Category: Illicit Trade

Illicit Trade Persists After Lockdown

Photo: Tobacco Reporter archive
The illicit cigarette trade continues to thrive in South Africa despite recent enforcement actions, according to a new Ipsos study.
According to Ipsos’ latest study, shops nationwide are still flooded with illegal tobacco products more than two years after the unconstitutional tobacco sales ban was imposed by the government as part of their response to the Covid-19 pandemic.
The study found that almost four out of five stores in the Western Cape (77.9 percent) sell cigarettes below the minimum collectible tax (MCT) rate of ZAR22.79 ($1.28) per pack. Almost three in four shops in Free State (72.3 percent) sell cigarettes below the MCT as do 66.2 percent of outlets in Gauteng, a significant increase compared to research conducted a year ago.

“The latest Ipsos study is irrefutable proof that the unconstitutional lockdown tobacco sales ban created a monster with an insatiable appetite.”
Johnny Moloto, general manager, BAT South Africa
A single pack of 20 cigarettes can be bought for as little as ZAR7, down from ZAR8, which was the lowest price found in the October 2021 study, according to Ipsos.
“The latest Ipsos study is irrefutable proof that the unconstitutional lockdown tobacco sales ban created a monster with an insatiable appetite,” said Johnny Moloto, general manager of BAT South Africa.
“Criminal manufacturers of tax-evading cigarettes are refusing to give up their control of the South African tobacco market and are pocketing billions in illicit profits that deprive the state of vital revenue and destroy honest jobs.”
November 9, 2022
Turkiye to Crack Down on Illicit Trade

Photo: Dzmitry
Turkiye plans to crack down on illicit tobacco production and consumption, which cost the state an estimated TRY30 billion ($1.61 billion) in lost tax revenue, reports Daily Sabah.
A draft bill set to be discussed at Parliament will bring prison terms of up to five years for people selling tobacco without licenses from the Ministry of Agriculture and Forestry.
Illicit product is estimated to account for 20 percent of Turkey’s tobacco market. In 2021, some 35 billion cigarettes containing contraband tobacco were sold. This year, consumption is projected to reach about 50 billion.
The majority of illicit trade comprises illegally produced, unlicensed tobacco sales, such as hand-rolled cigarettes, representing around 27 percent of Turkish cigarette consumption. Counterfeit or smuggled cigarettes, by contrast, constitute about 3 percent of the market.
Authorities seized 4.7 million packages of smuggled cigarettes, 273 tons of tobacco products and 329,000 cigars during the first nine months of 2022, preventing a loss of TRY625 million in tobacco taxes, according to police data.
November 8, 2022
Ukraine: Illicit Tobacco Sales Hit Record High

Photo: Ivan Semenovych
The share of illicit tobacco products in Ukraine reached its highest level since the country’s independence in 1991, reports Interfax Ukraine.
According to an October study by the Kantar Ukraine Institute, illicit products accounted for 21.5 percent of the Ukrainian tobacco market in August 2022, up 5 percentage points over the average annual indicator for 2021.
The survey shows that Ukrainian smokers bought 8.46 billion illegal cigarettes since the beginning of 2022, equaling the volumes for the whole of 2021, and caused the government to miss UAH20.65 billion ($558.71 million) in tobacco tax payments.
Kantar Ukraine specified that fake cigarettes in Ukraine accounted for 8 percent of Ukraine’s tobacco market in August 2022 compared with 6.6 percent in August 2021.
November 4, 2022
Politicians Linked to Tobacco Smuggling

Photo: Ivan Semenovych
Montenegro’s outgoing Prime Minister Dritan Abazovic has accused the Democratic Party of Socialists (DPS) of maintaining ties to tobacco smugglers, reports Balkan Insights.
During a parliamentary Security and Defense Council session on Oct. 17, Abazovic claimed that three major tobacco smuggling groups operate in the country, at least one of which is linked to the DPS.
Abazovic urged prosecutors to investigate his claims, adding that he would “self-arrest” if his assertions proved false.
Since the collapse of Yugoslavia in the 1990s, the Port of Bar has become a center for cigarette smuggling from where imported tobacco is re-exported and cigarettes made in Montenegro are shipped.
Abazovic said the smugglers had the political support of current President Milo Djukanovic and his DPS, which held power for almost three decades.
In recent years, Montenegrin authorities have seized hundreds of tons of smuggled cigarettes and more than two tons of cocaine in Bar. Earlier this month, the head of Montenegro’s Customs Office resigned after being linked to tobacco theft in Niksic.
October 19, 2022
Record Seizure of Illegal Cigarettes at Hull Port

Photo: Tobacco Reporter archive
British Customs authorities reported the largest-ever seizure of illegal tobacco in the United Kingdom when a sniffer dog found 99 million illicit cigarettes in the Port of Hull, reports BBC News.
The illegal products were in eight shipping containers said to have been shipped through the United Arab Emirates. The cigarettes were worth about £44 million ($48.56 million) in unpaid taxes, according to HM Revenue and Customs (HMRC).
Import documents falsely labeled the shipping containers as carrying birchwood logs.
“This is the single largest seizure of cigarettes ever made at a U.K. port,” said Anthony Usher, deputy director of HMRC’s fraud investigation service. “Our streets would have been flooded with them had they not been discovered.
“Cheap cigarettes come at a cost as they often fund organized crime and other illegal activity that causes real harm to our communities, such as drugs, guns and human trafficking.”
October 10, 2022
Customs Chief Quits Over Cigarette Theft

Photo: Evan Novostro
Rade Milosevic, head of Montenegro’s Customs Office, resigned after an investigation launched by the Special State Prosecution into the tobacco theft in the town of Niksic, reports Balkan Insight.
Milosevic was questioned by police after €1 million ($971,805) worth of tobacco was stolen from a factory in Niksic, where it was supposed to be destroyed.
“I decided to take this action in order to relieve the government, the Customs Office and myself personally of the pressure. I am convinced that my work did not violate the law, but the media and a political hunt were aimed at discrediting me,” Milosevic said.
“It [the hunt] was designed and instructed by certain interest groups threatened by my conscientious and professional work,” he added.
The Special State Prosecutor’s Office stated that Customs officials, without adequate security measures, took over a truck of cigarettes intended for destruction. The truck never made it to its destination at the Mai-rai factory. Police later found the truck hidden in Podgorica, the capital. Customs officers Elvir Adrovic and Milutin Pejovic were arrested.
“I would be very unpleasantly surprised if Milosevic made this kind of oversight,” said outgoing Prime Minister Dritan Abazovic. “He explained to me how the system works, but the authorities will investigate whether there is anything else there.”
Opposition and civic organizations called for Milosevic’s dismissal, but Abazovic urged prosecution to fully investigate the matter first.
Earlier this year, Abozovic suggested tobacco smuggling groups contributed to the no-confidence vote that brought him down in mid-August.
October 10, 2022
Hong Kong: Record Seizures of Cigarettes

Photo: Kal’vān
Hong Kong authorities confiscated HKD1.23 billion ($157 million) worth of illicit cigarettes to date this year—the largest haul of the contraband in 20 years, reports the South China Morning Post, citing figures from the Customs and Excise Department.
As of Sept. 22 this year, customs officials had seized about 440 million untaxed cigarettes, well above the 427 million cigarettes worth HKD1.19 billion found in the whole of 2021.
If legally imported, this year’s contraband would have generated HKD839 million in tax, according to a law enforcement source.
The source attributed the rise in contraband seizures to the resumption of seaborn logistics after Covid-19 disruptions and a possible rise in the price of tobacco products in Europe.
“As the resumption of seaborne logistics business in May, syndicates have started to accumulate their storage of illicit cigarettes in the city while trying to find buyers in Hong Kong and overseas,” the source told the South China Morning Post.
He said some of the gangs also stockpiled a huge volume of illicit cigarettes in the city as they anticipated a possible rise in the price of tobacco products in Europe amid high inflation.
This year’s seizures reached 440 million cigarettes after authorities discovered 21.6 million untaxed cigarettes worth HKD59 million hidden in two shipping containers in Tsing Yi and Yuen Long in their latest operation on Sept. 19.
September 23, 2022
Firms Settle New York Tax Evasion Case

Image: Rawf8
New York’s attorney general office announced a $50 million agreement with Grand River Enterprises Six Nations of Canada (GRE) and Native Wholesale Supply Co. (NWS) of New York to settle allegations of tax evasion in the state.
According to the complaint, the two companies brought millions of cartons of unstamped cigarettes into New York from Canada.
The attorney general’s office contends that NWS purchased cigarettes and tobacco products from GRE, imported them into New York, and distributed the cigarettes to retailers in the state—despite having no license to do so. GRE allegedly knew that the cigarettes it sold to NWS would be sold into New York without going through a New York state licensed stamping agent for prepayment of state taxes and would be neither stamped nor taxed as required by New York law.
“Hardworking New Yorkers pay taxes and so should multi-million-dollar companies,” said New York Attorney General Letitia James in a statement. “Regulating and taxing cigarettes is a critical tool to protect public health from the deadly dangers of tobacco. Today’s agreement enforces New York’s laws and will stop the overflow of unstamped cigarettes into New York.”
In addition to paying the $50 million, the companies agreed to modify their business practices to prevent future sales of unstamped cigarettes in New York.
In a statement, NWS clarified that while the settlement ends the litigation, it is not an admission of wrongdoing.
“In this almost decade-long dispute, the NY Attorney General claimed that sales of cigarettes by NWS to certain Native American Nations situated within the geographic borders of New York state were subject to New York state regulation and taxation. NWS, as well as the manufacturer of those products, GRE, vigorously objected to and adamantly denied such claims. As part of NWS’ Chapter 11 plan of reorganization, NWS allowed those claims to proceed in federal court in New York State.
“The settlement announced today brings an end to that litigation, without any admission of wrongdoing or liability by NWS or GRE. The settlement payments are to be paid solely by NWS and are not denominated as payment of back taxes. They are payments that the parties agreed are payments of disputed claims payable under the trust set up in accordance with the Chapter 11 plan of reorganization.
“NWS and GRE have at all times maintained and continue to maintain that the transactions at issue do not and did not violate any federal or New York State laws, particularly in view of well-established sovereign and treaty rights established with the federal government.”
September 13, 2022
Ousted Prime Minister Urges Smuggling Probe

Photo: Ivan Semenovych
Montenegro’s outgoing prime minister, Dritan Abazovic, urged the state prosecutor to investigate tobacco smuggling, claiming that organized crime groups contributed to the no-confidence vote that brought him down in mid-August, reports Balkan Insight.
Abazovic provided the prosecutor’s office with documents detailing schemes and naming individuals. According to the outgoing prime minister, cigarette smugglers have been funding political groups to further their causes. “I expect an avalanche to be triggered,” Abazovic told reporters on Sept. 5. “I had to show the roadmap of the tobacco smuggling in Montenegro.”
In May 2019, a probe by the Balkan Investigative Reporting Network showed how Montenegro had become a hub of global tobacco smuggling, funneling millions of counterfeit cigarettes into the EU with “ghost” ships, shell companies and forged paperwork.
The Port of Bar is reportedly at the center of this illicit trade. In several large-scale operations in recent years, Montenegro police and customs seized hundreds of tons of smuggled cigarettes and more than two tons of cocaine in the port.
Top officials are rumored to be complicit in the schemes.
In April, Montenegrin police arrested Vesna Medenica, former head of the supreme court, on charges of illegal activities that included drug trafficking and tobacco smuggling.
September 8, 2022
Belgium: One in Five Cigarettes Untaxed

Photo: paolo
More than one in five cigarettes smoked in Belgium are untaxed, reports The Brussels Times, citing new research carried out by Cimabel, the Belgium-Luxembourg federation of cigarette manufacturers.
A study of discarded packets and cigarette butts collected between April 18 and May 9 found that 21.8 percent of cigarettes consumed had escaped Belgian tax authorities, accounting for around €700 million ($699.69) in lost tax revenue.
Of the untaxed cigarettes, 1.9 percent were counterfeit. The remaining 19.9 percent were legally brought into Belgium from countries with a lower tax burden. Of the cigarettes purchased outside of Belgium, more than half (51.8 percent) came from Bulgaria. Other countries of origin included Poland (7.8 percent of supply), Turkey (6.88 percent) and Romania (3.67 percent).
During Cimabel’s previous semi-annual survey, which took place in October 2021, the share of untaxed cigarettes was 13.8 percent. The organization attributes the increase in tax-evading tobacco products to drastic tax hikes introduced on April 1, 2022, which have encouraged smokers to find cheaper ways of purchasing cigarettes.
Cimabel urged the Belgian government to refrain from further tobacco tax hikes.
“As long as the federal government continues to drastically increase excise duties on tobacco products each year, the demand for cheap cigarettes will continue to grow, and criminal organizations will continue their illegal practices on Belgian territory,” the federation warned.
September 1, 2022