Context:

• This article is based on an Editorial “As illicit trade booms, seizure amount: 3.5 tonnes of gold, 18 crore cigarette sticks and 90 tonnes of heroin caught in FY23” which was published in the Indian Express. Recently, FICCI CASCADE reported on illicit markets  associated with financial flows and revealed their linkages with organised crime and terrorism.

Statistics by FICCI: Illegal Economy in India and its Impact

• Assessing India’s Illegal Economy: The illegal economy in India has an overall score of 6.3, which is higher than the average score of 5 of other 122 countries.
  • 3,172 cases of drug seizures were recorded during 2014-2022 as per FICCI reports. 
  • FICCI Analysis on organised crime: In the organised crime segment, India has a lower score of 4.3 against 5.2 for an average of 122 countries.
• Revenue Loss for India has faced an approximate total potential revenue loss of US $13 billion between 2009-2018. 
• Significant Seizures from Last year as per FICCI reports: Around 3.5 tonnes of gold, 18 crore cigarette sticks, 140 metric tonnes of red sanders and 90 tonnes of heroin were seized along with other drugs during the last financial year.

FICCI’s Insights on Illicit Trade: Counterfeits, Smuggling, and Money Laundering

• Reference: Illegal exchange of goods and/or services, often in violation of national or international laws. It comprises trade of manufacturing and export of counterfeit goods.
• Types of Illicit Trade are Counterfeiting, Smuggling, Money laundering, etc.
  • Counterfeits: Counterfeits are most commonly called “fake goods” or “knock-offs.”
  • Smuggling: Smuggling in India report 2021-22 identified 437 instances of duty evasion totalling Rs 3,924 crore, which was a 40 percent jump from 2020-21.
  • Money laundering: Based on UN Office of Drugs and Crimes (UNODC) estimates, in 2021, the quantum of money laundering in India was estimated at $159 billion (around 5 percent of GDP).
    • Definition: Money laundering is the process of hiding the source of money obtained from illegal sources and converting it to a clean source, thereby avoiding prosecution, conviction, and confiscation of the criminal funds.

Interconnected Threats: The Nexus of Illegal Economy, Terrorism, and Organized Crime

• Nexus: There is an intricate nexus between the illegal economy, terror and organised crime. 
• Financial Flows: Illicit financial flows drain resources from development not only when they leave a country (outflows), but also when they enter a country (inflows). 
• Organised Crime and Illegal Economy: Drug trafficking, arms smuggling, counterfeit goods, and wildlife trade are lucrative enterprises that fund criminal networks. 

• Linkages with Terrorism: Illicit trade generates significant revenue, enabling financial backing for terrorist organisations. 
  • According to the United Nations, millions of dollars from the trade of illicit tobacco reach terror outfits such as the Taliban and Al-Qaeda.

FICCI Report: Impact of Illegal Trade on Economy, Enforcement, and Brand Value:

• Loss to Economic: as per FICCI reports Governments suffer heavy losses by way of loss of sales tax, customs tax etc. 
• Enforcement: Sophisticated, well-connected and adequately funded activities of counterfeiting and smuggling are presenting a bigger challenge for enforcement authorities. 
• Breeding Ground for Criminal Activities: Financial gains are further deployed for illegal activities such as drug trafficking and other organised crimes.
• Visible Consequences: FICCI analyses that there is adverse impact on innovation, investment, brand reputation, health and wellness and national security are well-known. 
• Technology Adoption: Online marketplaces have become a preferred hub for illicit operators owing to their wider reach and ease of access. 
• Downfall of Local Industries: It drastically cuts prices of locally manufactured goods thereby leading to unemployment.
• Dilution of Brand Value  to Inferior Products as observed by FICCI: Inferior products tarnish the reputation of the manufacturer and dilute the brand image over time. Manufacturers lose their trust as consumers unknowingly buy fake products. 

Suggestions by FICCI: Government Agencies’ Role in Combating Illicit Trade in India

• Role of Central Bureau of Investigation (CBI): Investigates a wide range of criminal activities, including corruption, economic offences, and cases related to organised crime.
• Role of Narcotics Control Bureau (NCB): Coordinates with other law enforcement agencies to address the illicit drug trade and associated criminal activities.
• Role of Enforcement Directorate (ED): Investigates economic offences and plays a crucial role in tracking and seizing assets acquired through illicit means.
• Role of National Investigation Agency (NIA): Investigates and combats terrorism and offences that have national and transnational implications. 

Way Forward: FICCI’s Recommendations – Combating Illicit Trade and Terror Financing in India

• Need to combat terror financing: Efforts and strategies aimed at preventing and disrupting the flow of funds and resources to terrorist organisations. 
• India’s geographical location with reference to drug producing zones like the Golden Triangle (Myanmar, Laos, and Thailand) and the Golden Crescent (Afghanistan, Pakistan, and Iran), call for a customised approach to deal with illicit trade and associated issues. 
• Enforcement agencies need to take into account the diverse methods and evolving technological advancements.
• Need to generate consciousness amongst consumers.
• Stringent anti-piracy regulations are a must to enforce IP rights and empower various enforcement agencies in India. There is a need for a separate e-Commerce law in the country. 
• Need to safeguard economic stability, ensure fair competition and ease of doing business, adoption of anti-counterfeit technologies, investing in research and development and collaboration with stakeholders.

Conclusion

• FICCI reports comprehensively observed that India is facing a growing threat from illicit trade impacting our economy, security, and reputation. To combat this issue, government agencies must collaborate effectively and strict regulations need enforcement. Public awareness and investment in anti-counterfeit measures are crucial steps toward securing our nation’s future

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