Austrac Raises Australia Illicit Tobacco Trade Storage Alarm Over 2.66bn Seizures
Australia illicit tobacco trade has left police running out of room to hold seized cigarettes and vapes, with secure storage facilities at capacity and destruction costs climbing. On Monday in Canberra, the Australian Federal Police told a parliamentary inquiry that the strain on storage and disposal was growing fast.
Since 2016, about 2.66bn illegal cigarettes, 510 tonnes of loose leaf tobacco products and 7.5m e-cigarette products have been seized in Australia. The AFP said it has been spending as much as $13 a kilogram for vapes to be destroyed, while a standard 550kg pallet can cost more than $7,150.
AFP Storage Facilities
The AFP told the inquiry that some companies require vape cartridges, batteries and heating elements to be manually dismantled before destruction. It said, "For large-scale seizures, these costs quickly become prohibitive, underscoring the increasing pressure on law enforcement resources and the need for more efficient, innovative storage and destruction solutions".
The force also told the inquiry, "There are opportunities to reshape the roles and responsibilities of commonwealth agencies responsible for seizure, storage, movement and destruction of tobacco and other drugs, noting current issues where AFP drug storage facilities are at full capacity and are costing the commonwealth to continue expanding storage facilities."
Canberra Hearing Monday
Anthony Helmond, the manager for law enforcement at Austrac, told a hearing in Canberra on Monday that the banking sector was reporting remittance providers and privately owned ATMs being used to move funds to pay for illegal tobacco stock. He said, "These are ATMs that are not affiliated with banks, that can be leased and used by individuals or businesses" and "Often the proceeds can be placed back into those machines."
The same hearing was told criminal gangs were using money laundering systems to handle billions in profits from illegal cigarettes, and were converting dirty cash into cryptocurrency to evade police. The trade has also been linked to drug trafficking, firearms offences, assaults, corruption and worker exploitation.
Illegal Trade Costs
The wider cost is already showing up in revenue forecasts. The illicit tobacco trade has cost the federal budget $6bn in lost excise in less than six months, while the Albanese government’s mid-year budget update in December forecast tobacco excise would raise about $5.5bn in 2025-26. By last week’s federal budget, that forecast had dropped to $4.1bn, and Treasury expects tobacco excise to fall to $2.1bn by mid-2030.
For people selling or moving tobacco outside the legal market, the pressure is now on the system that stores and destroys what police take off the street. The bottleneck in secure facilities means seized stock is competing for space with other confiscated goods, while the cost of disposal is rising each time a large load comes in.
