A joint law enforcement investigation identified members of an Australian syndicate involved in the importation of illegal tobacco and cigarettes from South East Asia and the Middle East. The tobacco products were imported from overseas using the services of complicit freight forwarders and a transport company operating domestically.
During this investigation, AUSTRAC provided financial analysis relating to the syndicate members and their associates. This analysis identified financial transactions used for the purchase of the tobacco and cigarettes, specifically involving funds flows to the United Arab Emirates (UAE) and Indonesia. Six Australian offenders were charged with possessing and importing tobacco products with intent to defraud the Commonwealth. The offenders received sentences ranging from fifteen months to six years and two months.
This case study involves the use of international funds transfer instructions (IFTIs) sent to beneficiaries in the United Arab Emirates (UAE) and Indonesia to purchase the illegally imported tobacco products. Law enforcement estimated that approximately AUD70 million in taxes would have been evaded, if it had not been seized. The potential profit for the sale of the illicit tobacco and cigarettes was estimated between AUD35 million to AUD45 million.
The following indicators may help identify similar criminal activity:
- multiple IFTIs in excess of AUD20,000 sent to a South East Asian or Middle Eastern country, e.g. Indonesia or the UAE
- multiple ordering customers sending IFTIs to the same beneficiary customer
- a domestic company remitting funds to an overseas company not in the same industry or business services, e.g. a hairdressing business remitting funds to an overseas tobacco supplier
- the reason for transfer stated on the IFTI does not match the business services of the company receiving the remittance, e.g. the IFTIs sent to a tobacco supply company where the reason for transfer states ‘building supplies’
- large cash deposits followed by IFTIs sent to companies associated with tobacco supply
- large cash deposits into a personal account inconsistent with customer profile e.g. the customer is unemployed or a student
- large cash deposits into a personal account where the customer is reluctant to provide information on the origins and use of funds.
A joint law enforcement investigation identified an Australian syndicate involved in the illegal importation of tobacco and cigarettes from the United Arab Emirates (UAE), Indonesia, Singapore and Malaysia. The syndicate was assisted by a freight forwarding services company and a transport services company. These complicit entities received cash payments by the syndicate for assisting in the illicit importations.
It was revealed both the complicit freight forwarding services and the transport services company facilitated by checking the clearance status of containers, alerting the syndicate whether law enforcement had any interest in the containers, and in arranging container collection from the wharf. Additionally, the freight forwarder also provided a storage facility for the illicit imports and assisted in the unpacking of containers. Law enforcement identified several storage units used to store tobacco and cover loads.
The syndicate was remitting funds via IFTIs to companies in the UAE and Indonesia through personal and business accounts. Many of the IFTIs were funded by large cash deposits made by syndicate members.
The illicit products were bound for the Victoria and New South Wales (NSW) markets. The investigation identified two retail shops in Victoria rented by syndicate members that were used to sell the illicit tobacco and cigarettes. A NSW-based entity was also involved in the distribution and sale of the products.
After executing search warrants at various residential and business properties law enforcement arrested and charged syndicate members and associates. Law enforcement seized nine residential properties as being the proceeds of crime, approximately 72 tonnes of tobacco, and 64 million cigarette sticks from a container and property searches. Additional seizures included approximately AUD224,000 in cash, a seven metre luxury boat valued at AUD70,000, and four cigarette filling machines.
Multiple suspicious matter reports (SMRs) submitted by banks revealed the transaction activity of the syndicate, particularly in relation to unusual cash deposits, some of which were used to fund IFTIs, as well as the destination of the IFTIs. The SMRs revealed the following transaction activity:
- A deliberate attempt by the syndicate members to disguise the origins of funds by making cash deposits and withdrawing the funds as bank cheques.
- The customers made single cash deposits of between AUD100,000 to AUD260,000 and were reluctant to provide information on the origins and use of the funds. On the same day of each deposit, bank cheques were drawn payable to different banks for similar or equivalent amounts as the preceding deposits.
- Large cash deposits totalling over AUD300,000 in a two week period. The cash was carried into the bank in large garbage bags consisting of AUD50 and AUD20 denominations.
- Three IFTIs valued at approximately AUD30,000 each sent to the same tobacco company in the UAE over a three day period. The ordering customers of the IFTIs were a syndicate member, his company and an associate.
- An employee of a syndicate member’s company conducting aggregate cash deposits of AUD100,000 over a seven month period. During this period the employee sent two IFTIs to tobacco companies in the UAE of AUD24,780 and AUD49,720 respectively.
Transaction reports submitted by the reporting entities were analysed by AUSTRAC and referred to law enforcement to assist with the investigation. AUSTRAC analysis of IFTIs and threshold transaction reports (TTRs) identified the transactions associated with the purchase of illicit tobacco products from the UAE and Indonesia by the syndicate. The analysis revealed:
- The association of the freight forwarding business with an export company. The export company was linked to businesses and individuals involved in illegal cigarette importations. In one year, the director of the freight forwarding business sent AUD38,200 from personal and business accounts to the export company.
- Over a four month period 17 IFTIs were sent to a tobacco company in the UAE totalling approximately AUD638,000. The IFTIs were predominantly between AUD23,000 and AUD47,000.
- Most of the 17 IFTIs sent to the UAE tobacco company stated ‘building materials’ as the reason for transfer and eight were remitted from the same branch of a bank, by seven different ordering customers.
- TTRs showed five of the IFTIs were funded by cash.
- One IFTI was sent through the account of an Australia-based business operated by a syndicate member. The business was identified as a hairdressing company.
- Over a four year period eight IFTIs were sent to a tobacco company in Indonesia and its operator totalling AUD286,620. The IFTIs were valued between AUD7,160 and AUD62,700.
Six persons were charged and sentenced as a result of the investigation. Three offenders received a custodial sentence and three a Community Correction Order (CCO) with a suspended sentence. The offenders were charges with the following:
- Four offenders were charged with possessing tobacco products knowing that they were imported with intent to defraud the revenue, contrary to section 233BABAD(2) of the Customs Act 1901, receiving sentences ranging from 15 to 24 months.
- Three of the above four offenders were additionally charged with attempts to possess tobacco products knowing that they were imported with intent to defraud the revenue, contrary to section 233BABAD(2) of the Customs Act 1901 (Cth) and section 11.1 of the Criminal Code 1995, receiving a sentencing period of 24 months.
- One offender was charged with three counts of importing tobacco products knowing that they were imported with intent to defraud the revenue, contrary to section 233BABAD(2) of the Customs Act 1901, receiving a sentence of 18 months.
- One offender was charged with attempting to defraud the Commonwealth, contrary to section 135.1 of the Criminal Code 1995, receiving a sentence of six years and two months.
Case study summary
|Offence||Illegal tobacco importation|
|Industry||Banking - Authorised deposit-taking institution (ADI)|
International - Indonesia and the United Arab Emirates (UAE)
|Designated Service||Account and deposit-taking services