By Type: Blogs

Inspector Led Authentication’s Contribution to Brand Protection Programs

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Author: Andree Bourgeois

By: Andrzej Hornostaj, VP Brand Solutions, Authentix

Identification of an at-risk product and implementing an authentication solution is not the end of the story, it is just the beginning. Constant inspection of the product in the supply chain and marketplace is required to ensure useful actionable insights is generated to minimize counterfeit and diversion practices while protecting your brand and bottom line.

Let’s Begin with Inspection Design

Inspection design is determined by the objectives of the inspection. Let’s consider two relevant approaches. Will the inspection be reactive to a specific counterfeit event, or proactive determining the scale of counterfeiting and generating actionable insights?

Ideally, inspections, like any investigation, should follow a holistic approach involving several stakeholder teams including product, brand protection, investigative, and legal. Each team has its own requirements for the actionable insights generated from an inspection. Some critical stakeholder questions may be as follows:

Product: What’s the scale and location of the counterfeiting problem for a product?

Brand protection: What’s the level of sophistication of the counterfeit operation (production and logistics)? Are security features being copied? Are packaging design changes required?

Investigative: Can the right data be gathered to support investigations into the counterfeit’s supply chain and to identify the manufacturing source? Is the evidence strong enough that it can be passed on to legal and law enforcement to perform raids and prosecutions?

Who will conduct the inspections?

The boots on the ground can either be members of the brand owner’s staff or third-party inspection agencies working on their behalf. Ideally, to infer useful insights from an inspection, the more data collected the better. This need pushes the brand toward engaging a third-party that can provide the coverage and inspector numbers to achieve data volume.

As always, inspector safety is paramount and consideration should be taken as to whether the inspector needs to be accompanied by law enforcement representatives.

Where to direct initial inspection efforts?

I would suggest initial efforts begin at the retail level where products of interest are typically more accessible to covert inspection. This type of insight helps to determine the scale or extent of the problem and generates a suitable baseline against which further inspections and remediation efforts may be compared. As pharmaceuticals are usually not accessible at pharmacies, other locations in the supply chain should be the initial focus.

Once a baseline is established, then testing of supply chain integrity should be performed. Keep in mind, some obstacles may be encountered at this stage as it is not always possible to accurately track the route by which products reach the end user beyond the first tier distributors.

To assist access / auditing of stock at distributors, brands should ensure that cooperation agreements allow for inspections with short notification times. This will prevent suspect items from being removed from the audit location by a guilty party.

Which inspection tools should be used?

Having the right tools during an inspection to automatically capture the data required for each stakeholder is important and ensures that repeat testing is minimised. With the right type of reader paired with a smart device, inspectors are equipped to not only identify counterfeit products, but also capture location data and photographs of the packaging. This complete picture of the scale and sophistication of the counterfeit operation can form the basis of effective enforcement actions.

Click here to learn more about brand protection. You can also contact Authentix at info@authentix.com.

Technology Progression in Fuel Marking

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Author: Andree Bourgeois

Stop Fuel Smuggling Series

By: Jeff Conroy, Chief Scientist, Authentix

Branded fuel suppliers began to use colorants in the 1950’s as a means to indicate fuel type, grade, or brand in the downstream petroleum industry, and this approach continues with wide-spread acceptance today. As fuel taxes and subsidies came into use around the globe, it was an easy extension to use this approach as an indication of taxes paid (or exempted).

The use of overt and covert dyes and field kits and devices to read them continue to be a backbone of many fuel marking programs. They are relatively inexpensive and allow non-technical personnel such as police and revenue inspectors to have some level of rapid field indication of illicit activity. This enforcement work is usually backed up by laboratory testing to confirm the identity and amount of marker present in the fuels in support of prosecution.

While visual colorants are low cost and easily implemented, as tax markers they have several disadvantages, including their ease of replication and removal from the fuels. In addition, because many fuels have some inherent color, visual determination is made difficult for many people, especially those with some degree of color misperception.

Making Tests More Reliable

Markers evolved to include more proprietary compounds, designed and developed for fuel marking. To overcome the shortcomings of a human visual assessment, machine readable features that are easy to use and give unambiguous results were developed. The application of portable devices for analysis of fuel markers also enabled a more rigorous quantitative analysis, making dilution detection in the field more reliable. Systems which utilize fluorescence (Forshee 2012) or absorbance (Banavali 2007) of invisible markers have been described. These devices are small, simple to use, and require very little maintenance.  Further enhancements of these types of devices have led to very sophisticated fuel analyzers, capable of analyzing multiple markers, in various fuel matrices, with little to no operator intervention to enable accurate measurement. Coupled with modern smart devices such as phones and tablets, these analyzers can give real-time GPS verified results and integrate with applications to manage workflows and data capture.

The Need for Quantitative Results

Because fuel integrity programs are often instituted to meet a wide range of objectives, each implementation is different.  For example, a country may choose to deploy a “national marker” program, indicating that all taxes have been fully paid on fuels.  In essence, the marker serves as a “chemical tax stamp” for all taxed fuels.  In this type of deployment, inspectors will be looking for the dilution of the fully taxed fuel due to the addition of a lower-taxed or diverted petroleum products, which do not contain a marker.  In this case, accuracy of a quantitative result is paramount.  To maintain program integrity, it is essential that the security of the marker is maintained with regular audits to maintain program integrity.

Another typical application is where a country needs to protect the use of subsidized petroleum products that can be used outside of their intended subsidized market.  In this case, the fuels would need to be treated with laundering resistant markers to prevent criminals from potentially removing the markers to prevent detection.  The simple presence of the marker in a non-subsidized fuel application could be enough to indicate illicit activity, reducing the need for quantitative results on the test.

Field versus Central Laboratory Testing

Some have advocated a “forensic test” in the field approach.  Such an approach requires “portable” instruments that require support (e.g. power, gases, and environmental control) from the vehicle in which they are mounted.  This approach can limit the number of testing systems deployed due to cost of the platform that includes a vehicle and the associated support.  In addition, the idea of deploying a forensic test into the field as opposed to performing the test under laboratory controlled conditions is yet to be defended in courts, where the approach may find considerable challenges.

In fact, two of the largest marker programs, the EU’s Euromarker and the United States Internal Revenue Service’s red dye marker have published reference methods (Linsinger, et al. 2004) (ASTM International 2009) and collection protocols required to support enforcement and prosecution.  The proper collection, chain of custody, and analysis of samples for support of litigation is well documented for many forensic activities such as drug enforcement, crime scene investigation, and environmental monitoring.  Following similar procedures for fuel sampling allows authorities to continue to deploy relatively cost effective field enforcement tests like covert machine readable features, while providing forensic evidence with a proven laboratory test protocol.

In the laboratory, GC-MS is used for analysis of fuel markers for over twenty years to provide unequivocal forensic level support of fuel marking program enforcement. Markers designed to exploit GC-MS offer definitive forensic evidence of the origin and condition of a fuel.  The markers are covert and robust, resistant to laundering agents, and compliant with the most stringent environmental regulations.  The analysis is very accurate, with limits of detection in the low parts per billion (or lower in some fuels) and very good accuracy and precision, as good as +/- 1% on the analytical method itself.

The Right Solution for the Right Outcome

Fuel marking technologies have evolved from the use of colorants and dyes to covert markers and machine readable features.  Field portable analyzers have greatly increased the accuracy of enforcement, and reduced the burden on personnel by making test results definitive and quantitative.  Markers have become more robust and resistant to laundering and meet the most stringent environmental, health and safety regulations.  Finally, the development of powerful laboratory controlled forensic molecular marker sets based on GC and GC-MS have strengthened the legal standing of these programs, enabling government agencies to enforce laws that protect subsidies and taxes on petroleum products.

Click here to learn more about how Authentix’s Vigilant® offering is helping governments prevent fuel fraud. You can also learn more about Assure™, our brand protection fuel marking program for oil marketing companies.

 

References:

ASTM International. 2009. “Standard Test Method for Determination of Solvent Red 164 Dye Concentration in Diesel Fuels.” ASTM Standard D6258 . West Conshohocken, PA: ASTM International.

Banavali, Rajiv M. & Ho, Kim Sang. 2007. Pyrazinoporphyrazines as markers for liquid hydrocarbons. United States. Patent 7,157,611. Published January 2 2007.

Forshee, Philip, & Kottenstette, Peter. 2012. Tagged petroleum products and methods of detecting same. United States Patent 8,129,190. Published March 6 2012.

Linsinger, T., G. Koomen, H. Emteborg, G. Roebben, G. Kramer, and A. and Lamberty. 2004. “Validation of the European Union’s Reference Method for the Determination of Solvent Yellow 124 in Gas Oil and Kerosene.” Energy & Fuels 18: 1851-1854.

Responsible Fuel Supply Chain Management Just Makes $ense

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Author: Andree Bourgeois

Illegal Fuel Trade, Supply Chain Integrity and Technology

By: Erwin Dorland, Advisory Program Delivery Manager, Authentix

When addressing the problem of fuel smuggling or fuel fraud, responsible fuel supply chain management isn’t just a simple question of doing the right thing – it makes financial sense.

Responsible management and minimising risks within the fuel supply chain will ensure quality and security of the supply chain.

Financial gain is often the key motive behind supply chain infiltration, as illegal practices can be extremely lucrative1. Often the legal and regulatory framework is weak, the risks are low and the financial gains can be high. As mentioned in a previous BLOG, in many cases, organised crime is involved, which contributes to the growth of this type of fraud.

Most countries have significant problems with lower taxed fuels being sold at higher taxed prices. For example, in Europe, diesel is sold at a lower tax rate for agricultural use, but is illegally used by road users, who are supposed to purchase higher taxed diesel. This type of fraud is preventing governments from collecting the right amount of taxes, which impacts government programs, the well-being of all citizens and the environment in which we live. In my experience, there are four key areas of focus to ignite action against the business of illicit fuel trade.

Visibility2, 3

Visibility refers to the ability to see what is going on within the supply chain. Fundamentally, having access to information will enable managers to make better decisions.

Information technology is at the root of supply chain management. With the advent of the Internet and the Cloud, information exchanges can involve many stakeholders and enables access to critical data 24/7.

Traceability

Traceability is closely related to visibility and refers to the ability to track the fuel’s provenance and maintaining a record of activities of the product flow.

Several tools are available to ensure traceability as fuel moves through the supply chain. The advancements in technology now allow stakeholders to tap into a variety of information sources for a balanced view of supply chain participants and risks. The fuel industry has a number of tools available, such as visible dyes, covert dyes, chemical markers, sealing of tankers, GPS tracking of trucks, dipping of trucks, and wet stock control to track products, to ensure quality and prevent fraud.

Integrity

National governments are increasingly being held accountable for policy actions and therefore the governments’ awareness of and commitment to high principles and business practices is increasing.

The exposure of irresponsible practice in the supply chain can result in severe damage to national governments’ reputation and citizens’ trust. For example, governments not collecting the available taxes and having the appropriate system in place to do so, might have a negative standing with citizens.

Transparency

Transparency refers to national governments’ engagement and communication with external stakeholders. Such engagement is designed to share the national governments’ practices with those that have an interest in the governments’ behaviour, including environmental and social performance. Supply chain issues are becoming more and more visible to citizens and stakeholders. Therefore, developing transparent information systems and processes to communicate sustainable supply chain practices is vital. For example, governments can use social media to inform and educate citizens about their approach to responsibility, by promoting supply chain transparency.

 

Ready for Action

To really support the initiative to stop fuel smuggling and fuel fraud, making the supply chain more resilient to supply chain risk involves attaining a good understanding of the supply chain and conducting analysis of the potential threats and the level of risk4. Technology can be used to verify fuel authenticity and tampering. The resulting information will need to be captured using the appropriate information technology and made visible to the appropriate stakeholders.

Among the considerations of the technologies to be used, must be the ability for the technology to pay for itself. Government and policy makers need to be educated regarding the risks of fuel adulterations and how the legal and regulatory framework need to work hand-in-hand with the introduction of technologies. Awareness needs to be created that no technology will provide absolute supply chain security, as there are always weaknesses to be exploited. The key is to understand the key risks and put tools in place to collect the appropriate information, so those risks can be managed.

Click here to learn more about how Authentix’s Vigilant® offering is helping governments prevent fuel fraud. You can also learn more about Assure™, our brand protection fuel marking program for oil marketing companies.

 

References

  1. Illicit Trade, Supply Chain Integrity, and Technology – www3 … – Illicit Trade, Supply Chain Integrity, and Technology, J Picard and C.A. Alvaranga
  2. https://dupress.deloitte.com/dup-us-en/topics/operations/supply-chain-transparency.html – The path to supply chain transparency, D Linich, University of Tennessee
  3. creating a transparent supply chain best practices – Global Supply ……  – Creating a Transparent Supply Chain – Best Practices, University of Tennessee
  4. Manage your supply chains responsibly – Business in the Community – How to: Manage your supply chains responsibly, Business in the community

The Harmful Implications of Illicit Fuel Trade—the economy, the people, the environment

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Author: Andree Bourgeois

Written by: Kevin McKenna, President, Oil & Gas, Authentix
Stop Fuel Fraud Series

People often ask me what I do for a living. When I state that I manage a business that helps detect and deter illicit fuel trade, most of the time the response is a confused look and the question, “What is illicit fuel trade, and is that really a problem?” My quick answer is that illicit fuel trade is likely the biggest problem that you have never heard of. The first step in tackling this menace is to shed light on its existence and the harm it inflicts on society.

For the past couple of weeks, we’ve produced some different blog posts discussing illicit fuel trade, a major worldwide problem stealing billions of dollars from governments, legitimate businesses, and consumers. “Illicit trade” can be the simple case of outright theft, which is very prevalent in Mexico today, where the state oil company, Pemex, says it lost about $1.6B in 2016 from fuel stolen from over 6,800 pipeline taps across the country. Another scheme of illicit trade is made possible by exploiting the differences in price between fuels or other petroleum products because of tax differences, subsidies, different grades, or product types (e.g., adulteration with non-fuel products such as solvents or waste oils).

Why fuel fraud is hard to detect

In both cases of illicit trade, the execution of the crime is simple – take a lower price (or stolen) product and either mix it with a higher priced product or replace it outright – sell the fuel at full price and pocket the difference. Even small differences in product prices can generate massive returns for criminals due to the sheer volume of petroleum products consumed every day. The crime is further enabled by the difficulty in detecting when it is perpetrated.

What does this mean to you?

Most consumers never see the road fuels that they purchase, and even if they did, an illicit product may look the same as legitimate product. If as a consumer, I unwittingly buy adulterated fuel at the premium price, obviously, I don’t get what I paid for; but it can also damage the engine of my car, reduce my fuel economy, and increase air pollution. The government doesn’t collect the taxes it needs, legitimate businesses suffer from unfair competition, and the reputation of oil marketing company brands may be unfairly tarnished.

At Authentix we believe that a system of fair and open commerce serves as a powerful agent for good throughout the world. When this system is compromised by illicit trade, civil society is weakened. The scope and scale of illicit fuel trade is particularly damaging in this regard – diverting money to organized crime and, in some cases, terrorist organizations, while defrauding governments of tax revenue necessary to fund programs in the service of their citizens. In many cases these taxes are a significant portion of the country’s total tax revenue – any shortfall in collection may necessitate higher taxes in other areas, placing an even larger tax burden on the populace.

The only people benefiting are the criminals perpetuating the crime – and it is BIG business. Our experience in several countries is that the illicit trade rate in the fuel supply chain was over 30% – translating into hundreds of millions of dollars each year lost to criminals in each of these countries.

Time to disrupt the business of illicit fuel trade

Fuel Marking Programs (FMPs) are a highly effective means to redistribute illicit gains away from organized crime and savings toward legitimate businesses and Government, while ensuring consumers get the quality products for which they have paid. In weeks to come, we will dive into FMPs and how we have seen FMPs assist governments in enforcement of policies prohibiting illicit fuel trade. Many of these programs deliver a significant return on investment of usually five to 10x the cost of the program.

I hope you recognize the lasting implications illicit fuel trade has on all of us. Usually after an awakening to how people’s everyday lives are affected, the next question is typically, “Why isn’t every government doing an FMP?” My personal opinion, it’s the same reason that most citizens aren’t aware of the problem and the harm it brings to their community – something we at Authentix are working diligently to change.

Click here to learn more about how Authentix’s Vigilant® offering is helping governments prevent fuel fraud. You can also learn more about Assure™, our brand protection fuel marking program for oil marketing companies.

How to Create a Secure, High-Quality Fuel Supply

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Author: Andree Bourgeois

Introduction to Stop Fuel Fraud Blog Series

Every country around the globe is dependent on the use of petroleum products to move people and goods around, generate power and generally keep their economies growing. Because of this ubiquity in the economy, most governments have developed fuel taxation systems to fund essential services for the benefit of their citizens and at times, provide subsidies to lower prices for certain essential fuels.

The differential in price between taxed, high-cost fuels and subsidized, low-cost fuels creates an incentive for criminally-minded people to perpetrate fuel fraud. The money generated by this illicit activity has been used to fund drug cartels and other organized crime[1] as well as terrorists[2].

Fuel fraud happens in a variety of ways. One form is smuggling in fuel from a neighboring country where prices are low. A striking example is Guyana, a small country in South America that shares a border with Venezuela, where the price of diesel is subsidized down to US$ 0.01 per liter. Guyana follows the prevailing market price for diesel, selling it at about US$ 0.70 per liter, so the incentive to bring fuel via ship or overland from Venezuela is quite strong.

Fuel fraud also occurs when high-priced, taxed product is diluted with cheaper or low-tax fuel products. An example of this is when diesel fuel intended for use in agriculture or mining carries a no- or low-tax rate and is diverted into the high-tax road diesel fuel supply.

Adulteration is a common type of fuel fraud that occurs when other types of hydrocarbons are introduced in the fuel supply. These are typically low- or no-value inferior products such as solvents or waste oils, which then adulterate the fuels meant for vehicles. These adulterants are both a source of additional air pollutants and can cause malfunctions, component failure and safety problems for engines that combust these compounds.

Fuel fraud is a rampant problem in the world, siphoning off needed tax revenues, harming air quality and damaging vehicle engines. This is the first in a series of articles about the ramifications of fuel fraud and a detailed review of the many ways it can occur. Stay tuned through the end of the series to learn how a well-designed, comprehensive fuel marking program – the introduction of environmentally-safe chemical markers into the fuel supply chain – can pay for itself in recapturing lost tax revenue while providing timely, actionable insights that allow government enforcement personnel to combat illicit fuel trade in their countries.

A secure, high quality fuel supply strengthens confidence in the government, provides a level playing field for the companies that sell and distribute fuel in the country and keeps vital funds out of the hands of the bad guys.

 

By: Gail Moser, Director of Marketing, Authentix

 

[1] https://www.nytimes.com/2017/04/26/world/americas/mexico-fuel-theft-crisis.html?_r=0

[2] https://www.usnews.com/news/the-report/articles/2015/11/23/financing-terror-where-does-the-islamic-state-group-get-its-money

A Product Owner’s Journey to Release the LSX 3000 Field Analyzer

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Author: Andree Bourgeois

It was over a year ago now that I was tasked with taking up the role Product Owner for Authentix’s newest analyzer for our Fuel Marking Programs, christened the LSX 3000 Field Analyzer. At the beginning of my involvement in the project, I was looking up quite a steep hill and had some reservations; it was my first time acting as a Product Owner of a project that had been in motion for a few months. What’s more, both the engineering team and software team weren’t working with clear instructions of what exactly they were supposed to build (in product development lingo, they didn’t have all of the “requirements”).

I quickly came to realize that both teams had done a spectacular job of coming very close to meeting the base requirements while developing their separate parts of the project. However, both teams were missing some key information. We in the Product Group knew that when we launch LSX 3000, we didn’t want to just be close, we wanted LSX 3000 to be the fastest, most accurate, and most reliable field analyzer on the market.

In my experience, the best way to tackle a problem is by facing the challenge head on. We started by reviewing the list of requirements by team and identifying the issues that each were facing. Once those missing requirements were identified, we further dissected them into their smallest components. This ensured that each issue was fully understood and could be addressed by the right individuals, and in the right order of precedence. Fast forward a few months, glossing over all of the inevitable growing pains that come with new processes (everybody just loves change!), we finally had a prototype unit that was ready for its first field test!
We looked for the best location for a field test that would ensure that we would really put the prototype LSX 3000 through its paces. After some discussion, one of our partners in Africa agreed to participate in a trial of LSX 3000.

So, after a brief, refreshing 23-hour flight, my colleagues and I stepped onto the tarmac in Accra, Ghana to begin our two-week field trial.
As it turns out, we chose a “perfect” location for the test. Temperatures in the sub-Saharan northern part of the country flirted with 50°C / 122°F (heat stress, check) while in the southern regions of the country, we faced near 100% humidity, if not outright drenching rainfall (humidity/water resistance, check). During this trial, we collected data, more data, just a bit more data, and some invaluable feedback on usability and functionality. At the end of two weeks, I had a great tan and a stack of information that would help our teams refine and improve the already amazingly tough prototype design.

The development process continued throughout the summer and fall, including several more trips abroad to test each new and improved version of the analyzer. Each time we returned, our stack of needed “improvements” grew shorter. The whole team knew we were getting close to a product that reflects customer and market needs, but we made the decision to do one final trial, only this time as observers. This trial tested the premise that a user with minimal training could operate the instrument and address any problem. Users were presented with different situations (uncharged/no power state, no wireless connection, etc.) and asked if they could resolve the situation themselves. The users were able to quickly and easily correct the problems on their own – positively reinforcing our premise and demonstrating that our new analyzer would be user friendly and simple to operate, one of the key requirements.

Additionally, the sampling data was a great resource for Chemometrics team members here in Texas. They used the insight to make changes to the analyzer’s mathematical models and the analytics processes of each successive prototype, making each version better and more accurate. All of the team’s work paid off. With a little over 18 months under our belt, LSX 3000 launched on 22 June 2017, under our Vigilant offering as the fastest, most accurate, and most reliable field analyzer available today.

Click here to learn more about Vigilant. You can also contact Authentix at info@authentix.com.

Are Counterfeiters Innovators

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Author: Andree Bourgeois

Are Counterfeiters Innovators?

I read an interesting article recently about the long discussed topic of why larger organizations can’t be more like a startup. [1] This topic is often brought up in the context of keeping organizations innovative and open to new markets and ideas outside of the normal focus of that business. But this article was interesting because it put forward a new thought I hadn’t seen in the normal discourse, the idea that startups aren’t bound by the same Iegal constraints of established businesses.

The idea struck me as absurd, what investors would get behind an operation or idea that at the outset appeared to be illegal? The article goes on to illustrate how many companies, including Uber, PayPal, Airbnb, and Tesla all had at least aspects of their business model that appeared to be illegal or at least in a very gray area that ran aground of regulatory restrictions on their industries.

One example the article missed, perhaps because of its age and lack of success was Napster. By developing a user friendly interface that specialized in music files, Napster gave would be consumers of music a taste of what they really wanted in content management; a set of features like platform independence, per track purchase, mobility, and the ability to make playlists. The problem was Napster did this be enabling the general population to become content pirates, clearly running afoul of even the most liberal interpretations of consumers rights to content they owned at the time. The music industry certainly couldn’t support having its content stolen and copied, and Napster was forced to shut down in 2001 amid copyright settlements less than three years from inception.

Yet it took Apple to drag the industry forward into digital distribution two years later rather than an internal industry response. The music industry was threatened because they didn’t know how they could monetize digital sales the way they had with physical media. And the industry suffered greatly for over a decade, with replacement revenues from digital media and streaming services just now reaching levels of the pre-Napster world. But the truckloads of CDs, associated manufacturing and logistics, and other cost structures in the industry have now been revolutionized. Digital content distribution is very high margin, with a higher percentage of revenues going to artists, and spurring on all new industries of content creation and entertainment. The future is very bright for this industry.

So what does this have to do with counterfeiters? Well, I think we can agree that counterfeiting is illegal and dominated by “startups” that can ignore the legal norms of doing business. That is not that surprising. And the technological innovations that have led to widespread outsourcing and high quality manufacturing around the globe are now being turned against the same industries that have benefited from them. Internet distribution of products have accelerated sales, but at the same time opened the door to counterfeit products being sold direct to consumer. Counterfeiters are extremely quick to exploit all these “innovations” to create an opportunity that established companies can’t exploit.
So what can we learn from this? I think the biggest takeaway from previous lessons is that there is no quick fix to the competitive threat. Fighting off the examples given will require a giant shift in how those industries do business. And the innovations of counterfeiters in the last 10 years will require companies to think beyond the simple fixes of applying a hologram or monitoring an online presence. It will require an examination from the ground up of how they source, manufacture, distribute, and ultimately sell to consumers.

In previous articles I’ve talked about the changing threats coming to CPG because of online retailers. [2] We’ve talked about both consumer and inspector led authentication, and the challenges both have. [3] An overall brand protection program that includes monitoring contract manufacturers, distributors, and retailers to gain visibility into the flow of products to consumers is becoming ever more important with the continued growth of counterfeiting. A holistic approach to fight these “innovators” is needed. Companies need to stop thinking about anti-counterfeiting solutions as a standalone effort, and think of the principals of securing supply chains and distribution as they think about the principles of quality, efficiency, and sustainability in their operations.

[1] https://hbr.org/2017/06/why-you-cant-just-tell-a-company-be-more-like-a-startup
[2] http://authentix.com/blog/preparing-for-the-pendulum-to-swing/
[3] http://authentix.com/industries/spirits/inspector-led-authentication/

The end is nigh for banknotes? The data disagrees.

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Author: Andree Bourgeois

The conventional wisdom is that the end of cash is near. A recent Forbes online article [1] is the latest example of selecting facts to support a view shared by many. Yes, electronic payments are grabbing a larger piece of the payment pie, and yes money can be dirty, but the most important data to assess the future of cash is to look at what is happening to the number of notes being issued each year. The data shows: the number of banknotes in circulation continues to maintain a steady growth pace of 4-5% annually. Growth rates vary between countries, but one is hard pressed to identify regions where the growth is flat or negative.

There are several reasons for the ongoing support and growth of cash. Some of these are:

  • Many enjoy the convenience and anonymity of cash
  • It is a failsafe option in times of emergency
  • For the unbanked, cash is the only payment option available
  • We have an emotional attachment to currency

At some point, we will see electronic payments (credit cards, debit cards, electronic transfers, cryptocurrencies) dwarf cash, but that point in time is decades away.

Recently, I attended the annual Currency Conference, which was held over the course of a week in Kuala Lumpur. Over 500 delegates including Central Bank currency management teams and industry suppliers gathered to discuss an array of topics covering banknote design, new authentication technologies, best practices to maintain the security and fitness of notes in circulation, and future trends, such as the growth of digital currencies, that could impact the use of cash.

With the understanding that cash will continue to grow over the foreseeable future and remain a critical payment option, Central Banks continue to invest in an array of advanced technologies to protect these payment instruments. This proactive approach to authentication is necessary as the counterfeiters are often highly talented and motivated to find new ways to deceiving the public and institutions.

The barriers to entry for establishing a large-scale counterfeiting operation continue to shrink. High performance desktop scanners, image editing software, and digital printers have made it easier and less costly to create effective counterfeit banknotes. Today’s counterfeiters complement these capabilities with holographic and optically variable elements to create fake notes that deceive the public and retailers. In addition, the use of the Dark Net has served to increase the distribution capabilities of counterfeiters by identifying buyers while maintaining anonymity.

As the counterfeiters advance their techniques, the list of targeted notes is growing. When access to a large and expensive print operation was a pre-requisite for counterfeiting, higher value notes were primary targets for the counterfeiters to achieve the maximum illicit gains. Today’s lower cost of entry has brought on an opportunistic counterfeiting approach that targets lower value, transactional notes of the local currency. Numerous news stories in the last year have highlighted this as more daily-use denominations are identified as counterfeit by central banks in major economies around the world.[2]

For as long as there have been banknotes, there have been those attempting to counterfeit them. As a result, the issuers of banknotes inherently understand proper approaches to securing their notes, such as:

  • Relying on advanced technologies, which are not generally available for use outside of banknote security
  • Anticipating future counterfeiting trends and establishing security road maps to thwart the future efforts
  • Upgrading banknote security designs and security features every 7-10 years
  • Investing in public education campaigns to raise awareness regarding the features for public use to help detect counterfeit banknotes

Because of the high degree of trust between the Central Banks and those that print, protect, and process their banknotes, it is a very small group of companies which are recognized as approved suppliers. Less than 20 companies provide over 90% of the related banknote materials, sensors, and services required by the Central Banks. This is a very different picture than the broader security industry, which focuses on brand protection and lower tier security documents.

Authentix in Currency

Authentix is honored to be counted among the distinguished organizations that help Central Banks protect their banknotes. Authentix covert, Central Bank level machine readable features are protecting 10s of billions of banknotes in circulation. In addition, over 550 high speed sensors developed and produced by Authentix are used on Central Bank sorting machines to confirm the authenticity and quality of deposited banknotes. Authentix fights illicit trade in many industries such as oil and gas, pharmaceuticals, agricultural chemicals, and spirits, but the protection and quality assurance of banknotes requires the most advanced technologies that we can bring to bear.

[1] https://www.forbes.com/sites/larrymyler/2017/05/11/no-wallet-no-problem-cash-is-no-longer-king/#60950102383a
[2] https://www.theguardian.com/world/2015/dec/03/uganda-deport-american-counterfeit-money-operation

There Are No Shortcuts To Safe Medicines

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Author: Andree Bourgeois

The Partnership for Safe Medicines® recently hosted a panel briefing of several former federal law enforcement officials and public health experts to discuss the merits of recent prescription drug importation proposals[1]. The panel highlighted one of the often overlooked aspects of these proposals aimed to quickly reduce the cost of prescription drugs to patients in need in the United States: the safety of these drugs that would circumvent current FDA regulated domestic supply chains.

Certainly the promise of lower cost prescription drugs is a powerful message to an electorate that sees the costs of these medicines continue to rise while stories of lower cost drugs in other parts of the developed world also make headlines. But those other countries have carefully negotiated and managed supply chains with pharmaceutical companies that ensure the safety of their drugs and often make it illegal to fill a prescription from outside the country. Such is the case in Canada, where Canadian pharmacies cannot fill prescriptions for U.S. patients. Instead, internet pharmacies that claim to be Canadian import drugs or counterfeits sell them to unsuspecting consumers. Like it has for so many other industries, the internet has enabled easy access of buyers and sellers, but with little accountability for product quality or authenticity. Consumers are left to trust the supplier is legitimate, often with no means for recourse if there is a problem.

So why not simply empower the FDA with oversight on importation of drugs from other countries to help ensure safety? That’s a reasonable proposal, but one that will undoubtedly add to the cost of importation. Furthermore, this is not a U.S. only policy problem. For example, if the U.S. and Canada were to legalize the import/export of drugs between the two countries, what would be the effect on Canadian drug prices? In 2014, total Canadian expenditures on prescription drugs was estimated to be $29B[2]. By comparison the United States spent $374B[3]. Even a mild influx of orders from the U.S. could stress the Canadian system, more importantly Canadians, affect pricing since drug companies will be forced to negotiate with Canada as an international supplier, and not a domestic single payer system, certainly driving up costs for Canadians.

The U.S. has left the pharmaceutical industry largely unregulated when it comes to pricing. We have no single payer system, we do not place limits on pricing, and we let the profit motivation of the free market system drive pricing, profit, investment, and innovation. And while we can certainly feel the effects of rising drug costs, we can also see that this system has of its own accord driven us to greater and greater innovation for treatments and cures, and has created a very secure supply chain for the sale and distribution of those medicines. There is almost certainly some kind of change and reform coming to healthcare costs in the U.S., and the pharmaceutical industry will have its part to play, but compromising safety cannot be part of the equation.

Counterfeiting and diversion of medicines and medical products are global issues that affect all countries. These illegal activities threaten the health and welfare of the citizens who receive fake or substandard product, as well as threaten the revenues of brand owners. These activities also undermine the efforts of the government to ensure the availability of affordable drugs to its citizens, thus enabling the proliferation of disease, which can lead to development of drug resistant pathogens.

Authentix is dedicated to the development of products and services that allow the authentication of products and their packaging in supply chains around the world. Authentix provides integrated programs that enable manufacturers to protect their products in complex supply and distribution chains, and informatics to monitor and report on problems as they become apparent.

For more information visit http://authentix.com/offerings/sherlox/.

1.) http://www.safemedicines.org/2017/04/the-fallacy-of-drug-importation.html
2.) https://www.cihi.ca/en/canadians-spent-288-billion-on-prescription-drugs-in-2014
3.) http://www.latimes.com/business/la-fi-drug-costs-20150414-story.html

Preparing for the Pendulum to Swing

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Author: Andree Bourgeois

With the proliferation of internet trade and globalization of manufacturing the pendulum has swung in the favor of counterfeiters as far as ease of access to markets and manufacturing capabilities. And no one has been a bigger lightening rod for criticism around this swing than Alibaba founder Jack Ma. Some of this criticism is well deserved, like the time Mr. Ma suggested:

“The problem is the fake products today are of better quality and better price than the real names,” he said at Alibaba’s investor day in Hangzhou. “They are exactly the same factories, exactly the same raw materials but they do not use the names.”(1)

And I suppose if one puts no value on the skills required to do market research, design and test products, develop quality plans and raw material specifications, then yes, contract manufacturers produce the exact same goods whether they carry the added logo and identification of the innovative companies that create the intellectual property and trademarks that people come to know and trust.
But recently Jack Ma wrote an open letter to China’s “parliament” suggesting that harsher enforcement against counterfeiting was key to fighting the problem.(2) It is no coincidence this change in focus from the quality of counterfeits to fighting the scourge of illicit goods comes at a time when The Office of the United States Trade Representative (USTR) reinstated the Alibaba TaoBao platform on its blacklist of “notorious markets” for selling fakes.(3)

But Mr. Ma does in fact have a point here. As reported in the article:

Alibaba says it handed over 4,495 leads on counterfeiting in 2016 that crossed the threshold of goods worth at least 50,000 yuan ($7,250). Of those, the authorities took on 1,184. That resulted in a scant 33 convictions. Alibaba has launched high-profile efforts, such as a push with the police in the city of Shenzhen and the luxury-goods brand Swarovski to shut down merchants selling fake watches. But some lawyers say those efforts amount to showboating.

But the sheer size of the problem of counterfeit distribution through an essentially frictionless market like Alibaba or Amazon Marketplace and Ebay make the follow-up on potential cases overwhelming for enforcement agencies. An activity that used to require some level of distribution and brick and mortar storefront to move counterfeit goods that could be investigated and raided is now replaced by digital entities that can literally appear and disappear with a few keystrokes. Traditional approaches to fighting illicit goods are overmatched.

So, what can a brand owner do to battle this enormous problem? The reality is that in the 21st century if you are a brand owner creating value from those intangible product qualities of design, style, quality, and ultimately reputation, you need to be investing some degree into the further differentiation of your finished good from that of your contract manufacturer. In our twenty years protecting brands we most often see hybrid and multi-layered solutions as effective means to enable different levels of inspection, from the internal security expert, all the way down to the consumer. And with the proliferation of smart devices and internet access, new tools are becoming available set to swing the pendulum back into the favor of brand owners to track the location of their products and possible illicit goods are a rate commensurate with the new internet economy. What is important is that brands consider equipping their goods with an overall brand protection program that includes monitoring and sampling contract manufacturers, distributors, and retailers to gain visibility into the flow of their products to consumers.

1. http://blogs.wsj.com/chinarealtime/2016/06/15/jack-ma-says-fakes-better-quality-and-better-price-than-the-real-names/

2. http://realmoney.thestreet.com/articles/03/08/2017/alibaba-urges-china-get-real-fakes

3. https://ustr.gov/sites/default/files/2016-Out-of-Cycle-Review-Notorious-Markets.pdf

4. http://realmoney.thestreet.com/articles/03/08/2017/alibaba-urges-china-get-real-fakes

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