http://www.interpol.int/Public/ICPO/speeches/SG20030716.asp
The Interpol General Secretariat is in possession of the following examples of IPC and terrorist financing.
Kosovo
An example similar to the situation in Northern Ireland is in the United Nations-administrated province of Kosovo. A significant proportion of consumer goods, (CDs, DVDs, clothes, shoes, cigarettes and computer software) available for sale, are counterfeit. The sale of counterfeit goods occurs openly and there is limited enforcement against counterfeit products due to significant legal loopholes. In Kosovo, there is a long-standing relationship between criminal organizations and local ethnic-Albanian extremist groups. This relationship is based on family or social ties. It is suspected that funds generated from IPC benefit both criminal organizations and extremist groups."
Hizbullah
Interpol is aware of three cases of IPC-related activity and terrorist funding in South America. These cases involve ethnic-Lebanese who are involved in the remittance of funds to Hizbullah. As in the case of European radical fundamentalist groups funds are thought to be indirectly remitted via organisations associated with Hizbullah. Interpol's information suggests that these persons are involved in the distribution and sale of counterfeit goods, not in the manufacturing or fabrication of counterfeit goods. It is suspected that most counterfeit manufacturing and fabrication is dominated by organized crime. Three examples illustrate this:
Funds generated from IPC may be remitted to Hizbullah using the following modus operandi. Counterfeit goods produced in Europe are sent to a free-trade zone in South America by a group of Lebanese criminals sympathetic to Hizbullah. The goods are then smuggled into a third country, to avoid import duties, where they are sold via a network of sympathizers and militants originating in the Middle East. An unknown amount of the money generated through this activity is suspected to be remitted to Hizbullah.
In February 2000, an individual was arrested for piracy and suspected fundraising for Hizbullah. The individual sold pirated music CDs, Sega, Sony and Nintendo game discs to fund a Hizbullah-related organization. Among the discs recovered were discs containing images and short films of terrorist attacks and interviews with suicide bombers. The discs were allegedly used as propaganda to generate funds for Hizbullah. Interpol is in possession of some of these films. This individual is currently a fugitive.
Another indivdual was arrested for his alleged ties with the Hizbullah in Foz do Iguazú in June 2002 after evading arrest in October 2001. The individual is wanted for tax evasion and the collection and remittance of funds to extremist organizations. Interpol files do not mention involvement in IPC. The alleged IPC connection is stated in open sources. Law enforcement sources indicate that numerous letters from organizations, suspected of being associated with Hizbullah in Lebanon, were found thanking the individual for financial contributions.
Future Evolutions
Based on the following factors it is possible to state that IPC may become a more important source of illicit financing for terrorist groups.
IPC crime is a low priority for law enforcement agencies and investigations are poorly resourced when compared to illicit narcotics or counter-terrorism investigations. There is also a lack of generalised expertise among law enforcement agencies in recognising and investigating counterfeit and pirated goods.
The size of the informal economy and the demand for inexpensive consumer goods means that a wide-range of products are vulnerable to counterfeiting and piracy. The demand for counterfeit or pirated goods is widespread due to perceptions that purchasing these goods is not criminal. There is a large illicit market for persons seeking to engage in low risk criminal activity.
Trafficking in counterfeit goods is a relatively easy criminal activity. A terrorist could make profit solely from the sale of counterfeit or pirated goods and does not need to be involved in the actual production or fabrication. Thus, there are relatively low entry costs and the illicit profit margins are high.
One estimate is that the profits from counterfeiting are similar to drugs trafficking; there is a return of 10 euros for each 1 invested (6).
Other estimates are that counterfeiting is more profitable than drugs trafficking, one kilo of pirated CDs is worth more than one kilo of cannabis resin. The kilo of CDs is worth 3000 and the kilo of cannabis resin is valued at 1000 (7). The same source states that a computer game costs 0.20 to produce and sells at 45 while cannabis costs 1.52 a gram and sells at 12 (8).
In terms of the levels of risk involved, the penalties are low, for example, in France selling counterfeit products is punishable by a two-year prison term and a 150,000 fine, while selling drugs is punishable by a ten-year prison term and a 7,500,000 fine.
It follows that the profit/risk ratio is attractive not only to criminals but also to loosely networked terrorist groups, like Salafi Group for Call and Combat, who do not have the capacity to generate funds through sophisticated criminal activity.
In the case of terrorist groups who resemble organized crime groups counterfeiting is attractive because they can invest at the beginning of the counterfeiting cycle and extract a illicit profit at each stage of the counterfeiting process from production to sale, thus maximising returns.
Other links:
http://eepi.ubib.eur.nl/iliit/archives/000453.html
http://www.hollywoodreporter.com/thr/article_display.jsp?vnu_content_id=1000528473
June 10, 2004
Interpol IDs piracy link to funding of terrorism
By Brooks Boliek - Hollywood Reporter
WASHINGTON -- There is new evidence that terrorist organizations around the world are getting at least some of their funding from the sale of illegally copied intellectual property, including pirated DVDs and CDs, according to Interpol and copyright trade groups.
According to an Interpol report prepared for the House Committee on International Relations, intellectual property crimes are a growing resource for terrorist groups from Northern Ireland to the Arab world, including al-Qaida and Hizbullah, and the RIAA has evidence that a pair of illegal CD plants in Pakistan is financed by Dawood Ibrahim, an Indian Muslim the Treasury Department named a "specially designated global terrorist" in October.
"This designation signals our commitment to identifying and attacking the financial ties between the criminal underworld and terrorism," said Juan Zarate, deputy assistant secretary for terrorist financing and financial crimes at the time.
"We are calling on the international community to stop the flow of dirty money that kills. For the Ibrahim syndicate, the business of terrorism forms part of their larger criminal enterprise, which must be dismantled," he said.
Ibrahim has found common cause with al-Qaida, sharing his smuggling routes with the terrorist network and funding attacks by Islamic extremists aimed at destabilizing the Indian government, according to the State Department.
He is wanted in India for the 1993 Bombay Exchange bombings and is known to have financed the activities of Lashkar-e-Tayyiba (Army of the Righteous), a group the United States designated as a foreign terrorist organization in October 2001. The Pakistani government banned the group and froze its assets in January 2002.
While intellectual property theft is not confined to entertainment products, it appears to be a funding source that terrorist groups are willing to exploit. Copyright piracy is estimated to cost U.S. companies $20 billion-$22 billion a year.
"In July 2003 Interpol concluded that the link between organized crime and counterfeit goods was well established and sounded the alarm that (intellectual property crime) was becoming the preferred method of funding for a number of terrorist groups," according to the April 6 report prepared by Interpol Secretary-General Ronald Noble. "Developments since then have reinforced this view, and the following example illustrates how these activities continue to be a cause for concern."
Interpol's report lays out a number of scenarios, but it described one of the operations like this:
"Funds generated from (intellectual property crimes) may be remitted to Hizbullah using the following modus operandi. Counterfeit goods produced in Europe are sent to a free-trade zone in South America by a group of Lebanese criminals sympathetic to Hizbullah. The goods are then smuggled into a third country, to avoid import duties, where they are sold via a network of Palestinians. An unknown amount of the money generated through this activity is suspected to be remitted to Hizbullah."
The Interpol report raised eyebrows Wednesday during a hearing before the Senate Foreign Relations Committee as it examined the impact of international copyright piracy.
While MPAA president and CEO Jack Valenti said his organization had no knowledge that funds generated from pirated movies paid for terrorist operations, he said copyright piracy was an easy way for any criminal organization to make money.
"It's nirvana for criminals," Valenti told the committee Wednesday. "It is a ripe, rich, fat target to deal with. It stands to reason that if it's low-risk, high-return and if you get caught it's a slap on the wrist, then criminals are going to do it."
The terrorist connection is but one of the reasons Washington needs to pressure other states into enacting and enforcing strong anti-piracy laws, executives with the entertainment and software industries told the committee.
Four countries in particular -- China, Brazil, Pakistan and Russia -- account for much of the trade in pirated movies, music, games and software.
RIAA president and CEO Mitch Bainwol suggested that the United States should consider revoking the "Generalized System of Preferences," a special trade status that lowers tariffs on goods for at least some of the countries.
For Russia and Brazil the time for a GSP decision is ripe," he told the panel. "You can treat it with nuance. You can make it whole or in part."
While international copyright piracy is a problem, other copyright barriers are just as troubling, the executives said. China only allows 20 U.S. films to be imported each year, and a recent decision by the government to prevent this summer's releases from being shown in China before the fall exacerbate the problem, Valenti said.
"It's impossible to fight piracy unless there is a legitimate exhibition," he said. "By the time these films get in legitimate theaters there will be millions of illegal copies on the street."
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...and the list goes on and on... Say what you will that video game piracy doens't fund terrorism, but these articles state otherwise.
What he said was that the Iraqis probably think of it as legal. I mean, what are the government gonna focus on? Piracy or the war? 
