Canada Encourages US to Follow Its Lead in Fighting Merchandise Counterfeiting

By Jeannette Richard | June 7, 2016 | 4:56pm EDT
Counterfeit Winnipeg Jet hockey jerseys with an estimated retail value of $12,000 that were seized by the Royal Canadian Mounted Police. (RCMP)


( -- The Canadian Anti-Fraud Centre (CAFC) is urging the U.S. to follow its lead in fighting merchandise counterfeiting by using information provided by victims to close the bank accounts of unscrupulous merchants selling knock-off goods.

During the past 12 months, Canada’s innovative program, called Program Chargeback, which is run by the Royal Canadian Mounted Police, identified 2,304 merchants selling counterfeit goods - most of them linked to three banks in China.

After shutting down their bank accounts, CAFC was able to recover $3.3 million for 9,390 victims who suffered an average loss of $300 to $350.

“My recommendation is that if the U.S. wants to, they can do the same thing we’re doing in Canada with the counterfeit complaints coming in,” said Barry Elliott, the head of CAFC’s Criminal Intelligence Analytical Unit, at a presentation last week at the Canadian Embassy in Washington.

The collaborative effort has been a great success, Elliott noted. “Everybody’s happy except organized crime, because, really, they’re the only ones taking the hit.”

“If you want to get control over what’s happening with the public in the States with counterfeit[ing], all you’ve got to do is bring in that complaint data, and you can monitor, how [the counterfeit sellers] are marketing their stuff, how they’re paying for it, and then you can attack that, you can attack the heart of the problem,” Elliott explained.

The Chargeback Program works through collaboration between victims of knock-off sellers, the CAFC, credit card companies, banks, and the companies whose brands are being counterfeited.

When consumers realize that they might have bought a counterfeit item, they are encouraged to file a complaint with the CAFC and provide basic information about the transaction, Elliott said.

Then the government quickly confirms with the branding company whether that item is a knock-off.


With that confirmation, and the transaction information provided by the victim, the CAFC and the credit card companies can identify the merchant bank account that the seller is using and notify the bank, which then freezes the account, preventing the counterfeiter from accessing the money received in the transaction.

The credit card companies play a crucial role in the Chargeback Program, Elliott continued. By extending their chargeback policy, they allow victims to receive a 100 percent refund for the amount they spent on the item if it is confirmed to be a counterfeit by the CAFC.

Cardholders can get a refund up to 540 days after the date of purchase. They are told not to return the counterfeit product, creating a further loss for the counterfeit seller.

This new policy not only gives security to credit cardholders, but also increases the incentives for the banks to freeze counterfeit merchants’ accounts faster, since in case of a chargeback, the merchant’s bank is responsible for refunding the money to the victim if the merchant’s account lack sufficient funds.

“By extending the period where chargeback rights exist for 540 days from the usual 120 days as it would be normally, that creates a potential liability for the acquiring bank, for the bank that has the relationship with that seller,” said Jay Dorey, vice president of global government relations for Visa Canada, who also spoke at the event.

“That liability lasts long after...those potential sellers are shut down, which means that the scrutiny, the oversight, and potentially the additional vetting of merchants and new merchants is higher.”

Since 2010, when the Canadian program began, 5,523 counterfeit merchants selling knock-offs of brand name goods have been identified. According to CAFC, counterfeit complaints spike in the winter months, with 1,600 reported last December, compared to 450 last month.

Elliott stressed the importance of shutting down merchant accounts in the fight against counterfeiting.

“You can attack organized crime by going for the heart, by taking away [counterfeit sellers’] ability to make money, by using, you know, their credit card and debit card payments...We realized that if we want to attack these guys, let’s go after their merchant accounts,” he said.

Because of the similarity between the U.S. and Canada, Elliott thinks that a similar program would work well in the U.S. “I think it would be doable, very doable, here in the U.S., doing exactly what we're doing in Canada,” he said.

David Lipkus, an attorney who works on behalf of brand holders in counterfeiting cases, and Nichole Reynolds, the director of U.S. government affairs for MasterCard, also spoke at the event.

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