Tobacco store arson attacks shine spotlight on ‘lucrative’ illicit tobacco industry

A spate of tobacco store firebombings has shone a spotlight on the industry’s infiltration by organised crime groups.

Carried out by low-level youth foot soldiers, more than two dozen attacks on tobacco stores across Victoria since March have revealed an ongoing turf war between rival syndicates.

But while the string of attacks in Victoria has generated headlines about the “utterly reckless” acts, investigators say similar firebombings and violence are being seen across the country.

In response, Victoria Police established the Luna Taskforce in October, drawing in expertise from across state and federal agencies, hoping to end the wave of attacks.

“Let me be clear and make no mistake … these criminal syndicates have the complete attention of Victoria Police and our partner agencies,” Detective Superintendent Jason Kelly, the head of the Luna Taskforce, says.

“Two syndicates, we believe, are now in conflict here in Victoria but also more broadly it’s being seen across Australia.

“I suspect this has been going on for a number of years.”

Police believe the arson attacks are a combination of rival groups attacking each other and syndicates sending a message to tobacco stores that have refused to stock their products.

“This conflict includes both the physical placement of illicit tobacco into stores … as well as demands for stores to sell the syndicates’ illicit tobacco products and pay a tax, or in other words an extortion, on a weekly basis,” Detective Superintendent Kelly said.

The syndicates, believed to be personnel from Middle Eastern organised crime groups and outlaw motorcycle gangs, are fighting over control of the sector’s massive profits.

According to the latest report released by the Australian Border Force (ABF), surging demand has led to record seizures of illicit tobacco in recent years.

In the last financial year the ABF seized more than 2000 tonnes of tobacco for the first time, a jump from 1600 tonnes the previous year.

This was almost equivalent to the quantities seized in the three years before that combined.

ABF Commander Clinton Sims says the issue has reached “record levels” with tens of millions of individual cigarettes detected in Victoria each week.

“In the last financial year we made 120,000 border detections in relation to illicit tobacco, seizing in excess of 1.7 billion cigarettes and more than 870 tonnes of loose-leaf tobacco,” he said.

“That’s a tax gap of $3.4bn … it leaves a very lucrative margin for organised crime to pick up.”

With one of the highest rates of national tobacco-specific tax in the world, Australia is a highly-profitable market for illegal tobacco.

Last year, the Australian Taxation Office estimated the market share of illicit tobacco had doubled to more than 10 per cent as increases in tobacco excise were implemented.

Packets of illegal cigarettes are selling for as little as $15 to $20, while legitimate packets can cost upwards of $40.

According to the Australian Criminal Intelligence Commission, this has created a market where only one in 30 containers of illicit tobacco needs to go undetected for the operation to remain profitable.

$5bn budget loss from illicit tobacco sales

With lower criminal penalties than illicit drugs, the risk-reward pay-off is “a lot more favourable” to organised crime groups, the Commission said earlier this year.

RMIT University associate lecturer and criminal justice researcher Jarryd Bartle believes many smokers are feeling the financial pressure of the cost of legal tobacco, creating an opening in the market for organised crime.

“As sophisticated as organised criminal networks are, their motivations are rather straightforward – to profit,” he said.

“Around 1 in 10 Australians are daily smokers, meaning you’ve got 2.5 million potential customers for your product.

“Based on the latest data, around 30 per cent of current smokers do not plan on quitting. This group is what’s fuelling demand of the illicit tobacco market.”

Mr Bartle said it was worth emphasising that the global market for illicit tobacco was on the decline, but record seizures “usually indicate” record level of demand.

“The relationship between tobacco taxation and the rise of illicit tobacco markets is complex,” he said.

“Just like all other attempts at drug prohibition, there will always be a proportion of people who will continue to use a prohibited product.”

Detective Superintendent Kelly said Luna Taskforce investigators believed many of Victoria’s tobacco stores were controlled or influenced by crime syndicates.

“We understand not every tobacco store is involved in the illicit market, however, what I can say is out of the 800-plus tobacco stores in Victoria we suspect … a large portion of the tobacco industry has been infiltrated,” he said.

“We’re seeing organised crime taking over stores and running them as if they’re legitimate,” he said.

Legitimate businesses are also being extorted and forced to sell the syndicate’s products, handing over a share of the profits.

Commander Sims said the ABF had noted a shift in the strategies of crime groups, with a reduction in the number of individual seizures, but most shipments found in “large volume sea containers”.

He said the three brands seen most frequently in seizures were Manchester, Double Happiness and Marlboro.

Most of the cigarettes are either counterfeits of regular brands made specifically for the illicit market or legitimate products cheaply purchased in countries with lower tax systems.

The majority of seizures in Australia are originating in the United Arab Emirates, China and Southeast Asia.

If there’s one message law enforcement want to pass to tobacco consumers in Australia, it is to “think twice” before purchasing illicit products.

“It’s important that those purchasing illicit tobacco understand that they are directly funding, or in other words putting money into the pockets, of organised crime and that the sale of organised tobacco funds other criminality such as the importation of illicit drugs and firearms,” Detective Superintendent Kelly says.

Since October, Luka Taskforce detectives have executed 65 warrants and arrested 18 people.

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