Digital and emerging technologies, such as blockchain, could be the saviour when it comes to fighting illicit trade but more needs to be done to improve global co-operation to ensure these new solutions are applied effectively, a new report claims.
In the white paper titled ‘Implementing Digital Solutions to Address the Issue of Cross-border Illicit Trade’, the Coalition Against Illicit Trade (CAIT) says the complexity of supply chains means “carefully designed interconnectable systems and a well-planned approach to supply chain security and consumer safety” is required if counterfeiting and smuggling are to be defeated.
While many governments and multi-state organisations are introducing new legislation and regulatory frameworks to address illicit trade, the CAIT says that too often these don’t take into account the cross-border nature of illicit trade and tend not to align with other country’s requirements.
The report gives the example of the rise of serialisation technologies to secure supply chains. But it states: “Different, complex, and contradictory requirements across the globe do not always provide additional supply chain security, but drive up costs for all supply chain participants in regulated markets. Moreover, the uncertainty caused by misaligned serialisation requirements contradicts the fundamental purpose for implementing those requirements in the first place by introducing additional risk to the system.”
Likewise, the report notes that regulatory developments in anti-counterfeiting and brand protection is a positive step but only when “they adhere to well recognised and actionable international standards”.
“The adequacy of mandatory traceability standards will help to ensure efficient and effective implementation of serialisation requirements, promote interoperability, facilitate cross-border communication and trade, and help markets to tailor their traceability requirements to those that provide the highest level of security for the lowest amount of time and capital investments,” CAIT says.
The report notes a number of new technologies, including invisible digital threads, secure graphics called STAMPS (Secure Tracking and Authentication through Matrix Printing and Scanning), spectral techniques, invisible laser-etched code, 2D barcodes, QR Codes, RFID sensors, Smartcards, near field communication (NFC) tags, and blockchain. What is particularly notable is that the vast majority of the technologies rely on some aspect of being digitised.
Blockchain, in particular, “looks set to change the way we track and trace products”, the report says, as interest in the technology that underpins the virtual currency Bitcoin increases across a number of sectors. It notes work already being done in both the food and pharmaceutical industries.
“While basic monitoring systems can improve product safety, a full digital footprint has a much greater positive impact because it creates conditions for continuous accountability, as each stakeholder in the supply chain receives objective feedback on his performance. Digital reporting therefore has the ability to create substantial improvements in the way our supply chains operate, going further than just fighting illicit trade,” the report says, adding that this needs to expand to work across borders.
Furthermore, the report notes that regulators need to engage with industries during the process of creating and refining anti-illicit trade regulation, ensuring that the requirements mandated are realistic and that those required to implement them are able to do so in a timely manner, and taking into account interoperable, open standards for global supply networks.
“More cooperation is required between companies and authorities, between countries of origin and destination, between independent standard setting bodies, economic operators in the supply chain, regulators and enforcement authorities, especially given the complexity of international supply chains,” CAIT says.
“But the involvement of all these levels of government, makes it sometimes hard to see the wood for the trees. They all also have a natural tendency to only focus on the problem within their own borders, ignoring the cross-border implications. We cannot therefore rely on each country or operator to tackle the problem; we need to think about cross-border solutions that ensure the necessary inter-operability among systems and operators, while recognising that different markets have different needs and abilities to enforce.”
The report concludes with a list of considerations authorities should take into account when designing regulations.