Action brought on 4 October 2024 – Lavrentiadis v EUIPO, and the Role of Trademark Rights in Money Laundering explained

On October 4, 2024, Lavrentios Lavrentiadis filed an action against the European Union Intellectual Property Office (EUIPO) concerning the European Union word mark "DALL" (Application No. 18 687 172). The case, registered as T-515/24, involves opposition proceedings initiated by Dalli-Werke GmbH & Co. KG. The applicant seeks to annul the contested decision of the Second Board of Appeal of EUIPO dated August 6, 2024, reject the opposition in its entirety, and have EUIPO bear the costs of the proceedings. The pleas in law include alleged infringements of Article 8(1)(b) and Article 33 of Regulation (EU) 2017/1001, as well as various EU law provisions requiring manufacturers to indicate the commercial origin of their products and clearly distinguish among product categories.

The Role of Trademark Rights in Money Laundering

Trademark rights, while primarily used to protect brands and distinguish goods or services, can also be exploited for illicit financial activities, including money laundering. Criminals and corrupt entities have found ways to use intellectual property (IP) rights, particularly trademarks, to disguise illegal funds and integrate them into the legitimate financial system.

1. How Trademarks Are Exploited in Money Laundering

A. Overvaluation and Fake Licensing Agreements

Criminals inflate the value of a trademark and use it to justify large financial transactions.
Shell companies license trademarks at artificially high fees, creating legal justifications for moving large sums of money across borders.
Royalties and licensing payments act as a way to launder money while appearing legitimate.

B. Trademark Sales and Transfers

Trademarks can be bought and sold at subjective valuations, allowing criminals to move money under the guise of business transactions.
A company purchases a trademark at a low price, then sells it to a related company for a higher price, creating a justification for moving large sums.

C. Counterfeit Goods and Black Market Sales

Fake luxury brands, pharmaceuticals, and electronics generate billions in revenue for criminal enterprises.
Proceeds from the sale of counterfeit goods are mixed with legal revenues, making it difficult to trace illicit origins.

D. Offshore Trademark Holding Companies

Criminals register trademarks in tax havens under anonymous shell companies.
These trademarks are then leased back to businesses in other jurisdictions, allowing them to send money offshore under the pretext of royalty payments.

E. Trade-Based Money Laundering (TBML)

Trademarks facilitate fake invoicing schemes, where companies misdeclare the value of branded products to justify moving illicit funds.
High-value trademarks are used to manipulate financial statements and inflate or deflate business worth.

2. Real-World Cases of Trademark Abuse in Money Laundering

A. The FIFA Scandal

In the FIFA corruption scandal, officials allegedly used intellectual property and branding agreements to disguise bribe payments.

B. Luxury Brand Counterfeiting

Criminal organizations involved in fake luxury goods (e.g., handbags, watches, perfumes) use trademark disputes and enforcement costs to launder money.

C. Russia and Sanctions Evasion

Russian oligarchs and sanctioned entities have reportedly transferred trademark rights to offshore firms to retain control over assets while bypassing restrictions.

3. Regulatory Challenges and Legal Responses
OECD & FATF Regulations: Governments and regulatory bodies recognize that IP-based transactions can facilitate money laundering and have increased scrutiny.
EU & US Crackdowns: Intellectual property offices and financial regulators are improving oversight on IP-related financial movements.
Trademark Valuation Rules: Efforts are being made to create standardized valuation metrics to prevent over-inflated trademarks from being used in laundering schemes.

4. Preventing Trademark-Based Money Laundering

Enhanced Due Diligence (EDD)
Regulators and businesses should vet trademark transactions, especially when linked to offshore jurisdictions.

IP Transparency Measures
Companies should disclose the ultimate beneficial owners (UBOs) of IP-holding firms to prevent anonymous abuse.

Monitoring Licensing Agreements
Authorities should scrutinize licensing deals with unusual fees or between related parties.

Trademark Watchlists
Governments can maintain high-risk IP asset lists to flag potential misuse.

Final Thoughts

While trademarks serve as vital economic assets, they can also be weaponized for financial crime. Enhanced regulation, transparency in IP ownership, and financial oversight are crucial in closing loopholes that enable money laundering through trademark rights. There is no indication that Lavrentios Lavrentiadis is involved in money laundering using the DALL trademark.