ASYMMETRICA

TRENDS & PROBLEMS IN ITTPPRESENTED TO THE OECD TASK FORCE ON CHARTING ILLICIT TRADE

PARIS, 6 MARCH 2014

ITTP in OECD Countries

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ITTP: Definitions

ITTP = Illicit Trade in Tobacco Products

3 Types of ITTP:

• Counterfeit: fakes of licit brands

• Contraband: licit brand cigarettes that are diverted from proper distribution channels and smuggled into other markets

• Illicit Whites: factory overproduction for the express purpose of smuggling

‘C&C’ = ‘counterfeit & contraband’ (used to distinguish from illicit whites)

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ITTP: Size & Harms

Greater harms to consumer health: toxins and external contaminants

Harms to brand integrity: loss of confidence in brand holder

EU alone lost $12.5 billion in tax revenues in 2012

Replacing ITTP with licit would result in an additional $31.3B in tax revenue worldwide

Illicit averages 11.6% worldwide:

16.8% in poor countries

9.8% in high-income countries

$81 billion a year (acc. to Transcrime) funds criminals and VEOs!4

CTP of ITTP

In Sahel, same routes for drugs and tobacco

Hezbollah: Operation Smokescreen & Operation Tobacco Road

PKK: smuggles into Iraq in same route used by Husseins

Real IRA fed by Belarussian smuggling gangs

2nd to heroin for Taliban!5

Supply Chain Problems

Key inputs feed both C&C and illicit whites

Key inputs are a choke point: only 5 companies, all of them in OECD countries

INTERPOL explicitly states: “lack of oversight in cigarette components funds organized crime”

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Supply Chain Due Diligence

A clearinghouse is needed to: • Regulate: risk-based due diligence to prevent adverse impact • Punish & Reward: brands can promote their CSR; non-compliant are

named-and-shamed • Educate: help consumer make informed choices; studies to legislatures

and law enforcement • Coordinate: diverse international actors & authorities

Based on OECD’s ‘Conflict Minerals’ Guidance • Demand-driven: Guidelines for Multinational Enterprises • Judicial framework: UNTOC, RICO, counter-terrorism, White House

Strategy to Combat Transnational Organized Crime • Tri-partite solution: government, industry & NGOs

Organizations like Centre for Transnational Accountability may represent the new model to conduct cross-industry due diligence

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