The 1993 bomb attack on the WTC was financed by fake t-shirts

They even believe that the 1993 bomb attack on the World Trade Center was financed by the sale of fake t-shirts on New York's Canal Street.

In light of last month's assault on the WTC and the alleged links between Osama Bin Laden and both incidents, this raises disturbing issues.

On a more practical level, counterfeiting also robs international governments of an estimated $500bn a year in lost revenues and taxes, leads to job losses in manufacturing and damages brands.

In the early 1990s, the high-end knitwear group Pringles closed down a factory in Scotland, blaming a flood of counterfeits from Asia.

A global industry

John Anderson, executive secretary of the Anti-Counterfeiting Group (ACG) in the UK, estimates that more than 10% of the trade in luxury goods is through counterfeiting.

He also believes that the worldwide market in counterfeiting is worth more than $250bn, and could even be as high as $1,000bn.

Mr Anderson: 'We need to change the public's perception'

With consumers feeling the pinch amid an economic downturn, there are fears that trade in cheap counterfeits is set to increase.

"Logic dictates that it certainly will," says Mr Anderson, pointing to the public's long love affair with the brand.

"Look at the desirability of brands - they market a way of life. If you drive an Audi, you are this sort of person and if you wear Levi jeans, you are that sort of person."

So the expectation is that if customers can't afford the real thing, they will flock to the fake substitutes.

Damaging brands?

Some might argue that counterfeiting brands actually benefits designers and can stimulate sales of the original product.

For example, manufacturers of expensive fragrances may not be averse to the odd fake t-shirt pushing their brand.

Counterfeiting threatens Louis Vuitton's brand

Additionally, shoppers on Canal Street are unlikely to buy in the high-end of the market if counterfeits disappeared.

The counter argument is that faking it can lead to the dilution of brands.

Normal customers who buy designer goods are discouraged from purchasing their Louis Vuitton hold-alls if they see an abundance of cheap imitations, says Mr Anderson.

Louis Vuitton, part of the LVMH Group, is said to be one of the fiercest anti-counterfeiting campaigners - although it declined to comment on the issue to BBC News Online.

The company has a zero-tolerance attitude to counterfeiting and will even take a market stall trader "to the cleaners" for selling fakes, says Mr Anderson.

In France it is illegal to buy fake goods and travellers returning from the Far East often have their purchases confiscated at French airports.

Italy's struggle

Italy, home to many of the world's exclusive brands, is also struggling to stamp out counterfeiting.

Break-ins at Italian designers have become more common

In a survey last year by the Milan Chamber of Commerce, three out of four designers felt victimized.

Many top fashion houses, such as Salvatore Ferregamo, Prada and Versace, have suffered break-ins, resulting in the loss of clothes, drawings and photographs.

"Whole collections have been stolen in the UK and Australia," says Peter Lowe, assistant director of the Counterfeiting Intelligence Bureau at the International Chamber of Commerce.

"They are lifted before they get to the catwalk, and find their way to Hong Kong where they are copied and manufactured."

Criminal gangs

Such sophisticated operations are the work of organised criminal groups which dominate the murky world of counterfeiting.

In the UK, it is estimated that 25% of organised criminal groups are involved in counterfeiting and piracy.

"For organised crime, it is highly profitable with relatively low risk," explains Mr Lowe.

"If street traders are caught they usually get a rap on the knuckles and a small fine."

However, the ease with which criminals use the sale of fake goods to launder drug money or finance terrorism could refocus attention on counterfeiting.

Since 11 September, the UK's National Criminal Intelligence Service has already suggested establishing a database to help prove links between counterfeiting and known criminals.

Teaching consumers

But for the ACG's Mr Anderson, the key issue is to educate the consumer.

"The stealing of intellectual property is not understood. If you asked someone what this means, they would be likely to say that it is some posh person's house," he quips.

We need to make people understand and take away demand

John Anderson ACG

"We need make people understand and take away demand."

A more draconian step would be to fine guilty consumers - 80% of whom admit to buying fakes.

"If consumers were fined, it would send a significant message and would have very strong impact," says Mr Lowe.

The nature of British legal system, however, would make this difficult.

For the present consumers are safe, but judging from some of the evidence, they may want to think twice next time they pick up a Prada handbag for $25.