Targeted Enforcement Against Illicit Trade in Tobacco Products: The Case of the United States

Introduction

Illicit trade in tobacco products (ITTP), much of which is carried out by organized criminal groups, is a substantial and growing economic activity around the world¹. Estimates vary due to the nature of the market, but about one out of every 12 cigarettes smoked worldwide in 2020 was illicit, either contraband to avoid taxes or counterfeit. Figures from Euromonitor International (2021) show that the volume of illicit trade in terms of cigarettes sold grew by 7.7% from 2015 to 2019 (even as total consumption of cigarettes fell by 7.6%), and illicit trade is expected to rise by 2025 to a worldwide market share of 8.8%. ITTP’s national market share in the US is in the range of 4.2% to over 20%, depending on the source, methodology, and timeframe of the estimates (which are discussed below). ITTP creates much harm: to health, to governments’ streams of tax revenue, and to social order by creating violence in illicit markets and by funding terrorist organizations (Reuter & Majmundar, 2015). As with other instances of smuggling and illicit trade, ITTP around the world is often facilitated by corruption, whether large-scale or petty or involving law enforcement or customs officials (Chionis & Chalkia, 2016; Kupatadze, 2021; Joossens & Raw, 2012).

To date, enforcement against ITTP in the US and in many other countries has had some isolated successes but overall has neither quashed the trade nor prevented its growth in most places. Increasing enforcement is costly, and enforcement can have unintended and unwanted consequences of its own, such as stimulating illicit revenue and violence (Prieger & Kulick, 2014, 2015). Thus, indiscriminate ramping-up of enforcement efforts is likely not the best strategy, and a careful look at alternatives is warranted. In this chapter, options to combat efficiently organized crime engaged in ITTP are examined.

The multiplicity of potential goals and evaluative dimensions — promoting public health, protecting tax revenue, suppressing violence, cutting off financing for terrorism, maintaining public order and the rule of law, fostering respect for government and removing possibilities for corruption (Rafay, 2023a) and improving relations between police and communities—creates difficulties for policy directed at criminals and organizations engaged in ITTP. Some tobacco-related policy goals work at cross-purposes to one another; promoting public health by taxing tobacco makes achieving the other goals more difficult. However, efficient enforcement strategies can improve the terms of the tradeoffs involved.

Three approaches—not necessarily mutually exclusive—to combat ITTP are broad-spectrum enforcement against ITTP in general, targeted enforcement against ITTP-related violence, and targeted enforcement against ITTP that funds terrorism. Lessons from experience with other organized illicit markets, most notably those for illicit drugs, insights from law and economics, and theories of enforcement swamping and strategic dynamic concentration are brought to bear on finding efficient options to combat ITTP and the related violence and funding for terrorist activity.

In the next section, ITTP in the US, its links to violence and terrorism, and current enforcement efforts are described. The subsequent section discusses the three alternative approaches: general suppression of ITTP, deterrence focused on violence, and deterrence focused on ITTP-enabled funding for terrorism. Aspects of Pulling Levers, a particular form of focused deterrence successful in reducing gun crime in drug markets, are discussed and applied to ITTP. The discussion of targeted enforcement encompasses both theoretical and practical aspects. The policy implications of the results are discussed in the recommendations section, including a discussion of how recent and likely future regulation may increase the scale of ITTP and its consequences. A summary of the pros and cons of the various approaches for policymakers leads to the conclusion that deterrence focused against violence is a promising strategy. Future research directions to address the increasing need for interagency cooperation to fight ITTP, particularly as some of it moves into cybermarkets, are discussed. A final section draws together the conclusions of the research.