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DSS – Industry Insider Interviews
INTERVIEW CALL GUIDE
Following is a call introduction and initial set of questions that should be customized to the specific industry/sector of each interviewee. *Please try to record interviews for reference.
INTRODUCTION:
Hello (name),
“Thank you for your willingness to assist us in this effort. As was mentioned when we first scheduled this interview, we are conducting a significant study on the types and impact of falsified printed materials to your industry, and several others. We are studying where the vulnerabilities lie, what’s been done to address them, and how they might be more effectively resolved. As a seasoned professional in this industry, your input is very valuable to us.
(ask if any questions…) “OK, do you mind if I record our conversation to simplify my note-taking?
“Great! I’d like to begin by asking…
I. BACKGROUND ON THE PROBLEM:
· In the __________ industry, what are the most sensitive types of printed documents (or other objects) that are used regularly?
· How common/widespread is the problem of fraud with documents like these?
· What are the inherent risks associated with fraud in these kinds of documents?
· Any idea about the typical costs (to businesses, the country, individual persons) that result from this type of fraud? (i.e., yearly $ loss, personal injury, national security, etc.)
· Does your organization spend significant time and/or financial resources on combating this problem?
o Any idea of the $ budget amounts that go to securing documents?
· What kind of situations arise commonly where falsification of these documents is a danger to the business (or to persons, or to other kinds of security)?
II. THE PROCESS:
· What is the typical lifecycle, or business process flow of these kinds of documents?
· Can you explain briefly what kinds of security measures are used by your business/industry to prevent the falsification of these types of documents?
o To whom are such documents submitted for authentication?
· How successful (or unsuccessful) are these methods, generally speaking?
· Where do security/validation processes create bottlenecks that reduce efficiency or service levels?
· Do you think the ability to print unique security features into your most sensitive documents/materials from any local printer [or in-line during production, for packaging] would be useful in streamlining these processes?
· Would your organization/industry be likely to use and benefit from this capability if it was delivered “on-demand” via the web (i.e., only as-needed)?
III. INFLUENCERS:
· Are you familiar with any industry associations or organizations
· What governmental regulatory bodies dictate how your organization handles document security?
o What specific regulations or policies have they issued?
IV. REFERRAL REQUESTS:
If this person doesn’t seem like the person with most responsibility/authority/information…
· Who in your organization owns (or takes the most active role in) assessing and assuring the security of all your printed documents? (i.e., Who would own the process of ensuring sensitive documents are protected from fraud?)
o Can you describe the various roles/people in this process, and their particular responsibilities in enforcing the security measures/process?
· May I contact this person(s) and mention you referred me to them, in order to conduct a brief interview?
Prudential Fox & Roach manages up to 34,000 faxed document pages each day. In one process example, the sales associate intake procedure relied on multiple, color-coded paper forms that were faxed or sent via interoffice mail across several departments for review by company staff. “It takes days for that to happen,” Monsanto said. “And it is very distributed—the form does not have a central location, it lives in multiple copies all over the company. Now with Captaris, we can automate this and focus on efficiency and centralizing all this information.”
In addition to the obvious safety issues, counterfeit automobile parts cost the automotive supplier industry over $12 billion annually. It’s estimated that if these losses were eliminated, the auto industry could hire 200,000 additional workers. It’s important to remember those numbers, because counterfeiting is not a victimless crime. In addition to selling bogus products, the counterfeiters are stealing jobs and money away from legitimate companies, destroying brand names, increasing warranty claims, and requiring legal fees and costly investigations. And if counterfeiters are having an impact on auto suppliers, they are going to have an impact on the aftermarket. You don’t want fakes on your shelves or in your shops. You want the real product, so you can build trust with your customers. There are also strong relationships between auto parts makers and auto parts stores – and both industries want to see the other as successful as they can be. The fight against counterfeiters is not limited to the automotive industry. The impact of counterfeiters is broad. When it comes to the economy overall, the U.S. Customs Service has estimated that counterfeiting has resulted in the loss of 750,000 jobs and costs the United States around $200 billion annually. The International Chamber of Commerce estimates that seven percent of the world’s trade is in counterfeit goods and that the counterfeit market is worth $350 billion.
The counterfeiting of automotive parts continues to be a major issue in the automotive parts industry. Counterfeit parts pose safety issues as poor quality substitutes of original parts and affect companies’ reputations. The Motor and Equipment Manufacturers
Association (MEMA) estimated that counterfeit automobile parts cost the American automotive supplier industry over $12 billion annually. Counterfeiters are taking jobs and money away from legitimate companies, destroying brand names, increasing warranty claims, and requiring legal fees and costly investigations.
A 2005 study by Frost and Sullivan found that counterfeit and gray market automotive components accounted for as much as 3.2 percent of all global counterfeit trade and that automotive parts counterfeiting is increasing at an annual rate of 9 to 11 percent, which is 1 to 2 percent higher than the average. The Frost and Sullivan study found that most counterfeit goods are still coming from China because the laws are more lax and socialeconomic structure supports counterfeiting. Several bills have been introduced in U.S. Congress to strengthen U.S. laws against counterfeit goods sold in the United States.
In a study by the U.S. Chamber of Commerce and the Coalition Against Counterfeiting and Piracy, Ford Motor Company is said to be losing about $1 billion per year due to counterfeit parts sales. Ford states that the real cost could be much higher, as it's impossible to determine the potential costs in terms of reduced safety related to these parts.
10 percent counterfeit suspected
There are no statistics specific to network hardware counterfeit rates. But according to a white paper by AGMA and consulting company KPMG, counterfeit products account for nearly 10 percent of the overall IT products market.
"That's $100 billion in fake memory sticks, drives, monitors, networking gear and other IT products floating around out there in black and grey market channels. This has huge implications for the enterprise," says Tidd, who became involved in his first counterfeit case in 2001. That case led him to a Canadian reseller who also was under investigation by HP. Out of that case, 3Com and HP, along with Cisco and Nortel, founded AGMA.
On a typical day in fiscal year 2006, U.S.
Customs and Border Protection:
Processed—
1.1 million passengers and pedestrians, including 680,000 aliens
70,900 truck, rail and sea containers
240,737 incoming international air passengers
71,151 passengers/crew arriving by ship
327,042 incoming privately owned vehicles
85,300 shipments of goods approved for entry
$84,400,000 in fees, duties and tariff s.
Executed—
63 arrests at ports of entry
2,984 apprehensions between ports for illegal
entry
Seized—
1,769 pounds of narcotics in 63 seizures at ports of entry
3,788 pounds of narcotics in 20 seizures between ports of entry
$157,800 in undeclared or illicit currency and
$646,900 worth of fraudulent commercial merchandise at ports of entry
4,462 prohibited meat, plant materials or animal products, including 147 agricultural pests at ports of entry
Refused entry of—
574 non-citizens at our ports of entry
63 criminal aliens attempting to enter the United States
Intercepted—
71 fraudulent documents
20 smuggled aliens
1.5 traveler for terrorism/national security
concerns
Rescued—
8 illegal crossers in distress or dangerous conditions between our ports of entry
Deployed—
1,264 canine enforcement teams
8,075 vehicles, 260 aircraft, 215 watercraft, and 202 equestrian patrols
Protected more than—
5,000 miles of border with Canada
1,900 miles of border with Mexico
95,000 miles of shoreline
Employed approximately 42,000 employees—
18,000 offi cers
12,300 Border Patrol agents
2,000 agriculture specialists
650 air and marine officers
Managed—
326 ports of entry
20 sectors with 33 border checkpoints between the ports of entry
Import Value by Mode of Transportation:
Sea:$600 Billion
Air:$364 Billion
Truck:$252 Billion
Rail:$77 Billion
FTZ /Whse: $83 Billion
Other:$37 BillionThe
Sea vessel imports accounted for 43% of all imports in FY 2004
66% of all sea vessel imports by value arrive in the US via container
The proportions of imports for all modes have remained relatively static since FY 1999
During 2006, the International Chamber of Commerce's BASCAP Intelligence Reports monitored 1,647 global incidents of intellectual property theft focusing exclusively on copyright and trademark infringement. A total value of US$1.9 billion was measured for seizures and losses from sources located in 92 countries. This represents an 11.4% increase in activity and a 21.2% increase in the total value of seizures and losses over the same period in 2005.
Analysis of this activity revealed links to a wide range of undesirable and violent activities which include drug use and trafficking, pornography, weapons and explosives, assaults, fraud, tax evasion, money laundering, illegal immigration, murder, theft and terrorism. In addition, it is apparent that entities involved in this illegal trade are becoming highly organized, with investments in large inventories and equipment, sophisticated communication and transportation methods, and well defined organizational structures. These elements form the basis of organized crime and have facilitated the tremendous growth of the industry.
The massive scale of the trade can be understood by the nearly infinite variety of goods being produced and sold, which include entertainment and software, clothing, pharmaceuticals, automotive parts, food and alcohol, cigarettes, jewelry and watches, to name a few. This impacts consumers, businesses and governments in the form of increased crime, health and safety concerns, the loss of business and tax revenue, and influences the social and moral fiber of society.
The IACC is the largest U.S.-based organization that exclusively represents the interests of companies concerned with product piracy and counterfeiting. The IACC has approximately 175 corporate, trade
association and professional firm members representing a cross-section of industries, including automotive, motion picture, software, apparel, luxury goods, footwear, personal care and pharmaceutical
sectors. Total revenues of IACC members exceed US$750 Billion.
The IACC’s 301 submission suggests to the USTR that China - the country with the largest piracy and counterfeiting problem – be listed as a Priority Foreign Country. Brazil, Canada, Costa Rica, Czech Republic, Paraguay, Russia and Vietnam are designated by the IACC as Priority Watch List Countries in the IACC submission. Further, Belize, Malaysia, Mexico and The Philippines are listed as IACC’s Watch List countries and Peru and United Arab Emirates received a Special Mention standing. However, the lack of inclusion of other countries in the report is not an acknowledgement by the IACC of improvements in those countries not named.
“While government leaders and policy makers in these countries are more cognizant of the negative implications tied to the trade of illicit goods, the need for greater priority to be given to anti-counterfeiting efforts remains dire,” said Nils Montan, president of the IACC. “The fact is counterfeiting poses serious threats globally to public health and well-being, causes substantial losses in tax revenues, hinders development of both domestic and international markets and diminishes incentives for global innovation.
The IACC’s Special 301 submission provides specific recommendations for legal and policy reform to guide national governments as they consider introducing best practices and assess whether their laws and enforcement procedures at least meet the minimum standards of protection set forth in the
Agreement on the Trade-Related Aspects of Intellectual Property by the World Trade Organization.”
China
China
China continues to be the single biggest source of counterfeit products worldwide, despite tremendous steps by the Chinese government over the last year to reduce counterfeiting. Over the last 12 months,
various enforcement arms of the Chinese Government have improved their performance in relation to IP enforcement, increasing IPR offense related convictions by 52%, and seizures of infringing goods by
nearly 100%. Yet, China remains the largest source worldwide of counterfeit goods and the largest source of counterfeit goods entering the U. S. – the problem of counterfeit exports continues to grow, spurred in large part by increasing use of the Internet as the main platform for promotion and sales.
China’s counterfeit and piracy problem continues to cause severe harm to virtually all IACC member companies with a problem spanning many product categories including electronics, pharmaceuticals, household appliances, computer peripherals, auto parts, lighters, optical media, toys, apparel, footwear, luxury accessories (including handbags, jewelry, watches and eyewear) and cigarettes.
The Facts:
* Counterfeiting costs U.S. businesses $200 billion to $250 billion annually.
* Counterfeit merchandise is directly responsible for the loss of more than 750,000 American jobs.
* Since 1982, the global trade in illegitimate goods has increased from $5.5 billion to approximately $600 billion annually.
* Approximately 5%-7% of the world trade is in counterfeit goods.
* U.S. companies suffer $9 billion in trade losses due to international copyright piracy.
* Counterfeiting poses a threat to global health and safety.
Consider the DANGEROUS FAKES:
o The Food and Drug Administration estimates that counterfeit drugs account for 10% of all drugs sold in the United States.
o The Federal Aviation Administration estimates that 2% of the 26 million airline parts installed each year are counterfeit, which equals approximately 520,000 parts.
o In 2003, the Motor and Equipment Manufacturers Association cited safety violations due to counterfeit auto parts: brake linings made of compressed grass, sawdust or cardboard; transmission fluid made of cheap oil that is dyed; and oil filters that use rags for the filter element.
2004
According to available midyear figures for 2003, the Department of Homeland Security reported 3,117 seizures of counterfeit branded goods with an estimated street value of about $38 million. The value of the merchandise seized that year, furthermore, was up 42 percent from calendar year 2002. The top five offending countries of origin were the People's Republic of China ($26.7 million), Hong Kong ($1.9 million), Mexico ($1.6 million), Korea ($1.4 million) and Malaysia ($1 million).
Figures published by the European Commission at the end of 2003 indicated that customs seized almost 85 million counterfeit or pirated articles at the EU's external border in 2002, and 50 million in the first half of 2003. In 2001, before the post-9/11 worldwide economic slowdown, EU customs officials seized well over 95 million counterfeit and pirated goods. And the total number of counterfeit products entering the European market reportedly increased 900 percent over the past decade.
The International AntiCounterfeiting Coalition (IACC), an association of more than 150 companies fighting product counterfeiting, calculates that this illegal practice exacts a cost of more than $200 billion a year in lost jobs, lost tax revenues and lost sales. Counterfeiting, according to a study by the Organization for Economic Cooperation and Development (OECD), was also responsible for the loss of 200,000 jobs in Europe. Combating counterfeiting also creates an unnecessary drag on the growth and trade of legitimate corporations. The world's Fortune 500 companies each reportedly spend an estimated average of between $2 million and $4 million annually to combat this problem-and you don't need to be a rocket scientist to figure out who, in the end, winds up footing the bill for such expensive anti-counterfeiting efforts.
The FBI and U.S. customs and border agents, on the other hand, estimate that the sales of counterfeit goods enrich international criminal organizations by about $500 billion every year. Carratu International PLC, a leading investigator of abuses of intellectual property, calculates that the global counterfeit market accounted for 9 percent of total world trade in calendar year 2003. The London-based organization anticipates that this percentage will double by 2005.
May 2006
Quantity of Seizures
244,724
Value of Seizures (USD)
$11,656,600
Incidents #
61
Counterfeit Items (Sales)
5,019
Losses Due to Counterfeiting (USD)
$2,283,900
Types of Counterfeits
Cigarette & Tobacco Products
Clothing & Accessories
Computer Equipment & Supplies
Drugs & Medical
Entertainment & Software
Financial Instruments
Identification
Industrial Goods & Supplies
Other Documents & Packaging
Quantity of Seizures
20,067,384
Value of Seizures (USD)
$145,411,580
Incidents #
298
Counterfeit Items (Sales)
314,004
Losses Due to Counterfeiting (USD)
$6,340,100
Types of Counterfeits
Cigarette & Tobacco Products
$5,286,200
Clothing & Accessories
$32,689,500
Computer Equipment & Supplies
Drugs & Medical
$1,497,000
Electronic Equipment & Supplies
$29,000
Entertainment & Software
$6,618,850
Financial Instruments
$93,248,030
Food & Alcohol
$49,000
Identification
$4,533,000
Industrial Goods & Supplies
$290,000
Jewelry & Watches
$83,500
Other Documents & Packaging
$75,000
Perfume & Cosmetics
3
$711,500
Toys & Sports Equipment
How big is the problem? - 2005
Quantifying an illegal activity will always be difficult and by default will be based on extrapolation and estimate. European Taxation and Customs Commissioner László Kovács said on February 8 2005 that counterfeiting is thought to be worth some €400 billion ($535 billion) worldwide. The OECD estimates that the fakes could account for 9% of world trade. Adding to that the lost jobs, lost profits and lost tax revenues, it becomes clear that counterfeiting is big business.
There is one set of figures that we can rely upon, which is the seizure statistics of the EU's Customs officers. According to the Customs Directorate-General of the European Commission, EU Customs in 2003 seized 92 million fake items, a 9% increase from 2002. Worryingly, these seizures included a 77% increase in foodstuffs and drinks from 2002, an 801% increase in perfumes and cosmetics and 996% more toys and games - all sectors with direct links to consumer health and safety. In the first nine months of 2004 alone, seizures of fake goods stood at over 75 million items.
The good news is that our Customs officers are becoming specialists in detecting fakes. Between 1998 and 2001, the detention rate of counterfeit and pirated goods by EU Customs went up by 900%, from 10 to almost 100 million objects. One could say that if they are finding more fake goods, then less is getting into the EU and so we are winning the war. If that is the case, however, would Customs officers not be finding less fakes? And where is the rest that they have not found?
Feb 2005
The value, worldwide, of counterfeit items sold and then seized in December alone surged to $875 billion. And printed items were the most common category. Leading a list of 227 incidents involving 14 million items:
* financial instruments, with 98 incidents worth a staggering $875 billion;
* degrees, certificates, tickets, licenses and coupons worth $98 million;
* entertainment and software CDs and DVDs worth $78 million;
* fake passports, visas, drivers' licenses, etc. worth $6.6 million.
Criminal organizations have a massive need for counterfeit identification to protect crooks and terrorists who perpetrate financial crimes such as check, credit and debit card fraud, says Glen Gieschen, whose Calgary, Canada consultancy (www.gieschen.com) tracks the field. "This is certainly one of the reasons why national identity cards and biometric passports are being proposed as one of many solutions to this problem," Geischen says.
Predictably, the typical tools employed by criminals are the same ones used by legitimate print services: CD and DVD burners, stamping equipment, computers, printers, scanners, laminating machines and digital cameras. China, highlighted last issue in concerns over counterfeit, is the most frequent locale (44% of the time) for manufacturing counterfeit items shipped elsewhere.
The amount of fake products confiscated each month by customs and law enforcement agents increased more than 200% from November, indicating an increased effort to remove them from the marketplace. The increase also may be an early indication that sophisticated print encryption techniques for identifying fakes are beginning to have an impact.
The U.S. Chamber of Commerce estimated product counterfeiting costs the U.S. economy $250 billion a year.
In real world terms, that is nearly a million American jobs lost to product piracy.
Counterfeit and pirated goods cost the global economy more than 500 billion dollars a year.
These are serious crimes that put consumers at risk with fake prescription drugs, harmful cosmetics,untested consumer electronics, and substandard automobile and aircraft parts. 750 thousand U.S. jobs to date have been lost due to Intellectual Property Theft.
"Counterfeiters and pirates are thwarting economic development and endangering health and safety. Their methods are sophisticated, their reach is far and their crimes claim victims every day. The scourge of counterfeiting and piracy has assumed epidemic proportions. This is a global phenomenon which requires global action,” said Dr. Kamil Idris, Director General of WIPO.
Today, almost every product on the market is a target of counterfeiting and piracy, endangering human health and safety and undermining economic development.
