By Richa Naidu, Emma Pinedo and Emilio Parodi
MADRID (Reuters) – Spanish police raided three clandestine tobacco factories earlier this year, seizing nearly 40 million euros ($44 million) worth of tobacco leaf and illicit cigarettes.
In one of them, in the northern town of Alfaro, they found 10 Ukrainian workers, including five war refugees, who had been put to work without contracts and with meager pay, it said. the police. They worked all day and lived in the factory, forbidden to leave.
The operation is one of dozens across the EU which regional law enforcement and enforcement agencies say has driven seizures of illicit cigarettes to record levels.
Criminal groups, which traditionally sourced mostly counterfeit tobacco products from outside the EU, are increasingly setting up production facilities in Western Europe to be closer to higher-priced markets, according to Reuters interviews. with half a dozen experts in the field, including law enforcement officials. , tobacco executives and industry analysts.
The trend has been accelerated by the halt in travel due to the COVID-19 pandemic, which has stifled supplies from outside the bloc, the European Anti-Fraud Office (OLAF) said. It may have been further accelerated by the war in Ukraine, which for years was a production center and transit route for illicit tobacco, OLAF added.
In addition to the human cost, counterfeiting is a financial spine alongside the world’s biggest tobacco companies at a time when they face a global drop in smoking that has spurred large investments in alternative products like vapes.
“Criminal gangs have gone from importing counterfeit products into Europe to establishing illicit manufacturing facilities within EU borders,” said Cyrille Olive, Regional Trade Enforcement Officer illegal at British American Tobacco (BAT).
BAT – one of the world’s tobacco giants along with Imperial Brands, Japan Tobacco and Philip Morris International – has seen an increase in counterfeiting since last year in France, the Netherlands, Portugal, Slovenia, Denmark and in the Czech Republic, added Olive.
Some activists have accused Big Tobacco of exaggerating the size of the illicit market to help lobby against higher taxes – which the companies deny. Nevertheless, the latest data shows that seizures of illicit cigarettes are on the rise.
According to OLAF data, a record 531 million illicit cigarettes were seized in the EU last year, a 43% increase from the approximately 370 million seized in 2020. Around 60% of cigarettes came from illicit production in the bloc while the rest was smuggled in.
Europol told Reuters that last year is likely to set a record for the number of illegal cigarette factories reportedly shut down by national police forces, although data for the full year is not yet available.
The industry has responded by hiring investigators to track illicit operations and share intelligence with European authorities, executives from Japan Tobacco, BAT and Imperial Brands told Reuters.
The three tobacco majors refused to quantify the financial blow of the illicit trade. Japan Tobacco, however, has spent “hundreds of millions of dollars” collecting information on counterfeiters which it then passes on to European authorities like OLAF, according to Vincent Byrne, the company’s anti-illicit trade operations manager.
“We have a dedicated function within the business to try and protect our assets, protect our brands and tackle illegal trade,” said Byrne, a former detective who investigated organized crime in Ireland.
BAT and Imperial Brands said they also had intelligence operations.
Philip Morris International declined to comment for this article.
PACK: LESS THAN ONE EURO TO MAKE
Counterfeiters typically replicate popular cigarette brands, including Winston from Japan Tobacco, Marlboro from Philip Morris, Dunhill from British America, and Nobel from Imperial Brands.
A pack of 20 cigarettes costs less than a euro to make, Byrne said, but trades many times over, depending on the market.
According to Alex McDonald, group security manager at Imperial Brands.
Russia’s invasion of Ukraine may have accelerated this trend, said Ernesto Bianchi, director of revenue and international operations, investigations and strategy at OLAF, adding that the agency was “analyzing how fraudsters could have reconfigured their routes”.
Ukraine was a hub for illicit tobacco manufacturing and a supply route for illicit and counterfeit cigarettes made in Russia and Belarus, businesses that may have been disrupted by the war, Imperial Brands’ McDonald said. .
Some counterfeiters lure and coerce Ukrainian refugees into becoming workers.
An illegal tobacco factory was dismantled last month in Roda de Ter, 80 km from Barcelona, Spanish police said on Thursday. Officers seized 11,400 kilograms of tobacco and 7,360 packets of cigarettes. Six Ukrainians worked there.
In Italy, officials said in April last year they found around 82 tonnes of counterfeit cigarettes at a factory in the industrial area of the municipality of Pomezia.
Investigators said they found Russian, Moldovan and Ukrainian workers working grueling shifts in a dangerous environment where bricked-up windows blocked fumes from escaping.
“A good number of Ukrainian workers have been found in these illegal factories,” Japan Tobacco’s Byrne said of counterfeiting operations across the EU.
“They are picked up from a van at an airport, windows blacked out, driven and swapped into another van,” Byrne said, recounting one particular incident.
“Eventually they are delivered to the factory. Cell phones are taken away from them. Essentially, it’s a form of modern-day slavery.”
($1 = 0.9310 euros)
(Reporting by Richa Naidu in London, Emma Pinedo in Madrid and Emilio Parodi in Milan; Editing by Matt Scuffham and Pravin Char)