Category: Illicit Trade

  • Queensland Cracks Down on Illicit Trade

    The Queensland government is intensifying efforts to combat the illegal trade of tobacco and vapes, which it claims is being exploited by criminal gangs. Health Minister Tim Nicholls revealed that 350-400 stores, including repeat offenders, are under surveillance, with recent raids seizing millions of illicit cigarettes, tons of loose tobacco, and tens of thousands of illegal vapes. Nicholls emphasized the need for stricter financial penalties, arguing that current fines, capped at $3,200 for individuals and $10,000 for corporations, are insufficient to deter the lucrative trade. Discussions are underway with the attorney-general to introduce harsher penalties.

    Meanwhile, the government faces mounting pressure to release the delayed Mid-Year Fiscal and Economic Review (MYFER). Labor’s Shannon Fentiman criticized the delay, suggesting the government is buying time to address fiscal mismanagement and accusing the LNP of stalling after their October election victory. Nicholls defended the postponement, citing efforts to uncover past Labor overspending and ensure an accurate portrayal of state finances. He dismissed opposition criticism as desperation, maintaining that the government is prioritizing transparency and accountability in its economic reporting.

  • Illegal Cigarette Factory Dismantled in Latvia

    Illegal Cigarette Factory Dismantled in Latvia

    Photo: Europol

    Latvian authorities dismantled a large illegal cigarette factory last week.

    The massive illegal manufacturing site was fully equipped with production machinery and raw materials. Police detained 32 people and seized nearly 300 million cigarettes, along with approximately 47 tons of leaf tobacco.

    If the cigarettes had entered the market, they would have deprived the Latvian state of more than €75 million in revenues, according to authorities.

    Searches were conducted simultaneously at multiple locations. Police carried out 26 searches in Riga, discovering warehouses containing cigarettes and detaining seven individuals, including six Latvian and one Russian national.

    Meanwhile, the state border guard carried conducted eight searches in Ludza, Rēzekne and Daugavpils, detaining 25 Ukrainian nationals at the Ludza factory, where counterfeit cigarettes were being manufactured under well-known brand names.

    The investigation was supported by Europol, which provided analytical support, and the Lithuanian Customs Criminal Service.

  • Thailand Launches Track-and-Trace System

    Thailand Launches Track-and-Trace System

    Photo: rangizzz

    Thailand is launching a track-and-trace system that allows smokers to verify the authenticity of their cigarettes by scanning a QR code, reports The Pattaya News.

    According to authorities, the innovation enhances tax collection efficiency, promotes transparency, and ensures compliance with international standards.

    Consumers can use smartphones to scan unique QR codes on cigarette excise stamps, accessing details such as the brand, manufacturer, tax payment date, shipment location and price.

    Discrepancies between the displayed information and the product can indicate contraband or counterfeit goods. Such illicit products may not meet quality standards and could pose serious health risks due to unregulated ingredients, says the Thai government.

    The system allows the public to report suspicious items directly to the Excise Department through a built-in whistleblowing feature.

  • Sophisticated Illegal Factory Dismantled in Spain

    Sophisticated Illegal Factory Dismantled in Spain

    Image: Paco Ayala

    Authorities dismantled a large a large counterfeit cigarette factory in Spain’s Malaga province, reports Sur.

    Guardia Civil officers confiscated 1,448 packs of counterfeit cigarettes from the facility, which operated 24 hours a day and distributed cigarettes throughout Spain. The illegal factory counterfeited four internationally known brands and had an estimated turnover of €4 million ($4.2 million) a month.

    Police were impressed by the operation’s level of sophistication. The facility was powered by a self-contained generator and stored 500 liters of fuel. To avoid detection, the factory operators had soundproofed the generator and made an exhaust pipe to expel the gases.

    In addition to the finished cigarettes, authorities confiscated a large amount of materials such as paper, filters and machinery, along with printing plates with the names of the commercial brands and packets ready to be assembled.

  • Illicit Trade Hurts PTC’s Sales

    Illicit Trade Hurts PTC’s Sales

    Image: Ali Sher

    Competition from illicit tobacco products caused Pakistan Tobacco Co.’s (PTC) sales to drop by 11.26 percent in the first quarter of the current fiscal year as compared to 2023-2024.

    “The legitimate tobacco industry in Pakistan faces continued challenges as illicit cigarette sales have reached alarming levels,” PTC’s senior regulatory affairs manager, Qasim Tariq, was quoted as saying by the Associated Press of Pakistan.

    During the period under review, PTC sold 6.3 billion cigarettes, against 7.1 billion in the comparable 2023 quarter.

    PTC is not the only organization impacted by illicit trade. In a recent statement to the Senate Standing Committee, the Federal Board of Revenue (FBR) revealed that 50 percent of cigarettes were being sold in Pakistan illegally, causing the government to miss out on much-needed tax revenue.

    Tariq attributes the problem, in part, to excessive tobacco taxation levels. In February 2023, the government increased the Federal Excise Duty by more than 150 percent, driving many smokers to purchase their tobacco on the black market instead. “As a result, there is an estimated PKR300 billion loss to government revenue which is essential for public services, infrastructure and economic development initiatives,” he remarked.

    While commending the FBR for its enforcement efforts against illicit tobacco trade, Tariq emphasized that isolated measures would not be enough to address the problem. He believes that the market for illicit products remains strong due the FBR’s limited resources and inconsistent enforcement at the retail level.

    “PTC strongly advocates for the full and consistent implementation of a track-and-trace system in all regions, including Azad Jammu and Kashmir, to enable authorities to identify and monitor products, reduce tax evasion and ensure only legitimate products reach consumers,” he said.

  • Illicit Market Thriving After Flavor Ban: ITCAN

    Illicit Market Thriving After Flavor Ban: ITCAN

    Image: Ahmed

    One year after Quebec banned non-tobacco flavored vapes, most vapers are buying such products illegally in the province, according to Imperial Tobacco Canada (ITCAN).

    In a survey carried out by Leger, 61 percent of vapers said that they purchased non-tobacco flavored vapor products in the past 12 months. Forty percent of those respondents said that they purchased an illegal flavored vapor product from a vape shop, and 33 percent of those respondents said they purchased flavored vapor products online. Forty-seven percent of those respondents said they knew it was illegal when they purchased a flavored vapor product

    “If the government’s objective was to create an untaxed and unregulated vapor market, then well done and mission accomplished,” said ITCAN Vice President of Corporate and Regulatory Affairs Eric Gagnon in a statement.

    ITCAN attributed the problem in part to weak enforcement. “A report from the Ministère de la Santé et des Services Sociaux (MSSS) website reveals that only 150 (38 percent of all vape shops) have been inspected by MSSS,” the company wrote. “Worse yet, very few fines have been issued with reports showing only 28 of those 150 received fines, even though more than 90 percent are uncompliant.”

    ITCAN urged the government to train inspectors, issue fines heavy enough to deter illegal players and conduct an “enforcement blitz” to demonstrate the gravity of the situation, among other suggestions.  

  • Maldives Intercepts Illegal Cigarette Shipment

    Maldives Intercepts Illegal Cigarette Shipment

    Photo: Sergey

    The Maldives Customs Service intercepted more than 8,000 cartons of cigarettes illegally shipped into the country on a fuel tanker operated by Hawks, one of the nation’s leading fuel importers and distributors, reports The Edition.

    Under a court order, authorities subsequently searched the Hawks Boatyard on suspicion that more cigarette cartons may be stored there. “So far in this operation, approximately 1,695 million cigarette sticks of Manchester brand have been found during the search of Hawks Boatyard, in the accommodation block and workshop,” the customs service wrote in a statement.

    The agency said that the cigarettes were brought in on MT Hawks Javaahiru and taken to Thilafushi on a local boat owned by the company, which was unloaded after regular business hours.

    A senior Hawks official told Mihaaru News that company management was not involved in the smuggling operation. “We are also hearing that this was done by some employees in connection with some foreigners,” he was quoted as saying. “Our management only learned of this when police also came with a court order to search the premises,” the official said.

    The official said Hawks was cooperating with authorities and would conduct an internal investigation.

  • Derailing Harm Reduction?

    Derailing Harm Reduction?

    Image: ArieStudio

    The unhelpful contribution of illicit vaping products

    By Pieter Vorster and Sudhanshu Patwardhan

    The rise of vaping as an alternative to smoking has brought the promise of significant net public health benefits but equally meaningful regulatory challenges. While legitimate vaping products can serve as a powerful harm reduction tool for adult smokers, the proliferation of illicit vaping products has introduced a plethora of problems that require careful consideration.

    This article will address the various impacts of illicit vaping products—ranging from health risks and tax revenue loss to underage use, environmental concerns and the potential for increased criminal activity. In countries where vaping products are banned, the illicit vape market has not only taken over but is also leading to a vicious cycle of vilifying an entire category of products that potentially offer a much less risky alternative to combustible tobacco users. The accompanying stigmatization and criminalization of smokers who seek safer alternatives is an affront to human rights. We will also explore the key drivers of the illicit market and potential solutions to mitigate these.

    Health Risks Associated With Illicit Vaping Products

    A key concern with illicit vaping products is the absence of regulatory oversight. Legitimate manufacturers must adhere to safety standards that ensure their products do not pose unnecessary risks to consumers. These regulations cover product composition, labeling and the disclosure of ingredients. In contrast, illicit products bypass these standards, introducing the potential for harmful substances in e-liquids, unsafe nicotine levels or faulty hardware, such as poorly constructed batteries.

    Potential health risks include:

    • Contaminated ingredients: Illicit vaping liquids may contain dangerous additives such as harmful chemicals or poorly sourced nicotine, increasing the risk of respiratory issues and other health problems.
    • Unregulated nicotine levels: Illicit products can contain nicotine concentrations far beyond legal limits, exacerbating addiction or leading to nicotine poisoning.
    • Defective devices: Poorly made or counterfeit devices may lead to malfunctions, such as battery explosions or inadequate heating mechanisms, posing physical dangers to users.

    Loss of Tax Revenue and Market Disruption

    Illicit vaping products not only pose health risks but have economic consequences as well. In jurisdictions where vaping products are subject to excise taxes or sales tax, such as in many European countries and parts of the United States, the sale of untaxed products represents a significant revenue loss for governments. These funds are often intended to support public health programs, anti-smoking initiatives or infrastructure investments. The absence of taxes on illicit products undermines these efforts and contributes to a broader sense of inequity within the market.

    Moreover, the price difference between legal and illicit products distorts the market. Legitimate operators who comply with taxation and regulatory requirements face unfair competition from cheaper illicit products. The lower price points of these illegal products not only make them more accessible but also undermine the efforts of legal businesses to compete, leading to the potential loss of jobs and investment in the legitimate sector.

    Underage Use and Accessibility

    One of the most troubling aspects of illicit vaping products is their role in enabling underage access and use. In most countries, the sale of vaping products to minors is strictly prohibited, and legitimate sellers are typically required to adhere to age verification processes. However, illicit products bypass these restrictions. Without regulated sales channels, these products can be more easily acquired by underage consumers, contributing to a rise in youth vaping.

    Factors contributing to underage use include:

    • Lower prices: The affordability of illicit products makes them more accessible to those who are underage and often more price-sensitive.
    • Unregulated sales channels: Without the oversight that governs legitimate sales, underage individuals can purchase these products through informal networks or online marketplaces with little to no age verification.

    The availability of illicit products for underage users creates a broader public health challenge. While the long-term effects of nicotine on developing brains remain debated, concerns about early nicotine exposure, potential addiction and its impact on cognitive function continue to drive public health discourse and have been key to the Food and Drug Administration’s highly restrictive premarket tobacco product application process in the United States.

    Elsewhere, the rise in underage vaping, fueled by the availability of illicit products, has prompted calls for stricter regulation of the legitimate market. In the U.K., for example, concerns about underage use have led to proposals for more stringent controls on all vaping products, which could inadvertently restrict access for adult smokers who use vaping as a tool for tobacco harm reduction.

    Environmental Concerns

    The environmental impact of illicit vaping products is another significant issue. Many of these products, particularly disposable vapes, are not designed with recyclability in mind. Since illicit manufacturers often prioritize cost savings over environmental considerations, their products are less likely to comply with proper waste disposal or recycling guidelines.

    Environmental risks include:

    • Disposable vapes: Many illicit, disposable vapes are discarded improperly, contributing to plastic waste and electronic waste.
    • Recycling challenges: Legal products are often part of recycling schemes or are designed with recoverable materials, but illicit products do not follow these environmental protocols.

    A lack of proper disposal mechanisms for illicit products not only exacerbates broader environmental challenges such as electronic waste and plastic pollution but also fuels calls for stricter regulation, or bans, of legal products.

    Criminal Violence and the Illicit Market

    In addition to the public health and economic consequences, the illicit vaping market has the potential to fuel criminal activity, particularly organized crime. The sale of untaxed and unregulated products can provide a significant revenue stream for criminal organizations, which, in turn, may lead to increased violence. Australia, which has imposed a de facto ban on vapes through its prescription model, has seen rising concerns about criminal violence linked to the illegal trade in vaping products. As the illicit market grows, so does the likelihood of violence between rival groups vying for control of the black market.

    Illicit Vaping—A Bipolar Problem?

    Growth in the illicit vaping market is being driven by a combination of factors. Peculiarly, the two bookends of the regulatory spectrum pose the highest risk: overly restrictive or prohibitive at one end and notification with poor enforcement at the other. It is easy to understand why prohibition or overly restrictive frameworks can be conducive for illicit products in the market—decades of prohibition experiments on alcohol, drugs and even chewing gums have shown how that can skew market economics in favor of bad actors.

    Regulations that are perceived as overly restrictive can push consumers and sellers toward the black market. In countries like Australia and the United States, where vaping regulations are particularly stringent, the high cost of compliance, limited access to legal products and high taxes can drive demand for illicit alternatives. These overly restrictive policies, while intended to protect public health, may inadvertently encourage consumers to seek out cheaper, unregulated options that bypass legal requirements.

    In the U.S., where only a limited number of products have been granted marketing authorization by the FDA (none of which are disposable), disposable vapes are estimated to account for close to 60 percent of national unit sales in tracked sales channels.

    Australia is another widely reported example of rampant sales of illicit vapes in response to a draconian regulatory framework, and the list does not end there. India and Thailand, among others where sales of vaping products are banned, have seen significant black markets emerge.

    At the other end are countries where there is no requirement for authorization per se and a basic notification process is considered adequate. Indeed, it may seem counterintuitive that harm reduction goals could be helped by the introduction of barriers to product launches and rapid innovation. However, an overly simplified notification process has the potential to put excessive responsibility on enforcement agencies in the marketplace. For example, in jurisdictions where a vaping product/SKU can be launched following a simple notification process of contents and related risk assessments, the potential exists for unscrupulous manufacturers and distributors to introduce products containing illegal additives or higher-than-allowed nicotine levels in a seemingly legal way. The EU Tobacco Products Directive and its transposition into local regulations in EU and ex-EU countries such as the U.K. creates such a situation. In the U.K., the U.K. Vaping Industry Association (UKVIA) believes that 40 percent to 60 percent of disposable vapes sold in the U.K. are likely illicit.

    A lack of adequate resources for law enforcement agencies also contributes to the persistence of the illicit market. Without sufficient funding and personnel to investigate and crack down on illegal operators, the illicit trade in vaping products continues to thrive. The combination of an unregulated supply chain and weak enforcement allows illicit products to enter the market relatively unchecked.

    Potential Solutions

    Addressing the issue of illicit vaping products requires a multifaceted approach involving both regulatory reform and enhanced enforcement mechanisms. Some potential solutions include regulatory reform, strengthened law enforcement and public awareness campaigns.

    Regulatory Reform

    Governments must strike a balance between protecting public health and ensuring that regulations do not drive consumers to the black market. By adopting a regulatory framework that allows adult consumers to access legal vaping products while maintaining appropriate safety and quality standards, policymakers can reduce the demand for illicit alternatives. This could involve:

    • Harmonizing regulations: standardizing regulations across jurisdictions to prevent regulatory discrepancies that fuel the illicit trade.
    • Moderate taxation: implementing reasonable excise taxes that do not create a significant price disparity between legal and illicit products.
    • Allowing legal access to adult smokers: Providing adult smokers with accessible, affordable and satisfactory regulated alternatives will discourage the use of unregulated products.

    Strengthening Law Enforcement

    To effectively combat the illicit market, governments must provide law enforcement agencies with the necessary resources to investigate and shut down illegal operators. This could include:

    • Increased funding for investigations: allocating more resources to law enforcement agencies to crack down on illicit vaping supply chains.
    • International cooperation: As the illicit trade often involves cross-border networks, international cooperation between customs and law enforcement agencies can play a vital role in curbing the flow of illegal products.
    • Licensing and tougher penalties: In the U.K., the UKVIA has proposed a mandatory licensing framework for vape retailers and distributors, with fines of up to £10,000 ($13,038) for retailers and £100,000 for distributors. The scheme aims to generate additional funding for enforcement, estimated at £50 million annually.

    Public Awareness Campaigns

    Educating the public about the risks associated with illicit vaping products can help reduce demand. Public awareness campaigns can inform consumers about the health risks, potential legal consequences and environmental harms linked to using unregulated products.

    By addressing the root causes of the illicit vaping market and implementing effective solutions, governments can safeguard public health, protect revenue streams and ensure that vaping products remain accessible to adult consumers seeking harm reduction.

    Sudhanshu Patwardhan is a medical doctor, nicotine expert and health tech entrepreneur from India, based in the U.K. He works on projects around the world to reduce harm from tobacco, especially among the most disadvantaged tobacco user populations.
    Pieter Vorster is a harm reduction expert with a long career as a financial analyst reporting on tobacco industry stocks.
  • Pakistan Announces New Crackdown on Illicit Trade

    Pakistan Announces New Crackdown on Illicit Trade

    Photo courtesy of Syed Rashid Ali

    Pakistan’s Federal Board of Revenue (FBR) will significantly step up its crackdown on illicit cigarette sales, starting in January, reports the Associated Press of Pakistan. The government agency plans to hire additional enforcement personnel to support its efforts.

    According to the FBR’s projections, tackling illicit sales could generate between PKR200 billion and PKR250 billion in additional revenue annually, from PKR300 billion to more than PKR500 billion.

    The Action to Counter Illicit Trade (ACT) Alliance welcomed the FBR’s announcement, adding that collaboration across government agencies, provincial authorities and law enforcement was essential in achieving Pakistan’s economic goals.

    “We call on all stakeholders to support FBR’s efforts, reinforcing measures that strengthen tax compliance and encourage economic integrity,” ACT Alliance National Convenor Mubahsir Akram said.

    Seventy percent of cigarettes sold in Pakistan currently evade taxation.

  • Armenia Thwarts Cigarette Smuggling

    Armenia Thwarts Cigarette Smuggling

    Image: Gevorg Simonyan

    Armenia’s State Revenue Committee (SRC) has foiled an attempt to smuggle a large shipment of cigarettes into the country, reports Panorama.

    In an Oct. 25 statement, the SRC said its employees were told that a large quantity of tobacco products could be hidden in a truck transporting cargo from Iran.

    After inspecting the truck driven by an Armenian citizen, they discovered 68,500 packs of cigarettes without excise tax stamps hidden beneath bags of cement.

    Preliminary calculations suggest the shipment had evaded AMD22.5 million ($58,128) in excise taxes.