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Bargain or bust

Written by Alan Robertson on 2 February 2015 in Feature

Discussion heats up over how best to crack down on illicit trade in Scotland

Brian McLean, HMRC

“We cannot expect legitimate businesses to compete against businesses using counterfeit goods, rogue traders, etc, at the same level,” Brian Gibson, assistant director of the Scottish Business Resilience Centre, tells a Holyrood event held in association with the Scottish Anti-Illicit Trade Group (SAITG) and Scottish Grocers’ Federation (SGF). It’s almost two years since the SAITG – now consisting of 18 bodies spanning the public, private and third sectors – was launched in an effort to crack down on the business of illicit, counterfeit and pirated goods north of the border. At an estimated cost of £1.3bn to the UK economy every year, their task is not straightforward.

Last year alone, HMRC seized over 1.4bn cigarettes and 330 tonnes of hand-rolling tobacco. More than 21.4m litres of alcohol with a revenue value of over £45m have been seized by HMRC and the Border Force in the last two years. “Alcohol duty fraud is big business – it costs taxpayers around a billion pounds a year,” says Brian McLean, higher investigations officer for HMRC. “The problem has grown since the introduction of the European single market in 1993. We’re not talking about people sneaking in a few cases in their van or car at Dover. These days, we see criminal gangs masterminding the sale of illegal drinks through various outlets.”

Sustained cross-agency enforcement activity may have seen the infamous Barras market in the east end of Glasgow cleared of £13.5m-worth of dodgy items in a year, but the threat is evolving. “What we’re finding, more and more, is that our members are coming under pressure from social media, particularly Facebook sites which spring up offering illicit cigarettes and tobacco for sale,” says John Lee, SGF public affairs manager.

Last November, for example, a site selling cut-price alcohol, cigarettes and Viagra in and around Aberdeen gained more than 17,000 followers in under a week. Trading Standards officials later discovered the website, which vanished within seven days of its launch, was not in fact based in the local area.

“[In terms of] our ability to apply for communications data under RIPA [Regulation of Investigatory Powers Act], the imposition of the requirement to apply to a sheriff court for a court order puts two hurdles in our way,” one Trading Standards official from the north east explains. “The second one is applying for the court order; the first is convincing our hard-pressed legal services that this is top of their agenda. When it comes to internet investigations, which is a very pressing issue with regards to anti-illicit trade, getting access to RIPA and communications data to press forward with our investigations is very much a hurdle we’re struggling to overcome.”

A national intelligence unit within Trading Standards Scotland (TSS) – a body set up to improve coordination of activity nationwide – has allowed a more targeted approach, chief officer Fiona Richardson claims, while there has been a “marked increase” in the number of intelligence logs on illicit trade being shared with the London-based Intellectual Property Office (IPO). When it comes to online activity, TSS has appropriate equipment and an officer trained to carry out covert internet investigations, says Richardson. “But that’s not replicated across the country,” she adds. “We’re more than happy to assist where we can with that but we recognise that there are huge challenges and the fact that goods are often being bought overseas obviously makes it very difficult for us to have an impact.”

HMRC is working closely with Royal Mail given that an increasingly popular route is for illicit tobacco to be posted from China, for instance. “I hold intelligence within the database that we maintain that will link IP [intellectual property] crime to any crime type you want to mention, including terrorism, including people trafficking, including sexual exploitation of children – you name it, it’s there,” adds Huw Watkins, IPO intelligence hub head.

The Scottish Government “at this point in time… does not consider the creation of a dedicated unit to be a necessity”, Cabinet Secretary for the Economy John Swinney has said, given the SAITG and Serious Organised Crime Taskforce are already delivering the “collective response” required. McLean seems to support that view. “I don’t know if the time is right for a specific group just now but with the closer working, especially with the Scottish Crime Campus, with HMRC and police already there, Trading Standards soon to be there, all working together, as long as we are all talking to each other and doing the same thing then I think that’s probably [more] beneficial at the moment than a separate group,” he says.

Last April, Police Scotland introduced a key performance indicator to benchmark the value of counterfeit and illicit goods seized. With two months of the financial year left, the figure currently stands at £23.5m; “very much the tip of the iceberg”, according to SAITG chair, Inspector Alan Dron, who reveals that three major operations are ongoing.

“If things go to plan, we’re looking at over £40-odd million from this year alone – that’s £40 million that we never had last year at all as a figure,” he adds. “If that was £40 million worth of drugs, it’s causing an issue and it’s higher up the agenda. If it’s [the KPI] going to run all of next year and all partners work together with a clear common focus, what that figure can then obviously show is a benchmark, [which] could or could not hold the influence [as to] whether there is a need for a separate group.”

Whilst Dron suggests the question might better be asked a year down the line, others are less patient. “I don’t think it is something you can wait for – you need to do it now [but] what model you choose is up to you,” says Kieron Sharp, director general of the Federation Against Copyright Theft.

An element of misunderstanding about illicit trade still exists within certain directorates in the Scottish Government, Lee suggests, calling for illicit trade to be made an explicit part of a ministerial portfolio. His members, he adds, are also concerned that plain packaging might serve to make the problem of illicit trade worse.

A number of amendments to existing proceeds of crime legislation are due to come into effect this summer as part of the Serious Crime Bill. Meanwhile, a working group set up by Scotland’s Serious Organised Crime Taskforce, to consider how processes around proceeds of crime might be improved, was due to report back this week.

Though it could do with being “tweaked”, current Poca legislation is far better than what came before it, says Detective Inspector Garry Deans, of Police Scotland’s specialist crime division. Indeed, a number of law enforcement partners across Europe are “envious” of the civil recovery opportunities at Scottish authorities’ disposal when a conviction cannot be secured.
Investigators within all partner agencies are therefore being urged to include proceeds of crime in their thinking from the outset. “Some of these particular penalties don’t necessarily have a sentence at the end of it but it does hurt them in the pocket,” says Deans. One search warrant executed at a house in Possilpark during his days in Strathclyde Police saw him come across a copy of the Proceeds of Crime Act in the suspect’s paper tray. “That particular individual was studying that because more and more people are more and more aware of what the proceeds of crime can do – that shows you how good a power it is.”

However, some people think the timescales involved are too prohibitive. “It’s time to revisit that legislation and begin to put some teeth into it to ensure that we can freeze assets quickly and we can repatriate assets into community support,” says Labour MSP Graeme Pearson, who was involved in pushing for the initial legislation during his days in law enforcement.

One HMRC official underlines the need to progress individuals through the criminal justice system more quickly, arguing the length of time for cases to be marked by the Crown Office and Procurator Fiscal Service is problematic. “It’s something that we’ve looked at previously and we’re continuing to work with, particularly with the advent of Gartcosh and serious organised crime [partners] now being in the same building,” says Dron. “It is sometimes like pushing water uphill. We have to find better ways of trying to get the Crown to realise, for a prosecution, the message it sends out. If it’s a good conviction, get it in the media, and also try and expedite it with a bit more speed.”

Equally, changing the general perception that the odd knock-off item represents a victimless crime is a focus of all those involved. The Real Deal initiative, a free award that gives recognition to markets that are fake, was rolled out to every market in Glasgow ahead of last summer’s Commonwealth Games, with Trading Standards keen to support wider usage. Work with UL, Disney and Interpol saw several local authority education departments last year introduce a DVD for younger children using The Lion King characters to educate them on why not to buy counterfeit goods, a first of its kind in the UK.

“A lot of people are being conned,” says Watkins. “Ten to fifteen years ago, if you bought something, a pair of training shoes [for example], for ten to fifteen quid, you’d think perhaps these are knock-offs. The criminals are very, very clever now. What they’re doing is pricing their products, they’re only paying the same as they were before but they’re pricing their products just at that edge of, ‘well actually, this isn’t a knock-off, this is a bit of a bargain’. And everybody in the UK loves a bargain.”