ABF aims sights at illegal tobacco trade, as smuggled cigarettes sold in Adelaide
Organised crime gangs are believed to be profiting from smuggled cigarettes being sold in nondescript corner stores across suburban Adelaide – while law-abiding retailers live quietly in fear of retribution.
Crime in Focus
Don't miss out on the headlines from Crime in Focus. Followed categories will be added to My News.
Smuggled tobacco products are being sold illegally on the streets of Adelaide, with organised crime gangs believed to be raking in profits generated from the “low risk, high reward” industry.
The black market trade is undercutting lawful cigarette retailers, who choose to stay silent out of fear of retribution from criminals.
Commonly smuggled cigarette brands include Marlboro and Manchester, which gangs purchase overseas for about $5 per 20-pack before they are brought into the country tax-free and quietly sold on the streets for large profits.
A packet of 20 Marlboro Gold cigarettes would usually fetch more than $30 when sold lawfully in Australia. Manchester is a brand manufactured overseas and is one of the most common brands found on the black market.
One Blair Athol store sells smuggled cigarettes of both brands for $24 a pack.
A special task force set up by the Australian Border Force is working to cripple the gangs by seizing staggering amounts of tobacco at our international borders each year.
In the last 12 months alone, the ABF made 157,500 detections of illicit tobacco nationwide, seizing more than 421 million cigarettes and 175 tonnes of loose-leaf tobacco – representing at least $608 million in evaded tax.
Included in those figures is a massive discovery made on a ship at the Port Adelaide harbour on April 14, which led to the arrest of a South Australian man.
ABF officers found more than 73kg of chewing tobacco and 587kg of loose-leaf tobacco hidden within a container from India.
Authorities then raided two homes and three businesses across Adelaide, seizing a further 300kg of tobacco and more than half-a-million dollars.
The maximum penalty for importing illegal tobacco with intent to defraud the government is 10 years imprisonment.
Experts say once tobacco slips through the borders and onto the streets, enforcement is rare.
In early July, however, SA Police officers made a surprising discovery when conducting COVID-19 compliance checks at a Pennington gift house on Addison Rd.
They walked in on a staff member selling illegal cigarettes to a customer, leading them to find 10,900 sticks of what was believed to be “chop-chop” – a street name for unpackaged tobacco that is rolled into empty cigarette tubes.
Officers also seized a plastic bag full of loose leaves.
Chop-chop, which accounts for nearly half of the illegal market, can be grown illegally in Australia or smuggled from Asia and the Middle East. It is often improperly dried and can contain mould.
A 24-year-old man from Fulham Gardens who worked at the gift shop was issued a $1620 fine.
A total of 23 reports relating to illegal tobacco were made to Crime Stoppers SA in the last year.
ABF’s Illicit Tobacco Taskforce, formed in 2018, is working to stem the flow of tobacco flooding the borders.
Acting superintendent Marnie Kennealy said the team was developed to dismantle organised crime gangs that smuggle the products from foreign countries.
The ITTF combines investigative and intelligence capabilities of not only the ABF, but the Department of Home Affairs, Australian Taxation Office (ATO), Australian Criminal Intelligence Commission, Australian Transaction Reports and Analysis Centre and the Director of Public Prosecutions.
“The illicit tobacco trade is seen by criminals, including outlaw motorcycle gangs, as an attractive market with a perceived low-risk nature,” Ms Kennealy said.
“Organised crime gangs are attracted to the potential profits that can be made from the illicit tobacco trade.”
Ms Kennealy said the gangs use profits from illicit tobacco to fund other criminal activity and prop up the “black economy”.
Australia’s appetite for cheap smokes is increasing, with a KPMG report revealing 20.7 per cent of all tobacco consumed in 2019 was from the black market.
It is a sharp increase from 14 per cent in 2018.
The KPMG report also shows a decline in legal tobacco consumption, which was offset by illicit smokes, meaning there was actually a slight overall increase in the amount consumed last year.
The figures also reveal Adelaide is one of the leading cities for non-domestic cigarette consumption – increasing from just 7.4 per cent of all tobacco consumed in 2017 to 16.8 per cent in 2020.
Non-domestic cigarettes are defined as smokes that are not Australian and have no local health warnings. They are often not in English and many of the brands cannot be found locally.
In 2018, Adelaide had the highest consumption rate of such cigarettes in the country.
Ms Kennealy warned: “Australians who buy illicit tobacco should be aware that the proceeds of these sales are supporting a market dominated by organised crime gangs that use the profits from illicit tobacco to fund other illegal activities”.
“In some instances, funds from the illicit tobacco trade are laundered offshore that may be supporting overseas criminal networks.”
Ms Kennealy said the trade is not a “victimless” crime.
“It deprives the community of legitimate Government revenue which would otherwise fund essential community services including the delivery of education and health programs.”
Head of Corporate and Government Affairs at British American Tobacco Australia, Josh Fett, said once tobacco makes it into the mainland, police enforcement is almost non-existent.
“Unfortunately, the majority of illegal tobacco either goes undetected at the border or is grown locally,” he said.
“Once it makes its way to stores, enforcement is not a priority (and) police don’t have the powers or penalties to shut these stores down.”
Mr Fett used the Pennington gift shop raid as an example, saying: “The store owner was fined $1620 for selling tobacco without a licence”.
“That’s no disincentive for serious organised criminals and just doesn’t send the message that this is a serious offence.”
Mr Fett said he is aware of several law-abiding retailers who struggle to compete with crime syndicates but are too scared to speak publicly about the issue.
He also said yearly tax hikes on tobacco are only accelerating the problem.
The current Australian tax rate is $0.95 per cigarette, or $1309.85 per kilogram. Rates will increase again by 12.5 per cent in September.
Ms Kennealy believes the high taxes and the black market are not linked.
“There’s a market there whether or not the increases are regular and ongoing or whether they’re not,” she said.
Former federal police officer Rohan Pike, who is credited with establishing the precursor to the ITTF, believes the main tobacco crime gangs are based in Victoria.
“New organised crime gangs realise what’s the point of getting caught for drugs and going to jail when you can get just as much money out of tobacco?” he said.
Mr Pike now provides illicit trade advice to the Australian Retailer’s Association.
Much of the product would be driven across the border into SA prior to coronavirus blockages, Mr Pike believes.
An ongoing government inquiry, which has so far spanned across three different federal parliaments, recently heard that established crime groups are diversifying their commodities to include illicit tobacco, due to its “low risk/high reward” nature.
“New organised crime groups are emerging that purely focus on illicit tobacco importation and distribution”, one submission by the ABF stated.
Mr Pike said the criminal networks establish shops across the country and “put their own people in it that they trust and away they go”.
“You can tell (the shops) from a mile away, because no one would be buying any of the rubbish that they have on display and then there’s a procession of people coming in and out with paper bags or black plastic bags,” he said.
“Now the tax rate has grown so much, everyone is attracted to it because there’s a high profit and low risk.”
Ms Kennealy said the Australian government is working to strengthen laws around illegal tobacco in an effort to deter opportunistic criminals.