A risk assessment agency in Hong Kong says counterfeit goods sold at high margins in Southeast Asia and the rest of the world can be traced to terrorist groups like Jemaah Islamiyah, Islamic extremists linked to the al-Qaida terror network.
Money made selling fake or copied DVD's, designer bags, and brand-name cigarettes can end up in the hands of terrorists.
The Hong Kong risk assessment firm Hill and Associates says counterfeit products not only damage corporate sales and tarnish brand names, the illegal trade also threatens regional security.
"Terrorist networks need money to function because they do not hold down regular jobs," said David Fernyhough, the company's brand director, speaking at the Foreign Correspondent's Club in Hong Kong. "Where the counterfeiting comes in is because it's very high return, very low risk, that money is untraceable and therefore attractive."
On a computer-generated chart used to track criminals, Mr. Fernyhough points to Jemaah Islamiyah's suspected terror boss, Riduan Isamuddin also known as Hambali. The chart shows the likely links between Hambali and others involved in the 2002 terrorist bombing of a Bali nightclub, which killed more than 200 people. He says the chart also suggests how traders in fake products filtered funds to Jemaah Islamiyah.
He says companies trying to stop counterfeiters should be aware that vendors of fake products are often also involved in drugs, people smuggling and terrorism.
Mr. Fernyhough says counterfeiters are attracted to brand-name products because of big profit margins.
"Products that tend to be involved, where you have organized crime and potential extremist exploitation are the high margin goods where you are making a lot of money for very little investment. Name brands sell for far greater than their actual worth," he said.
Mr. Fernyhough says counterfeit goods make up about five percent of world trade, accounting for hundreds of billions of dollars each year.