Wednesday, July 1, 2009

Cigarette and Tobacco Smuggling Finances Terrorism Worldwide

Via -

A new report from the Center for Public Integrity, an investigative journalism outfit, details how terrorists and insurgencies the world over have smuggled cigarettes to finance their organizations and their missions.

CPI's investigation concentrates on seven groups which range from Marxist insurgencies to jihadist terrorists and from republican terrorists to profit-driven Congolese rebels.

After crackdowns on fundraising following the 9/11 attacks, terrorist groups worldwide have increasingly turned to criminal rackets, officials say. And smuggling cigarettes — either untaxed or counterfeit — has proved a particularly lucrative, low-risk way to fund operations.

Hezbollah, the Taliban, and al-Qaeda are involved in smuggling cigarettes; so are the Real Irish Republican Army (Real IRA) and the Kurdistan Workers’ Party (PKK). Terrorist financing through cigarette smuggling is “huge,” says Louise Shelley, a transnational crime expert at George Mason University and an adviser to the World Economic Forum on illicit trade. “Worldwide — it’s no exaggeration… No one thinks cigarette smuggling is too serious, so law enforcement doesn’t spend resources to go after it.”

“Cigarettes are easy to smuggle, easy to buy, and they have a pretty good return on the investment,” adds David Cid, a former FBI counterterrorism agent and deputy director of the Memorial Institute for the Prevention of Terrorism in Oklahoma City. “Drug dogs don’t alert on your car if it’s full of Camels.” And, he notes, “The other advantage is you don’t go to jail for 50 years.”

Trafficking stolen and counterfeit cigarettes has unwittingly become a lucrative venture for terrorist and militant organizations because of the hefty taxation on tobacco,
such as in the state of New York. According to CPI, it costs $100,000 to produce 10 million cigarettes in China, which can reap revenues as high as $2 million in the United States. When you consider the relative cheapness of terrorist operations, 9-11 only cost Al Qaeda about $500,000 to pull off, profit margins like these are enormously attractive to terrorists and militant groups.

But stopping the nexus between cigarette smuggling and terrorist financing is possible, reports CPI.

“You need to ensure that the products are being sold through legitimate channels through legitimate distributors — that they’re not committing willful blindness,” Larry Johnson, a terrorism and criminal finance investigator for BERG Associates, told CPI. “The contraband is fairly easy to deal with because it’s in the power of the distributors and producers to control the process. This is actually one of those few problems that is fixable.”

For more on the report and the relationship between terrorism financing and tobacco smuggling, see this article from the Agence France Presse.

For a short film on how taxes created an explosion in black market cigarettes in New York, watch the below from the CPI.

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