Hong Kong raids show illicit trade’s immunity to the pandemic

November 13, 2020
hongkong

Customs officials in Hong Kong have significantly increased anti-illicit trade efforts in a bid to tackle growing criminal activity in the region, leading to a string of high-profile sting operations since the beginning of the year.

In just two weeks in September, officials seized around 8.25 million suspected illicit cigarettes, worth an estimated HK$22.6 million. This followed several successful raids over the month, where law enforcement intercepted criminal activity—criminals who have adapted their enterprises to benefit from the disruption caused from COVID-19. 

As illicit trade shows no signs of slowing down in the region, the scale and frequency of the raids have grown in importance. Authorities are tasked with sustaining momentum to stop the smugglers and counterfeiters from exploiting global volatility as it continues to unfold.

Project Thunder

September’s raids were part of “Project Thunder,” an operation launched to combat the illicit cigarette trade that has become endemic in Hong Kong’s public rental housing (PRH). More than 1 million people in Hong Kong (one in five), many of whom reside in PRH, live below the city’s poverty line. Earlier this year, local news reported that unemployed citizens were being offered lucrative pay to deliver illicit cigarettes to buyers across the city—suggesting key links between illicit trade and PRH neighborhoods. 

In response to this growing trend, law enforcement conducted a series of territory-wide raids. Across PRH, 26 cases were raised in different districts to tackle activities supporting illicit cigarette trade, cross-boundary smuggling, storage, and distribution as well as the sale of illicit whites. This led to seizures of around 550,000 suspected illicit cigarettes as customs officers raided suspected storage in PRH units and detained vehicles allegedly used for contraband distribution.

The activity did not stop there. On September 16, officers raided two vehicles and a village house, seizing 1.88 million suspected illicit cigarettes worth around HK$5.17 million, with a duty potential of about HK$3.58 million. The next week, 27 people were arrested as officers seized around 7.7 million suspected illicit cigarettes.

This followed customs’ large-scale enforcement at the start of the month, intercepting almost 23 million suspected illicit cigarettes worth nearly HK$63 million in market value—the sixth successful seizing of goods exceeding HK$10 million. That same week, a storehouse raid uncovered about 960,000 suspected illicit cigarettes evading a duty potential of about HK$1.8 million, and 380,000 suspected illicit cigarettes were found in a vehicle suspected to be used for illicit cigarette distribution. 

Illicit whites 

In Hong Kong, it is an offense to be involved with, possess, sell, or buy illicit cigarettes. Yet despite penalties of up to a HK$1 million fine and two years’ imprisonment, continued consumer demand drives many to trade cheaper “illicit whites,” cigarettes that are typically produced legally in a country with the sole intention of being smuggled into other markets to be sold illegally. In 2019, there were about 637,900 daily smokers, representing 10.2 percent of the local population aged 15 and above, meaning illicit trade is an attractive venture, both as a source of income and for the customer.

COVID-19 

One thing is clear: As COVID-19 continues to send shockwaves through global markets, the illicit trade industry continues to thrive. Capitalizing on disrupted global supply chains, criminals are turning their efforts to driving an underground market for excisable, popular goods. These in turn are lucrative prospects for criminals, offering an illegal alternative for consumer goods, including cigarettes.

The severity of illicit trade during the COVID-19 pandemic was highlighted at a local press conference, where resulting border closures were cited as a catalyst for smugglers switching to sea routes. This allegedly had led to coastal areas becoming highly exposed to criminal activity. It was also discussed how those living in PRH were being taken advantage of by criminals within illicit tobacco trade networks, noting how many competitively priced cigarettes have been found distributed in the estates, routinely sold at far lower prices than legitimate retailers.

“We must continue to take action to protect legitimate businesses and safeguard those who may be putting themselves in harm by way of sourcing and supplying illicit whites,” commented Rodney Van Dooren, PMI’s Director of Illicit Trade Prevention in Asia. “The numbers are staggering. In fact, we have seen the surge of smuggling activities as criminals are taking advantage of this pandemic. This is why we must acknowledge the work of customs and law enforcement agencies for their relentless efforts to combat illicit tobacco trade over the past year. As criminals adapt to exploit the new normal, we must call upon all stakeholders, both in the private and public sectors, to support the authorities to protect society and the livelihood of our community.”
 
Looking ahead

The latest raids across the region demonstrate illicit trade shows no sign of abating, with record numbers continuing to be reported; in the first half of 2020, customs confiscated HK$300 million worth of illegal cigarettes, nearly double last year’s total haul. As the effects of the pandemic continue to unfold, those looking to protect both society and the economy must adopt a multifaceted approach to fight illicit trade head on. Continuing to strengthen collaboration between involved entities and enforcing the rule of law must be prioritized to reduce the smuggling flows looking for opportunities to infiltrate legitimate markets.

Earlier this year, Stop:Illegal reported Hong Kong’s largest illicit cigarette haul in two decades, resulting from close investigative and operational collaboration between customs administrations. Read more here.

STOP ILLEGAL

Written by STOP: ILLEGAL

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