These days we are all faking it. It's the label for less. The brand as a bargain. Counterfeit accessories have never been smarter or better. But behind your imitation Louis Vuitton bag lurks a murky word of copyright theft and organised crime. Rachel Cooke investigates

In this, the age of the accessory, women tend to fall into two groups: there are those who adore shoes and there are those who adore bags. Me, I am a bag lady. At the last count, I owned about two dozen. They are my fetish object of choice and they come in all shapes and sizes - in canvas, leather and string, and in wool, crochet and basketwork. Some I bought on whim, others I chose only because they matched a certain dress or skirt. I have one - a crocodile-skin clutch - that I inherited from a great aunt. It's the most divine thing.

I do, however, have my limits. The most I have ever spent on a handbag is - whisper it softly - £280, for a leather number by the Irish designer Orla Kiely. (Look, it's beige, so it goes with everything.) To spend more than £300 on a bag is, I think, just plain stupid. Would I like to own an Hermés Kelly bag? Of course, preferably in baby blue. But the truth is that even if I could bear to join a waiting list, the sums involved (£8,000) are ridiculous. The same goes for the Louis Vuitton Sac Plat. For reasons I cannot quite explain, I adore the Sac Plat - a shopping bag for women who have their hair blow-dried every single day. How much is a Sac Plat? Oh, only £400.

It was the Vuitton Sac Plat that I pictured in my mind's eye when I began researching this piece.

I wondered, in the first instance, how easily I might come by a decent copy. I chose the Sac not only because I covet it, but because it is a 'classic' bag rather than a 'hot' bag and is thus less likely to be a target for counterfeiters (who, just now, are concentrating their efforts on the Murakami, which features the LV logo in several colours on a white background). My search did not take long. In fact, I did not even leave the house. I simply put the words 'fake bags' into Google. Two seconds later the entire Louis Vuitton range was on my screen. A remarkably slick-looking facsimile Sac Plat could be purchased for £60.

The many internet sites now selling fake luxury goods stand as testament to the increasing sophistication of the world of the counterfeit. Fashionable but impoverished girls in search of a bit of Gucci used to head straight for the nearest market: Wembley and Portobello in London, Canal Street in New York. There, they would pick up the latest bag, belt or sunglasses for a song, and who cared if it didn't last beyond the end of the season? No longer. These days, some fakes are so good, even the editor of Vogue would be hard pressed to spot the imposters (which is why they're more expensive than their 10-quid-a-throw predecessors). Moreover, you can buy them with a credit card, the same way you would a book on Amazon. In the end, as a kind of trial run, I ordered a 'Lous Vuitton' [sic] wallet from a site specialising in leather goods and watches called www.bestreplica.co.uk. (Counterfeiters often make the mistake of thinking that slightly changing a brand name protects them from the law, but this is not the case: the Trademarks Act specifies that it is an offence even to use any design or logo that is 'confusingly similar' to that used by its owner.) It set me back £49, as opposed to the real thing, which costs upwards of £150. I was not entirely hopeful that anything would arrive at all; the site worked OK, but the bags themselves were photographed against a background of white skirting board and beige carpet, which was not exactly reassuring.

Ten days later, however, my postman handed me a padded envelope with a Chinese postmark and customs label. Inside was a battered but perfectly genuine-looking gold-brown Louis Vuitton box. Inside this was an equally genuine-looking Louis Vuitton felt pouch. And inside this was my wallet. It was not a bad fake, but it was not a brilliant one, either. The monogram design did not look like it would wear away in seconds, which is the usual problem with Louis Vuitton copies, and it did at least appear to be made of leather. On the other hand, the thing was held together with glue as well as stitching; the credit-card slots were roughly cut; and the clasp, given a good yank, was in danger of coming off in my hand. Still, the fact that the wallet was an expensive disappointment was, in another way, probably a good thing. Given what I subsequently learnt about the murky world of the counterfeit, had it been exemplary, I would have been in an agony of indecision as to what to do next. Log on again and get myself that oh-so-longed-for bag? Or switch off the computer like a good global citizen?

According to a recent survey by the UK Anti-Counterfeiting Group, a third of us would knowingly purchase counterfeit goods if the price and quality were right, and 29 per cent of us see no harm in the selling of fake goods unless the purchaser is in some way at risk. Meanwhile an estimated £6.4bn is lost to the economy every year - the government alone loses £1.7bn in VAT to counterfeiting and piracy (the clothing and footwear industries lose around 3.2 per cent of their annual revenue; the toy and sportswear industries an amazing 11.5 per cent).

The effect on the economy, however, is only half the story. According to the International Criminal Police Organisation (Interpol), counterfeiting and piracy - a global trade worth some $250bn - is rapidly becoming the preferred method of funding for a significant number of terrorist groups. Trafficking in counterfeit goods is still a relatively low-risk criminal activity. In general, the law enforcement agencies do not treat intellectual property crime (IPC) as a high priority, and when they are initiated, investigations tend to be seizure-based and rarely extend to following onward flows of money. Sentences are, moreover, relatively low when compared to those for, say, drug trafficking, while profit margins are high. Interpol estimates that profits raised from counterfeiting are similar to those from drug trafficking.

'Unfortunately, the big guys are attracted to counterfeiting because the risks are still relatively low,' says Ruth Orchard, the director general of the UK Anti-Counterfeiting Group (ACG), whose members include Louis Vuitton, Hermés, Chanel, Gucci, Rolex and Burberry. 'The manufacturers and importers rarely get stung. But their profits fund some very dodgy activities.' Asked to come up with a specific instance, Orchard told me that the Organised Crime Task Force in Northern Ireland estimates that 41 per cent of organised criminals are involved in intellectual property theft and two-thirds of organised gangs in the province have paramilitary involvement. To give you an idea of the size of the figures involved, in 2002, the police in the province seized counterfeit goods worth in excess of £6m. The vast majority of these items were cigarettes and DVDs; a significant proportion, however, were luxury goods including bags and watches. Interpol has yet more examples. In Kosovo, a significant proportion of consumer goods available for sale are counterfeit, profits from which are likely to benefit both organised criminals and ethnic-Albanian extremist groups. The same goes, to a lesser extent, for Chechnya. In 2000, a joint operation between Russian law enforcement agencies and private industry resulted in the break-up of a CD-manufacturing plant. According to the officials involved, the plant was a source of financing for Chechen separatists. Interpol is also aware that North African radical fundamentalists are financed through IPC. One militant, who has been active in Europe for the past decade, has been recently convicted of trafficking counterfeit goods. There is also evidence that both al-Qaeda and Hizbollah are involved in IPC-related crime. 'The public,' says Bryan Lewin, lead officer for counterfeiting at the Trading Standards Institute, 'tends to think that fake luxury goods are just a bit of harmless fun. But they are wrong, and need to be educated.'

Cartier is currently involved in 2,500 legal proceedings and devotes $3.8m annually to its crusade; Louis Vuitton has more than 1,000 active cases each year. Last month, it was revealed that Tiffany has sued eBay, claiming that the online auctioneer has aided violations of the Tiffany trademark by letting counterfeits be sold on its website. The company claims up to 73 per cent of the 'Tiffany' jewellery sold on eBay this year was fake. Lewin believes that, unless sites such as eBay learn to be more attentive, this case is likely to be the first of many. Burberry, too, is highly aggressive in its efforts to protect the exclusivity of its brand. In 2001, when its famous check was enjoying its fashion comeback, the company issued a statement in Draper's Record. 'We watch out for our trademarks,' it said. 'Anyone who uses our name, or checks identical or confusingly similar to our Burberry check... will hear from our lawyers.' Last April, Croydon council reported a raid on a retailer in which illegal copies of Burberry handbags and scarves were confiscated. Trading Standards officers were 'acting on a tip-off from an investigator working on behalf of Burberry'.

Statistics suggest that only 3 per cent of the traffic in counterfeit goods is seized by customs. So, for most luxury-goods companies, vigilance has necessarily become a way of life. 'It's all about intelligence gathering,' says Ruth Orchard. 'Shell companies tend to disappear very quickly, so you need trained investigators - ex-police and ex-customs - to go beyond them. You also need devices that enable identification of genuine goods, such as holograms and codes, and this must be a rolling programme since the counterfeiters take only about two months to catch up.'

Serial numbers, like those on a genuine Rolex watch, are no longer enough to prove that the item in question is genuine: some counterfeiters put a genuine but less valuable movement inside a more expensive Rolex casing, with the result that the watch is neither properly a fake, nor as valuable as its face might suggest. For this reason, Rolex will no longer tell the owner of a watch whether or not it is genuine solely on the basis of the serial number that it carries; to be sure of its provenance, it must be examined by an expert.

But however much indignant noise the luxury-goods companies make about the counterfeiters (and putting aside the links with organised crime for a moment), do fakes really affect their sales? Were they to disappear, would those who used to buy them be found swinging past the doormen who stand outside the stores on Sloane Street?

In the fashion world, opinion is divided. 'There is no doubt that this is a serious problem for these businesses,' says Roger Tredre, editor-in-chief of the internet fashion bulletin Worth Global Style Network. 'The luxury sector is pinning its hopes for the future on the strength of demand in China, the biggest market in the world, which also happens to be where the majority of fakes are manufactured. If an entire market ends up being quite happy with a decent counterfeit, they're going to be in trouble. We're not talking about a few students; we're talking about people who could afford, or might afford, the real thing but who end up buying a fake instead. In China, we're not even always talking about fakes, but surplus goods manufactured in the same factory as the real thing and then siphoned off and sold on the black market. It's too easy to take a kind of Naomi Klein view of counterfeiting - that it's great for "the people". You could be depriving someone of a job.' Has Tredre ever owned a fake? 'I once bought a fake Rolex on Canal Street for about $10.' He laughs. 'And, of course, it never really worked.'

Others are more sanguine. 'It's difficult to get to the bottom of the facts,' says the fashion writer Sarah Mower. 'I've just been to China and I think the counterfeits are a double-edged thing. In remote parts of the country, they create free advertising for when people start to trade up. Apparently, one trend in China is for those who have bought the real thing to keep the sales tag on it as proof.

I think the fashion houses should probably be pleased when people start copying: it's a sign that opportunity is on its way. In theory, Bernard Arnault [who runs LVMH, the conglomerate that owns several luxury brands, including Louis Vuitton] hates it when his designs are copied. But when stuff is ripped off, it's fashionable. It's a kind of weather vane. It would be far worse not to be copied. That would be a bit pathetic. In fact, if I were the desperate CEO of a struggling company, I might go out and try to persuade these people to copy my designs.'

Big fashion houses worry about the 'pollution' of their brand; they want a certain kind of person (Kate Moss or Gwyneth Paltrow, preferably) to be seen wearing their logos, not the entire population of Barnsley. But even if they could stamp out the production of fakes, they can't control this, as the famous photograph of the former EastEnders actress and cocaine addict Daniella Westbrook dressed head-to-toe in Burberry check testifies (the picture was proof positive that Burberry's fashion moment was officially over). In truly hip circles, logos are only worn in an 'ironic' way, so a fake really is as good as the real thing. 'If it's obvious that something is a fake, it can be funny,' says Andy Capper, editor of the uber-cool style magazine Vice. 'I've got a $15 Rolex. It goes with my gold rings.' Only 'Chavs' truly like logos, he adds. Kira Joliffe, founder of the thrift magazine Cheap Date, agrees. 'I don't have ethical reasons for not buying fakes,' she says. 'But honestly, who wants to wear real Louis Vuitton, let alone fake? It's sad.'

Unsurprisingly, at an organisation like the Anti-Counterfeiting Group, such blase attitudes fall on deaf ears. Ruth Orchard is uncompromising. In fact, she and her members would like to see the law changed so that it becomes an offence to be caught buying or in possession of counterfeit goods. 'I don't regard the idea as too swingeing. The only way to stamp out counterfeiting is to dry up the markets. We can educate consumers, but a change in the law is the only real way of doing that.'

What about those who genuinely believe they are getting the real thing? (Apparently, lots of women turn up at Rolex clutching watches that they have been generously given by ex-lovers, only to discover that they own a rather deft fake - these watches are known in the trade as 'fuck-me gifts'.) Orchard is frosty. 'Mostly, people know exactly what they are buying.' I think about my 'Lous Vuitton' wallet and my hitherto urgent need for a fake Sac Plat and, feeling suitably chastened, I quickly hang up.

· Market interviews by Syma Tariq

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