Tackling illegal trade is a top priority for us. Not only does it harm legitimate manufacturers, farmers, and taxpayers, it also affects our business and reputation. Our Anti-Illicit Trade (AIT) team is recognized as the industry leader in combating this problem. The team is made up of experienced professionals with years of service within law enforcement and governments across the globe. This team focuses on the parts of our business that are most impacted by illegal tobacco.
Tackling illegal trade
Annual consumption of illicit tobacco is estimated to exceed 10% of all cigarettes sold globally (excluding China), with an approximate 35 billion U.S. Dollars in global tax revenue lost each year. This illegal trade fuels human trafficking, organized crime, and terror groups, and undermines legitimate tobacco businesses. It also causes harm to consumers, as uncontrolled products circumvent regulations and quality controls.
Our AIT team's role is to:
- Combat the diversion of genuine JT Group products into the illegal supply chain;
- Fight the counterfeiting of JT Group brands, including e-cigarettes; and
- Educate stakeholders about the proliferation of illicit whites
(cigarettes manufactured for the sole purpose of being smuggled and sold in another market).
An unlawful value chain from manufacturing to distribution
The illegal tobacco trade is big business, aggressively protected by organized gangs. This ever-evolving industry covers an unlawful value chain that reaches from the streets to internet forums, from factories to entire geographic zones, spanning bulk tobacco leaf to finished smuggled goods, as we explain below.
From loose tobacco on the streets to unauthorized tobacco factories
Illegal tobacco is not limited to finished goods: there is a growing problem of tobacco leaf or semi-processed tobacco being sold on streets across the globe. JTI combats this illegal bulk tobacco trade by providing law enforcement with the latest trends and locations, thereby allowing the authorities to prevent the distribution of illegal bulk tobacco. Read the case study on how we helped to seize bulk illegal leaf in Serbia.
AIT supports law enforcement agencies in shutting down illegal tobacco factories and warehouses. When these locations are identified, JTI provides a forensic analysis of illegal production machinery, packaging, and cigarettes. If counterfeit JT Group brands are present, the team works with JTI’s intellectual property team to initiate legal action for trademark infringement. In 2017, JTI provided intelligence to local law enforcement teams which resulted in the following:
- > 20 illegal factories closed down
- > 23.3 million counterfeit JTI cigarettes seized
- > 298 tons of tobacco seized
- > 210 arrests
Illegal manufacturing in parts of Europe to illegal trading in FREE-TRADE zones
Historically, counterfeit JT Group brands were manufactured in Asia. However, there is a growing trend for illegal and counterfeit products to be manufactured within the European Union. Products can be transported across this region with no customs controls, thereby reducing the risk of seizures. Currently, Poland is being targeted as a major location for illegal manufacturing of products.
Elsewhere, Free-Trade Zones, which are special geographic regions exempt from traditional customs authorities, are being exploited by criminal gangs to manufacture and transport illegal goods, including tobacco products. The Organization for Economic and Cooperative Development is strengthening its focus on the illegal trade in these areas and is working in partnership with AIT personnel. One proposal is to champion Free-Trade Zones that prevent the storage or transportation of illegal products, and that are approved through a positive certification scheme.
Spotting unlawful retailing in small shops stamping out illegal sales online.
We are stamping out the prevalence of illegal products in small retail shops. When local enforcement agencies prosecute owners of retail premises for selling illegal cigarettes, AIT personnel provide evidential statements regarding counterfeit JTI brands. In the UK, 505 witness statements were prepared in 2017.
In 2015, our AIT team identified an increasing amount of counterfeit JTI products being sold online, particularly on social media platforms. A pilot project was set up in the UK to address this, using special software that can identify illegal sales.
- > To date, just under 13,000 links advertising illegal JTI products were removed within 24 hours. This represents an estimated 1.6 million U.S. dollars worth of JTI products advertised at any one time.
- > Enhanced software was introduced in October 2017, with impressive results. In September, 444 social media posts were removed, with a JTI product value estimated to be 68 million U.S. dollars; in October, 2,483 posts were removed, with an estimated value of 170 million U.S. dollars.
- > The project has been extended to Ireland, Italy, France and Spain, and a similar project has now commenced in Russia.
Accurate information builds trust with authorities
One of the factors behind JTI’s success in tackling illegal trade is the close collaboration we enjoy with our law enforcement partners. A continual flow of quality information has established JTI as a credible and reliable source. JTI is proud to have been recognized by multiple law enforcement agencies as the industry leader in providing information on illegal tobacco to law enforcement.