How the
Pandemic is
Shaping Illicit
Economies and
Organized Crime

Hernan Albamonte
Head Illicit Trade Prevention U.S., Philip Morris International, Inc.

2020 started as no one had expected and unfolds in ways many of us would like to forget. The global COVID-19 pandemic has unfortunately impacted the lives, health and wellbeing of many around the world. It has also abruptly changed our day-to-day operations — how we work, do our grocery shopping, educate our children, play and socialize. And as we’re looking ahead to the new normal, we can be sure that some things we took for granted in the pre-coronavirus (COVID) period, will not be the same going forward. 

Our world is starting to feel the primary and secondary economic impacts of the pandemic on our global economy. Among the looming threats is the possible exacerbation of illicit trade, which will require attention and decisive action to combat. Early reports indicated that criminals were quick to exploit opportunities at the height of the pandemic, as law enforcement and government leaders were focused on handling the immediate and urgent crises at hand.

For example, the Global Initiative Against Transnational Organized Crime in its recent “Crime and Contagion” report, explains how some criminal groups were quick to scale up their activities during the pandemic, adding new scope and increasing their profitability. Other international organizations such as INTERPOL and Europol, have also raised concerns over organized-crime groups exploiting the health sector, including flooding online markets with “look-a-like” N95 medical masks. President Donald J. Trump has even put the U.S. military on notice to be ready as intelligence shows that cartels, criminals and terrorists will try to exploit the pandemic for their own gain.

Therefore, it is critical to monitor this situation closely. Importantly, it’s more essential than ever for public and private actors to work together, sharing knowledge and expertise to tackle illicit trade and combat the criminal networks profiting from it.

The far-reaching consequences of illicit trade

Because of smuggling, counterfeiting and tax evasion, governments lose billions of dollars in tax revenues, legitimate businesses lose customers, brand integrity is compromised and consumers are exposed to unregulated products.

Illicit trade in consumer goods – such as tobacco is also leveraged by transnational organized crime groups to fund other illegal activities – ranging from illegal trade of drugs, guns and wildlife to human trafficking. And even terrorist organizations have been reported to use illicit trade as a means to finance their operations.

According to the OECD, the volume of international trade in counterfeit and pirated products could amount to as much as USD 509 billion. This represents up to 3.3 % of world trade.” As for illicit tobacco trade, the numbers are staggering. According to the World Health Organization and the World Bank, illicit trade in tobacco represents 10 to 12 percent of global tobacco consumption, with an estimated illicit volume of up to 600 billion illegal cigarettes. In the U.S., $3 to $7 billion in taxes are lost annually to individual states and localities. Illicit trade makes cheap, unregulated tobacco products easily accessible —undermining efforts to reduce smoking prevalence and protect youth from smoking.

Preventing illicit tobacco trade: a key priority requiring wide-ranging collaboration

Eradicating illicit tobacco trade has been a long-standing priority for Philip Morris International (PMI). We want our products sold legally to adults in the market for which they are intended. Period.

To deter illicit tobacco flows, we invest significantly in supply chain controls through preventive and protective measures, implement track-and-trace solutions in line with strict regulatory requirements, use sophisticated authentication and security technologies and apply comprehensive due diligence of customers and suppliers. But, addressing the complex issue of illicit trade requires more than efforts of a single business or sector.  

Effective policies and regulations have a crucial role too. Significant progress has been made by the U.S. Government in the past couple of years, with several important steps to fully assess, monitor and combat this growing security and safety threat.

In 2018, President Trump signed into law a mandate for the U.S. Government to determine a national strategy to combat the international illicit tobacco trade. He also signed the Hizballah International Financing Prevention Amendments Act, requiring federal agencies to report on efforts to combat terrorist tobacco trafficking networks. Additionally, in the FY 2018 National Defense Authorization Act’s Senate committee report, illicit tobacco is designated as an item of special interest. The report detailed, “The committee is concerned by the illicit trade in tobacco and its propensity to fund transnational organized crime and terrorist groups.”  

In 2019, the bipartisan Combatting the Illicit Trade in Tobacco Products Act (CITTPA) was introduced in the Senate and House. Passage of this legislation would demonstrate the U.S. Government’s global leadership and compel compliance from foreign governments to identify and deter those engaging in the trade of illicit tobacco.

Beyond government and industry action, there’s also a need for a much wider cross-sectoral collaboration between public and private sectors and civil society to build innovative programs against illegal trade in its many forms and make full use of existing expertise, knowledge and evolving technologies.

This is exactly why PMI launched PMI IMPACT, a global initiative aimed at supporting third-party projects to tackle illegal trade and related crimes, such as corruption, money laundering and organized crime. Collaboration is a key element of the success against illicit trade, especially in today’s hyper-connected world… and in particular during this pandemic.

Looking ahead

As we think about and build a collaborative structure to combat illicit trade, we must be cognizant that, like the virus we fight today, traffickers respect no borders and easily infiltrate our defenses. Transnational criminal organizations and global terror groups use illicit trade to facilitate crimes in local communities, disrupting civil society and cultivating corruption.

The time for coordination and cooperation is now as we look ahead to rebuilding our economies and societies after COVID-19. We need to strengthen our international capabilities to detect and thwart illicit trade and to hold authorities accountable for preventing criminal enterprises from undermining our safety, security and commerce. We remain ready to cooperate with all members of society to address this pressing issue.