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Japan Tobacco International (JTI) published a report, independently verified by Intrinsic Insight Ltd., entitled “The Gathering Storm”, on how the illegal tobacco trade operates during the Covid-19 global pandemic and how they prepare to reap the rewards in the economic aftermath that will follow.
Law enforcement agencies around the world welcomed the report, which is based on 63 field studies, conducted across 50 countries including Russia, Canada, Malaysia, and the Philippines where tobacco smugglers currently have a strong presence. JTI intelligence found that the global public health crisis and financial downturn created the conditions for a perfect storm where organized criminal groups will further exploit public demand for cheap goods, and capitalize on dwindling buying power in the impending global recession, particularly in countries with high tax regimes.
The report provides a global picture of four emerging trends, consistent with Euromonitor and Europol intelligence:
1. Evidence shows that criminal groups are biding their time in readiness for an anticipated boom in illegal tobacco sales;
2. After initial disruption to the illegal supply chain in Western European markets, organized criminals quickly exploited the inconsistent approach to travel and lockdown rules and found alternative routes from production to distribution, leading to significant seizures of illegal factories or their components in countries such as the Czech Republic, Greece, Ireland, Belgium, and Spain;
3. Changed law enforcement priorities and border restrictions have been mixed in limiting supply and the availability of illegal tobacco: whilst governments and authorities in Far East Asia were quicker to impose restrictions, those in the West failed to act with such precision;
4. Technology has been increasingly deployed throughout the pandemic to enable sales of illegal tobacco to continue where strict lockdowns were put in place by governments throughout Eastern Europe, the Middle East, Africa and Asia Pacific, where WhatsApp and Facebook have provided quick and easy methods of communication between the consumer and criminals. Furthermore, the International Chamber of Commerce predicts that global counterfeit trade will reach $4 trillion by 2022, primarily fueled by e-commerce.
According to the World Bank, the global trade in illegal tobacco is already worth an estimated $40-50 billion each year to the criminal groups who produce, manufacture, smuggle, distribute and sell tobacco products on which there is no tax duty paid. The loss of revenue to law-abiding retailers is also significantly felt, as is the impact on consumers who are lured into buying sub-standard products.
"To some consumers illegal tobacco is a victimless crime, which is why we need to inform them not only of the hidden dangers they are consuming, but the wider social consequences of buying from criminal groups who also traffic people and arms," said Ian Monteith, JTI's global anti illicit trade director. "Our report, shared with over 160 Law Enforcement Agencies across the world, is the first of its kind for intelligence gathering during the pandemic, and we hope it will serve as a warning to governments of 'The Gathering Storm' in the black market."
JTI set out its plan in the report to tackle 'The Gathering Storm', calling for:
- Improved enforcement at national borders;
- Improved intelligence sharing through public and private partnerships between all industries and law enforcement agencies;
- Exploration of fiscal measures that will allow consumer confidence to grow and avoid the temptation to spend on illegal products;
- Co-ordinated global campaigns to inform consumers through increased awareness about the dangers of illegal tobacco and the consequences that arise through its trade.
A copy of the report can be found on jti.com (https://www.jti.com/sites/default/files/global-files/documents/download-pdf/the-gathering-storm.pdf)