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|Kate Willson||June 29th 2009|
Center for Public Integrity
For centuries, blue-turbaned nomadic Tuareg tribesmen have led caravans of camels across the expanses of the Sahara. Laden with millet and cloth from Africa’s West Coast, the caravans traveled unmarked paths to trade for salt and dates in Timbuktu, across the sand plains of Niger, and into the mountain oasis of the Algerian south.
Smugglers take the same routes today — driving SUVs along paved roads or with guidance from the Tuareg and satellite phones — to move weapons, drugs, and, increasingly, humans — through the Sahara for transport across the Mediterranean Sea. The paths are no longer known as the Salt Roads of the Tuareg, but as the “Marlboro Connection,” named after the most lucrative contraband along this 2,000-mile corridor.
Among those who control this underground trade is al-Qaeda in the Islamic Maghreb (AQIM), an Algeria-based terrorist organization widely believed to have been backed by Osama Bin Laden. Descended from the Salafist Group for Preaching and Combat (known by its French acronym, GSPC) the group has hundreds of members and is blamed for a bloody campaign of bombings, murders, and kidnappings across North Africa and Europe. The lead smuggler, Mokhtar Belmokhtar, 37, is blamed for the 2003 kidnappings of 32 European tourists and the 2006 murder of 13 Algerian customs officials. “They are a significant threat,” says Lorenzo Vidino, author of Al Qaeda in Europe. “Of all Islamic terrorist groups, they have the most extensive and sophisticated network in Europe… And among their activities, smuggling is particularly important.”Military officials and scholars say cigarette smuggling, in fact, has provided the bulk of financing for AQIM. The money comes not directly from smuggling, but from charging protection fees to others moving the untaxed cigarettes through the Sahara. The most smuggled brand is Marlboro, followed by Gauloises and American Legend, as well as counterfeited Rym, a popular Algerian brand.
Al-Qaeda’s North Africa affiliate isn’t alone. After crackdowns on fundraising following the 9/11 attacks, terrorist groups worldwide have increasingly turned to criminal rackets, officials say. And smuggling cigarettes — either untaxed or counterfeit — has proved a particularly lucrative, low-risk way to fund operations.
Hezbollah, the Taliban, and al-Qaeda are involved in smuggling cigarettes; so are the Real Irish Republican Army (Real IRA) and the Kurdistan Workers’ Party (PKK). Terrorist financing through cigarette smuggling is “huge,” says Louise Shelley, a transnational crime expert at George Mason University and an adviser to the World Economic Forum on illicit trade. “Worldwide — it’s no exaggeration… No one thinks cigarette smuggling is too serious, so law enforcement doesn’t spend resources to go after it.”
Cigarettes are easy to smuggle, easy to buy, and they have a pretty good return on the investment,” adds David Cid, a former FBI counterterrorism agent and deputy director of the Memorial Institute for the Prevention of Terrorism in Oklahoma City. “Drug dogs don’t alert on your car if it’s full of Camels.” And, he notes, “The other advantage is you don’t go to jail for 50 years.”
Traditional terrorist networks aren’t the only armed groups making money from the underground cigarette trade. Insurgents and paramilitary forces are also on the take. Many of the world’s longest-running civil wars are fueled by contraband, according to a 2002 study by Stanford University’s James Fearon, and tobacco is only one of the favored commodities. Cocaine smuggling has largely propelled the FARC’s 40-year insurgency in Colombia. Diamonds have funded civil wars in Sierra Leone and Angola. And opium has fueled drawn-out conflicts in Burma and Afghanistan.
The increasing use of smuggled tobacco by terrorist and insurgent groups parallels the rapid growth of a multibillion-dollar trade in cigarette smuggling around the world. Huge tobacco black markets have arisen from New York State to Paraguay to Eastern Europe, as smugglers move cheap and counterfeit cigarettes to sell in lucrative high-tax regions. The illicit trade is fueling addiction, say health experts, by making inexpensive cigarettes widely available, while robbing governments of sorely needed tax revenue. At the same time, officials warn, the booming black markets are fueling not only some terrorist groups but dozens of organized crime gangs, who find the big profits and low risk hard to resist.
In addition to al-Qaeda in the Islamic Magreb, at least a half-dozen terrorist groups and insurgencies have profited from the black market in tobacco. Among the others:
Both the Provisional Irish Republican Army and the militant splinter group Real IRA have used cigarette smuggling to finance their operations. While both groups seek the unification of the island of Ireland, the Provisional IRA announced in 2005 that it would henceforward use only peaceful means. The Real IRA continues to employ terrorist tactics including robbery, bombings, and assassinations, most recently shooting dead two British soldiers in Northern Ireland in March.
“Cigarette smuggling has definitely been a major source of funding for the Provisional IRA — not only the Real IRA — and other terrorist groups in Northern Ireland,” said Rogelio Alonso Pascual, an IRA expert teaching at Madrid’s Universidad Rey Juan Carlos.
The Real IRA has flooded Ireland with contraband cigarettes and imported counterfeit versions of popular brands. Authorities say the group is responsible for nearly all the smuggled tobacco seized in Northern Ireland, and they say cigarette smuggling has emerged as a top funding source for the organization. Combined, the IRA groups reaped an estimated $100 million in proceeds from cigarette smuggling over a five-year period, according to a 2004 report by William Billingslea, an analyst for the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives.
In March, a Miami man was indicted in connection to a cigarette smuggling ring with ties to the Real IRA. The arrest comes after a seven-year investigation stretching from the Canary Islands to Panama, through the port of Miami and on to Ireland and the UK. U.S. and European officials declined to comment, saying the case is “complex” and ongoing.
In the restive tribal belt of Pakistan — where Osama bin Laden is thought to be hiding — some of the most hunted Taliban militias collect money from cigarette smugglers in exchange for allowing Marlboro knock-offs and cheap local brands to flow into Afghanistan and China. Cigarettes have become an increasingly important source of financing for the groups, second only to the heroin trade, according to Pakistani intelligence officials.
As NATO forces battled Taliban in Afghanistan, the insurgents increasingly sought sanctuary along the ungoverned border regions of Pakistan where both the Taliban and the vast majority of Pakistanis are Sunni Muslim and ethnic Pashtuns. The Khyber Agency, a border province boasting the most-traveled trade route between the two countries, is also the hotbed of cigarette counterfeiting in Pakistan.
The Kurdistan Workers’ Party (PKK) long controlled the smuggling routes between Turkey and northern Iraq. Blamed for thousands of deaths since its inception in 1978, the leftist group comprised of Turkish Kurds has sought to establish a Marxist state in southeastern Turkey. The PKK has carried out bombings of Turkish governmental security forces and popular Turkish tourist sites.
The PKK funds itself through donations from sympathizers, trafficking in narcotics and arms smuggling, and by charging a fee for every container of cigarettes allowed to pass through its territory. Whereas the group controlled the flow of contraband cigarettes into Iraq during the 1990s, they now control the flood of counterfeit cigarettes streaming out of Iraq, according to Sharon Meltzer, an expert on cigarette smuggling and transnational crime at American University. “It’s still going on; it’s just changed direction,” she said. “Now counterfeit factories are operating openly in Iraq.”
Hezbollah, the Lebanon-based militia and political organization, is also engaged in tobacco trafficking. The radical Shiite group receives a significant percent of its financial support from Iran, but also relies on proceeds from smuggling cigarettes and other goods.
In three connected U.S. cases since 2000, defendants tied to Hezbollah have pleaded guilty to smuggling low-tax cigarettes from North Carolina and untaxed cigarettes from New York Indian reservations to the high-tax state of Michigan. Nearly 50 defendants have faced federal charges ranging from cigarette smuggling and money laundering to material support for terrorists. Investigators say the operations made millions of dollars, some of it traced back to Hezbollah leaders in Lebanon. The network’s kingpin — Mohamad Hammoud — is serving time at a medium-security federal prison in Indiana. His projected release date: September 2135.
The U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is investigating a number of cigarette smuggling cases that appear linked to terrorism, according to Associate Chief Counsel Jeffrey Cohen. “It’s not because terrorists like cigarettes particularly, but because it’s an easy way to finance things,” Cohen says. In most U.S. cases, groups send money through hawala, a parallel banking remittance system that relies on family, ethnic, and regional ties. Because there are few records, he adds, “it’s difficult to know how much of this is going to terrorists and how much is going to food and education.”
The use of hawala makes it exceedingly difficult to track money in such cases, agrees Phil Awe, acting chief of ATF’s alcohol and tobacco enforcement branch. “The information is anecdotal,” says Awe, who investigated the U.S. Hezbollah cases. “There are a lot of small villages [in the Middle East] where Hamas, Hezbollah, and others are ruling. If you’re sending money back to those small villages where extremist groups operate, there’s a good chance some of that money is ending up with them.”
FARC has evolved from the world’s largest, strongest, Marxist-based insurgency into what is widely seen today as a criminal outfit that is the world’s largest supplier of cocaine. The group began by charging taxes on coca-growers in FARC-controlled regions but has since developed into a self-sustaining cocaine trafficking organization.
To launder its money, FARC and other Colombian narcotraffickers use what is known as the black market peso exchange in which they smuggle drugs to the U.S. and sell the dollars to informal bankers called “peso brokers.” The peso broker in turn sells these dollars to Colombian exporters who buy U.S. goods with the laundered funds. Those export goods are then smuggled back into Colombia.
In Colombia, well established drug routes were easily converted into cigarette-smuggling routes,” Interpol’s Ralf Mutschke said in written testimony to the House Committee on the Judiciary in 2000. DEA’s Alvin James said U.S.-manufactured cigarettes, “especially Marlboros, Kents, and Lucky Strikes, made up a large portion of the trade goods that were smuggled into Colombia and financed by this process.”
Anyone trafficking drugs from Colombia to the United States is at least tangentially involved in smuggling cigarettes from the United States to Colombia, authorities say. Traditional drug cartels, left-wing guerrilla groups, and the equally brutal right-wing paramilitary groups jostle for market share. The players and brands have changed over the years, but investigators say the market remains the same.
The primary transit points for the cigarette black market run through Aruba and Panama. Panama customs authorities confirmed in April a seizure of cigarettes belonging to FARC, but could not provide details pending an ongoing investigation.
Seven thousand miles from the coca-rich plains of Colombia, in the dense jungles of eastern Congo, rebels allegedly profit from a millionaire tobacco tycoon who recently pleaded guilty to cigarette smuggling.
A U.N. Security Council investigative body called the Group of Experts reported in December that Tribert Rujugiro Ayabatwa, a tobacco tycoon who pleaded guilty to cigarette tax evasion charges in South Africa, has been funneling money to a Congolese rebel group that has committed human rights violations including recruitment of child soldiers, mass rape, and murders.
More than five million people have died in the Congo since 1998, making it among the most lethal conflicts since World War II. The vast majority of fighting now occurs in the east between three opposing forces: the Congolese military, a Hutu-backed rebel group, and a Tutsi-backed rebel group called The Congres National Pour la Defense du Peuple (CNDP). Led by Laurent Nkunda, the CNDP has perpetuated serious human rights abuses that include mass murder, torture, rape, forced recruitment of children, and slavery, according to the U.N.’s Group of Experts.
Rujugiro owns Mastermind Tobacco Company, which produces Yes cigarettes, and Congo Tobacco Company, which produces Supermatch cigarettes, according to company filings. Rujugiro has cigarette factories across central and eastern Africa, as well as tobacco fields in many sub-Saharan countries. He also has factories and transport companies in Dubai, and has stakes in banking, oil, real estate, and construction companies across Africa. Rujugiro is also an adviser to Rwandan president Paul Kagame, according to the U.N. findings.
The Group of Experts has uncovered a series of e-mails and individuals who claim that Rujugiro has been supporting the CNDP through cash payments and supplies, and that he pays the CNDP to allow the traffic of his untaxed cigarettes. Rujugiro has denied the allegations of smuggling and CNDP ties in a post on his website and in a letter to a Rwandan newspaper.
Port authorities seized 97 million contraband Supermatch cigarettes in Ghana earlier this year, investigators say. The cigarettes were manufactured in the United Arab Emirates, stamped with fake “Sale in Ivory Coast” stamps, and destined for Mali, where they are not licensed for sale. Supermatch, meanwhile, has become the most smuggled brand into Uganda.
Rujugiro’s South Africa operation was shuttered in 2006, when the South African Revenue Service froze the company’s assets and filed fraud charges against him and his son. Rujugiro left the country and was arrested at Heathrow airport in London last fall. He settled the case this month before being extradited, agreeing to pay a $7 million fine and to comply with tax laws in future.
Stanching the Flow
At the core of the problem, say scholars, are the high profits of tobacco smuggling, which rival those of narcotics, and the relative cheapness of conducting a terrorist operation. In many cigarette smuggling cases, millions of dollars are at stake. A shipping container containing 10 million cigarettes costs as little as $100,000 to produce in China, but can bring as much as $2 million in the United States. Cigarette smuggling bolstered the entire economy of Montenegro during the 1990s.
Contrast that with the small amounts it takes to conduct a terrorist attack. “Part of the problem is that it takes so little to finance an operation,” says Gary LaFree, director of the University of Maryland’s National Consortium for the Study of Terrorism and Responses to Terrorism. British authorities, for example, estimated the 2005 London subway bombing that killed 52 people succeeded on a budget of less than $15,000. Al-Qaeda’s entire 9/11 operation cost between $400,000 and $500,000, according to the final report of the National Commission on Terrorist Attacks Upon the United States.
To end the flow of criminal money to terrorist groups and insurgencies, experts say, will mean cutting off the flow of contraband — whether narcotics or tobacco. Terrorism and criminal finance investigator Larry Johnson, with BERG Associates, notes that it’s much easier to crack down on the flow of legal products like tobacco. “You need to ensure that the products are being sold through legitimate channels through legitimate distributors — that they’re not committing willful blindness,” he says. “The contraband is fairly easy to deal with because it’s in the power of the distributors and producers to control the process. This is actually one of those few problems that is fixable.”
Kate Willson is a correspondent for the Center for Public Integrity. Alain Lallemand and Aamir Latif contributed to this story.