E-Commerce and Digital Marketplaces: The Booming Business of Cross-Border Transaction Laundering

Washington, DC / ICAIE News (Press Release) / September 17, 2024: The International Coalition Against Illicit Economies (ICAIE) announces the publication of a new Fall 2024 Policy Brief entitled, “E-Commerce and Digital Marketplaces: The Booming Business of Cross-Border Transaction Laundering“, co-authored by John Cassara, David M. Luna, and Dr. Layla M. Hashemi.

Executive Summary

Criminals, counterfeiters, illicit threat networks, and money launderers are reaping hundreds of billions of dollars in profit every year from criminality across today’s hubs of illicit trade, global supply chains, and e-commerce platforms. Even before the recent COVID-19 pandemic, illicit trade in the digital world and across e-commerce platforms was becoming quite lucrative. This is increasingly true due to the relative ease of gaining access to sell counterfeits and illicit goods across an array of e-commerce platforms, social media, encrypted messaging apps, online-marketplaces, and other digital shopping streams. Today, counterfeits, pirated and stolen products, and other illicit goods and contraband transverse borders and communities, and enter our supply chains, businesses, and homes.

The economic, security, social, and environmental impacts of illicit goods are serious and multi dimensional threats. They help fuel transnational corruption and crime and greater insecurity while also endangering the health and safety of consumer-citizens around the world. Approximately 87% of consumers who bought a counterfeit product have suffered some sort of negative consequences, ranging from defective products and financial losses and, in some cases, severe illnesses and serious physical injuries.

Illicit trade results in lost revenue and market share for legitimate business enterprises; theft of intellectual property, trade secrets, and critical data; job displacement for workers and business closures; increased costs of doing business overseas; and diminished brand integrity and market reputation value. According to the FBI, it is estimated that China steals up to $600 billion of American intellectual property (IP) annually. It is estimated that IP theft endangers the jobs of more than 45 million Americans who work in IP-intensive industries, resulting in a loss of more than $6.5 trillion in economic output.

IP crime also hurts the ingenuity, innovation, and competitiveness of leading market companies and small-and-medium sized businesses. Illicit goods are often produced in unregulated spaces where criminals and criminal entrepreneurs use forced labor in dangerous, unsanitary conditions, or manufacture fake goods using pollution-creating machinery and toxic materials that harm our collective environmental and human security.

With advances in mobile devices and communications and the ease of downloading shopping apps, bad actors have shifted the trade in counterfeits, stolen and illicit goods, and related criminality away from physical retail stores to targeting digital spheres, in which payments can easily be made with digital currencies or value cards. Purchased real and fake goods arrive almost overnight through express shipping couriers or postal services.

In this ecosystem of criminality and fraud, counterfeiters and money launderers alike are similarly exploiting legal, regulatory, and law enforcement vulnerabilities to leverage anonymity in establishing online stores through the incorporation of anonymous shell companies, as well as the use of anonymous payment systems to enter e-commerce markets to transact in numerous criminalities. While counterfeiters and money launders target all aspects of the retail supply chain to traffic illicit goods, e-commerce is also increasingly used to sell illicit or stolen goods, and to launder dirty money derived from predicate crimes and cross-border illicit activities.

Often, transaction laundering includes the formal financial and banking system, unregulated payment gateways, and some payment systems of e-commerce platforms. However, even with an array of illicit activities and transaction laundering being conducted across e-commerce platforms and digital marketplaces, one report estimates that only nine percent of retailers view e-commerce crime as a priority.

This ICAIE Fall 2024 policy brief highlights the ongoing threats related to international transaction laundering and other financial crimes related to e-commerce and the trade in counterfeits and illicit goods. These threats are significantly expanding illicit economies globally. The policy brief also provides a special focus into the trade in illicit pharmaceuticals across online pharmacies in digital marketplaces.

Finally, ICAIE examines some of the new forms of money laundering in the cyber world including digital wallets, cryptocurrencies, mobile payments, and other emerging illicit finance methodologies.

E-Commerce and Digital Marketplaces: The Booming Business of Cross-Border Transaction Laundering, 17 September 17, 2024.