How Counterfeiting Crimes Trigger Money Laundering Charges

How Counterfeiting Crimes Trigger Money Laundering Charges

Counterfeiting, the crime of making fake versions of goods and trying to sell them as if they were real, often leads to money laundering charges as well. That’s because counterfeiters make a lot of money selling their knock-off products, and then have to find ways to make that money appear legitimate.

According to the United Nations Office on Drugs and Crime (UNODC)[1], article 6 of the UN Convention Against Transnational Organized Crime requires countries to make money laundering a crime. This allows police and prosecutors to detect, investigate and charge money laundering connected to counterfeiting and other crimes.

How Selling Counterfeit Goods Generates Illegal Profits

Counterfeiters make huge profits by selling fake versions of popular products. They avoid paying licensing fees or royalties to the brands they are ripping off. They also save money by using inferior materials and labor. This lets them sell knock-offs cheaply, while still making big margins.

For example, a counterfeiter might make a fake luxury handbag for $10 in costs but sell it for $100. The real version would retail for $500. So the counterfeiter makes $90 pure profit on each bag sold. If they move 1,000 bags per month, that’s $90,000 in untaxed monthly income.

These profits add up fast when counterfeiters sell fake versions of popular electronics, designer clothing and accessories, sports apparel, pharmaceuticals, and more. For example, up to 10% of all pharmaceutical drugs worldwide may be counterfeit, according to estimates by the Pharmaceutical Security Institute.

Ways Counterfeiters Try to Launder Their Profits

To enjoy their illegal profits, counterfeiters have to make that money appear legitimate. Otherwise, they can’t spend it openly without attracting attention from tax authorities or law enforcement.

Some ways counterfeiters may try to launder their profits include:

• Mixing it with income from legal businesses like restaurants, bars, or import/export companies.
• Using shell companies to open bank accounts and transfer money.
• Breaking up deposits into amounts small enough to avoid scrutiny.
• Using money mules to move money between accounts or countries.
• Investing in real estate, luxury assets, or businesses in other names.
• Transferring it digitally through cryptocurrencies or offshore accounts.

According to Interpol, the scale of profits from counterfeiting makes it attractive for organized crime networks. They have the infrastructure needed to produce fake goods on an industrial scale. They also have connections to launder the profits internationally.

A report by the RAND Corporation estimated that counterfeiting accounts for up to 5% of world trade. This generates around $500 billion in illegal profits annually that counterfeiters must launder.

Penalties for Money Laundering Connected to Counterfeiting

In the United States, money laundering is a federal crime under the Money Laundering Control Act. Penalties depend on the amount laundered and other factors. Possible sentences include:

• Up to 20 years in prison.
• Fines of up to $500,000 or twice the amount laundered.
• Asset forfeiture, requiring forfeit of property connected to the crime.

The maximum prison sentence increases to 30 years if the laundered money came from certain serious crimes. These include trafficking in counterfeit goods, corruption, fraud, organized crime, and drug trafficking.

Conspiracy or aiding and abetting money laundering also carry stiff penalties. For example, knowingly allowing counterfeit profits to be laundered through your business could result in prosecution.

In addition to criminal prosecution, the government can file civil suits against money launderers. These aim to recover the illegal profits through forfeiture proceedings.

Famous Cases of Counterfeiters Caught Money Laundering

Here are some notable examples of counterfeiters who got caught laundering their profits:

• Michael Marin – The former CEO of a mortgage company was convicted in 2009 of selling over $2 million in counterfeit art. He funneled the profits through shell companies set up in his gardener’s name.
• Rosie Sutton – This British woman sold millions in fake designer clothing and handbags through eBay stores. She was jailed in 2014 for laundering over £1 million in profits.
• Xia Yeliang – A Chinese national living in Canada was convicted in 2015 for importing counterfeit items like Nike shoes and Burberry bags. He laundered over $4.5 million through China into Canadian bank accounts.

These cases highlight how selling knock-off goods can generate huge profits that lead to money laundering. Counterfeiters try to hide their incomes to evade taxes and detection by authorities.

Defenses Against Money Laundering Charges

Possible defenses against money laundering charges connected to counterfeiting include:

• Lack of knowledge – Arguing you did not know the money came from illegal counterfeiting profits.
• No intent – Claiming you did not intentionally try to conceal illegal profits or make them appear legal.
• Entrapment – Alleging law enforcement induced you to commit money laundering.

However, these defenses can be difficult to prove. When substantial amounts of money are involved, prosecutors argue defendants should have known something illegal was going on.

The complexity of money laundering cases is why those charged often seek experienced criminal defense lawyers. An attorney can protect your rights and potentially negotiate reduced penalties or dismissals.

Conclusion

Given the massive profits from counterfeit goods, traffickers must launder that money to benefit from it. But money laundering carries its own serious criminal penalties. So counterfeiters face risks both from trafficking fake goods, and from trying to hide the profits generated.

To avoid money laundering charges, it’s wise not to get involved in selling counterfeit items in the first place. The short-term profits are rarely worth the long-term consequences of breaking the law.