Linking Crime and Terrorism
Print Issue: January 2015
Though homeland security professionals have long suspected a link between terrorist organizations and retail crime, the specifics of such relationships have been difficult to quantify. In a recent study, researchers at the Center for Anti-Counterfeiting and Product Protection at Michigan State University investigated 10 product counterfeiting schemes with known links to terrorists occurring in the United States between 1990 and 2013. The study, The Nexus Between Terrorism and U.S. Product Counterfeiting, found that the incidents involved 89 people with ties to jihadi or far-right extremism, lasted an average of three years, and netted nearly $100 million.
According to the report, 67 of the 89 suspects participated in the crimes purely for profit. While these participants funneled money to extremist groups, they had no interest in the ideology of those factions. Of the remaining suspects, only four had purely ideological motives. This desire for financial gain might put investigators on a new track, says the report. By looking at crime, rather than terrorism, "officials may obtain information useful for further identifying and exploring parts with potential links to terrorist organizations."
"We know that counterfeiting is used by organized retail crime and terrorist groups to help fund their activities," explains Joseph LaRocca, vice president and senior advisor of loss prevention at RetaiLPartners. "But in addition to the risks from these organizations, our citizens also face direct health and safety dangers. These dangers range from fake, substandard electrical gadgets to fake pharmaceuticals that have no therapeutic value and may even cause direct harm."
Retail crime is a nightmare for any asset protection manager; approximately $30 billion annually in shrinkage, losses in revenue, and theft in the supply chain are all causes for concern. But what keeps homeland security professionals up at night is wondering what some of that money may be funding, says Daniel McGarvey, the director of security programs at Global Skills X-Change and vice chair of the ASIS Defense and Intelligence Council. Although there are no official numbers, industry experts estimate that billions are being funneled from retail criminal activity to terrorist organizations overseas.
The link doesn't surprise McGarvey because, as he explains, large, organized terrorist organizations tend to function much like a military organization with a political arm. "Any time you look at an organization, whether it be a company or terrorist group, you still have administrative actions that have to take place," he says. "You just don't think about it that way, but they're an organization, they have all the basic needs of any organization…plus a few extras."
Terrorist organizations work with organized crime players or insert themselves into the supply chain to acquire money, electronics, easily liquidated goods, and other items from the United States. It's a tough issue to pin down, since most retail crime seems isolated. But when millions of dollars a week flow to terrorist groups, it is clear some of that money is coming from crime. "Anywhere that you see normal criminal activity taking place, the terrorists understand that process as well and are attempting to exploit it for their own profit," says Bill Scott, CPP, director of Defense Department programs at ABS Consulting.
Scott says that even seemingly petty crimes, such as reselling cigarettes, can funnel significant amounts of money to bad players in the Middle East. He gives an example of criminals buying cigarettes for $4 in a state with low taxes and reselling them for $8 in a region where higher taxes might increase the price to $15. On the surface, this type of activity doesn't seem like a big deal, but it adds up, he says.
"Law enforcement doesn't have time to worry about the thought of someone bringing a truck of cigarette cartons from North Carolina to New York. But if this operation is providing as much as $3 million a week, some people estimate, to Hamas…well, now it's a bigger deal," Scott explains.
Here's one way an organized crime group might carry out a retail theft scheme, according to LaRocca. The boots-on-the-ground booster steals a large amount of brand-name jeans from a retailer. He sells the jeans to the fence operator, who passes them on to a distributor with ties to the Middle East that might mix those jeans with other legitimately purchased items, like handbags or other apparel. This distributor starts shipping these goods to legitimate retailers, who pay the distributor for the items. And just like that, the stolen jeans are back on the shelves of legitimate businesses, and the distributor funnels the money wherever it pleases.
Terrorist organizations rely on crime groups to facilitate this type of activity. "You won't have Hezbollah or Hamas operators down in your local shopping center, but the people at the top of the pyramid have direct contact back to the Middle East," LaRocca explains.
There are three main motivating factors for terrorists to interface with the manufacturing and retail industries, explains McGarvey. One is the classic retail theft approach that LaRocca described: stealing items that can easily be liquidated from a store. He says it's normally regional stores, mom-and-pop-stores, and corner bodegas that fall victim to redistributing stolen goods.
"These operators are setting up stores, warehouses, and distribution networks, and they're reselling the goods," LaRocca notes. "They're going to set up the whole store and it's going to look and feel legitimate until you pierce the veil a little bit."
The supply chain also gives terrorists easy access to large quantities of goods. It isn't difficult for bad actors to insert themselves somewhere along the supply chain since there are so many individual parts. Even having influence at a port of entry where goods might enter the country can be a tremendous advantage, McGarvey says.
"You don't have to be the drug cartel, you don't have to have the resources that ISIS has," notes Jim Shamess, CPP, president of 5D Solutions. "There are so many lines within the supply chain to make significant amounts of money. The tens of billions of dollars that are involved in these rackets—any reasonable percentage of that is enough to carry a terrorist campaign."
Another way terrorists benefit from retail theft comes from a military perspective. Terrorists seek out computers, cell phones, and key pieces of military equipment to use in their operations. These are either acquired through theft or the support of insiders, Shamess explains. There have even been instances of cell phones stolen from the United States used as improvised explosive devices (IEDs).
The third factor is the use of stolen products for political gain. McGarvey says that Hamas and Hezbollah are known for stealing large quantities of baby formula, which is a prized commodity in the Middle East and Africa. This gives these groups a tremendous political advantage locally, he says.
On top of funding terrorism, this type of retail crime can spell disaster for the stores unwittingly caught up in it, as well as the customers, LaRocca says. When a store is looted, it has to replace the stolen merchandise and address the breach, which can result in lost sales and falling stock prices. "It turns into a PR nightmare," LaRocca says.
Federal officials have long fought the use of retail crime as terrorist funding. In 2009, a hearing before the House Subcommittee on Crime, Terrorism, and Homeland Security mentioned the link between retail crime and terrorism. The FBI reemphasized its fight against retail theft in 2011. A widely-cited Congressional Research Service report on the issue was released in 2012; it stated that "industry experts, law enforcement, and policy makers have expressed concern about the possibility that proceeds from [organized retail crime] may be used to fund terrorist activities."
The problem has not improved. "The rackets are so pervasive and so large and skilled in their financing and laundering methods that they are very hard to track down," Shamess notes. "It takes a long time to track multiple rackets and the connections among them. It's an extraordinary task."
One problem is that retail theft is not a federal crime. LaRocca says that industry associations, such as the National Retail Federation, have been working to bring their concerns to the attention of the public, law enforcement, and legislators, but "the congressional route has been a really tough road for retail."
"Our industry, over the last decade, has made really great strides in combating many of these problems," LaRocca notes. "The retail industry has lobbied hard at the state and national levels for legislation to go after these groups aggressively. In some places, that has been successful, and there's been a lot of bills put forward, with strong legislation going after organized retail crime."
Retailers are working hand-in-hand with the FBI, Secret Service, Immigration and Customs Enforcement, and other agencies to go after many of the large, sophisticated criminal organizations, LaRocca says, and nontraditional players such as eBay have been working with retailers to combat the problem.
"Today you'll find committed federal people all over the country looking at these cases because they're high dollar and they're usually pretty sophisticated players, and they always have a nexus into something else," LaRocca explains.
Private industry can also play a role. Shamess emphasizes the importance of regional retail crime associations, which are growing in number across the country. "One small city, one store, one community at a time is important, but collectively you need to identify where the most important links are," says Shamess.
LaRocca agrees. He says a national database that provides retailers and law enforcement with intelligence capabilities could provide a comprehensive picture of the problem. "Tracking the frequency of crimes, methods and operations, and ultimately the offenders will enable retailers and law enforcement agencies to apply investigative techniques and strategies to target organized retail crime activity, including the sale of counterfeit goods," LaRocca says.
Explosives Detection In The Field
Although airports are tempting targets for terrorists, bombs and explosive materials pose an immediate threat on the battlefield or in the community. Handheld explosives detection devices give first responders an advantage in unstable situations, says Kevin Knopp, CEO and cofounder of detection technology manufacturing company 908 Devices.
“With the unfortunate onset of extremist activity domestically and abroad, there is an ever-increasing need to keep evolving technology for field use in harsh conditions to protect our first responders and communities,” Knopp explains. “The threats are becoming more advanced and unexpected, from the use of commercial materials to make homemade explosives and IEDs to the latest developments in hypertensive contact explosives. Therefore, we see this type of technology as a necessity in the field in a number of settings. “
908 Devices has developed a handheld chemical detector that alerts the user to the presence of precursors, explosives, drug substances, chemical warfare agents, and more. Knopp says the M908, which uses high-pressure mass spectrometry technology, is designed to meet military standards, weighs under five pounds, and is easy to operate.
Handheld chemical detectors can provide first responders, bomb disposal units, and the military with situational awareness during an incident, protecting all involved, Knopp says.
“Areas of public traffic—subways, stadium events, et cetera—are areas where this type of technology is needed,” Knopp notes. “Examples like the London subway bombing in 2005 and the Tokyo subway chemical attack using sarin gas in 1995 continue to be the catalyst for driving fieldable technology forward.”
Like companies building liquids explosive detectors, 908 Devices works with the U.S. Technical Support Working Group to develop new handheld devices that aim to address the ever-evolving terrorist threat.
“With the evolving techniques used by extremists today, it is hard to stay one step ahead,” Knopp states. “It is our mission to continue honing our high pressure mass spectrometry technology platform to provide a robust tool for threat detection.”