German customs operation gives counterfeiters the blues

An international operation headed by customs officers in Germany that aims to disrupt the trade in counterfeit medicines, especially on the Internet, has notched up some notable successes in its first 18 months.

Project Blue is specifically targeted at the illegal trade in pharmaceuticals and is being conducted by a 12-member team from German customs, operating out of Freiburg, under the leadership of Sieghart Vosseler.

The operation relied initially on monitoring of the Internet to identify websites offering illegal medicines for sale, and brought together customs from a number of countries, other enforcement bodies including the police, the pharmaceutical industry and the credit card companies.

"The cooperation of the financial sector made this a unique operation, and was a major contributory factor towards the success of Project Blue," said Vosseler, who heads the Organised Crime Investigations unit at German Customs.

Few people are aware of the hugely complicated network that is operating when they make a purchase using a credit card, and particularly the fact that the likes of Visa and Mastercard never actually touch the money that changes hands.

"The credit card companies provide the network for payment, but the actual money is handled by independent companies known as acquirers," said Vosseler.

"In order to find out where the money goes we need to identify the acquirers, and through them it is possible to track down the bank accounts and ultimately the identity of the illegal website operators."

This is such a crucial part of the operation that the Project Blue team has four people working full-time on tracking financial transactions, as finding the money made from the counterfeit trade - and seizing it - is actually much more effective than intercepting shipments of fake medicines.

He cited a case last May in which a German Internet pharmacy was raided and a large quantity of fake medicines were seized, including products mimicking Pfizer's erectile dysfunction product Viagra (sildenafil citrate).

The ringleader of the operation was in fact a career criminal - a burglar - who had decided to swap over to counterfeit medicines as the risks were low and the rewards high. The Project Blue taskforce were able to follow the financial transactions of the ring - which involved shifting large quantities of money (around €3m) through seven separate countries, and freeze their bank accounts.

A total of seven arrests were made in the operation, which resulted in the seizure of more than 172,000 medicine units and nearly €390,000 in cash, as well as the confiscation of around €700,000-worth of assets such as cars and property.

The case came to trial in February and four people were convicted of aggravated offences against Germany's Medicines Preparations Act, with sentences ranging from one to three years in prison and €1.5m in forfeited assets.

"There is a lot of money in counterfeit medicines," commented Vosseler, at a recent IQPC conference in Amsterdam, the Netherlands.

He cited a study carried out at the University of Bonn which looked at the profit which can be made when a criminal invests a €1,000 stake in counterfeit goods.

For counterfeit money the return would be around €3,000, rising to a little under €7,000 for a fake credit card. Counterfeiting software gives an even better return at around €100,000 profit, but all are eclipsed by fake pharmaceuticals with a whopping €500,000 return.

The Project Blue team is looking to expand its network of collaborators, either with other enforcement agencies or pharmaceutical companies, Vosseler told the conference, as the operation is now trying to move up the distribution chain from the website operators to those supplying the international trade in counterfeits.

However, he also issued a plea to the pharmaceutical industry to be careful how they share information about counterfeiting cases, citing one incident in which information was given to both German and Dutch customs. That raised the possibility of two separate enforcement operations running simultaneously, which could have compromised the investigations.

"Either give the information to one enforcement authority, or more than one, but make sure all the organisations know who is involved," he asked.

He also noted that the nature of the financial trades within online illegal medicines supply is changing fast. At the moment credit cards still account for the bulk of the financial transactions, but other vehicles such as Paypal are becoming more common.

"We are always looking for new ways to cooperate with the financial community in this area," he said.