Definitions

Illicit Trade

adj. n. The supply, distribution and sale of tobacco

products on which applicable taxes in the country of

consumption are not paid.

Definitions

Genuine contraband

Unlawful movement of genuine tobacco products from one

tax jurisdiction to another without the payment of

applicable taxes or in breach of laws prohibiting its import

or export.

Counterfeit

Illegal manufacturing where product bears a trademark

without the owner’s consent. Counterfeit products can be

sold in the source country or smuggled into another

country.

Definitions

Illicit Whites

These products are typically produced for the

purposes of smuggling into countries where

there is no prior legal market for them.

Definitions

At a global level…

Over 1 in 10 cigarettes consumed globally are illicit – that’s a volume of

about c.600 billion cigarettes a year. Lined up end to end, that’s enough to

get to the moon and back 60 times.

The illicit trade is the fourth largest supplier of cigarettes in the world,

with 10-12% of global volumes – twice the size of Imperial Tobacco.

Scale

Impact

Drivers

Drivers

Industry provides crucial support to government and law

enforcement, but:

We don’t pass or enforce laws

We don’t determine excise regimes

We don’t police borders

Role of Government

Government is the key player

in tackling illicit trade

Imperial Tobacco is firmly opposed to illicit trade and cooperates

with authorities around the world to prevent illegal tobacco products

from finding their way onto the market.

Our Position

Our AIT Strategy

A

Engage with stakeholders

Support Law Enforcement

Supply Chain

Integrity

Our code of conduct sets out the standards of responsible

behaviour that all employees are expected to follow. Preventing

illicit trade is at the heart of this.

Code of Conduct

We will only conduct business with and supply product to

customers who have a reputation for honesty and integrity, are

reputable and committed to honouring the objectives set out in our

product supply compliance policy.

Know your Customer

We will only supply product that meets the fiscal, legal and

regulatory requirements of the intended retail market.

Product Supply Policy

We are investing heavily in our Track & Trace capability, which enables

us - and law enforcement - to detect where genuine products could

become diverted from legitimate supply chains into unintended markets.

ITG Track & Trace

Cooperation with Government

Engagement UK

Engage with Retailers• Advertorials and videos pushed

to trade press & web sites

• Encourage retailers to report illicit

activity

• Nearly 70% of retailers aware of

our AIT campaign – creates fresh

enthusiasm, support and

intelligence

Raising social and regulatory awareness

Educate and engage authorities

Series of seminars with municipal authorities,

Customs, Law Enforcement focussed

Practical support to law enforcement

Lobby for increased penalties

Educate consumers:

Broadcast, Print and Digital media and

advertising campaign around tax loss, criminality,

youth access

Engagement Spain

Initial results: Reduction/Stabilisation of NDP rates in target areas

Cooperation with Law Enforcement

Disrupting the production and export of counterfeit Golden Virginia from

Asia to UK/Europe

ITG Intelligence led to raids on:

7 printing workshops raid in China

2 packing house raid in China

One export shipment from China to Felixstowe

Two export Shipments from Indonesia to Manchester

Results:

Over 900,000 GV pouches seized

Retail value of finished product > £16 million

Potential duty loss to HMRC of £11 million

Project Greenleaf

Shutting down Europe’s largest illegal tobacco

factory

ITL uncovers organised criminals working with Italian

tobacco factories to submit legitimate export paperwork

while diverting the tobacco products to be sold illegally

within the EU.

Further investigations identify a network of criminals,

transport and storage companies inside and outside the

EU. Intelligence is shared with authorities in Germany

and Poland, Italy and the UK.

In March 2015 intelligence developed via Roker Park

leads to identification of the then biggest illegal cigarette

factory in Europe, located in Poland.

Project Roker Park

Officers seized:

• 2.5 million kilos of illegal

tobacco worth €375m

• 4 illegal production lines,

• 20.5 million cigarettes

without Polish tax stamps

• € 8.25 million in cash

Unravelling a multi-national conspiracy May 2012: Hungarian authorities seize cigarette making machinery. ITL forensic experts confirm

this to be “Machine 18,” the source of over 472 million sticks of counterfeit ITL brands.

July 2012: Bulgarian authorities seize counterfeit Regal packaging materials sufficient to

manufacture of 100 million cigarettes.

ITL Forensic analysis and intelligence associate Machine 18 and the seized Regal packaging

with a new counterfeiting operation, designated Machine 73.

October 2013: Serbian Customs seize a truck transporting hidden reels of Regal branded

labels. This truck was followed to a warehouse outside Budapest, later identified as a

distribution facility for counterfeit raw materials.

All seizures were linked to one company – Vest Trade Group.

July 2014: Europol, HMRC, Hungarian Customs and the Polish CBS raid premises in Poland,

Hungary and Belgium, leading to the seizure of “Machine 73.”

Machine 73 was capable of manufacturing 1.5 billion sticks per year. The potential annual loss

to the company was estimated at c£10-15 million.

Project Flushing Meadows

Find out more

www.imperial-tobacco.com/illicit-trade/

@ImperialTobacco

https://www.linkedin.com/company/imperial-tobacco