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Uncovering the hidden costs of counterfeit products

Updated: Aug 29, 2023

A vigilant shield against counterfeits fortifies not only products, but the bond between brand and consumer.

The global impact of counterfeit products

Start with what is right rather than what is acceptable


In today's globalised marketplace, counterfeit products have emerged as a significant and growing threat to both consumers and legitimate businesses. The proliferation of fake goods not only undermines consumer trust but also poses serious health and safety risks. In response, governments, industries, and regulatory bodies worldwide have been implementing stringent control measures to combat the spread of counterfeit products and protect consumers. This article explores the comprehensive strategies and innovative technologies being employed to tackle this pressing issue.


Does your organisation's approach to external threats consider the global impact of counterfeit products and do leaders perceive that it is a victimless crime. With the exponential growth and impact to business and government projects what deterrence can be put in place to raise awareness and significantly impact this illicit transnational crime.


In part due to the piracy of items such as branded garments, footwear and perfumes, counterfeit products in a large percentage of cases continues to be socially acceptable.


Much has been published internationally about the global threat of counterfeit products including the impact that it has on public health and safety and yet there remains public complacency and the continued lack of a coordinated international response to this proliferation that impacts all sectors.


It is common in international business for the manufacturer of a client's brand clothing or perfume to make excess quantities of the requirement to sell off either at a reduced price through their supply chain or in some cases rebranded as a completely different product. This may be counterfeiting in its simplest form however the scale of counterfeiting and the threat to life and lives lost in many areas continues to grow.


GLOBAL COUNTERFEIT PRODUCT FIGURES

According to the Organisation for Economic Cooperation and Development, counterfeit products represent about 3% of global trade that equates to approximately $590 billion.


The International Anti-Counterfeiting Coalition (IACC) reports that counterfeit products trade has increased from $5.5 billion in 1982 to approximately $600 billion today.








GLOBAL IMPACT OF COUNTERFEIT PRODUCTS

If we consider the below statement we can make an assumption that in the majority of cases that the quality of the counterfeit product will be inferior and that any goods or materials manufactured in volumes have the potential to be counterfeited.


A counterfeit product's key purpose is to maximise the revenue for the counterfeiter and their illicit network

COUNTERFEIT PRODUCTS AND CHILD LABOUR

What does this mean in the context of child labour and modern day slavery, firstly a source of labour to produce these products and an additional financial route for criminals? It can also explain part of the reason why organised crime and terrorist financing also see this as an easy route to collect illicit funds and keep them below the radar of government organisations.


The level of counterfeit pharmaceuticals has a significant impact globally and their continued proliferation and breadth of pharmaceuticals counterfeited, in areas such as antimalarials it is difficult to measure the number of deaths caused where individuals believed they were protected, only that it will be significant.


SUPPLY CHAIN INFILTRATION

In addition to the loss of revenue opportunities by the big brands it is estimated that EU tax revenues from retail and wholesale sector amounted to EUR 4.3 billion. The US Chamber of Commerce confirmed in 2018 that each year, international counterfeiters ship more than $400million dollars worth of counterfeit goods to unsuspecting American consumers. These include counterfeit brake pads for cars and airbags that fail; counterfeit batteries and chargers that melt and catch fire.


RISK ASSESSMENT & RESPONSE

So how do we tackle this problem from an organisation perspective? In addition to procurement fraud and corruption training, training on how to identify counterfeit markers, counterfeit detection, and supply chain prevention solutions that can support an organisation response, an organisations risk assessment and management including prevention through design are also key first steps to understand the level of risk and potential impact.


If a supplier has knowingly introduced counterfeit products to maximise profits, part of any risk assessment should also take the view that they are likely to be committing other types of procurement fraud. Only when making this additional assessment will an organisation be able to measure the full extent of their procurement fraud risk.


In addition to the introduction of supply chain solutions such as RFID to monitor and mitigate this procurement fraud risk and the production of global figures on illicit trade, the international community needs to introduce a coordinated communication strategy that changes the message around counterfeit products, the impact that it has and the lives lost. Only when we have this consistent message will we be able to measure whether there is a positive global impact on this area of illicit trade and financial flows.


If you have a counterfeit product risk, what do you believe should be the next step that can significantly impact this global illicit transnational crime?



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