AI and the Next Generation of Fraud: When Advanced Fakes Threaten Everything We Consume

For years, the advice for online shopping was straightforward: check for typos, blurry images, and awkward phrasing. That advice is now dangerously outdated. Generative AI has not just improved the tools available to criminals, it has fundamentally rewritten the rules of online deception. While counterfeit luxury handbags have long been the public face of this problem, the danger now extends far beyond fashion, including the pharmaceuticals we take, the liquor we drink, and the food we eat.

The Death of the "Obvious" Fake

Shoppers used to rely on obvious signs to tell real from fake, but those hallmarks are disappearing. Instead of using bad Photoshop and poor grammar, counterfeiters now use AI to create perfect product photos, clear marketing messages free from typos, and believable reviews at little cost. Counterfeiters apply machine learning and advanced imaging tools to closely copy product features, like patterns, shapes, and finishes, making it easier to trick consumers.

The scale of counterfeit and pirated goods is alarming. The OECD and EUIPO research shows that international trade in these goods is worth up to USD 467 billion each year, which is about 2.3% of global trade. What is different now is not only the volume of products, but also the sophistication. Generative AI tools can quickly copy official pharmaceutical company websites and procure similar domain names with slight misspellings or a different TLD such as ".biz" or ".org," making them very hard to tell apart from the real websites.

When Fake Drugs Kill

While fake luxury items like handbags or watches can contain dangerous chemicals, counterfeit drugs pose a direct health liability. These fake medications do not follow any safety protocols, do not perform in the way those who rely on them need, or, even worse, can lead to serious health problems. This makes counterfeit drugs both a public health issue and a crime.

The sophistication of AI-powered pharmaceutical counterfeiting is alarming. Mark Lee, founder and CEO of MarqVision, explains that counterfeiters are using AI to replicate pharmaceutical packaging with high accuracy, build convincing fake websites, and manipulate search algorithms, including SEO, to lure vulnerable patients. "You can actually just copy and paste the pharmaceutical brand's website, for example, Pfizer.com, and then you can just submit that in one of these vibe-coding websites, and they will just recreate everything on that website in a matter of five seconds," Lee said.

What makes this even more dangerous is the specialization emerging among counterfeit sellers. Lee's company conducted a 72-hour survey of Facebook and Instagram and found 138 unique global pharma drugs across 690 distinct products being sold on these platforms alone. "There are counterfeit sellers that are kind of specializing in oncology, for example," Lee noted. "They're selling all types of oncology drugs, and they become an expert in selling these types of treatments, and they know who to target".

(Seized counterfeit pharmaceutical products. Image courtesy of EUIPO, www.euipo.europa.eu)

The consequences are severe. Europol's Operation SHIELD VI, which ran in 30 countries from April to November 2025, led to the prosecution of 3,354 people and the seizure of €33 million in counterfeit medicines, doping substances, and food supplements. Europol specifically warned about the spread of fake Semaglutide-based products marketed as fat-burners, as well as fake medicines containing dangerous synthetic substances like nitazenes. These substances are similar to opioids and increase the risk of poisoning and overdoses.

Poisonous Food and Supplements

The food sector has not been spared. Data on customs seizures indicates that a wide range of food products are being counterfeited, with the most frequently seized products including candies, frozen fruits, tea, coffee, chocolate, honey, cooking oil, and even baby milk powder. The leading provenance economies for counterfeit foodstuffs are China and Turkey, with Middle Eastern countries playing a significant role.

A particularly disturbing case emerged from South Korea, where the Ministry of Food and Drug Safety prosecuted a distributor that used AI-generated fake doctors to advertise ordinary vitamin C and yeast products as having anti-aging and "body age reduction" effects. The company created a virtual middle-aged "doctor" indistinguishable from a real person and used the AI-generated figure to recommend products on YouTube and social media. Over nine months, they sold approximately 650,000 products, generating 8.1 billion won (approximately $6 million) in revenue.

The deception was sophisticated: under Korean law, doctors and other experts are explicitly prohibited from recommending food products in advertisements. By using an AI-generated figure that looked like a real physician, the company exploited consumers' trust in medical authority. The Ministry of Food and Drug Safety subsequently amended the Food Labeling and Advertising Act, the Cosmetics Act, and the Pharmaceutical Affairs Act to explicitly prohibit AI-generated fake experts or celebrities from recommending food, cosmetics, or medicines.

Hazardous Cosmetics and Personal Care Products

Counterfeit cosmetics and perfumes are another growing concern. EU data show that perfume and cosmetics account for about 3% of counterfeit goods seized in the EU market, alongside categories like toys (19%) and clothing and accessories (12%). 

These products avoid any health controls and may contain harmful substances, endangering consumers who are often unaware of the illicit origin of the items they purchase.

The Industrialization of Fraud

AI-enabled fraud is growing rapidly. According to TRM Labs' 2026 AI-in-Crime Adoption Index, scam reports involving AI increased about 13 times from 2022 to 2025. In 2026, losses from deepfake scams have already gone beyond the total for 2025 by 263%.

Ari Redbord, TRM's global head of policy, explained the change: "AI has not created new crimes. It has made it easier to commit old ones. The skills needed have dropped, and the ability to do things on a larger scale has increased. What used to require a whole team can now be done by one person with a subscription."

This industrialization is visible in the rise of scam compounds across Southeast Asia, where organized criminal groups operate large-scale fraud enterprises. In Brazil, the combination of a substantial consumer market, a well-established informal production chain, and growing access to AI tools creates an environment conducive to sophisticated counterfeiting.

The Human Cost Behind the Fakes

What consumers often fail to see is the broader criminal ecosystem behind counterfeit goods. EUIPO and Europol consistently document that the sale of counterfeit goods is often linked to organized crime networks, highlighting the serious implications for public safety and economic stability. By buying such goods, consumers sometimes unintentionally support additional serious crimes such as cybercrime, money laundering, and environmental crime.

The OECD has reported that illicit trade in counterfeit, pirated, and substandard goods has a direct impact on economies by reducing tax revenues for states. It also creates unfair competition, leading to revenue losses for legitimate businesses. An illicit trade can diminish the willingness and capacity of legitimate economic operators to invest, which may affect economic growth and job creation. Counterfeiters may also exploit labor, potentially through hazardous working conditions, underpayment, and coercive employment practices.

The Defensive Response

The good news is that AI is also being deployed for defense. Amazon identified, seized, and disposed of over 15 million counterfeit products in 2025 using AI tools. Its systems scan billions of attempted product page changes each day, while multimodal tools analyze text, images, seller behavior, and supply chain patterns for signs of abuse.

MarqVision employs top-tier engineers, including former Google software engineers, to develop AI tools capable of identifying and shutting down counterfeit pharmaceutical threats. 

The European Union has strengthened its intellectual property enforcement mechanisms, and Europol continues to coordinate multinational operations against pharmaceutical crime networks.

While many people focus on AI-generated online stores and scams, a different fight is happening on the ground. Specialized firms that enforce intellectual property rights are working hard to combat counterfeiting and ensure effective brand protection. One such firm is the Selective Trademark Union (STU). With 40 years of experience and operations in nine Asian countries, STU offers tailored anti-counterfeiting services designed to meet the unique challenges in the region.

STU implements a dual approach of online surveillance and on-site investigations to trace counterfeit goods to their origins effectively. This comprehensive strategy not only removes fraudulent listings from e-commerce platforms but also addresses the manufacturing phase by shutting down factories that create fake products. In addition, STU provides training for law enforcement focused on brand protection and product identification, empowering them to dismantle counterfeiting networks and eradicate sources of counterfeit goods, even as advances in AI make imitation products increasingly convincing.

What Consumers Can Do

Given that the old red flags are gone, protection requires a shift in mindset. The Commodity Futures Trading Commission (CFTC) recommends studying images and video for distorted hands and other imperfections, listening carefully to vocal inflections, and tightening social media privacy settings.

For all product categories, experts recommend:

- Verify the source: Purchase pharmaceuticals only from licensed pharmacies, and check whether online sellers are authorized. Europol specifically warns against obtaining prescription drugs from unsafe online sources.

- Be skeptical of deep discounts: If a product, whether luxury, pharmaceutical, or food, is offered at a fraction of its normal price, the adage applies: if it seems too good to be true, it probably is.

- Check packaging carefully: Look for inconsistencies in labels, seals, and fine details. Counterfeiters are getting better, but imperfections remain.

- Use verification tools: Emerging AI-powered tools can help verify product authenticity, from scanning wine bottles to analyzing pharmaceutical packaging.

- Report suspicious products: Consumer reporting systems help authorities track and shut down counterfeit operations.

The fundamental lesson is this: in the age of generative AI, the absence of errors is no longer evidence of legitimacy. Good grammar, professional photos, and moving stories have become the norm, so consumers need to watch out for this change. The counterfeit market is now more than just cheap fake products sold on the streets. It has turned into a complex, AI-driven crime operation that costs legitimate businesses billions, supports organized crime, takes advantage of vulnerable workers, and can even be deadly in cases involving drugs, food, and alcohol. The risks are extremely high.

Let's stay one step ahead of counterfeiters and protect the brands that matter most!

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40 Years of Experience in Protecting Intellectual Property. At Selective Trademark Union (STU), we know how important intellectual property (IP) is to brand owners, and we are dedicated to safeguarding it. Check our website at www.stu.net for more information.

Article References:

Commodity Futures Trading Commission, Office of Customer Education and Outreach. (2025). Criminals increasing use of generative AI to commit fraud. https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/AI_Fraud.html

Europol. (2026). SHIELD VI: Over 3.1 million pills seized in EU-wide action against counterfeit medicinal products. European Anti-Fraud Office. https://anti-fraud.ec.europa.eu/media-corner/news/shield-vi-over-31-million-pills-seized-eu-wide-action-against-counterfeit-medicinal-products-2026-02-25_en

Europol. (2025). Europol warns AI is transforming organized crime in Europe. International Review of Artificial Intelligence Law. https://www.reviewofailaw.com/Tool/Evidenza/Single/view_html?id_evidenza=3102

EUIPO & OECD. (2025). Mapping global trade in fakes 2025: Global trends and enforcement challenges. European Union Intellectual Property Office. https://www.euipo.europa.eu/en/news/observatory/euipo-and-oecd-publish-a-report-on-counterfeit-and-pirated-trade

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Meta. (2026, February 26). Meta is suing a Vietnamese account for fraudulent advertising. Vietnam.vn. https://www.vietnam.vn/en/meta-khoi-kien-1-tai-khoan-viet-nam-vi-quang-cao-lua-dao

Ministry of Food and Drug Safety (South Korea). (2026, June 10). Fake AI doctor promoted anti-aging foods. The Dong-A Ilbo. https://www.donga.com/en/article/all/20260611/6263176/1

OECD. (2025, May 6). OECD report: Global trade in fake goods hits $467bn, threatening safety and IPR. Insight EU Monitoring. https://ieu-monitoring.com/editorial/oecd-report-global-trade-in-fake-goods-hits-467bn-threatening-safety-and-ipr

RTL Today. (2025, October 16). Scam or small business? How fake AI-fueled 'Made in Luxembourg' shops are fooling buyers online. RTL Today. https://today.rtl.lu/news/luxembourg/how-fake-ai-fueled-made-in-luxembourg-shops-are-fooling-buyers-online-2346631