles, weapons, communication equipment, etc. The indirect costs incurred, which are usually much higher than direct ones, include those of running terrorist organisations, including recruitment, training, propagation of agenda, cost of inactive terrorist cells, etc. As per news and media reports during the past several decades and cases disclosed by law enforcement agencies, terrorist organizations raise funds from a wide range of sources, largely from state funding and donations and charities. However, in the past few decades, they have expanded their funding avenues and have been actively using counterfeiting, piracy and smuggling as means of funding their operations.

During the past few decades, leading intelligence and law-enforcement agencies around the world have found conclusive evidence of the increasing involvement of terrorism organizations in counterfeiting, piracy and smuggling activities to fund terrorist attacks. While several counterfeiting outfits are transferring portions of their proceeds to terrorist organizations, some of these are set up for the sole purpose of financing terrorism. Counterfeiting of drugs, luxury goods, cigarettes, etc., is a major source of contribution to funding extremist groups. Similarly, smuggling of goods is used by terrorist organizations to raise funds and launder proceeds from other businesses, and use these to finance terrorism. Investigations by law enforcement agencies the world over have revealed that smuggling of gold, cigarettes, oil, precious gems and stones, music and film DVDs, narcotic drugs, etc., are the major contributors to financing of terrorism.

As per the recent news reports, apart from their direct involvement in counterfeiting, piracy and smuggling to raise funds, terrorist organizations have increasingly begun to develop strong linkages with organized crime and mafia organizations to fund their operations. Given their vast network, it is easier for organised crime outfits to raise funds through counterfeiting, piracy and smuggling, which are then laundered to finance terrorist organizations.

India has taken several initiatives to curtail the menace of counterfeiting, piracy and smuggling, and its nexus with financing of terrorism. The Government has passed and enacted several laws and enforcement agencies have been enabled to detect and prevent counterfeiting, smuggling and financing of terrorism. Significant technological advancements have been made by the industry and the Government, which has implemented capacity-building measures to create awareness among consumers, industry and enforcement agencies to sensitize them about this menace.

FICCI’s Committee against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE) has released a landmark study in 2013 on the Socio-Economic Impact of Counterfeiting, Smuggling and Tax Evasion in India. The study also recommends concrete steps to be taken by the Government in order to curtail such activities. In addition to efforts made till now, it is essential for the Government and industry to collaborate on tackling the menace of counterfeiting, piracy and smuggling. Some effective measures could include:

 Setting up of government agencies that are solely responsible for preventing counterfeiting and piracy  Strengthening laws and regulations to aid enforcement agencies in investigating and prosecuting perpetrators of such crimes

Working on creation and implementation of standard technical solutions for anti-counterfeiting / piracy and smuggling to be adopted across industry sectors  

Creating awareness among consumers and enforcement agencies on the importance of effectively tackling counterfeiting, piracy and smuggling  This knowledge paper explores the dimensions of financing of terrorism through counterfeiting, piracy and smuggling. Due to the sensitivity of the topic, our analyses are presented from the qualitative point of view, based on secondary research carried out in the field.


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