Category: Illicit Trade

  • Indonesia to Crack Down on Illegal Trade

    Indonesia to Crack Down on Illegal Trade

    Photo: bayu harsa

    The Indonesian Customs and Excise Directorate General wants to lower the share of unlicensed cigarettes after seeing a surge in the illicit products during the coronavirus pandemic, reports The Jakarta Post.

    The goal is to bring the market share of illegal cigarettes below 3 percent, down from the 4.8 percent seen in 2020, according to Customs and Excise Director General Askolani. “[With the operation] we are conducting this month and next month, we hope we can reduce it to below 3 percent.”

    Customs estimates show that illegal cigarette market share had dropped to 3.03 percent in 2019 before increasing recently.

  • RELX Warns Against Fake Sellers

    RELX Warns Against Fake Sellers

    Example of a fake RELX website selling unofficial RELX products

    RELX International has warned consumers against purchasing its products through unofficial or unlicensed websites. “It has recently come to the attention of RELX International that a number of unlicensed persons or companies are attempting to profit off of the good and responsible reputation of the RELX brand in a number of markets, including Australia and Philippines,” the company stated in a press release.

    “In addition to selling unlicensed and potentially fake products, these websites and social media channels have been disseminating a variety of unfounded claims about our products or e-cigarette products in general. RELX International only provides science-based information about our products and only sells products to adult smokers or vapers. Furthermore, RELX International never uses any cartoons or ‘kid-friendly’ images or videos in our branding.

    “RELX International established the Golden Shield Program in 2019 to help prevent the production and sale of illicit e-cigarette goods such as those mentioned above. With the goal of safeguarding adult e-cigarette users’ right to access quality products, members of RELX International’s Golden Shield Program utilize large amounts of data and other technologies to track down illicit e-cigarette products sold online and offline. The Golden Shield team actively works with online social media platforms, online e-commerce platforms as well as Customs authorities to eliminate illicit vaping products from the market.

    “The Golden Shield team has already helped authorities launch 28 criminal cases related to the illegal production and sale of illicit or copyright infringing e-cigarette products. Over 77,000 websites and over 6,000 social media accounts have been taken down due to the Golden Shield team’s efforts, and 550,000 illicit products have been removed from the market.

    “Moving forward, we are committed to getting even more counterfeit products off the market.”

    The release lists all the official RELX websites as well as provides an email address to confirm third-party websites that are selling authentic RELX products.

  • Video: Polish Authorities Dismantle Illicit Factory

    Video: Polish Authorities Dismantle Illicit Factory

    The Polish authorities have dismantled an organized crime group involved in the production of illegal cigarettes, reports Europol.

    On July 27, more than 100 officers from Poland’s border guard searched locations across the province of Warsaw. An illicit factory was dismantled, and 16 suspects were charged for their involvement in this illegal tobacco activity. The leader of the criminal organization features among those arrested.

    More than 1.6 million counterfeit cigarettes were seized on site by the Polish authorities alongside 13 tons of tobacco that could have been used to produce a further 13 million cigarettes. The tax loss for the Polish treasury is estimated at about €3.8 million ($4.51 million).  

    The factory’s estimated production capacity was approximately 1 million cigarettes per day. The counterfeit cigarettes were destined predominantly for the U.K. and Germany, where they would have had a value of up to €9.7 million.

  • Covid Border Closures Yield Tax Windfall

    Covid Border Closures Yield Tax Windfall

    Photo: marcyano79

    The U.K. treasury received a £1.35 billion ($1.88 billion) windfall last year as Covid-related border closures made cigarette smuggling nearly impossible, reports The Express.  

    The huge rise in duty has prompted tobacco manufacturers to push for tougher sanctions on those involved in the smuggling, production and distribution of illegal cigarettes.

    “Covid stripped some illegal volumes into the market, and there was a revenue bounce for the Treasury as a result,” said Ian Howell, fiscal and regulatory affairs manager for Japan Tobacco International.

    “It shows how we need to tackle illicit tobacco as every illegal product that is sold takes money away from the government and the increased revenue during lockdown shows the scale of it.”

    HM Revenue and Customs estimates that the sale of illegal tobacco products has resulted in a tax revenue loss of more than £47 billion since 2000.

    An HMRC spokesman said the agency would continue to work with authorities to tackle the illicit tobacco trade problem.

  • EU Sanctions Target Belarus Tobacco Sector

    EU Sanctions Target Belarus Tobacco Sector

    Photo: andriano_cz

    New economic sanctions placed on Belarus by the European Union focused on seven economic sectors, which include petroleum, finance, arms and surveillance technology, and the nation’s tobacco-processing business.

    Belarus’ lucrative tobacco-processing industry—the source of a flourishing trade in cigarettes smuggled to the EU—was also targeted with bans on exporting to Belarus goods used in the manufacture of tobacco products. The goods listed include filters, cigarette papers, tobacco flavorings and machinery.

    Belarus is a dominant player in cigarette smuggling, which rebounded recently with the increase in EU excise duties on cigarettes and the banning of menthol cigarettes in the bloc. With the average price of a pack of cigarettes in Belarus running the equivalent of about $0.80 compared to $4.30 in Latvia and much higher in other parts of the EU, there is plenty of room for profit in smuggling.

    Cigarettes are a huge moneymaker for Belarus and for one of the country’s richest men, Alyaksey Aleksin, who now finds himself among the 166 individuals blacklisted from traveling or doing business with the EU. Aleksin, who was involved in the construction of a new tobacco factory in Minsk, is a major player in the distribution of cigarettes in Belarus and in recent years by presidential decree gained the exclusive rights both to import tobacco and to sell products both at home and abroad produced by the Hrodno Tobacco Factory, Belarus’ largest cigarette manufacturer.

  • South Africa Asked to Tackle Smuggling

    South Africa Asked to Tackle Smuggling

    Photo: Tobacco Reporter archive

    The major legal cigarette manufacturers in South Africa have called on the South African Revenue Service and law enforcement agencies to increase their efforts to prevent criminal networks from selling illicit cigarettes, reports Food for Mzansi.

    During June, about ZAR17 million ($1.2 million) worth of illicit cigarettes were destroyed, following the destruction of ZAR30 worth of illicit cigarettes at the Beit Bridge border post earlier in the year. In all, 181 million cigarettes valued at ZAR219 million ($15.1 million) have been seized and destroyed so far this year.

    Zacharia Motsumi, spokesperson for the South Africa Tobacco Transformation Alliance, which represents the legal tobacco value chain, said, “We have seen some significant action in recent weeks, but it’s going to take a combined national effort to completely stamp out the illicit traders. We are suffering huge losses because of the illicit cigarette networks, and more action is needed to arrest the perpetrators and destroy their illicit products.

    “We need to put a stop to their nefarious activity—it is destroying jobs and also robbing the country of tax revenue. The seizures and confiscations are significant, but they are just the tip of the iceberg. The illicit trade continues to cause massive harm to the economy and punishes farmers, processors and manufacturers who go about their business in a law-abiding way.”

  • Tobacco Smuggling Group Dismantled

    Tobacco Smuggling Group Dismantled

    Photo: Europol

    The Portuguese National Guard and the Spanish National Police have dismantled an organized crime group involved in excise fraud and the smuggling of tobacco products, reports Europol.

    During coordinated actions on July 7, authorities seized 8,000 kg of tobacco worth €2 million ($2.36 million) and 454,000 cigarettes with a value of €113,500. They also confiscated seven weapons, 24 vehicles and €216,000 in cash and bank deposits. Seventeen people were arrested.

    The criminal network was involved in the illegal import of large quantities of tobacco leaves and strips from Spain into Portugal. This raw material served the illegal production of both cigarettes and tobacco for roll-your-own cigarettes distributed on the Portuguese black market.

    Earlier, in mid-June 2021, Spanish authorities discovered and dismantled cutting and processing facilities. The tobacco processed there was shipped to Portugal where it was stored in different warehouses before being further distributed. Since the investigation was launched in May 2020, the Portuguese and the Spanish authorities have detained 23 individuals and seized about 1.8 million illicit cigarettes along with 11 tons of tobacco, all of which was worth about € 3.2 million.

    Illicit trade in tobacco for roll-your-own cigarettes continues to be a widespread criminal trend in Portugal. Certain “cheap white” cigarette brands have become so popular on the black market that criminal networks have started to counterfeit them rather than smuggle them. This illegal activity generates millions of euros in profit for the involved criminal organizations.

    While total cigarette consumption continues to decline, the share of illicit cigarettes in Europe increased by 0.5 percentage points to 7.8 percent in 2020, according to a recent study by KPMG.

  • Call for Inquiry into Illicit Tobacco Market

    Call for Inquiry into Illicit Tobacco Market

    Photo: Tobacco Reporter archive

    British American Tobacco has called for an inquiry into South Africa’s tobacco market following a new report showing surging sales of illicit cigarettes.

    The number of shops selling illegal cigarettes in the Eastern Cape has more than doubled in the four months since the last time results were released, according to a recent Ipsos report. In KwaZulu-Natal, the rate has shot up by one-third. Two out of three shops in the hotspot provinces of Free State, Gauteng and Western Cape sell illegal cigarettes, and illegal cigarettes are on sale in nearly half (41 percent) of all shops nationwide.

    Five times as many outlets on petrol forecourts now sell illegal cigarettes since the last time results were released, according to BAT. Illegal cigarettes are being sold for as little as ZAR6 ($0.42) per pack, a fraction of the Minimum Collectible Tax (MCT) rate of ZAR21.60 per pack of 20.

    “This research is damning proof that authorities have failed to bring South Africa’s colossal criminal market in cigarettes under control,” said BATSA General Manager Johnny Moloto in a statement. “Tax-evading manufacturers who exploited last year’s lockdown ban are now running rampant and costing South Africans huge sums of money at a time when every cent is a lifesaver. It is nothing short of a national emergency that demands a full-scale inquiry into the whole industry.”

    According to BAT, brands owned or licensed by members of the Fair-Trade Independent Tobacco Association feature prominently on the black market. The FITA in the past has rejected suggestions that its members are involved in the illicit trade.

    The latest Ipsos fieldwork was carried out from June 15–22, 2021, and follows similar studies in March and February of this year.

    Moloto urged the government to introduce of a minimum retail sales price of ZAR28 for a pack of 20, ratify the World Health Organization’s illicit trade protocol and introduce a track-and-trace system, among other measures to fight the illegal cigarette trade.

  • RYO Tobacco Smuggling Network Dismantled

    RYO Tobacco Smuggling Network Dismantled

    Law enforcement organizations in Spain and Portugal have dismantled an organized crime group involved in large-scale tobacco smuggling, according to Europol.

    The criminals would illegally import from Spain to Portugal large quantities of tobacco leaf and strips, destined to produce both cigarettes and tobacco for roll-your-own cigarettes, which were subsequently distributed onto the Portuguese black market.

    On June 24, police arrested eight Spanish and Portuguese individuals and seized 11 tons of tobacco leaf and fine-cut tobacco alongside 90,000 illegal cigarettes and 186,500 cigarette filters. The amount of tobacco seized is enough to produce some 11 million cigarettes worth €2.7 million ($3.22 million) in Portugal.

    The criminals were managing the import of the tobacco via several companies established with the sole purpose of committing excise fraud. Cutting and processing facilities had been set up in Spain, from which the tobacco was shipped to Portugal where it was stored in different warehouses until it was distributed further.

    The revenue loss generated by these tobacco products illegally imported from Spain to Portugal is estimated at more than €2 million.

    Europol brought together the national investigators on both sides who have since been working closely together to establish a joint strategy to bring down this network. Since then, Europol has provided continuous intelligence development and analysis to support the field investigators.

  • KPMG: Illicit Cigarette Trade up in Europe

    KPMG: Illicit Cigarette Trade up in Europe

    Photo: IvanSemenovych

    While total cigarette consumption continues to decline, the share of illicit cigarettes in Europe increased by 0.5 percentage points to 7.8 percent in 2020, according to a new study by KPMG.

    The increase of the illicit cigarette market—which comprises contraband, counterfeit and illicit whites—was driven by an unprecedented 87 percent surge in counterfeit consumption. The tax loss for governments of the EU’s 27 member states now amounts to approximately €8.5 billion ($10.15 billion).

    The annual study, conducted independently by KPMG and commissioned by Philip Morris International, evaluated the consumption and flows of illicit cigarettes in 30 European countries—the 27 EU member states as well as U.K., Norway and Switzerland.

    It shows how legal and illicit cigarette consumption was impacted by the Covid-19 pandemic, a period of lockdowns and restricted movement of people within the EU coupled with declines in affordability. The report estimates that total consumption of cigarettes declined by 4.7 percent in 2020 to 438.8 billion in the EU member states, while the Covid-19-related border controls and travel restrictions resulted in a sharp decrease of nondomestic consumption, which declined in 2020 by 18.5 percent (11.9 billion cigarettes). The decline in total cigarette consumption also coincided with the growth of 6 billion cigarette equivalent units in the fine-cut tobacco category in 2020.

    Consumption of illicit whites and other contraband cigarettes decreased year-over-year, but these declines were more than offset by an increase in counterfeit, which almost doubled in 2020, equating to 10.3 billion fake cigarettes, up from 5.5 billion in 2019. This was estimated to be driven mainly by an unprecedented 609 percent increase in counterfeit cigarette consumption in France, reaching 6 billion fake cigarettes consumed in the country alone.

    It is crucial to protect consumers against counterfeits and that law enforcement, governments and trademark owners come together as one to address and eradicate illicit trade.

    Alvise Giustiniani, vice president of illicit trade prevention, PMI

    “It is crucial to protect consumers against counterfeits and that law enforcement, governments and trademark owners such as ourselves in the private sectors come together as one to address and eradicate illicit trade in Europe and beyond,” said Alvise Giustiniani, vice president of illicit trade prevention at PMI, in a statement. “Eliminating illicit trade is particularly important within the context of PMI’s transformation toward a smoke-free future, and we need to continue working in partnerships to address any potential illicit trade threats, including in our novel products. Compliance to the law and effective enforcement against criminals profiting from illicit trade is an absolute must.”

    Interviews with law enforcement, conducted by KPMG as part of the study, indicate that organized criminal groups continued to move their operations inside the EU borders as a large proportion of illicit whites and counterfeit cigarettes are also believed to be manufactured in illegal factories within the EU. This is further supported by the increasing number of illegal cigarette factory raids in multiple European countries.