TRIBUNE

When we decided to launch I.T.T.A (ALCCI) to sensitize businesses and the public sector on the damages caused by this scourge, only a few international bodies had addressed it, like the World Customs Organisation, the O.E.C.D, the World Economic Forum in Davos, Interpol and Europol. In France, governmental authorities have not yet recognised this subject fully and enterprises are still in a reactive stance regarding it. The situation has somewhat changed lately. Studies have eased the understanding of the threat, entailing that people who have to know about it to act are alarmed. It is only a fledgling movement that I.T.T.A wants to bolster so that Illicit Trade be reined in, In France as abroad. Alain Juillet, Hervé Pierre, Dominique Lapprand

Illicit Trade can be defined as the selling of goods and services to the public in violation of laws. This activity is as old as commercial and economic exchanges. It was there all along. In its most traditional aspect, it violates property rights. More recently, it antagonized laws protecting consumers, environment and more broadly speaking the judicial international order.

A traditional form of crime, but poorly enforced

Illicit Trade is not like other forms of commerce that, until the end of the 19th century, relied on physical property of goods being traded between buyers and sellers. Illicit Trade today is mostly about stolen, counterfeited or fraudulent merchandise.  It also thrives on the violation of laws protecting intellectual property.

Its development was mostly due to the creation of complex and heavy taxes which have generated trafficking of numerous items that may be sold without paying affixed taxes (VAT, customs and excise, and other diverse taxes). More recently, Illicit Trade has gained further momentum with the violation of intellectual property laws. It is based in this case on the counterfeiting of intangible (software, patents, and copyrights) or tangible assets (branded goods). As before, enforcing the law in the latter cases relies on proving the property rights of traded items.

The illicit trader benefits from a tremendous pricing advantage compared with honest competitors. At best, the product did not cost the perpetrator anything (theft); at worst, he/she avoids affixed taxes (contraband, fiscal embezzlement) or the conception of the item (counterfeit). Whilst it would be possible to enforce Illicit Trade on the basis of penal laws and regulations that are intended to protect property effectively and the collection of taxes, it is however difficult to do so considering the laxity of most courts re these violations.

In its traditional aspect, Illicit Trade is therefore a major risk for businesses. If it is theoretically possible to enforce it with existing statutes, those are not sufficiently used by the judiciary whose knowledge of what is at stake is still insufficient.

New forms of Illicit Trade regarding consumers and natural/social environment protection.

Ethics regulations among corporate and smaller businesses are imposed to protect both consumers and natural/social environment. For consumers, health, hygiene and security are priorities. Illicit Trade obviously has no such concern and does not provide any form of consumers protection. As for the environment, the situation is often worse. Illicit Trade deals with many items or services related to polluting activities, endangered and protected species² or, worse, in connection with new forms of slavery (forced labour or child labour) or conflicts (blood diamonds, tropical wood). These violations are in total non-compliance to laws.

The forms of non-compliance are diverse. It depends on local laws, particularly sophisticated in the Western world, but not well harmonized or congruent on the regional or multilateral stage despite a multiplicity of agreements. Thus, the trade of a product can be licit here and illicit elsewhere, depending on where you are. The various answers to these administrative regimes emphasise an insufficient globalization of laws with respect to the items which are the most traded and exchanged throughout the world. The W.T.O so far has refused to address this issue whereas other organizations (O.E.C.D, W.E.F) are at least beginning to do so.

The risk for the business is twofold. On the one hand, the illicit trader benefits from a pricing advantage. On the other hand, businesses can, unbeknownst to them, integrate products coming from Illicit Trade and its nastiest forms, in their processes.

In its emerging form of non-compliance, Illicit Trade not only represents an unfair trading threat, but also a threat to the integrity, ethical positioning and image of businesses. The answer to those challenges is unfortunately still judicially insufficient and politically only fledgling.

The corruption of commercial practices and laws

The complexity of modern economy and the new capabilities of transportation and communication allow a high mobility of goods and of financial transactions that accompany these trades. Speed and globalization ultimately jeopardize commercial and contractual practices, sometimes causing businesses to lose control of the products they make, sell or buy. Parallel imports of licit and authentic items can make for high losses. The participation in a laundering process involving Illicit Trade can also threaten businesses, and cause lawsuits and financial risks.  The violation of the law is here mainly one of commercial rights.

This is still a grey area, a sensitive issue that most enterprises are poorly cognisant of. This is exacerbated by the lack of consistency and rules on the international level.

The corruption of commercial practices and laws by Illicit Trade can strike any business; they may become victims of predatory unfair competitive practices and cause grave financial damage and a potential heightened risk to their image.

Illicit Trade’s connection to crime

Illicit Trade is not only about violation of laws and regulations. It is also about a close link between those unfair commercial practices and organized crime, not only for bulk supplies but also with street distribution through the retailing sector. Who, indeed, can convey and protect whole containers on several continents if not organised crime? Who is able to control high street sale, generating several millions annually? Who can finance, manage and launder the money earned?

The risk brought about by Illicit Trade is here and now: in fostering the change from a demand rationale to a supply one: thereby creating an apparently satisfied client. This implies that Illicit Trade can no longer be viewed as a collection of diverse violations. It upends the traditional judicial view: the mechanisms behind Illicit Trade must be treated on their own, as a whole, on the same level as money laundering.

Trade is pervading the Web, a virtual public space where multiple transactions happen, as in the streets (Street sales on the sly), commercial outlets (sales under the counter) or neighbourhoods (from word of mouth). We identify three basic forms of e-Illicit Trade.

Illicit Trade and Darknet

Illicit Trade on the Darknet requires specific softwares and processes, warranting the actors’, sellers’ and buyers’ anonymity. Several studies have shown that e-Illicit Trade represent an annual market of several $ billion, involving numerous sites  (crypto markets) where retailers thrive. The same studies also evidenced that the majority of exchanges taking place are about drugs (70%), medicines (20%), the rest being spread from arms to fraud-softwares, hacking tools, ID thefts, personal date filrs, illegally obtained. Payment will take place through particular means, Paypal or still crypto-currencies.

Illicit Trade and the classical Web

On the classical Web, sales of counterfeited, prohibited for sale, stolen or non-compliant products are the most frequent forms of Illicit Trade. Placing the sites, identifying them, is always difficult. Payment is here too processed through cards, Paypal or any other means. Delivery is conveniently done through regular postal services or express delivery companies whose responsibility is at stake. Expedition is often from abroad (outside the E.U) entailing a slight risk at the borders. To avoid that risk, it can be orchestrated from a clandestine warehouse in France. Figures in billions of dollars are often cited (source?)

Illicit Trade on social networks and sites between individuals

Social networks and Small Ads sites are the third place for e-Illicit Trade. The method is always the same: the network or the small adds site facilitate the initial relation between a seller and a buyer. The realization of the transaction and the subsequent payment will take place on another support, contrary to what happens on the Darknet where the three-pronged action (contact, payment, transaction) are on one same interface. Figures lack, but if querried, enterprises victims of those trades speak of volumes in the hundreds of thousand dollars, if not millions. This worries regular corporates such as Facebook,, Le Bon Coin, PriceMinister, Amazon, Alibaba.

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REFERENCES

I.T.T.A is gathering here main documents relating to Illicit Trade. Some are published by international organisations. Others are academic works that the reader the reader is invited to get by him/herself, accordingly with copyrights. READ MORE

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