Everyone loves a bargain, but the true cost of counterfeit goods to businesses and individuals is complex and often deeply chilling.
A US1.7 trillion-dollar problem and counting
We often think of the counterfeit goods industry as tourists browsing through “luxury” sunglasses, watches and handbags, care of a street vendor or maybe a clandestine showroom. But that’s only the tip of the iceberg – after all, it’s an industry that according to the OECD costs the global economy more than US$1.7 trillion. Just look at online retail, which allows consumers to connect with retailers of fake goods half a world away – most commonly in China, although India, Malaysia, Pakistan, Thailand, Turkey, Vietnam and South Korea are all also reported to be major sources of illicit goods.
And that’s just the consumer level. Business’s supply chains are rife with counterfeit goods, often unknowingly. Legitimate businesses have been found selling everything from counterfeit apparel and accessories to counterfeit toothpaste, wine, vitamins and more.
Firstly, and most obviously, there are intellectual property (IP) issues associated with dealing in products that are clearly imitations of someone else’s designs.
The counterfeit goods are generally not of the same quality as legitimate products or as thoroughly regulated. Many are even actively dangerous. Dealing in counterfeit goods puts your customers’ health and safety at risk – not to mention the host of reputational and legal risks you and your organisation could face should the worst happen.
One of the reasons that counterfeit goods are sold so cheaply is because they tend to be manufactured under forced labour conditions and/or by persons who have been trafficked. This might be a good time to remind you that some jurisdictions, including Australia, require businesses to report on the risks of engaging in modern slavery through their supply chains, making this a regulatory compliance consideration as well as an ethical one.
Finally – and perhaps most disturbingly – the production and sale of fake goods have been shown to have been used as a method of fundraising by organised crime and terrorist organisations. Apparently, it’s even more profitable than drug trafficking. For those entities who have anti-money laundering/counter-terrorist financing obligations (AML/CTF), that should ring a few alarm bells. And even those who don’t should be aware that dealing in property owned or held by terrorists is an offence with severe penalties in many jurisdictions.
So how can I ensure my business stays clear of fake goods?
Due diligence is king. Vet your customers and third parties, including your suppliers – remember, their actions could have real, significant implications for your business. Always know your product. Ensure your quality control standards are up to par and are being enforced.
It’s natural to be tempted by something that seems like a good deal. But if it’s too good to be true… remember the risks.
Contact GRC Solutions today for more information about our off-the-shelf and bespoke online training modules on Anti-Money Laundering, Modern Slavery, Fraud, Third Party Risk and more.