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August 24, 2025 • 13 mins

The illegal tobacco trade has become a very lucrative business worldwide.

In Australia for example, illegal, excise-evading cigarettes now comprise of half of the products sold to the country’s 2.7 million smokers, according to the ABC. It’s thought the $10 billion a year in revenue there is going straight into the pockets of organised crime.

But, has this trend made it to New Zealand shores? And how much of a headache is it causing those protecting our borders?

Today on The Front Page, head of Fraud and Prohibition, Chief Customs Officer Nigel Barnes, is with us to discuss how they’re cracking down on illegal tobacco.

Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.

You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.

Host: Chelsea Daniels
Editor/Producer: Richard Martin
Producer: Jane Yee

See omnystudio.com/listener for privacy information.

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Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Kyota.

Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast presented by the New Zealand Herald. The illegal
tobacco trade has become a very lucrative business worldwide. In Australia,
for example, illegal excise evading cigarettes now comprise half of

(00:27):
the products sold to the country's two point seven million smokers.
According to the ABC, it's thought that ten billion dollars
a year in revenue there is going straight into.

Speaker 1 (00:39):
The pockets of organized crime.

Speaker 2 (00:41):
But has this trend made it to New Zealand shores
and how much of a headache is it causing those
protecting our borders. Today on the Front Page, Head of
Fraud and Prohibition Chief Customs Officer Nigel Barnes is with
us to discuss how they're cracking down on a legal tobacco.

(01:03):
First off, Nigel, what are some key trends you've seen
in illegal tobacco smuggling over the years.

Speaker 3 (01:11):
Well over recent years, the efforts to smuggle will listed
tobacco have become more sophisticated and been of larger quantities.
In particular, we're seeing that tobacco smugglers will mirror what
we see drug smugglers do so they'll use similar consentent
methods and similar tradecraft such as using shelf companies.

Speaker 1 (01:32):
Have you seen an increase recently.

Speaker 3 (01:35):
Yes, it's trended up with over the last few years.
It does, I guess fluctuate a little bit depending on
the type of illicit tobacco and the group's involved.

Speaker 4 (01:46):
But in the main it's traveling upwards.

Speaker 1 (01:48):
How much you've seeing the border.

Speaker 3 (01:51):
Well, an example is last October, following a referral from
the Overseas Customs Administration, we see over two million cigarettes
and a container from Southeast Asia and that represents roughly
three million dollars worth of revenue of asion.

Speaker 1 (02:08):
Wow, and that's just some of the kind of volumes.

Speaker 2 (02:10):
Hey, what types of illegal tobacco products are most commonly
intercepted and has that changed?

Speaker 3 (02:17):
Most commonly it'll be cigarettes, but we do have a
market for chewing tobacco and also susha tobacco as well
as loose tobacco.

Speaker 2 (02:27):
How does customs handle these seized illegal tobacco products? Like,
what happens when you're court importing and then you've got
what was it two million cigarettes to dispose of?

Speaker 1 (02:39):
What do you do with them?

Speaker 3 (02:40):
Well, they get disposed of safely, but basically they're dolling
up at land, all right.

Speaker 2 (02:46):
And what happens to those court importing or a distributing
it say.

Speaker 3 (02:51):
So, we prosecute to the full extent of the law
that we can, and we don't exclusively charge for customer
offenses as well. So an example of that is last
year where a individual in christ Church broke into a
warehouse and stole a large amount of tobacco from that
warehouse that then led to a burglary investigation. The polices

(03:13):
led that part of it, and then once it was
established that this was actually a illicit tobacco manufacturing effort,
Customs then charged him with the illegal manufactured, the unlawful
import of the tobacco as well as the burglary. He
was sentenced earlier this year two years and eight months
in prison.

Speaker 2 (03:32):
What's the maximum penalty if I was to say, try
and smuggle in.

Speaker 1 (03:38):
A two million cigarettes from Southeast Asia?

Speaker 3 (03:40):
I say so, the maximum penalty is five years imprisonment
under the Customs and ext ISAAC offenses. However, you what
we find is that people rarely stick to this one
type of offending, so it's quite common for us to
see crossover with drug offending as well as money laundering,
where we identify those offenses, we charge for those.

Speaker 1 (04:00):
Well, what is the alternative.

Speaker 5 (04:04):
Do you then drop legal cigarettes back to twenty dollars
in order to compete twenty dollars a pack they're currently
about sixty bucks a pack to compete with the illegal tobacco.

Speaker 1 (04:15):
You can't.

Speaker 5 (04:16):
You absolutely can't not, because you can't. The smoking rates
would first of all go through the roof, because if
you actually look at the statistics, they've halved since the
excise was first introduced. So it actually is working to
do what its main purpose is, which is to cut
smoking rates and therefore help the public health system obviously

(04:39):
look after the well being of the country. But on
top of that, it's second purpose is obviously to raise
tax as well.

Speaker 2 (04:48):
Do you think that it's seen as more low risk
than trying to smuggle say Class A drugs because you've
got a maximum penalty of a five years imprisonment versus
life imprisonment.

Speaker 3 (05:00):
Well, what I think motivates these criminals is actually the money.
So yeah, there is a difference in the maximum penalty
maximum tem of prisonment, But what really hurts these guys
is when you take their money and take their assets.
So where were possible we make referrals. We work quite
closely with the police Asset Recovery Unit because what really

(05:20):
hurts them is taking away there all gotten gains.

Speaker 2 (05:23):
Why do you think organized crime groups are becoming increasingly
involved in tobacco smuggling.

Speaker 3 (05:29):
Well, there is a lot of money in it, there's
no doubt about it. In twenty eighteen, which is a
wee while ago now, we found four million dollars in
cash in a storage unit and that was the proceeds
of ilicit tobacco.

Speaker 1 (05:41):
Where are these products ending up?

Speaker 3 (05:43):
Well, a lot of them are retailed throughout the country.
There are various ways that various outlets. I'm not just
talking about dairies. It could be restaurants as well, online
as well, in chat groups as well as through community organizations.

Speaker 1 (06:00):
It's some of the figures here.

Speaker 2 (06:01):
It looks like the revenue from the tobacco excise tax
peaked in twenty twenty, then it's been dropping since. Does
that make you believe that more smokers are in fact
turning to the black market.

Speaker 3 (06:14):
I think it's probably fair to say that the illicit
market is increasing and the smoking rate is dropping. So
as the overall consumption goes down, the size of the
illicit market relative to the legal market increases.

Speaker 1 (06:35):
How do you work with overseas agencies?

Speaker 2 (06:38):
Because I know that Australia's got a huge illicit tobacco problem,
and as we know what happens in Ossie soon comes
over the Tasman to our shores, something like I think
nearly half of Australia's two points something million smokers are
now smoking illegal tobacco or tobacco that hasn't been through

(06:58):
the excise tax process.

Speaker 1 (07:00):
Is that alarming to you.

Speaker 3 (07:02):
Well, we definitely don't want to end up with a
problem the scale that Australia has. There are, in fact,
even more concerningly homicides and arsons attributed to the illicit
tobacco problem in Australia, and we definitely don't want to
see that here. We work quite closely with our partners overseas,
not just the Australian Border Force, but also his Mentesces
Revenue and customs in the UK well as other jurisdictions

(07:26):
in Southeast Asia.

Speaker 2 (07:27):
Is Southeast Asia where we're getting most of it from.

Speaker 3 (07:32):
Well, the international supply chain for USIT tobacco is actually
quite complex, and there's factories not just in Southeast Asia
but also in the Middle East and in Eastern Europe
that manufacture huge amounts of cigarettes which are destined for
the illicit market, and they don't make their way directly
to New Zealand or ways. They'll go through other countries

(07:53):
and intermediary countries where their origin is concealed, and then
they might go into a concealment such as construction materials
and things like that. So it's not really straightforward just
to say it's all coming from one part of the world,
but certainly our siegere statistics would suggest that it's mostly
coming from Southeast Asia.

Speaker 2 (08:14):
If you were to put a percentage on it, how
much do you reckon customs is seized at the border
and how much has slipped through the cracks?

Speaker 3 (08:22):
Perhaps, Well, that's a great question and I wish I
had a really a really precise answer to it. It's
really hard to estimate. There have been various attempts to
estimate the size of the I listed market in New
Zealand and the University of Auckland and University of Otago
both completed studies in recent years on it, and also

(08:43):
the tobacco industry complete studies on it as well, which
they publish. The range in the size of the listed
market is in these estimates is huge. The lowest one
is around about six point eight percent and the highest
one is around about twenty four percent.

Speaker 4 (08:57):
Is it somewhere in between? Probably?

Speaker 3 (09:00):
So I can't really I wouldn't really want to take
a stab.

Speaker 6 (09:05):
The criminals will lose revenue, and we'd like to think
that your average Australian is a law abiding citizen, and
generally they were up until a few years ago, until
the attacks became so extreme combined with the cost of
living crisis, they just decided that enough was enough and
they weren't going to pay those excessive prices. So there
is a balance, There is a level where people will

(09:28):
hopefully return to the legal product.

Speaker 2 (09:32):
Do you think there's a point where we can't increase
the excise tax by anymore? Like looking at some figures here,
the excise tax increased to one eight hundred and twelve
dollars and sixty one cents per kilo, and compare that
to three hundred and ninety three dollars and three cents
in two thousand and nine. Now, granted the smoking rate

(09:53):
has decreased since two thousand and nine. Don't get me wrong,
but depending on the brand, that tax today may up
around eighty percent of the cost of a pack of smokes.

Speaker 1 (10:04):
Do you reckon we've gone too far?

Speaker 3 (10:06):
Well, I'm not really an expert in the economy of it.
There is no doubt though, that the amount of exercise
is what drives the drives the profitability of the market,
So it's definitely a factor. But there's much more to
it than just the excise. There are elicit tobacco markets
in countries with much lower excise rates than New Zealand

(10:26):
as well.

Speaker 2 (10:27):
What new technologies or intelligence capabilities are customs using to
tackle this? Obviously you've got at the border as well,
but have you.

Speaker 1 (10:35):
I don't know.

Speaker 2 (10:36):
I'm just assuming a whole group of you guys in
a room just on Facebook, marketplace searching for listings or something.

Speaker 3 (10:43):
Well, we take a bank for back approach to our investigations.
So what we do is, rather than trying to simply
suppress every instance of elicit tobacco being sold in the community,
we look to target the source of it and take
out the people who are profiting from the import and

(11:04):
then the distribution of these cigarettes on a large scale.
We get a lot of benefit from community reporting, so
crime Stoppers and also our own Border Protect hotline. But
more importantly, we have a very good relationship with industry
and we encourage our industry partners as well, such stratefwards

(11:26):
and Customs brokers to let us know when something doesn't
appear right.

Speaker 2 (11:30):
Has the team tackling this at the border grown along
with the rate of illicit tobacco so to speak, like,
do you have as many boots on the ground to
say to tackle this problem.

Speaker 4 (11:46):
Yeah.

Speaker 3 (11:46):
In twenty twenty two, Customs received ten point four million
dollars in funding over four years, which we think we've
delivered a really good return on investment with our seizure
stats and our prosecutions as well as our set restraints
in that short time. But what's really important, I think

(12:07):
is that you don't outgrow a organized crime problem you
think it. So our strategy is basically to make life
as hard as possible for these criminals and in particular
just make it not profitable for them to.

Speaker 2 (12:21):
Operate here And looking forward, Nigel, what further changes, whether
it be legislative, operational, or technological, could improve new Zealand's
ability to curb illegal tobacco.

Speaker 3 (12:34):
Really it comes down to I think good old fashioned
investigating and also community buy in. There might be a
sentiment out in the community that elicit tobacco is not
actually a serious problem, and that it's great that people
can get cheaper cigarettes, But what those people are playing
to realize is that they themselves are actually being exploited

(12:55):
by organized crime and there are people driving around in
very flash cars that those guys.

Speaker 4 (12:59):
Have paid for.

Speaker 1 (13:00):
Thanks for joining us, Nigel.

Speaker 4 (13:01):
Thanks Chelsea, much appreciate it.

Speaker 2 (13:06):
That's it for this episode of the Front Page. You
can read more about today's stories and extensive news coverage
at enzidherld dot.

Speaker 1 (13:14):
Co dot nz.

Speaker 2 (13:16):
The Front Page is produced by Jane Ye and Richard.

Speaker 1 (13:19):
Martin, who is also our editor. I'm Chelsea Daniels.

Speaker 2 (13:24):
Subscribe to The Front Page on iHeartRadio or wherever you
get your podcasts, and tune in tomorrow for another look
behind the headlines.
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