JTI report warns of a ‘gathering storm’ in the black market

Japan Tobacco International, ( JTI) has published a report, independently verified by Intrinsic Insight Ltd., entitled ‘ The Gathering Storm’, on how the illegal tobacco trade is operating during the Covid-19 global pandemic and preparing to reap the rewards in the economic aftermath that will follow.

Law enforcement agencies around the world have welcomed the report, which is based on 63 field studies, conducted across 50 countries including Russia, Canada, Malaysia, and the Philippines where tobacco smugglers currently have a strong presence.

JTI intelligence found that the global public health crisis and the financial downturn has created the conditions for a ‘perfect storm’ where organized criminal groups will further exploit public demand for cheap goods, and capitalize on dwindling buying power in the impending global recession, particularly in countries with high tax regimes.

The report has provided JTI with a global picture of four emerging trends, consistent with Euromonitor and Europol intelligence: Evidence shows that criminal groups are biding their time in readiness for an anticipated boom in illegal tobacco sales.

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It also shows that after initial disruption to the illegal supply chain in Western European markets, organized criminals quickly exploited the inconsistent approach to travel and lockdown rules and found alternative routes from production to distribution, leading to significant seizures of illegal factories or their components in countries such as the Czech Republic, Greece, Ireland, Belgium, and Spain.

The report revealed that changed law enforcement priorities and border restrictions have been mixed in limiting supply and the availability of illegal tobacco: whilst governments and authorities in Far East Asia were quicker to impose restrictions, those in the West failed to act with such precision.

Technology has been increasingly deployed throughout the pandemic to enable sales of illegal tobacco to continue where strict lockdowns were put in place by governments throughout Eastern Europe, the Middle East, Africa and the Asia Pacific, where Whatsapp and Facebook have provided quick and easy methods of communication between the consumer and criminals.

Furthermore, the International Chamber of Commerce predicts that global counterfeit trade will reach $4 trillion by 2022, primarily fueled by e-commerce.

According to the World Bank, the global trade in illegal tobacco is already worth an estimated $40-50 billion each year to the criminal groups who produce, manufacture, smuggle, distribute and sell tobacco products on which there are no tax duty paid.

The loss of revenue to law-abiding retailers is also significantly felt, as is the impact on consumers who are lured into buying substandard products.