EUBAM support in fighting cigarette smuggling in the Mission’s area of responsibility

1. Context

Cigarette smuggling is presently assessed as one of the most serious risks to border security at the Moldova-Ukraine border. Despite the good work being done by local and international law enforcement agencies, the likelihood of the illegal movement of cigarettes through the Ukraine – Moldova border remains high. This is especially the case at the Transnistrian segment of the border, which is especially vulnerable to smuggling because the Moldovan authorities are not present at this segment. This means that there is no legitimate partner for Moldovan and Ukrainian law enforcement agencies to work with to counteract smuggling.

Analysis of the suspect movement of cigarettes into Transnistria indicates that the delivery of tobacco products vastly exceeds the potential demand on the Transnistria local market. There is no accurate figure for the population of Transnistria, but the usual estimate does not exceed 500,000. This leads to the conclusion that they are moved towards the much larger market in Ukraine and also transited via Moldova to the EU.

As the response to this threat, in May this year the Government of Ukraine excluded border crossing points at the Transnistrian segment from the list of those permitted to clear excise goods to Transnistria, including cigarettes.

The effect of this measure was dramatic, cutting off the supply of suspect cigarette shipments to Transnistria via Ukraine at a stroke. But it was a short-lived effect, because in May, the Moldovan Government licensed a Tiraspol-based agency to import cigarette imports into Transnistria for sale in two duty free shops.   From May until September, a huge number totaling almost one billion cigarettes – was imported. It appears that these figures were sufficiently alarming for the Moldovan authorities to withdraw the licence to import in September.

2. EUBAM Anti-tobacco smuggling Flagship Initiative

Cigarette-smuggling is a highly profitable and often a highly-organised crime. And fighting it requires a highly collaborative approach. With this in mind, in 2010 the Mission set up Task Force Tobacco to provide a collaborative platform. The Task Force has become the key mechanism for engaging with our Moldovan and Ukrainian partners as well as wider stakeholders on the specific issues related to the illicit trade in cigarettes.

This systematic and focused mechanism has proven successful. It has encouraged partners to share intelligence and develop integrated methods for dealing with a common problem. It has also facilitated contacts with their counterparts in EU member states and other countries, as well as the broader business community.   I like to think of this as hard-wiring our Moldovan and Ukrainian partners into the wider effort to fight tobacco-smuggling.  The wiring is about hooking up the different parts of the circuit both in terms of making the right contacts and connections, but also in ensuring partners have the necessary skills and infrastructure to carry out their tasks effectively.

EUBAM believes that the sound foundations developed through this system will prove to be sustainable beyond the completion of the Mission’s mandate. For the time being EUBAM continues to lead this project which rests on four main lines of activity:

• first, the coordination of risk management decisions
• second, monitoring the transit and export of raw tobacco and cigarettes to Transnistria
• third, sharing analytical and operational information between partner services at the national, bilateral and international level
• finally, a range of enforcement activities such as the targeting of suspicious shipments, joint investigations and joint border operations.

I’m going to briefly describe three examples of concrete outcomes resulting from the work of the Task Force Tobacco in assisting Moldovan and Ukrainian partner services to cooperate with OLAF and their counterparts in EU Member States.

The first example is an operation carried out by Moldovan, Italian, German law enforcement agencies and OLAF, which led to the closing down of an international tobacco contraband network in November 2014. EUBAM brought the Moldovan agencies together with their Italian counterparts and OLAF. The information-sharing and cooperation established enabled law enforcement agencies in Italy and Germany to dismantle the network late last year. The scheme is calculated to have cost the Italian budget only in excess of €90mn.

The second example is an operation which shut down an illegal cigarette factory near Chisinau in Moldova in March this year. The operation was led by the General Prosecutor’s Office with support from the Intelligence and Security Service of Moldova.  This successful outcome was the result of intensive cooperation between the two agencies, facilitated by EUBAM. It included intelligence-sharing, crime analysis, collaboration and coordinated intervention. The ensuing investigation confirmed that counterfeit brands of cigarettes were smuggled to the EU Member States by different routes, including Ukraine.

The third example is a case where the real-time exchange of information between Romanian and Ukrainian customs administrations, supported from EUBAM, led to the detention of a truck transporting almost 15.5 million cigarettes from Romania to the Donetsk region of Ukraine in March this year. It was EUBAM which suggested the consignment was worth monitoring because its illogical and convoluted transportation route made it a suspect cargo.  The beginning point was Romania and the destination was the Donetsk region of Ukraine, but the route took it via Hungary, Slovakia, Poland, Lithuania, Latvia and Russia.

3. Future

So, I’ve set out the context of cigarette smuggling in the Mission’s area of responsibility and described the work of Task Force Tobacco. I’d like to conclude this presentation by briefly outlining the main focus for our future activity on tobacco smuggling.

The Mission has made fighting tobacco-smuggling one of its flagship initiatives. The initiative is meant to build on and reinforce current efforts against the illicit tobacco trade. The main focus will be on cigarette smuggling. Why? Because cigarette smuggling represents a major economic and security challenge for both countries and a serious concern for the European Union and its Member States as well.

To achieve a more coherent approach, the Mission has recommended that Moldova and Ukraine adopt national anti‐tobacco strategies, and that they begin with the law‐enforcement component first before drawing in other strands work. Both Governments have accepted this as the way forward. Work is already well advanced in Moldova, but less so in Ukraine. This is understandable given the current situation In Ukraine, so we need to be realistic about the achievable rate of progress.

Once adopted, the national strategies will form an effective basis for deeper partnerships with concerned European and international agencies, which will, in turn, allow for better coordination and more high-profile and ambitious operational work.

The strategies will set out the legislative, operational and infrastructural frameworks and requirements for partner services to step up the fight against large-scale tobacco smuggling. The strategies should achieve three key outcomes:

• strengthening the fight against illicit trade in tobacco and at the same time dramatically decreasing the extensive losses to the state budgets of Moldova and Ukraine
• decreasing revenues to criminal groups
• protecting consumers from counterfeit products.

The strategies will set out how the Moldovan and Ukrainian authorities will continue to target, catch and punish those in the illicit tobacco trade. But they will also describe how they will step up preventative work by targeting the places of manufacture within their own countries. This will attack the problem at source before these illegal products even start their journey towards the EU and other markets.

Working together – at the national, bilateral and international level – is the key to an approach that should deliver concrete benefits for Moldova, Ukraine and EU Member States. To achieve this, we need to make sure that what we do jointly with Moldovan and Ukrainian partner services complements their own and wider European efforts to:

• protect revenues
• protect public health
• protect legitimate businesses, including their intellectual property
• and, finally, to protect the security of our communities.