Organized Crime Embraces Film Piracy; Terrorists May Follow, Report Says

By Matthew Harwood

Film piracy by organized crime is flourishing worldwide, with some of the proceeds possibly financing terrorism, according to a new report from the RAND Corp. financed by the Motion Picture Association.

“If you buy pirated DVDs, there is a good chance that at least part of the money will go to organized crime and those proceeds fund more dangerous criminal activities, possibly terrorism,” said RAND’s Greg Treverton, the study’s lead author.

The criminal organizations that traffic pirated DVDs span the globe and often have multinational criminal connections. The report tells of one Italian crime boss turned government witness who explained the his organization's connection to Chinese and Taiwanese criminal gangs involved in film piracy and other acts of counterfeiting.

“Given the enormous profit margins, it’s no surprise that organized crime has moved into film piracy,” said Treverton.

The profits associated with film piracy are astounding, outperforming revenue generated from both Iranian heroin and Colombian cocaine. In Malaysia, a pirated DVD costs 70 cents to make and sells on a corner in London for $9, more than 1,000 percent markup.

The report also discusses three groups that have used film piracy to finance terrorism. The best-documented case involves the Irish Republican Army, which used film piracy among other criminal activities, to fund its terrorist campaign against the British government. Another case involves the D-Company, an Indian criminal group heavily involved in film piracy. In 1993, the group carried out a string of bombings on what became known as “Black Friday” in Mumbai, killing 257 people and wounding hundreds more. 

The third example has the most relevance today.

In 2004, the U.S. government labeled DVD pirate and counterfeiter extraordinaire Assad Ahmad Barakat “a specially designated global terrorist” for transferring $3.5 million to Hezbollah. His criminal network operates within the heavily Lebanese tri-border area of Argentina, Brazil, Paraguay, in what RAND calls “most important center for financing Islamic terrorism outside the Middle East.” (For more on the connection between Islamic extremism, terrorist financing, and the tri-border region, see John Barham's "Hezbollah's Latin American Home," from the Feb. 2008 issue.)

RAND notes the boom in film piracy is directly linked to weak penalties when someone is caught and convicted, which is rare.

An individual convicted of selling counterfeit products in France can expect a maximum of two years in prison and a $190,000 fine compared to ten years in prison and a fine of $9.5 million if caught selling drugs. In the United States, 134 people were sentenced to federal prison for intellectual property crimes in 2002, while 1.5 million people were arrested for drug offenses nationwide in 2003.

If governments worldwide want to decrease the volume of counterfeited goods and cut off a possible avenue of terrorist financing, RAND recommends spending more money and manpower to address the problem while passing tougher penalties for those convicted of counterfeiting and other intellectual property crimes.


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