Illicit trade is a major and growing problem worldwide.

Be it smuggling, counterfeit or tax evasion, governments are losing billions of dollars in tax revenues, legitimate businesses are being undermined and consumers are being exposed to poorly made and unregulated products.

A global problem

Although difficult to measure, almost every sector of society and product category is affected.

The United Nations estimated that in 2009, US$2.1 trillion was generated by the illicit trade. According to the International Chamber of Commerce, the cost to the international economy of counterfeiting and piracy alone was US$1 trillion in 2011. Based on these calculations, the World Trade Organisation estimates that the value of counterfeit and pirated goods is equivalent to some 7% of the world’s merchandise.

Illicit trade in excisable fast moving consumer goods

Excisable fast moving consumer goods such as tobacco and alcohol are widely recognised to be among the most illegally traded products in the world.

According to the International Chamber of Commerce, the value of international and domestic trade in counterfeit and pirated goods in 2013 was $710–$917 billion. In addition the Chamber forecasts that the value of domestically produced and consumed counterfeit and pirated goods could range from $524–$959 billion by 2022. (The economic impacts of counterfeiting and piracy 2017)

Based on EuroMonitor’s revisions, the illicit cigarette trade is 8% of global consumption at 463 billion sticks in 2015. This resulted in a tax loss of around U$40 billion. (Illicit trade on tobacco products 2016)

According to the World Customs Organization (WCO) there has been a decrease in the number of reported seizures of cigarettes – from 5,182 seizures in 2014 to 4,042 seizures in 2015. This represents a 22% decrease. However, a non-proportional decrease (by 73%) in the quantities seized has been recorded: a total of 9,872,742,345 reported in 2014, compared to 2,657,864,362 pieces in 2015. (WCO Illicit trade report 2015)

Dominance of organised crime

Illicit trade is not just the work of small operators. Organised crime is increasingly dominant, exploiting differences between national regulatory regimes, advances in technology and global financial and transportation links to traffic illicit goods.

Illegal manufacturing facilities and distribution networks span continents and substantial resources are invested in copying even the most sophisticated anti-counterfeiting devices such as paper tax stamps and holograms.

Interpol, the international police organisation, states that gangs which traffic illegal drugs, weapons and people are also behind the illicit trade in tobacco. According to the US Department of Justice, some of these groups also have ties to terrorist organisations.

The value of counterfeit and pirated goods is equivalent to some 7% of the world’s merchandise