Andrew Kerr explains on page 4 of the FCA Bulletin how organized crime and terrorist groups use tobacco smuggling in various parts of the world.
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This article was published in a pdf format within the FCA Bulletin 74, page 4.
TOBACCO AND TERROR, by Andrew Kerr
(published in FCA Bulletin 74, page 4)
International crime syndicates are raising millions of Australian dollars from the sale of illegally imported tobacco in Australia, according to an article published in The Australian, on 11 March 2008.
The proceeds are being sent to groups linked to terrorists in the Middle East.
Richard Janeczko, national manager for investigations with Australian Customs, told The Australian that the illegal tobacco industry is emerging as a potentially lucrative source of terror financing, with Middle East and Vietnamese crime groups being actively involved in importing tobacco.
He told the newspaper that based on information from law enforcement agencies abroad, “It is believed the Lebanese groups responsible for tobacco importation and distribution in Australia have links to terror groups back in the Middle East.”
The illegal tobacco industry is beginning to rival illicit drugs as a source of revenue and is increasingly dominated by the same players, Janeczko said. “It is a big issue and I think people have underestimated the degree of criminality involved.”
He estimated that the sums raised were probably in the millions of Australian dollars, although it was impossible to know precisely. Most of the money is sent to groups through intermediaries and in small quantities, well below the reporting threshold.
Last year’s seizures of around 95 million cigarettes and 236 tonnes of tobacco meant a loss in excise duty estimated at Aus$100 million, according to Janeczko.
Most of the tobacco was smuggled in shipping containers from Vietnam, China, the Philippines and Indonesia.
EARLIER EVIDENCE OF THE TOBACCO-TERROR LINK
The Australian article adds to concerns about profits from illicit tobacco being a source of funding for terrorist activities.
Being legally traded and widely smuggled, tobacco is an ideal medium for criminal groups to penetrate and exploit the legal trade system with little risk of detection and minimal legal penalties if caught.
The current absence of an international legal regime to clamp down on the illegal tobacco trade is akin to laying out the welcome mat to organised criminal networks and terrorist groups which have become highly sophisticated and fluid in their operations.
A report published in November 2003 by the General Accounting Office (GAO) of the US Congress (GAO-04-163) emphasised contraband tobacco alongside counterfeit goods and illicit drugs as a highly profitable and important source of terrorist funding.
One example cited is of Hezbollah generating an estimated profit of US$1.5 million between 1996 and 2000 by buying cigarettes in North Carolina, a low-tax US state, for resale in Michigan, a high-tax state.
Putting this into context, the cost of the 9/11 attacks on the World Trade Centre may have been between $300,000 and $500,000 says the GAO report. Officials from the Bureau for Alcohol, Tobacco and Firearms told the GAO that Al Qaeda and Hamas also earned assets from selling contraband tobacco or counterfeit cigarette tax stamps.
Writing in The Police Chief (the official publication of the International Association of Chiefs of Police), in February 2004, William Billingslea, a senior intelligence analyst with the US Bureau of Alcohol, Tobacco, Firearms, and Explosives opened by stating, “Illicit cigarette trafficking now rivals drug trafficking as the method of choice to fill the bank accounts of terrorists.”
Investigators discovered traffickers in the United States and the United Kingdom had provided material support to Hezbollah and the Real IRA (RIRA), among other terrorist groups.
Law enforcement research indicated that groups tied to the Kurdish Workers Party (PKK), and Islamic Jihad (both Egyptian and Palestinian) have been involved in illicit trafficking of cigarettes.
Billingslea says that terrorist groups work with organised crime groups as well as with international drug trafficking organisations. Hezbollah and Hamas members reportedly established front companies and legitimate businesses in the cigarette trade in Central and South America.
The IRA was one of the first terrorist groups in Europe to begin using cigarettes to fund their activities, according to Billingslea.
He refers to estimates that illicit cigarette trafficking by the three primary factions of the IRA (the Provisional IRA, Real IRA, and the Continuity IRA) yielded more than $100 million in the five years up to 2004.
In addition, the Loyalist Volunteer Force and the Ulster Volunteer Force were estimated to have raised, respectively, $3.3 million and $2.5 million annually.
In eastern Turkey, a raid on a PKK safe house turned up a printing press for producing counterfeit tax stamps rather than arms and ammunition. The PKK has also made large sums of money by selling smuggled US cigarettes into Iraq across the Turkish border.
Billingslea says that the “new face of terrorism” is goal-oriented, integrating perfectly legal enterprises with criminal or illicit enterprises and appearing more like an organised crime group that also conducts terrorist acts, rather than a terrorist group that commits crime.
Beyond traditional ways of raising funds, terrorist groups are also starting to exploit the freedom of cyberspace, and gaps in legislation, to get involved in internet sales of cigarettes.
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