Speaker 1: Kyota.
Speaker 2: I'm Chelsea Daniels and this is the Front Page, a
Speaker 2: daily podcast presented by the New Zealand Herald. The illegal
Speaker 2: tobacco trade has become a very lucrative business worldwide. In Australia,
Speaker 2: for example, illegal excise evading cigarettes now comprise half of
Speaker 2: the products sold to the country's two point seven million smokers.
Speaker 2: According to the ABC, it's thought that ten billion dollars
Speaker 2: a year in revenue there is going straight into.
Speaker 1: The pockets of organized crime.
Speaker 2: But has this trend made it to New Zealand shores
Speaker 2: and how much of a headache is it causing those
Speaker 2: protecting our borders. Today on the Front Page, Head of
Speaker 2: Fraud and Prohibition Chief Customs Officer Nigel Barnes is with
Speaker 2: us to discuss how they're cracking down on a legal tobacco.
Speaker 2: First off, Nigel, what are some key trends you've seen
Speaker 2: in illegal tobacco smuggling over the years.
Speaker 3: Well over recent years, the efforts to smuggle will listed
Speaker 3: tobacco have become more sophisticated and been of larger quantities.
Speaker 3: In particular, we're seeing that tobacco smugglers will mirror what
Speaker 3: we see drug smugglers do so they'll use similar consentent
Speaker 3: methods and similar tradecraft such as using shelf companies.
Speaker 1: Have you seen an increase recently.
Speaker 3: Yes, it's trended up with over the last few years.
Speaker 3: It does, I guess fluctuate a little bit depending on
Speaker 3: the type of illicit tobacco and the group's involved.
Speaker 4: But in the main it's traveling upwards.
Speaker 1: How much you've seeing the border.
Speaker 3: Well, an example is last October, following a referral from
Speaker 3: the Overseas Customs Administration, we see over two million cigarettes
Speaker 3: and a container from Southeast Asia and that represents roughly
Speaker 3: three million dollars worth of revenue of asion.
Speaker 1: Wow, and that's just some of the kind of volumes.
Speaker 2: Hey, what types of illegal tobacco products are most commonly
Speaker 2: intercepted and has that changed?
Speaker 3: Most commonly it'll be cigarettes, but we do have a
Speaker 3: market for chewing tobacco and also susha tobacco as well
Speaker 3: as loose tobacco.
Speaker 2: How does customs handle these seized illegal tobacco products? Like,
Speaker 2: what happens when you're court importing and then you've got
Speaker 2: what was it two million cigarettes to dispose of?
Speaker 1: What do you do with them?
Speaker 3: Well, they get disposed of safely, but basically they're dolling
Speaker 3: up at land, all right.
Speaker 2: And what happens to those court importing or a distributing
Speaker 2: it say.
Speaker 3: So, we prosecute to the full extent of the law
Speaker 3: that we can, and we don't exclusively charge for customer
Speaker 3: offenses as well. So an example of that is last
Speaker 3: year where a individual in christ Church broke into a
Speaker 3: warehouse and stole a large amount of tobacco from that
Speaker 3: warehouse that then led to a burglary investigation. The polices
Speaker 3: led that part of it, and then once it was
Speaker 3: established that this was actually a illicit tobacco manufacturing effort,
Speaker 3: Customs then charged him with the illegal manufactured, the unlawful
Speaker 3: import of the tobacco as well as the burglary. He
Speaker 3: was sentenced earlier this year two years and eight months
Speaker 3: in prison.
Speaker 2: What's the maximum penalty if I was to say, try
Speaker 2: and smuggle in.
Speaker 1: A two million cigarettes from Southeast Asia?
Speaker 3: I say so, the maximum penalty is five years imprisonment
Speaker 3: under the Customs and ext ISAAC offenses. However, you what
Speaker 3: we find is that people rarely stick to this one
Speaker 3: type of offending, so it's quite common for us to
Speaker 3: see crossover with drug offending as well as money laundering,
Speaker 3: where we identify those offenses, we charge for those.
Speaker 1: Well, what is the alternative.
Speaker 5: Do you then drop legal cigarettes back to twenty dollars
Speaker 5: in order to compete twenty dollars a pack they're currently
Speaker 5: about sixty bucks a pack to compete with the illegal tobacco.
Speaker 1: You can't.
Speaker 5: You absolutely can't not, because you can't. The smoking rates
Speaker 5: would first of all go through the roof, because if
Speaker 5: you actually look at the statistics, they've halved since the
Speaker 5: excise was first introduced. So it actually is working to
Speaker 5: do what its main purpose is, which is to cut
Speaker 5: smoking rates and therefore help the public health system obviously
Speaker 5: look after the well being of the country. But on
Speaker 5: top of that, it's second purpose is obviously to raise
Speaker 5: tax as well.
Speaker 2: Do you think that it's seen as more low risk
Speaker 2: than trying to smuggle say Class A drugs because you've
Speaker 2: got a maximum penalty of a five years imprisonment versus
Speaker 2: life imprisonment.
Speaker 3: Well, what I think motivates these criminals is actually the money.
Speaker 3: So yeah, there is a difference in the maximum penalty
Speaker 3: maximum tem of prisonment, But what really hurts these guys
Speaker 3: is when you take their money and take their assets.
Speaker 3: So where were possible we make referrals. We work quite
Speaker 3: closely with the police Asset Recovery Unit because what really
Speaker 3: hurts them is taking away there all gotten gains.
Speaker 2: Why do you think organized crime groups are becoming increasingly
Speaker 2: involved in tobacco smuggling.
Speaker 3: Well, there is a lot of money in it, there's
Speaker 3: no doubt about it. In twenty eighteen, which is a
Speaker 3: wee while ago now, we found four million dollars in
Speaker 3: cash in a storage unit and that was the proceeds
Speaker 3: of ilicit tobacco.
Speaker 1: Where are these products ending up?
Speaker 3: Well, a lot of them are retailed throughout the country.
Speaker 3: There are various ways that various outlets. I'm not just
Speaker 3: talking about dairies. It could be restaurants as well, online
Speaker 3: as well, in chat groups as well as through community organizations.
Speaker 1: It's some of the figures here.
Speaker 2: It looks like the revenue from the tobacco excise tax
Speaker 2: peaked in twenty twenty, then it's been dropping since. Does
Speaker 2: that make you believe that more smokers are in fact
Speaker 2: turning to the black market.
Speaker 3: I think it's probably fair to say that the illicit
Speaker 3: market is increasing and the smoking rate is dropping. So
Speaker 3: as the overall consumption goes down, the size of the
Speaker 3: illicit market relative to the legal market increases.
Speaker 1: How do you work with overseas agencies?
Speaker 2: Because I know that Australia's got a huge illicit tobacco problem,
Speaker 2: and as we know what happens in Ossie soon comes
Speaker 2: over the Tasman to our shores, something like I think
Speaker 2: nearly half of Australia's two points something million smokers are
Speaker 2: now smoking illegal tobacco or tobacco that hasn't been through
Speaker 2: the excise tax process.
Speaker 1: Is that alarming to you.
Speaker 3: Well, we definitely don't want to end up with a
Speaker 3: problem the scale that Australia has. There are, in fact,
Speaker 3: even more concerningly homicides and arsons attributed to the illicit
Speaker 3: tobacco problem in Australia, and we definitely don't want to
Speaker 3: see that here. We work quite closely with our partners overseas,
Speaker 3: not just the Australian Border Force, but also his Mentesces
Speaker 3: Revenue and customs in the UK well as other jurisdictions
Speaker 3: in Southeast Asia.
Speaker 2: Is Southeast Asia where we're getting most of it from.
Speaker 3: Well, the international supply chain for USIT tobacco is actually
Speaker 3: quite complex, and there's factories not just in Southeast Asia
Speaker 3: but also in the Middle East and in Eastern Europe
Speaker 3: that manufacture huge amounts of cigarettes which are destined for
Speaker 3: the illicit market, and they don't make their way directly
Speaker 3: to New Zealand or ways. They'll go through other countries
Speaker 3: and intermediary countries where their origin is concealed, and then
Speaker 3: they might go into a concealment such as construction materials
Speaker 3: and things like that. So it's not really straightforward just
Speaker 3: to say it's all coming from one part of the world,
Speaker 3: but certainly our siegere statistics would suggest that it's mostly
Speaker 3: coming from Southeast Asia.
Speaker 2: If you were to put a percentage on it, how
Speaker 2: much do you reckon customs is seized at the border
Speaker 2: and how much has slipped through the cracks?
Speaker 3: Perhaps, Well, that's a great question and I wish I
Speaker 3: had a really a really precise answer to it. It's
Speaker 3: really hard to estimate. There have been various attempts to
Speaker 3: estimate the size of the I listed market in New
Speaker 3: Zealand and the University of Auckland and University of Otago
Speaker 3: both completed studies in recent years on it, and also
Speaker 3: the tobacco industry complete studies on it as well, which
Speaker 3: they publish. The range in the size of the listed
Speaker 3: market is in these estimates is huge. The lowest one
Speaker 3: is around about six point eight percent and the highest
Speaker 3: one is around about twenty four percent.
Speaker 4: Is it somewhere in between? Probably?
Speaker 3: So I can't really I wouldn't really want to take
Speaker 3: a stab.
Speaker 6: The criminals will lose revenue, and we'd like to think
Speaker 6: that your average Australian is a law abiding citizen, and
Speaker 6: generally they were up until a few years ago, until
Speaker 6: the attacks became so extreme combined with the cost of
Speaker 6: living crisis, they just decided that enough was enough and
Speaker 6: they weren't going to pay those excessive prices. So there
Speaker 6: is a balance, There is a level where people will
Speaker 6: hopefully return to the legal product.
Speaker 2: Do you think there's a point where we can't increase
Speaker 2: the excise tax by anymore? Like looking at some figures here,
Speaker 2: the excise tax increased to one eight hundred and twelve
Speaker 2: dollars and sixty one cents per kilo, and compare that
Speaker 2: to three hundred and ninety three dollars and three cents
Speaker 2: in two thousand and nine. Now, granted the smoking rate
Speaker 2: has decreased since two thousand and nine. Don't get me wrong,
Speaker 2: but depending on the brand, that tax today may up
Speaker 2: around eighty percent of the cost of a pack of smokes.
Speaker 1: Do you reckon we've gone too far?
Speaker 3: Well, I'm not really an expert in the economy of it.
Speaker 3: There is no doubt though, that the amount of exercise
Speaker 3: is what drives the drives the profitability of the market,
Speaker 3: So it's definitely a factor. But there's much more to
Speaker 3: it than just the excise. There are elicit tobacco markets
Speaker 3: in countries with much lower excise rates than New Zealand
Speaker 3: as well.
Speaker 2: What new technologies or intelligence capabilities are customs using to
Speaker 2: tackle this? Obviously you've got at the border as well,
Speaker 2: but have you.
Speaker 1: I don't know.
Speaker 2: I'm just assuming a whole group of you guys in
Speaker 2: a room just on Facebook, marketplace searching for listings or something.
Speaker 3: Well, we take a bank for back approach to our investigations.
Speaker 3: So what we do is, rather than trying to simply
Speaker 3: suppress every instance of elicit tobacco being sold in the community,
Speaker 3: we look to target the source of it and take
Speaker 3: out the people who are profiting from the import and
Speaker 3: then the distribution of these cigarettes on a large scale.
Speaker 3: We get a lot of benefit from community reporting, so
Speaker 3: crime Stoppers and also our own Border Protect hotline. But
Speaker 3: more importantly, we have a very good relationship with industry
Speaker 3: and we encourage our industry partners as well, such stratefwards
Speaker 3: and Customs brokers to let us know when something doesn't
Speaker 3: appear right.
Speaker 2: Has the team tackling this at the border grown along
Speaker 2: with the rate of illicit tobacco so to speak, like,
Speaker 2: do you have as many boots on the ground to
Speaker 2: say to tackle this problem.
Speaker 4: Yeah.
Speaker 3: In twenty twenty two, Customs received ten point four million
Speaker 3: dollars in funding over four years, which we think we've
Speaker 3: delivered a really good return on investment with our seizure
Speaker 3: stats and our prosecutions as well as our set restraints
Speaker 3: in that short time. But what's really important, I think
Speaker 3: is that you don't outgrow a organized crime problem you
Speaker 3: think it. So our strategy is basically to make life
Speaker 3: as hard as possible for these criminals and in particular
Speaker 3: just make it not profitable for them to.
Speaker 2: Operate here And looking forward, Nigel, what further changes, whether
Speaker 2: it be legislative, operational, or technological, could improve new Zealand's
Speaker 2: ability to curb illegal tobacco.
Speaker 3: Really it comes down to I think good old fashioned
Speaker 3: investigating and also community buy in. There might be a
Speaker 3: sentiment out in the community that elicit tobacco is not
Speaker 3: actually a serious problem, and that it's great that people
Speaker 3: can get cheaper cigarettes, But what those people are playing
Speaker 3: to realize is that they themselves are actually being exploited
Speaker 3: by organized crime and there are people driving around in
Speaker 3: very flash cars that those guys.
Speaker 4: Have paid for.
Speaker 1: Thanks for joining us, Nigel.
Speaker 4: Thanks Chelsea, much appreciate it.
Speaker 2: That's it for this episode of the Front Page. You
Speaker 2: can read more about today's stories and extensive news coverage
Speaker 2: at enzidherld dot.
Speaker 1: Co dot nz.
Speaker 2: The Front Page is produced by Jane Ye and Richard.
Speaker 1: Martin, who is also our editor. I'm Chelsea Daniels.
Speaker 2: Subscribe to The Front Page on iHeartRadio or wherever you
Speaker 2: get your podcasts, and tune in tomorrow for another look
Speaker 2: behind the headlines.