Federal Police say illegal tobacco funds terrorism

Illegal tobacco comprises anywhere from five to 17 per cent of the total retail market. Source: ABC
Illegal tobacco comprises anywhere from five to 17 per cent of the total retail market. Source: ABC

Revelations that the illicit tobacco industry in Australia may be helping to fund international terrorist networks have been met with support from the P&C sector, with calls to the Australian government to rethink legislation and taxation on cigarettes.

Australian Federal Police assistant commissioner Wayne Buchhorn told the ABC yesterday that he had “significant” concerns that the proceeds from the illegal tobacco trade in Australia was being funneled to extremist groups in the Middle East.

A staunch campaigner against counterfeit and other illicit tobacco products, Australasian Association of Convenience Stores CEO Jeff Rogut said that the concerns raised by Buchhorn meant a new regulatory approach to legal tobacco was required to combat smuggling and support law enforcement.

“The illicit trade of tobacco has an enormous impact on the small businesses in Australia who responsibly retail legal tobacco products,” he said.

“The high profile seizures of contraband tobacco at our borders, links to criminal gangs and even terrorism highlight the enormity of the illicit tobacco issue.

“The regulatory environment for legal tobacco in Australia has seen us become one of the most lucrative markets for illicit tobacco in the world.

“The financial consequences to small businesses are extreme but it’s the many unintended or unforeseen impacts that are equally as troubling, such as the increase in armed robberies, higher insurance costs and additional security needs – all burdens that are again borne by retailers.”

A survey conducted by AACS in 2016 showed that 22 per cent of Australian smokers had been offered illegal or illicit tobacco products. Reports vary on the degree to which illicit tobacco comprises the Australian market, with figures quoted from 5-17 per cent of overall sales.

Mr Rogut said that excise hikes on legal tobacco “played directly into the hands of these gangs” and made the roles of the relevant officials more difficult.

An anti-counterfeit initiative recently launched by the Australian Retailers Association has sought to mobilise businesses concerned about illicit trade, and encourage Government to increase efforts in cracking down on illicit tobacco traders and protect small business.

The initiative would seek to play a similar role to the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy (BASCAP) initiative in seeking to unite business groups and associations and generate real change.

ARA executive director Russell Zimmerman said that counterfeit tobacco products would come under the remit of the initiative, which had a focus on many product types, including the widescale bootlegging of brand name fashion products.

“The anti counterfeiting initiative is a campaign…against all types of counterfeiting found in retail, including but not limited to, bootleg handbags from high end fashion labels, snack foods, footwear and all areas of counterfeiting including counterfeit tobacco products,” he said.

Mr Zimmerman questioned the success of higher excise on cigarettes, and suggested there was a level of balance required to prevent cigarettes entering higher price ranges.

“With the higher prices on cigarettes thanks to tax, this pushes prices towards upwards to the more expensive price range of illicit drugs, and does not stop people from either starting or continuing to smoke,” he said.

“The ARA view is that we do not believe the taxes serve to prevent new smokers from entering the market.

“Young people start smoking due to pressures other than pricing, usually peer pressure, and the high prices do not deter young people from finding the money, (perhaps by pooling) to buy and share a packet of cigarettes.

“We all know that tobacco is not healthy for people however there are no controls around illicit tobacco, and without any controls will be of even more concern on what these products may contain.

AACS CEO Jeff Rogut said the illicit trade was affecting the profits of many businesses, small and large.

“It can also mean responsible operators are liable for counterfeit products that manage to infiltrate the supply chain,” Mr Rogut said.

“AACS has zero tolerance for any person or business which engages in illicit trade and supports any initiative aimed at deterring counterfeiting and penalising criminals involved in black market operations,” he said.

Tobacco farming in Australia, previously a source of the illicit “chop-chop” loose leaf rolling tobacco, ended in 2006 after Philip Morris and British American Tobacco Australasia paid compensation to growers to source their tobacco overseas.

C&I Week contacted UNSW’s Drug and Alcohol Research Centre for comment.

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