Europol Helps Close Down One of Holland Largest Illegal Cigarette Factories

One of the largest illegal cigarette factories ever discovered in the Netherlands has been dismantled by law enforcement, with 13 arrests and seizures of 3.6 million cigarettes and 32 tonnes of tobacco.

The Europol-supported operation was led by the investigation service of the Dutch tax authorities, FIOD (Fiscale Inlichtingen en Opsporings Dienst), in cooperation with the Ukrainian State Border Guard Service.

The factory was in full operation when law enforcement entered the premises, reported Europol in a press release. The 13 arrested suspects mainly included nationals from Eastern Europe.

Along with the cigarettes and tobacco, investigators seized packaging material, cigarette paper, filters and glue. All in all, the illicit operation represented an estimated €6 million in lost tax revenues.

In general, the illegal processing and production of tobacco is dispersed across multiple facilities so criminals can spread the risk, observed Europol. In this case, though, the entire production cycle took place in one factory. The factory was located in a rural warehouse, which allowed the criminals to go about their illegal business unnoticed.

Dutch authorities estimated that the machinery could potentially produce one million cigarettes a day, thereby illustrating the extent to which illicit cigarettes are produced within the EU. The production is believed to have been destined for the black market in countries where the retail price of cigarettes is high (such as the UK), and the factory is presumed to have produced 18 million illegal cigarettes – which were subsequently seized outside of the country.

Europol’s Analysis Project Smoke, dedicated to investigating the unlawful manufacturing and smuggling of excise goods, supported the investigation. The exchange of information between law enforcement authorities and the analysis of operational data contributed to the identification of the potential location of the factory. Links established with recent seizures of tobacco in other countries helped further the investigation.

FIOD is also an active member of the ongoing special operational taskforce set up in 2018 between Europol and EU member states to tackle top organised crime groups facilitating the supply of tobacco, machinery, skilled workers and non-tobacco material to illicit factories.

Similar situation in Germany

This recent enforcement action in the Netherlands came just a few weeks after the raid of one of the largest illegal tobacco factories in Germany, capable of making 10 million cigarettes per week. This was the fourth illicit production facility uncovered on German territory, according to Europol.

The raid resulted in the arrest of 12 individuals and was carried out by German customs with the assistance of German and Polish police and Europol. All those arrested were either Polish or Ukrainian nationals.

11 million cigarettes were also seized as they were being loaded into a truck. Most of the cigarettes were believed to have been destined for the black market in the UK, where the retail value of cigarettes is much higher than in Germany. The estimated tax loss to the German state revenue resulting from the illegal production facility was estimated at €1.5 million per week and – as the factory was thought to have been in operation since the end of 2016 – the total tax loss for the entire period was estimated at several hundred million euros.

A recent study by KPMG found that imports of illicit cigarettes from non-EU countries such as Ukraine and Belarus declined in 2018, as a result of ongoing enforcement efforts to restrict illicit flows. However, to fill the void created by the drying up of these illicit flows, law enforcement reports suggest there were ‘increasing volumes from illegal factories within the EU’, with some illegal producers, who were previously operating from outside the EU, apparently shifting their business within its borders.