3.1
While the onset of the COVID-19 pandemic and subsequent government measures to address it have disrupted many illicit activities of organised crime groups (OCGs), it has simultaneously facilitated opportunities for new crime or the expansion of existing activities.
3.2
Globally, the pandemic has increased demand for pharmaceutical products, medical devices and Personal Protective Equipment (PPE). The demand for these products has led to the trafficking and sale of both counterfeit and legitimate items by opportunistic criminals. The risk of substandard and falsified pharmaceutical, medical or PPE products can undermine public confidence in the reliability and safety of genuine products, impact public health, have flow-on effects on the economy, and in some cases have life‑threatening consequences for individuals.
3.3
This chapter explores the risk of genuine medical and PPE products being diverted from Australia, as well as substandard products entering Australian markets during the pandemic. It summarises Australia's response in ensuring the integrity of supply chains and outlines opportunities to enhance Australia's efforts in this regard.
Drivers and enablers
3.4
Some potential motivating drivers and enablers for the trafficking of false or genuine pharmaceutical, medical or PPE products were canvassed in evidence to the inquiry.
3.5
According to the United Nations Office on Drugs and Crime (UNODC), transnational OCGs are taking advantage of gaps in regulation and oversight to exploit the crisis and cash in on public anxiety to peddle substandard PPE and medications. Prior to the discovery and rollout of vaccines for COVID-19, they predicted that COVID-19 vaccines could be exposed to falsification and trafficking.
3.6
Dr John Coyne and Ms Leanne Close, who provided evidence in a private capacity, argued that a short-term decline in illicit drug profits arising from border closures and lockdowns could motivate some OCGs, especially those with transnational connections, to seek new criminal opportunities from the pandemic.
3.7
Moreover, Dr Coyne explained that OCGs might also be attracted to producing and selling false or illicitly obtained medical or PPE products, as the penalties for these activities are less severe than those associated with the manufacture and distribution of illicit drugs. Dr Coyne and Ms Close suggested that the investigation of these types of crimes and disruption of illicit supply chains will need to become a priority, potentially even more so than drug-related investigations.
3.8
Professor Roderic Broadhurst, who provided evidence in a private capacity, advised that illicit crypto-markets or 'darknets' are playing a key role in the distribution of COVID-19 related products, medicines, and PPE. A snapshot of the illicit market for COVID-19 related products conducted by the
Australian National University in April 2020 found 645 listings, including 222 unique listings, of COVID-19 related products across 12 markets. PPE accounted for nearly half of all unique listings, and one-third of products were antiviral or repurposed medicines. Supposed vaccines, tests and diagnostic instruments each accounted for nearly 10 per cent of listings. The estimated value of all unique listings amounted to $369,000.
3.9
This research provided a detailed picture of the availability of products on the darknet and showed that the range of products available as potential treatments for COVID-19 was more extensive than first expected.
3.10
While the availability of COVID-19 related products was lower than other contraband, underground sale of fraudulent or untested vaccines and medicines increased during the pandemic.
Fraudulent pharmaceuticals and vaccine concerns
3.11
Concerns were raised regarding fraudulent pharmaceuticals and vaccines entering the Australian market.
3.12
Professor Broadhurst pointed out that an 'online shadow economy' has evolved during the pandemic. He noted a close link between media attention and the demand for COVID-19 products, including scam and fraud tools. Professor Broadhurst recommended that online black markets be continuously monitored now there are real COVID-19 vaccines in short supply.
3.13
To questions of vulnerabilities and Australia's preparedness to respond to fraudulent vaccines and medical products, Mr Michael Pezzullo, the Secretary of the Department of Home Affairs, confirmed that it is a federal health responsibility—'the proof of identity of the medicine, the proof of custody of where it's been manufactured, whether it's properly certified and properly labelled'. He advised that the Department of Health will ensure there are robust integrity measures to protect the vaccine(s) and to ensure a controlled rollout.
3.14
Furthermore, Ms Justine Saunders, Deputy Commissioner, Operations, at the Australian Border Force (ABF) acknowledged that counterfeit pharmaceutical goods and possible fake vaccines would have significant risks for the Australian community. Ms Saunders advised that the ABF conducts 'risk based intelligence-led targeting' to identify and seize counterfeit goods, and prioritises intervention based on product harm.
3.15
In addition, the ABF works closely with the Therapeutic Goods Administration (TGA). The TGA provided written guidance to the ABF requesting the temporary targeting and referral of certain imported goods, such as PPE and specific test kits. The ABF advised it will have closer engagement with the TGA as the threat environment changes in relation to vaccines.
3.16
Mr Pezzullo assured the committee that the government was working collegially and collaboratively across portfolios to safeguard the vaccine supply chain. He explained that the Home Affairs Portfolio was working, for example, to ensure that the Department of Health, in carrying out its functions in this regard, had ready access to and support from those in the Home Affairs Portfolio who have 'law enforcement, security and border expertise', so the Department of Health can 'focus on the things that they really need to focus on, which is the medicine'.
Vulnerability of Pacific nations
3.17
The risk of counterfeit pharmaceuticals entering Pacific nations, and what Australia could do to help mitigate the risk, was raised in evidence.
3.18
According to Dr Coyne, the lack of ventilators and other necessary medical items in Pacific nations means those populations are more likely to be susceptible to fake pharmaceuticals. Dr Coyne argued that Australia’s national planning around pharmaceuticals in relation to COVID-19 should incorporate the Pacific as a high priority in the next few years.
3.19
Ms Saunders from the ABF advised that while it does not have any specific programs with stakeholders within the Pacific region, it will continue to share intelligence that relates to counterfeit vaccines and goods.
Ensuring essential PPE and medical products
3.20
Australia has been addressing the diversion of essential goods and entry of counterfeit medical products through legislative changes, law enforcement efforts and several cross-agency taskforces.
3.21
In March 2020, the Customs (Prohibited Exports) Regulations 1958 were amended to implement a temporary prohibition on the non-commercial export of certain goods that contribute to controlling and preventing the spread of COVID-19, for example, disposable face masks, gowns, gloves, or goggles and hand sanitiser or alcohol wipes.
3.22
In addition, the Health Minister made the Biosecurity (Human Biosecurity Emergency) (Human Coronavirus with Pandemic Potential) (Essential Goods) Determination (Biosecurity Determination), which required the surrender of essential goods to the Crown if sent on or after 30 January 2020, and still held for inspection by the ABF. Essential goods included certain PPE (disposable face masks, disposable gloves, and disposable gowns, protective eye wear in the form of goggles, glasses or visors), alcohol wipes and hand sanitiser. The Biosecurity Determination also addressed concerns that PPE and disinfectant products were being purchased at retail prices and hoarded for sale at a significant profit (known as price gouging).
3.23
The ABF seized chloroquine medicines (believed to treat COVID-19) which were being imported into Australia at the height of demand for these products. Evidence to the inquiry confirmed that there are already fake cures and illegitimately sourced PPE available on the darknet and other open social media sites. For example, Sinovac vaccines were available on WeChat and then taken down by Chinese authorities, which raised concerns that genuine vaccines would be diverted into illegitimate markets.
3.24
Furthermore, in August 2020, there were a considerable number of PPE units (destined for export to international locations) which had been seized at the border. This included approximately:
10 244 sanitiser products;
51 347 disposable gloves;
1917 disposable gowns; and
3.25
It should be noted that very little of the consignments seized were found to be non-legitimate or have any criminal nexus, and there had been no arrests made.
3.26
The ABF established Operation Hangfire to combat the diversion of essential goods and protect the community from counterfeit or illegitimate goods such as counterfeit COVID-19 test kits. The operation was established to focus on trade-related fraud and the risk posed by trade-based money laundering from the commercial sale of unapproved or counterfeit critical consumables.
3.27
The AFP established Taskforce Quadrant in partnership with the ABF, the ACIC and Australian Transaction Reports and Analysis Centre (AUSTRAC). Taskforce Quadrant focuses on suspected breaches of the
Health Minister’s Determination and the amended customs regulations (relating to the improper export and/or profiteering from price gouging on the non-commercial export of essential PPE and medical goods).
3.28
In June 2020, Taskforce Quadrant had engaged in 15 overt deterrence and compliance activities across the country with businesses and entities. No large exports (planned or conducted) had been identified in breach of the Biosecurity Determination, or the amended customs regulations, and no charges had been laid. Mr Ian McCartney, Deputy Commissioner Investigations, AFP, highlighted that while there had been no arrests, the AFP was of the view that the legislation had had a significant deterrent effect.
3.29
The AFP submitted that taskforce agencies continue to actively share intelligence in relation to any suspected breaches of the regulations and Biosecurity Determination. Taskforce partners have worked closely with the Department of Health to examine financial activity across commercial and wholesale suppliers of essential goods in an effort to identify alleged criminal activity. The AFP stated that Taskforce Quadrant will continue to work with partners across law enforcement, government and industry to disrupt or prevent the exportation of essential goods from Australia.
Looking ahead
3.30
With the urgency of sourcing PPE and medical devices now diminished in Australia, the committee heard that it is important for Australia to prepare for the post-COVID era. Witnesses advised that it is expected that this period will see intensified criminal activity driven from places such as the Pacific and Southeast Asia, compounded by increased demand, economic disruption, and rising unemployment. Importantly, as people become financially stressed or impoverished, they may look to alternatives to fulfil their medication needs at a lower cost.
3.31
Dr Coyne and Ms Close argued that OCGs located in China or with connections to China's industrial hubs are likely to focus on selling fraudulent medical goods for inflated prices while demand outstrips supply, and over time, undercut genuine supplies by being sold at a lower price. Thus, the Mekong subregion and China should become more of a priority to Australia’s efforts to counter organised crime. Additionally, Dr Coyne and Ms Close submitted that governments and policymakers should work more closely with law enforcement to increase effectiveness.
3.32
Professor Broadhurst was of the view that while there is considerable work being done to address the trade of counterfeit pharmaceuticals, Australia’s vulnerability lies in the lack of an international system to protect supply chains. Professor Broadhurst argued that there is a need for an internationally seamless process for dealing with the impending problem of the safety of vaccines and drew attention to the European Medicrime Convention, which had been established to look at the issue.
3.33
The Organisation for Economic Co-operation and Development (OECD) argued that greater institutional capacity is needed to counter illicit trade in fake medicines. For example, they suggested enhancing penalties and sanctions, improving screening of small shipments, and eliminating criminal activities related to illicit trade carried out in free trade zones.
3.34
Dr Coyne argued that law enforcement needs upskilling to achieve an understanding of legitimate flows of pharmaceutical products. He stated that Australia has strong border controls, however, law enforcement may need more resourcing to assist in the investigation of illegitimate vaccines as a priority.
3.35
In order to protect against the risk of a counterfeit vaccine being distributed through the impersonation of a government entity, the Australian Competition and Consumer Commission suggested that regulators could increase awareness and warnings and continue the disruption of illegitimate activities.
3.36
The committee discussed whether disparate penalties for fake pharmaceuticals should be aligned across jurisdictions to disincentivise importation offences. Dr Coyne argued that legislating these types of issues with more sentencing and longer sentences is not always the answer, but Australia should instead look at the whole supply chain and determine the best places to target it.
Committee view
3.37
It is not surprising that OCGs and opportunists have taken advantage of public anxiety about COVID-19, and began to traffic false and genuine medical and PPE products.
3.38
The committee's inquiry found that fake vaccines and illegitimately sourced PPE are available for purchase online, while chloroquine medicines and a considerable volume of essential PPE products have been seized at the Australian border. The committee acknowledges the concerns raised about Australia's vulnerability, which lies in the lack of an international system to protect legitimate supply chains and that COVID-19 vaccines may be subject to falsification and trafficking.
3.39
The committee is pleased that the Department of Health and the Home Affairs Portfolio are working together to ensure the integrity of Australia's supply chains and control the manufacturing and distribution of vaccines. The committee looks forward to learning more about the design of the supply chain and its associated integrity framework, through its inquiry into vaccine-related fraud and security risks.
3.40
The committee commends the work of the Home Affairs Portfolio and the
Department of Health in carrying out temporary prohibitions on essential goods by identifying suspected shipments and managing their surrender to the Commonwealth. The committee agrees this has likely provided a deterrent effect and is pleased that taskforce agencies continue to work together to prevent and disrupt illegal activity.
3.41
The committee believes it is vital to ensure that Pacific nations have access to safe and effective COVID-19 vaccines, and that they are supported to ensure vaccine integrity. The committee commends the Australian Government for providing such support to Pacific and Southeast Asian countries, by supplying COVID-19 vaccines and providing technical support to regional partners, including the assessment of vaccine safety, efficacy and quality. To ensure the Pacific, Timor-Leste and Southeast Asia achieve full immunisation coverage for COVID-19, the Australian Government committed $23.3 million in the 2020-21 Budget, and an additional $500 million over three years to support this outcome.
3.42
The committee acknowledges that Australia's law enforcement agencies already work closely with Pacific nations to address counterfeit vaccines and goods. However, the committee considers that law enforcement agencies could further assist Pacific nations to protect against counterfeit COVID-19 medical and pharmaceutical products through capacity building and training programs.
3.43
To investigate the above matters further, the committee resolved on 17 March 2021 to hold an inquiry to ensure Australia’s law enforcement agencies are equipped to mitigate vaccine fraud risks and secure Australia’s COVID-19 vaccine program to promote consumer confidence. This inquiry into vaccine‑related fraud and security risks is ongoing.
3.44
The committee recommends that the Australian Government, in consultation with Australia's law enforcement agencies, canvass specific programs to assist Pacific nations to target and detect counterfeit pharmaceuticals, vaccines and COVID-19 related materials such as personal protective equipment.