Experts have alerted governments across the world to the threat of rising illicit trade resulting from the ongoing pandemic situation.
The experts, who spoke at a recent webinar, further proffered measures that can assist governments to counter the resultant proliferation of illicit products which cost governments huge losses in revenue.
The impact of taxation on illegal trade, particularly during strained economic times, was also a key discussion point during the session.
The webinar, titled ‘Global Illicit Trade – Profiteering from Pandemic,’ was organised by The Economist Intelligence Unit and featured a panel of experts from law enforcement, international organisations and industry. Participants tuned in from various sectors all over the world.
The discussion, which was moderated by Christopher Clague, a managing editor and head of Trade and Globalisation Issues at the Economist Intelligence Unit, noted that with the current global situation necessitating shut borders and travel restrictions, organised crime groups had quickly adapted to deploy alternate measures in producing and trading illicit products, including use of the internet, social media, online networking sites, courier taxis and delivery services.
Paul Stanfield, INTERPOL’s director of Organised and Emerging Crime and panellist at the event, highlighted how the restriction in the movement of people are forcing criminals to go online and commit massive amounts of frauds.
“Criminals have taken advantage of the situation by becoming savvier using the internet. So, we see a lot of the criminal activities going on online because of the restriction of movements. Criminals are very quick to adapt, and they are motivated primarily by making money,” Stanfield said.
Another panellist, Ian Monteith, global senior director of Anti-Illegal Trade at Japan Tobacco International (JTI), noted that “despite Covid-19 restrictions, significant illegal production has continued throughout the last few months of lockdown and organised crime groups are opening new factories”.
“For instance, as many as eight new illegal production or storage sites have been identified in Belgium since the start of this year, many during the crisis. This picture extends to most EU countries and large counterfeit production sites have been seized in the Czech Republic, Greece, Spain and Ireland in recent weeks,” Monteith said.
He explained that criminals were very quick in adapting their ways of working and switching to the goods that are in high demand, while using the same illegal channels.
For instance, in Ukraine organised crime groups that are normally involved in illegal tobacco activities smuggled 1.5 tons of medical masks to Italy in the first week of the pandemic.
There was similar a seizure in Germany of illegal cigarettes and personal protective equipment. In the EU (Europol study) some of the organised crime groups trafficking pesticides are also involved in other illegal activities such as trafficking counterfeited cigarettes and illegally trading pharmaceuticals.
This clearly demonstrates that criminal groups are well connected, organised, business driven and operate as a network.
“The current pandemic crisis has been taking an immediate toll on the real economy and people’s disposable income. Many people have experienced unemployment and loss of earnings immediately reducing their purchasing power while the crisis has created additional pressures on an increasing number of consumers who have less money to spend. Hence, an increasing number of consumers will inadvertently revert to non-taxed, illegal products and this applies to all sorts of goods such as electronics, health products and car parts amongst others,” Monteith said.
János Bertók, acting director, OECD Public Governance Directorate and a panellist at the webinar, added that there are more than 100,000 new websites that have been created related to COVID-19 for distribution of products.
“This distribution channels are created to provide all COVID-19 related protected foods or pharmaceuticals and this is extremely dangerous, because there’s very limited control of the quality. There is an internal and very rapid spread of falsified medicines,” Bertók said.
“There were strong viewpoints on the possible solutions which governments could deploy to overcome this challenge. Amongst the key points emphasised was strong and consistent enforcement of existing measures such as strengthening the control on borders, stricter punishments and higher sanctions as deterrents for criminals,” he said.
The panellists further highlighted the requisite for close coordination and cooperation between governments and legitimate companies at both national and international levels, as well as reinforced cooperation between countries.
They said the fight against illicit trade requires that the appropriate initiatives of enforcement need to be coupled with reasonable policies of moderate tax increases taking into consideration its impact on affordability as a potential driver for consumers to turn to illegal trade.
Taxation should carefully balance each country’s policy priorities and concerns, which include robust revenue generation, consumer purchasing power, differences in economic development and employment within the country, illegal trade, and possible risks from regional sensitivities such as propensity to cross-border shopping, the panellists said.
