Law enforcement officials on Capitol Hill Wednesday told a House panel that the booming international trade in phony consumer goods is funding terrorism.

Officials say international property crime (search), which relates to the counterfeiting and pirating of goods, has reached an estimated $500 billion in black market trade globally. In 2001 in Europe, the European Union reported the seizure of 95 million items of counterfeit or pirated goods, representing nearly $2 billion. The FBI estimates counterfeiting has caused businesses in the United States to lose $200 billion to $250 billion per year.

Top Interpol (search) official Richard Noble (search) told the House International Relations Committee that groups like Al Qaeda and Hezbollah (search) are making money in trafficking consumer goods like fake Nike sneakers, Sony stereo equipment and Calvin Klein jeans, products that can be bought and sold on any street in America.  Lawmakers agree the problem needs to be addressed.

"The real challenge for American shoppers is resisting the temptation to buy these goods that are much lower in price, and so the importance of this hearing is a start in communicating to shoppers in America and around the world that they need to resist the temptation to buy that cheaper product with the understanding that often it goes into the criminal element and very likely often goes into the terrorist element," said Rep. Adam Smith, D-Wash.

Noble, the secretary-general of Interpol, said terrorist groups are conducting their counterfeit business on a global scale. He said groups like Al Qaeda may use the funds to finance their organization or carry out attacks.

"We know that Al Qaeda supporters have been found with commercial-size volumes of counterfeit goods. And if you find one Al Qaeda operative with [counterfeit products] it is like finding one roach in your house. It should be enough to draw your attention to it," Noble said.

Law enforcement officials say international property crime nets terror groups high financial returns but causes significant losses for legitimate businesses.

But getting cooperation has not been easy. Legal experts say that because counterfeiting is viewed as a victimless crime, it's tough to give it the attention it deserves. And, it must be done in a diplomatic manner. 

"It is a very delicate issue to go into a country and accuse the country of being responsible for a crime problem in that other country. But we find that the best way to do that is to get the police working on actual cases," Noble said.

Officials warn that since the United States responded so forcefully to the Sept 11, 2001 attacks, including shutting down terror financing sources, the nature of terrorism has changed. Terror groups are increasingly turning to entrepreneurial endeavors, whether it's counterfeiting or establishing legitimate businesses.

Anti-counterfeiting groups suggest the United States should take the lead in getting other countries to crack down on international property crime through more aggressive law enforcement.

Fox News' Kelly Wright contributed to this report.