Malaysia: Illicit Cigarette Boom Rakes in Billions for Organised Crime Syndicates

Source from:  The Malaysian Insider 03/06/2014

The lack of control in the cigarette component supply chain has contributed to the sale of illicit cigarettes by organised crime syndicates who are raking in billions in illegal profits, said Interpol, shedding light into an illicit trade where Malaysia is ranked no. 2 in the world according to a Goldman and Sachs study.

Secretary-general Ronald K. Noble said that acetate tow, a core component in cigarette filters, is being exported in high volumes to cigarette manufacturers, "well above" the requirements for legitimate production.

"And in some cases, significantly higher than government mandated levels," he said in a statement today.

He said that in one country, figures showed that there was a surplus of 27,000 tons of the component in one year, which was enough to make 214 billion cigarettes, bringing in billions to the black market.

"The figures speak for themselves. Legitimately produced acetate tow is being oversupplied and used in the illicit trade in tobacco which generates millions in illegal profits for organised crime," he said.

Noble said several measures should be put in place to deter the flow of acetate tow to illegal manufacturers. One of them is for governments to impose severe criminal sanctions of civil penalties on producers who knowingly sell to manufacturers producing illicit cigarettes, or who remain wilfully ignorant to the final distribution points of their products.

However, he said that the indifference displayed by the acetate industry players have shown that they are "not interested" in solving the issue.

"Having met with the Global Acetate Manufacturers Association on two occasions, I am persuaded that their industry is neither interested in taking active measures to find out how their product ends up in the hands of organized criminals, nor in any meaningful collaboration with law enforcement to combat this problem," Noble added.

This means governments have to take the initiative to block the sale of illicit cigarettes by tightening their laws in supply of cigarette components.

He also said that international protocols concerning tobacco-related products are being implemented but called on governments to start taking control of the supply chains of the components.

"Action is needed now if we are to avoid letting society pay the price for a lack of control by acetate tow producers over the end distribution points for their products."

Last year's Goldman Sachs Global Investment Research Report said that Malaysia was the second highest in the world in the illicit cigarette trade. Reports from tobacco companies also showed that 34.5% of all cigarettes or 7.9 billion sticks sold were contraband.

According to the British American Tobacco Malaysia's website, approximately one out of every three packs of cigarettes sold in Malaysia is smuggled, for which taxes or duties are evaded, amounting to RM2 billion in losses annually.

The Customs Department has seized more than 1.6 billion sticks of illegal cigarettes worth more than RM134mil since 2011.

Amendments to the Control of Tobacco Product Regulations 2004, which were gazetted last June, stipulate that it is illegal to sell cigarettes in packets that do not carry government health warnings and pictures, and it is illegal to purchase them.

Malaysians caught purchasing illicit cigarettes may face a maximum fine of RM10,000, jail of up to two  years, or both. – March 6, 2014. Enditem