Fighting online illicit trade

How the internet has been a catalyst for illicit trade and how policymakers and industry can come together to tackle it
Source: Adobe Stock

By Marta Pacheco

Marta Pacheco is a Communications Consultant, Freelancer, Journalist & Independent Researcher.

21 Feb 2022

Advanced connectivity has brought the world closer together, making the movement of people, goods, and services easier than ever. But policymakers are increasingly concerned that connectivity has also allowed illicit trade to flourish.

According to Europol, there are more than 5,000 organised crime groups under surveillance in the EU; highly skilled organisations with cross-border operations coordinated online. Over time, criminals have upgraded their methods, with Europol’s SOTCA report 2021 describing today’s criminals as “digital natives”. While many crimes have fully migrated online, “virtually all criminal activities” feature someonline component. “Criminals exploit encrypted communications to network among each other, and use social media and instant messaging services to reach a larger audience to advertise illegal goods, or spread disinformation,” reads Europol’s report.

Given this trend, the International Chamber of Commerce has projected that the global economic value of counterfeiting and piracy could reach $2.3 trillion this year. “Criminal activity on the internet is a growing problem today,” MEP Arba Kokalari tells The Parliament Magazine. “It harms consumers who accidentally purchase dangerous products, businesses that are exposed to unfair competition and victims of crime financed through unlawful trade.” Fellow EPP MEP Ivan Stefanec adds, “E-commerce platforms play an essential role in a globalised digital economy, which was accelerated by the pandemic. However, their services are at risk of being misused by third parties including terrorists for illegal activities.”

“E-commerce platforms play an essential role in a globalised digital economy. However, their services are at risk of being misused for illegal activities”
Ivan Stefanec MEP

A global threat

For certain industries, such as the pharmaceutical and tobacco sectors, fighting illicit online products has become a permanent arm of their activities. Affordable Medicine’s Secretary-General Kasper Ernest told The Parliament Magazine that since the Falsified Medicines Directive (FMD) was implemented it’s possible to verify every medicinal product arriving at factories in the EU. “I would never buy medicine online, unless I absolutely trusted the seller,” Ernest added. The European Federation of Pharmaceutical Industries and Association (EFPIA) also recognises that counterfeit medicines represent a threat to patients’ health and safety and has signed up to the DG GROW MoU on the sale of counterfeit goods on the internet, a voluntary agreement facilitated by the European Commission to prevent offers of counterfeit goods from appearing in online marketplaces.

One sector particularly affected by illicit trade is the tobacco industry. According to the World Bank, the global trade in illicit tobacco is reportedly worth an estimated $40-50bn each year to the criminal groups who produce, manufacture, smuggle and sell tobacco products. While in Europe, an official report by French politicians Éric Woerth and Zivka Park reveals that there is a lack of a “comprehensive idea of [tobacco] counterfeiting”, with the report also acknowledging the existence of factories in Belgium and Spain. Nevertheless, when asked in 2020 about the financial consequences caused by the illicit tobacco trade, EU Budget Commissioner Johannes Hahn said this figure is estimated to be around €10 billion in losses to annual and EU budgets.

In response to fears that the profits from illicit tobacco trade are being funnelled into terror groups or organised crime, JTI (Japan Tobacco International) established the AntiIllicit Trade (AIT) team in 2009, which has been directly responsible for seizures of over three billion illegal cigarettes by law enforcement in 2021. The Teams official investigation initiated by JTI revealed that criminals were using Facebook and other social media channels to make millions of pounds selling cigarettes – many of them fake. The investigations into sales relating to JTI alone resulted in more than 17,000 social media posts for 210,000 items being removed from the internet between 2015 and 2019. “Technology has been increasingly deployed throughout the pandemic to enable sales of illegal tobacco. Though our own initiatives over 24,500 illegal tobacco websites were removed in the UK, Ireland, Spain, France, Romania,” says Ian Monteith, Director of Antiillegal Operations at JTI.

“Monitoring and enforcement in this area is lacking and the policies of online operators alone are often insufficient to prevent determined offenders”
Jiří Pospíšil MEP

A European response

According to RUSI, the exploitation of the internet and delivery services to sell and transport illicit products in Europe have become persistent trends. And the International Journal on Cyber Criminology (IJCC) has shown that past studies have provided little information on the size and magnitude of trafficking different types of products on crypto markets, including tobacco trafficking.

Responses so far to illicit trade have arguably been not well suited to combat these new smuggling methods and could be strengthened in a number of ways. It is evident that not only raising awareness about what lies behind illicit trade, both in the online and offline world, is of the utmost importance, but also that information-sharing and enforced cooperation between regulators, law enforcement and industry is crucial to addressing it.

Czech MEP Jiří Pospíšil says it’s time for the Commission and EU agencies such as the EUIPO, as well as Member states, to take more action to counter “the abuse” of e-commerce. “Monitoring and enforcement in this area is lacking and the policies of online operators alone are often insufficiently effective to prevent determined offenders,” he adds. Pospíšil – along with MEPs Kokalari and Stefanec – welcome the recent vote on the new Digital Services Act, which would introduce mandatory procedures for removing illegal goods and services and prevent unlawful trade by imposing ‘know your business customer’ obligations on online marketplaces. “It is a big step in the right direction towards a safer internet and better digital business environment,” Kokalari says.

Another approach that could bear fruit is through anti-money laundering legislation. EU ministers recently agreed to negotiate with the European Parliament to update existing rules on information accompanying financial transfers. The aim of the proposal is to introduce an obligation for crypto asset service providers to collect and make accessible all information about the sender and beneficiary of the transfers of virtual or crypto assets they operate.

Meanwhile, the EU tobacco traceability system is another crucial development in the EU’s approach to tackling illicit trade. Under the system all unit packets of tobacco products are marked with a unique identifier, ensuring that their origin is legitimate. Budget Commissioner Hahn said in September 2020, “The  Commission is actively engaged in fighting the illicit tobacco trade affecting the EU and Member States’  public finances.”

This content was commissioned by Japan Tobacco International (JTI) and produced by Dods

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