Underworld kingpin Kazem “Kaz” Hamad is extorting nearly $1 million a month from the state’s illicit tobacco shops after waging a nearly two-year campaign of firebombings and shootings in a bid to take control of the black-market cigarette trade.
Police and underworld sources estimate Hamad’s criminal syndicate now controls several hundred underground tobacco retailers, representing about a quarter of the estimated 1300 legitimate and black-market shops selling cigarettes across the state.
Underworld kingpin Kazem “Kaz” Hamad (inset) is extorting nearly $1 million a month from the state’s illicit tobacco shops.Credit: Matt Davidson
Each shop in Hamad’s turf is forced to pay $2000 a month in cash, a kind of ‘tax’ to be allowed to operate and sell the cheap illicit cigarettes being smuggled in by the gang. Those who refuse are threatened, and if they fail to fall into line, their shops may be firebombed.
“It’s huge money Kaz is pulling in every week. The business is so big it’s become a monster,” an underworld source said.
Hamad is suspected of launching the ‘tobacco war’ in early 2023 after several rival criminal gangs attempted to set up a ‘commission’ that would monopolise the illegal trade and keep new players from entering the lucrative black market.
The 40-year-old was deported to his native Iraq in mid-2023 after spending eight years in jail for drug trafficking. Hamad has emerged as one of the most powerful and dangerous players in Melbourne’s underworld on the back of a wave of profits from illicit tobacco and drugs.
There have been more than 130 firebombings and several shootings, including two murders, linked to the rivalry between Hamad and several other organised crime groups.
But the ‘tax’ is just a drop in the bucket compared to the enormous profits being reaped by the syndicates that are supplying and selling illicit cigarettes.
Across the city, the most common black-market brand is selling for $18 to $25 for a pack of 20. Legitimate cigarette brands cost $38 to $50 a pack due to high federal taxes.
The most common are Dubai-based brand Manchester and Chinese-made Double Happiness. Neither can be lawfully imported or sold in Australia.
Police sources say the syndicates have set a ‘floor price’ per pack for illicit retailers to prevent undercutting and preserve profits. The price is set inside encrypted chat groups and must be obeyed.
It costs the syndicates about $2 a pack to buy in Dubai, with the sale price in Melbourne almost entirely pure profit.
These shops have also been making huge returns on illicit vapes, which were banned from sale earlier this year, except through pharmacies. A vape that costs $2 for illicit retailers can be sold under the counter for $40 to $50 to customers.
The illicit tobacco market is now worth about $6.27 billion a year, up more than 530 per cent since 2017, according to the Australian Taxation Office.
Despite the violence, several hundred tobacco shops are believed to have opened in the past two years – many of which are little more than fly-by-night operations designed to shift huge volumes of illicit cigarettes.
In some cases, operators have tried to disguise their purpose by tricking out shopfronts as gift or toy stores. Several months ago one opened as a sex shop where illicit cigarettes are being rung up as “condoms”.
An underworld source said any business selling black-market tobacco was considered “fair game” for extortion by the syndicates.
“These guys are not regular people, regular business owners. They’re choosing to make a quick dollar by selling an illegal product they buy from criminals. They’re already involved, and they’re gonna have to pay someone,” they said.
Other shops are owned and operated directly by the syndicates, and their arrival in an area has led to attacks to force competitors to shut down.
Police sources say it is rare for legitimate tobacco retailers to be stood over by the syndicates.
In November, the state government passed legislation to create a tobacco licensing regime, but it could be more than a year before the system is fully operational.
Meanwhile, the sales of the illicit product have become so brazen that The Age has found packs of Manchester and banned vapes in shops located near state parliament and the headquarters of the Australian Border Force, Victoria Police, the Australian Federal Police and the Department of Justice and Community Safety.
Dr John Coyne, head of strategic policing and law enforcement at the Australian Strategic Policy Institute, said the high taxes on tobacco were “legitimising criminal markets” and empowering crime syndicates.
“We’re seeing a dislodgement of smokers away from the legitimate market. So we’re actually pushing people into the illegitimate market. It’s seen as a victimless crime,” he said.
“One of the barriers to entry to being a wholesale illicit drug importer is access to capital. All of a sudden, there’s people who’ve got a whole pile of cash and they can’t necessarily launder it. It just creates these criminal ripples through the market.”
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