Michael Connolly Head of Specialist Investigations Inland Detection Scotland, N.Ireland & NE England. Tackling Tobacco Smuggling Together

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1 Michael Connolly Head of Specialist Investigations Inland Detection Scotland, N.Ireland & NE England Tackling Tobacco Smuggling Together

2 HMRC Operational delivery HMRC Intelligence Strategy/Policy Investigation/Detection Large Business Unit Overseas Domestic Criminal Investigation Inland Detection UKBA Trading Standards / Police

3 History of Inland Detection HM Customs & Excise HM Revenue & Customs HM Revenue & Customs UKBF De-merger Specialist Investigations Inland Detection

4 The Roles and Responsibilities of Inland Detection Scotland - To support the legitimate tobacco trade. - To reduce revenue losses by minimising the market penetration of smuggled tobacco products. - To provide support for Criminal Investigation operations. - Work closely with other Law Enforcement Agencies.

5 Sanctions & Penalties Prosecution for evasion of excise duty Unlimited fine and up to 7 years in prison if convicted on indictment Proceeds of crime confiscation orders - remove the motivation to offend by stripping out the profit Seizure of illicit goods and vehicles used to transport them Confiscation of cash Penalties for selling non-fiscally marked tobacco products A fine of up to 5000 for holding or selling goods which are required to bear a fiscal mark but do not. A fine of up to 5000 for managers of premises who allow them to be used for the sale of unmarked tobacco. In addition, the court can prohibit the sale of tobacco products from the premises for up to 6 months. New penalties for handling goods subject to unpaid excise duty A penalty of up to 100% of the duty in addition to seizure of the goods and the possibility of also being made to pay the evaded duty Details of deliberate defaulters who evade more than 25,000 can be published Sale of counterfeit tobacco products (Trading Standards) A fine or up to 10 years in prison if convicted on indictment

6 Video Clips Through the door 2 minutes Roadside seizure 1 minute Dinner lady 2 minutes Airport smugglers UKBA 1.5 minutes Barras Market 1.5 minutes

7 EU Cigarette Prices March 2010 Source: TMA based on price of MPPC and exchange rates available at March < Sweden 4.45 Finland Ireland 7.23 UK 6.29 Denmark 4.23 Netherlands 4.12 Belgium 4.12 Estonia 1.73 Latvia 1.82 Lithuania 1.87 France 4.76 Germany 4.00 Italy 3.15 Czech Republic 1.97 Poland 1.74 Austria 3.40 Hungary 1.97 Slovak Republic 1.78 Romania 2.04 Portugal 2.98 Spain 2.68 Luxembourg 3.13 Slovenia 2.00 Bulgaria 1.79 Greece 2.72 Malta 3.40 Cyprus 2.40

8 Shift in the composition of UK seizures largely best selling UK brands smuggled from the EU counterfeit UK brands begin to appear emergence of non-uk brands/cheap whites genuine UK brands fell to 6%, while non UK brands make-up nearly half of large seizures Seizures by Type 2002/03 Seizures by Type 2009/10 28% 41% 46% 48% 31% Counterfeit Genuine UK Brands Other (including non-uk brands) 6% Counterfeit Genuine UK Brands Other (including non-uk brands) Charts illustrating the increase in counterfeit cigarettes and cheap whites over last few years

9 Operation Formosa

10 Operation Formosa

11 Operation Formosa

12 Operation Formosa

13 Operation Cheekbone

14 Significant Seizures January tonnes loose tobacco Postal Depot UK April to August 25 tonnes HRT UK April to August - 26 million cigarettes 250 kilos counterfeit packaging - Self Storage, Glasgow

15 Looking ahead Availability - tobacco products display ban from Oct 2011 Public attitudes - cross government marketing strategy New smuggled commodities counterfeit HRT, cheap whites, etc New smuggling seams and trends emerging constantly Smuggler sophistication driving down costs; fewer risks with loads (e.g. postal traffic) Incentives to smuggle remain strong - tobacco duty escalator

16 Joined up working FCLO network strategically placed in high risk source countries and along key transit routes UKBA partnership agreement targets agreed annually DoH & HMRC tobacco strategies aligned DoH sponsored expansion of the FCLO network MoUs with the tobacco manufacturers EU anti-smuggling agreements Local Authority Trading Standards Protocol North of England programme

17 Specialist Investigations - Tactics Civil investigation of the wider tax implications Developing our response to investigate other tax implications of illicit trade and challenging assets gained from unlawful conduct Increased public awareness Reducing the demand for illicit product and encouraging the reporting of information

18 As the demand remains high and the incentives to smuggle and sell illicit tobacco remain strong There is an ongoing threat Working closely together diminishes that threat! Thank you