Counterfeiting

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A counterfeit is an imitation that is made usually with the intent to deceptively represent its content or origins. The act of creating a counterfeit is called counterfeiting. The word "counterfeit" most frequently describes forged currency or documents, but can also describe clothing, software, pharmaceuticals, watches, or any other manufactured item, especially when this results in patent or trademark infringement. Counterfeiting has also been used as a weapon of war between countries, in an attempt to undermine the value of an enemy's currency. Laws against counterfeiting exist throughout the world, both for counterfeiting their own and other currencies, and international police track counterfeiters and their products. Most countries have developed protection against counterfeit currency, but as technologies advance counterfeiting methods become more advanced.

This is especially true of digital recordings of music and movies, which can easily be copied without loss of quality and thus, provide a great temptation to those who see this as an opportunity to make a quick profit. As with all crime, the elimination of this activity will not be accomplished by stricter laws, better law enforcement, or harsher penalties, but rather by a change in the hearts and minds of people so as to live for the sake of others rather than exploiting them for selfish gain.

Contents

Definitions

Counterfeiting covers a wide range of consumer items, from outright fakes in the sense that they are non-functional lookalikes (such as prescription drugs), functional but inferior items (such as blank videotapes), to fully functional items illegally manufactured without paying copyright fees (music from CDs or movies on DVDs). In the latter case, there is often little or no attempt at disguising its origin as the end user will be aware that the counterfeit product will work at least as well as the original. The alternative term, "bootleg," is more often used for this type of counterfeiting, where the user is fully aware of its illegal status.

By contrast, a "knockoff" item may imitate a well-known one, may be sold for a lower price, and may be of inferior quality, but there is usually no attempt to deceive the buyer or infringe upon brand names, patents, trademarks, or copyrights.

Types of counterfeiting

Counterfeiting of money

Forms to counterfeit coins from the late second and early third century

Counterfeiting money is probably as old as money itself. Before the introduction of paper money, the two main methods were to mix base metals in what was supposed to be pure gold or silver, or to "shave" the edges of a coin so that it weighed less than it was supposed to. A "fourrée" is an ancient type of counterfeit coin, in which a base metal core was plated with a precious metal to look like its solid metal counter part.

Nations have used counterfeiting as a means of warfare, the idea being to overflow the enemy's economy with fake bank notes, so that the real value of the money plummets. Great Britain did this during the Revolutionary War to reduce the value of the Continental Dollar. Although this tactic was also employed by the United States during the American Civil War, the fake Confederate currency it produced was of superior quality to the real thing.

This building was used to mint counterfeit American nickels in the late nineteenth and/or early twentieth centuries. The picture was taken in 1911 and featured in a Chicago newspaper.

Another form of counterfeiting is the production of documents by legitimate printers in response to fraudulent instructions. In the Portuguese Bank Note Crisis of 1925, the British banknote printers Waterlow and Sons produced Banco de Portugal notes equivalent in value to 0.88 percent of the Portuguese nominal Gross Domestic Product, with identical serial numbers to existing banknotes, in response to a fraud perpetrated by Alves dos Reis. Similarly, in 1929, the issue of postage stamps celebrating the Millennium of Iceland's parliament, the Althing, was compromised by the insertion of "1" on the print order before the authorized value of stamps to be produced.

In 1926, a high-profile counterfeit scandal came to light in Hungary, when several people were arrested in the Netherlands while attempting to procure 10 million francs worth of fake French 1000-franc bills which had been produced in Hungary; after three years, the state-sponsored industrial scale counterfeit operation finally collapsed. The League of Nations' investigation found Hungary's motives were to avenge its post-World War I territorial losses (blamed on Georges Clemenceau) and to use profits from the counterfeiting business to boost a militarist, border-revisionist ideology. Germany and Austria both had an active role in the conspiracy, which required special machinery. The quality of fake bills was still substandard however, due to France's use of exotic raw paper material imported from its colonies.

During World War II, the Nazis attempted to do a similar thing to the Allies with Operation Bernhard. The Nazis took Jewish artists in the Sachsenhausen concentration camp and forced them to forge British pounds and American dollars. The quality of the counterfeiting was very good, and it was almost impossible to distinguish between the real and fake bills. However, the Germans could not put their plan into action, and were forced to dump the counterfeit bills into a lake from which they not recovered until the 1950s.

Today, the finest counterfeit banknotes are claimed to be U.S. dollar bills produced in North Korea, which are used to finance the North Korean government, among other things. The fake North Korean copies are called Superdollars because of their high quality. Bulgaria and Colombia are also significant sources of counterfeit currency.

There has been a rapid growth in the counterfeiting of Euro banknotes and coins since the launch of the currency in 2002. In 2003, 551,287 fake euro notes and 26,191 bogus euro coins were removed from European Union circulation. In 2004, French police seized fake 10 euro and 20 euro notes worth a total of around €1.8 million from two laboratories and estimated that 145,000 notes had already entered circulation.

The spread of counterfeit goods has become global in recent years. It is currently estimated that counterfeit goods comprise five to seven percent of world trade, ranging in losses between 500 billion and 600 billion U.S. Dollars. In the early years of the twenty-first century, the United States Secret Service noted a substantial reduction in the quantity of forged U.S. currency, as counterfeiters turned their attention towards the Euro.

In 2006, a Pakistani government printing press in the city of Quetta was accused of producing large quantities of counterfeit Indian currency. The Times of India reported, based on Central Bureau of Intelligence investigation, that the rupee notes were then smuggled into India as "part of Pakistan's agenda of destabilizing (the) Indian economy through fake currency." The notes are "supplied by the Pakistan government press (at Quetta) free of cost to Dubai-based counterfeiters who, in turn, smuggle it into India using various means," the report said.[1] This money is allegedly used to fund terrorist activities inside India. It has been alleged that terrorist bombings of trains in Mumbai were funded by money counterfeited in Pakistan.[2]

Money art

"Look 'ere—this arf-crown won't do. It ain't got no milling on its hedge." "Blimy! Nor it 'as! I knew I'd forgotten somefink."
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Cartoon in Punch magazine August 25, 1920. A half crown was a coin worth one-eighth of a British pound.

A subject related to that of counterfeiting is that of money art, which is art that incorporates currency designs or themes. Some of these works of art are similar enough to actual bills that their legality is in question. While a counterfeit is made with deceptive intent, money art is not—however, the law may or may not differentiate between the two.

Counterfeiting of documents

Forgery is the process of making or adapting documents with the intention to deceive. It is a form of fraud, and is often a key technique in the execution of identity theft. "Uttering and publishing" is a term in United States law for the forgery of non-official documents, such as a trucking company's time and weight logs.

"Questioned document examination" is a scientific process for investigating many aspects of various documents, and is often used to examine the provenance and verity of a suspected forgery. Security printing is a printing industry specialty, focused on creating documents which are difficult or impossible to forge.

Counterfeiting of consumer goods

In the United States, the FBI estimates that American companies lose up to $250 billion annually due to counterfeit goods. According to the Organization for Economic Co-operation and Development as well as the European Commission, counterfeit goods are responsible for the loss of 100,000 jobs in Europe each year.[3]

Certain consumer goods, especially very expensive or desirable brands, or those which are easy to reproduce cheaply, have become popular among counterfeiters, who attempt to deceive the consumer into thinking they are purchasing a legitimate item, or convince the consumer that they could deceive others with the imitation. An item which does not attempt to deceive, such as copy of movie with missing or different cover art, is often called a "bootleg" or a "pirated copy."

Apparel, accessories, watches, and other goods

Counterfeit clothes, shoes, and handbags from designer brands are made in varying quality; sometimes the intent is only to fool the gullible, who only look at the label and are ignorant regarding details of the authentic item, while others put some serious effort into mimicking fashion details. The popularity of designer jeans, starting in the late 1970s, also spurred a flood of knockoffs.

Factories that manufacture counterfeit designer brand garments and watches usually originate from developing countries such as China. Many international tourists visiting Beijing find a wide selection of counterfeit designer brand garments at the infamous Silk Street. Expensive watches are also subject to counterfeiting; it is a common cliché that any visitor to New York City will be approached on a street corner by a vendor with a dozen such fancy watches inside his coat, offered at amazing bargain prices.

Media products

Music, movies, and computer software may be easily copied. Compact Discs, videotapes, and DVDs, computer software, and other media which are easily copied or "pirated" are often sold through vendors at street markets, mail order, and numerous Internet sources, including open auction sites like eBay, making counterfeit content easy to distribute.

Music enthusiasts may use the term "bootleg" recording to differentiate otherwise unavailable recordings from pirated copies of commercially released material.

Drugs

A counterfeit drug or a counterfeit medicine is a medication which is produced and sold with the intent to deceptively represent its origin, authenticity, or effectiveness. It may not contain active ingredients, contain an insufficient quantity of active ingredients, or contain entirely incorrect active ingredients (which may or may not be harmful), and is typically sold with inaccurate, incorrect, or fake packaging.[4] An individual who applies a counterfeit medication may experience a number of dangerous consequence to their health, such as unexpected side effects, allergic reactions, or a worsening of their medical condition.

Illegal street drugs may also be counterfeited, either for profit or for the deception of rival drug distributors or narcotics officers.

The extent of the problem of counterfeit drugs is unknown since counterfeiting is difficult to detect, investigate, and quantify. However, it is known that they occur worldwide and are more prevalent in developing countries. It is estimated that upwards of 10 percent of drugs worldwide are counterfeit, and in some countries, more than 50 percent of the drug supply is made up of counterfeit drugs. Furthermore, the World Health Organization estimates that the annual earnings of counterfeit drugs are over 32 billion U.S. Dollars.

There are several technologies that may prove helpful in combating this problem, such as radio frequency identification which uses electronic devices to track and identify pharmaceutical products by assigning individual serial numbers to the containers holding each product. For example, the FDA has been working towards an "Electronic pedigree" (ePedigree) system to track drugs from factory to pharmacy. Innovative technology includes the use of mobile phone cameras to verify the source and authenticity of drugs within a world wide market through use of unique identifying unbreakable codes.[5] Raman spectroscopy can be used to discover counterfeit drugs while still inside their packaging.[6]

On May 6, 2005, the Chinese press agency, Xinhua, reported that the World Health Organization had established Rapid Alert System (RAS), the world's first web-based system for tracking the activities of drug cheats, in light of the increasing severity of the problem of counterfeit drugs.

Anti-counterfeiting measures

Money

There are a number of ways to fight counterfeiting. The two main ways are making products difficult to counter and to punish counterfeiters harshly.

Historically, the perpetrators of such deeds were often dealt with very harshly. In 1162, Emperor Gaozong of the Chinese Song dynasty decreed counterfeiters of the Huizi currency to be punished by death and to reward informants. The English couple Thomas Rogers and Anne Rogers were convicted on October 15, 1690, for "Clipping 40 pieces of Silver" (in other words, clipping the edges off silver coins). Thomas Rogers was hanged, drawn, and quartered and Anne Rogers was burnt alive. These gruesome forms of punishment were due to the acts being construed as treason, rather than a simple crime.

A 1929 convention in Geneva produced widely agreed upon laws regarding counterfeiting, including punishments for counterfeiting both one's own and other countries' currencies, and extradition agreements for offenders.

Two forged UK pound coins. The left coin shows poor surface clarity, irregular reeding and no side lettering. The right coin demonstrates poor metal quality.

Traditionally, anti-counterfeiting measures involved the inclusion of fine detail with raised intaglio printing on bills which would allow non-experts to easily spot forgeries. On coins, "milled" or "reeded" (marked with parallel grooves) edges are used to show that none of the valuable metal has been scraped off. This detects the "shaving" or "clipping" (paring off) of the rim of the coin.

In the late twentieth century, advances in computer and photocopy technology made it possible for people without sophisticated training to easily copy currency. In response, national engraving bureaus began to include more sophisticated anti-counterfeiting systems such as holograms, multi-colored bills, embedded devices such as strips, microprinting, and inks whose colors changed depending on the angle of the light, and the use of design features such as the "EURion constellation" which disables modern photocopiers. Software programs have been modified by their manufacturers to obstruct manipulation of scanned images of banknotes.

In the 1980s, counterfeiting in the Republic of Ireland twice resulted in sudden changes in official documents: In November 1984, the £1 postage stamp, also used on savings cards for paying television licenses and telephone bills, was invalidated and replaced by another design at a few days' notice, because of widespread counterfeiting. Later, the £20 Central Bank of Ireland Series B banknote was rapidly replaced because of what the Finance Minister described as "the involuntary privatization of banknote printing."

In the 1990s, the portrait of Chairman Mao Zedong was placed on the banknotes of the People's Republic of China to combat counterfeiting, as he was recognized better than the generic designs on the renminbi notes.

In Australia, the original paper decimal currency banknotes introduced in 1966 were eventually replaced with new designs printed on clear polyester film, which allowed them to have "see through" sections that are almost impossible to duplicate with a photocopier.

Consumer goods

There are many different ways to prevent counterfeiting or piracy of consumer media. Some software companies require a security key to install their products onto a computer. Some music CDs and movie DVDs come with anti-piracy encryption.

New technology, such as watermarks and scanable barcodes, has also made it easier to create more secure physical documents. This technology takes the form of . These have been implemented in such identification cards as drivers' licenses.

One of the most frequent issues raised at the World Trade Organization is that of counterfeiting. The United States has often complained of Chinese counterfeit goods eating into their profits.[7] Economic sanctions against Chinese business are one possible outcome of such a complaint with the WTO.

The issue of counterfeiting will continue to be a thorn in the side of legitimate business so long as there are people who believe that there is a profit to be made.

Notes

  1. Forbes Magazine, Pakistan printing fake Indian currency—Times of India. Retrieved April 25, 2007.
  2. India Alert, MK Narayanan's speech at the 43rd Munich Conference on Security Policy. Retrieved March 17, 2007.
  3. The Third Global Congress on Combating Counterfeiting and Piracy, First Global Congress on Combating Counterfeiting. Retrieved March 17, 2007.
  4. BBC Two, "Bad Medicine" broadcast on Tuesday July 12, 2005.
  5. Yottamark, Video clip of mobile phone verification of authenticity of drugs. Retrieved March 17, 2007.
  6. BBC, Fake drugs caught inside the pack. Retrieved March 17, 2007.
  7. BBC, US mulls WTO move on China piracy. Retrieved March 17, 2007.

References

  • Burke, Bryan O. 1988. Nazi Counterfeiting of British Currency During World War II: Operation Andrew and Bernhard. Book Shop. ISBN 0961827408
  • Hopkins, David M., Lewis T. Kontnik, and Mark T. Turnage. 2003. Counterfeiting Exposed: How to Protect Your Brand and Market Share. New York: Wiley. ISBN 0471269905
  • Johnson, David R. 1995. Illegal Tender—Counterfeiting And The Secret Service In Nineteenth-century America. Smithsonian Institution. ISBN 0788198041

External links


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