Counterfeit Goods

Primary gains come from selling counterfeit products, generating new criminal proceeds that require laundering.

Trade finance instruments, including letters of credit, are misused to move revenue from counterfeit goods under the guise of legitimate transactions. By falsifying invoices, shipping records, or other supporting documentation, criminals secure financing or bank guarantees that mask the illicit origin of proceeds from fake merchandise.

Criminals exploit weaknesses in cross-border shipping and distribution channels by mixing counterfeit goods with legitimate cargo, forging transport documents, and introducing fake merchandise into legitimate retail pathways. This operational channel vulnerability facilitates the commingling of illicit revenues with lawful sales.

This is the primary vulnerability because the technique systematically exploits multiple jurisdictions—often with weak IP enforcement or inconsistent AML controls—by forging trade records and routing counterfeit goods or proceeds across borders. This cross-border complexity impedes oversight, enabling criminals to obscure both their shipments and beneficial ownership.

Provides reference pricing and market trends for various goods. By comparing declared product values against recognized commodity benchmarks, financial institutions can detect indications of counterfeit goods through price discrepancies or mismatches with typical market valuations. This helps identify under- or over-invoicing schemes that criminals may use to disguise the true nature and value of counterfeit products.

Require detailed verification of corporate ownership and trade documentation for high-risk exporters or importers. This includes validating brand authenticity certificates and cross-checking declared goods against known legitimate manufacturers. Scrutinize beneficial ownership structures, especially where shell companies or layered entities appear, to expose hidden links to counterfeit operations or forged shipping records.

Implement focused monitoring scenarios to identify frequently structured deposits, withdrawals, or repetitive re-deposits tied to proceeds from counterfeit sales. Flag the unusual use of trade finance instruments, such as letters of credit, for repeated international shipments when transaction values do not align with typical market prices or the customer’s stated business profile.

Conduct robust due diligence and ongoing monitoring of logistics providers, freight forwarders, and distributors to ensure they have no prior involvement in counterfeit trafficking or trade documentation fraud. Require contractual clauses mandating compliance with intellectual property regulations, and periodically review any shifts in supplier ownership or shipping routes that may conceal counterfeit operations.

Hold funds in escrow accounts for trade transactions until brand authenticity checks, inspection of shipment contents, and verification of shipping documents are completed. Release payments only upon satisfactory proof of genuine product sourcing and compliance with relevant import/export requirements, preventing the flow of proceeds for counterfeit goods.

Leverage publicly available data and industry blacklists to check whether customers, suppliers, or trade partners have documented histories of IP infringement or counterfeit product lawsuits. Validate supplier and manufacturer claims by comparing social media, trade registries, and official brand records to uncover discrepancies that may indicate involvement in counterfeit distribution.

Conduct in-depth reviews of invoices, bills of lading, and shipping documents to identify inconsistencies, under-invoicing, or mismatched product descriptions indicative of counterfeit goods. Cross-verify shipment details with market pricing data and legitimate brand registries to detect mispriced or suspicious merchandise, and escalate potential document forgeries or IP infringements for further investigation.

• Proceeds from the sale of counterfeit goods are deposited into business or personal bank accounts, making them appear as normal revenue streams.
• Criminals perform repeated withdrawals and re-deposits (layering) across multiple accounts, blurring the origin of funds.
• The established legitimacy of bank accounts helps mask suspicious transactions, enabling counterfeit-related proceeds to blend with genuine earnings.

• Criminals use letters of credit to finance purchases or sales of counterfeit merchandise under the pretense of legitimate trade.
• Falsified shipping documents and invoices convince banks to guarantee payments, creating a veneer of lawful transactions.
• Once issued, the letter of credit transfers funds in a manner that appears compliant with trade requirements, thereby laundering proceeds derived from counterfeit operations.

• Offenders forge or manipulate documents such as bills of lading or commercial invoices to disguise the nature, quantity, or value of goods.
• These trade instruments enable large cross-border transactions to appear legitimate, masking counterfeit shipments within normal trade flows.
• By exploiting documented "evidence" of lawful commerce, criminals integrate illicit proceeds from counterfeit goods into the global financial system with diminished scrutiny.

• Street-level or retail sales of counterfeit items frequently generate substantial physical currency.
• Criminals exploit the anonymity of cash by splitting deposits into smaller amounts or funneling them through multiple channels to avoid detection.
• Converting counterfeit sales into cash and then re-depositing it reduces traceability, complicating financial investigations and AML controls.

• Enable criminals to finance purchases or sales of counterfeit goods under the guise of legitimate trade deals.
• Fraudulent or superficial documentation can satisfy bank requirements, facilitating disbursements that appear legitimate, thus laundering proceeds derived from counterfeit merchandise.

• Facilitate cross-border transportation and distribution of counterfeit goods, often hidden within legitimate shipments.
• Provide opportunities to manipulate or forge shipping documents (e.g., bills of lading), disguising the illicit nature of goods and evading regulatory scrutiny.

• Criminals forge or falsify import/export paperwork, including customs declarations and invoices, allowing counterfeit goods to enter legitimate supply chains.
• Misrepresentation of product origin or quantity conceals the counterfeit nature, undermining authorities' ability to detect illegal shipments.

• Deposit counterfeit product revenues as legitimate business income, commingling illicit proceeds with legitimate funds.
• Repeated withdrawals and re-deposits create layering, making illicit transaction patterns harder to detect, thereby complicating AML investigations.

• Provide channels to establish shell entities or layered corporate structures across multiple jurisdictions, hiding beneficial owners tied to counterfeit operations.
• By minimizing transparency, criminals obscure the flow of illicit funds from counterfeiting activities, circumventing AML oversight.

Banks receive deposit transactions from counterfeit goods sales, providing a platform for layering through repeated withdrawals and re-deposits.

• Criminals use standard banking products (e.g., local business accounts) to launder illicit proceeds under the guise of legitimate business income.
• Ongoing deposit and withdrawal activities, especially across multiple accounts, complicate financial institutions' transaction monitoring and customer due diligence.

Engages in cross-border trade, handling customs paperwork and shipping logistics that can be manipulated to disguise counterfeit stock.

• May file falsified declarations or invoices, masking the true contents of shipments and the origin of goods.
• Presents challenges for financial institutions attempting to verify legitimate trade transactions or track the flow of funds tied to imports and exports.

They oversee large-scale production or acquisition of counterfeit goods across multiple jurisdictions. Profits from selling these items are funneled through various accounts or corporate structures, hindering clear identification of illicit funds by financial institutions.

• Generate illicit revenues from counterfeit product sales and deposit them into the financial system.
• Move funds repeatedly between accounts, complicating AML controls and obscuring the true source of earnings.

They produce or alter documents such as import/export declarations, shipping manifests, and trade invoices to disguise the true nature of counterfeit shipments.

• Enable criminals to misrepresent the origin or value of goods, undermining financial institutions' ability to verify legitimate trade transactions.
• Facilitate the integration of illicit product revenue by making financial flows appear compliant with official documentation.

These minimally active entities are used to obscure beneficial ownership and route revenues from counterfeit goods as though they stem from legitimate operations.

• Provide a veil of legitimacy by issuing invoices and receiving payments tied to fake merchandise.
• Conceal ultimate beneficiaries from financial institutions, complicating beneficial ownership screening and due diligence.

Handles transportation and warehousing, potentially mixing counterfeit goods with legitimate cargo. Criminals exploit these services to move illicit products undetected.

• Complicit or unwitting logistics operators may issue or accept fraudulent shipping records, obstructing efforts by financial institutions and authorities to trace product origins.
• Cross-border shipments make it more challenging to identify suspicious transaction patterns linked to payments for counterfeit merchandise.

These retail businesses, whether complicit or unaware, introduce counterfeit goods into legitimate consumer channels, mixing illicit revenue with lawful sales.

• Financial institutions processing merchant payments or deposits face difficulty identifying which proceeds derive from counterfeit products.
• Criminals exploit merchants' routine transactions to commingle illicit funds, hindering detection efforts.