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Illegal tobacco trade may be fuelling terrorism, Border Force warns -

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LEIGH SALES, PRESENTER: If you're a smoker, you'll certainly know that government tax hikes have sharply forced up the price of legal cigarettes. that's in turn pushed up demand for cheap cigarettes causing the illegal tobacco industry to flourish.

Not many people would even know there's a black market tobacco industry in Australia, much less associate it with organised crime or terrorism.

But tonight in an exclusive interview with 7.30, a top police officer reveals the links between illegal tobacco importation, drug trafficking and extremist groups in the Middle East.

Nick McKenzie repor

NICK MCKENZIE, REPORTER: It's 6.30 am in a car park in outer suburban Melbourne in late August.

The Australian Border Force is preparing for a raid and 7.30 has been invited along.

So we're just following about 15 cars that are filled with Border Force investigators. They've been investigating shipments of tobacco from overseas imported into Australia some time ago.

Now's the time to do the raids.

They're going to knock on someone's door who is behind the importation or the retailing of this illicit tobacco. It's a multimillion dollar trade.

At the time of this raid on the house we're approaching, there'll be other raids on other houses across Melbourne and on warehouses and the Border Force investigators are hoping to find product tobacco, smuggled tobacco along with perhaps some proceeds of crime - talking about cash.

(Knocking on door)

They found what they were looking for - bags and bags of tobacco and boxes and boxes of smuggled cigarettes - at the house, and more at the storage facility in Melbourne's north.

It took months of investigation to gather the evidence needed to stage the raid.

Early this year, Inspector Allister Keel began tracking an Australian website selling discounted cigarettes.

The site was run by a Melbourne man suspected of working for a decade with some of the transnational organised crime syndicates who have perfected the art of bypassing Australia's border security.

ALLISTER KEEL, AUSTRALIAN BORDER FORCE: If you look at the activity down at the docks and if you look at the number of organised crime syndicates that are attracted towards this type of illicit activity, there is a lot coming in, and quite simply it's very hard to pick up everything.

NICK MCKENZIE: In August, Keel's small team of investigators began tracking multiple shipping containers coming into Melbourne, in which they suspected were filled with tobacco destined for the online retailer.

ALLISTER KEEL: We believe the majority is coming from Asia and the Middle East. In this instance, in this investigation, the majority of illicit tobacco products were coming from China.

We're under no illusion about how big the problem is.

NICK MCKENZIE: Australian investigators know from bitter experience they face significant problems building a case against illegal tobacco importers.

On a Saturday evening in May this year, in an up-market senior suburb, a senior manager from British-American Tobacco was brutally bashed outside his family home.

The crime remains unsolved, but police suspect an illegal tobacco syndicate in Sydney may be responsible.

The executive had been helping police uncover a tobacco-importing operation based in Dubai.

What does the assault of the senior manager of British-American Tobacco in Sydney, outside his family home, show about the way these groups operate?

WAYNE BUCHHORN, ASST COMMISSIONER, AUSTRALIAN FEDERAL POLICE: Impunity's not the right word, but they're certainly very bold and prepared to take risks to protect their industry, one would assume.

NICK MCKENZIE: The boom in the illicit tobacco trade is partly the product of moves by successive governments to increase the tax on tobacco.

Earlier this year Scott Morrison announced new tax increases pushing up the price of a pack of smokes from $25 to $40 over four years.

SCOTT MORRISON, TREASURER: The net impact of the tobacco measures will raise $4.7 billion over the next four years.

NICK MCKENZIE: The tax hikes have tremendous public health benefits - they've also been welcomed by organised crime.

WAYNE BUCHHORN: The higher the tobacco is on the legal, legitimate market, then the potential for it to push those customers into the illicit tobacco market is also very real.

ALLISTER KEEL: So, as the tax hikes continue year after year, organised crime are rubbing their hands?

WAYNE BUCHHORN: They're certainly making more money out of it, absolutely.

NICK MCKENZIE: Assistant Commissioner Wayne Buchhorn has been seconded from the Federal Police to oversee Border Force's new counter organised crime operations, and its battle against illicit tobacco importers.

WAYNE BUCHHORN: I would suggest it's probably a billion-dollar trade, yeah. Absolutely, because it is a very lucrative trade, and the money that you can make by bringing it in illicitly is quite significant.

And, you know, that money is then used for other activities, which is a major concern for us.

NICK MCKENZIE: Late last year, a notorious Middle Eastern crime syndicate was targeted in raids in Sydney after police found evidence it was using tobacco importations to fund drug trafficking.

WAYNE BUCHHORN: It's used to fund drug importations and drug activities. There's also evidence that it's utilised in other serious and organised crime activities.

Also, the funding of extremist activities, we're seeing some elements of that.

NICK MCKENZIE: 7.30 has read police intelligence documents linking suspected Middle Eastern tobacco importers in Sydney to a Hezbollah-aligned charity in Lebanon.

WAYNE BUCHHORN: The connections back into the Middle East, the potential for that to happen is very real, and that's a significant concern for us in the current environment in particular.

NICK MCKENZIE: And there has been intelligence, at least, suggesting some of those profits may be entering the extremist/terrorist world in the Middle East?

WAYNE BUCHHORN: Yes. Yes.

NICK MCKENZIE: Would you describe the organised crime elements involved in this trade as posing a national security threat and if so, why?

WAYNE BUCHHORN: I would consider it so, because the potential for organised crime groups to, you know, attack the institutions of state, whether through corruption or through their infiltration of legitimate supply chains in our case and that has the potential to, you know, cause corruption within government agencies and more broadly.

So the potential for that to be a national security risk, for me, is very real.

NICK MCKENZIE: Earlier this month, Border Force arrested the online smokes seller, and two importers.

ALLISTER KEEL: The search is now under way, and officers are dealing with the suspects inside the premises.

NICK MCKENZIE: The success of the operation meant that 4.5 tonnes of smuggled tobacco - over 600,000 cigarettes, contraband worth millions - would not be used to fund criminal enterprises.

The reality is that this haul is just a drop in the smuggling ocean.

ALLISTER KEEL: We're under no illusion about how big the problem is and there are a number of syndicates like this, potentially even larger, who are dealing in illicit tobacco products and bringing shipments in on even a more regular basis.

WAYNE BUCHHORN: Whether it's through the internet, through the local retailers, it's not difficult to obtain.

NICK MCKENZIE: As easy as getting a six-pack?

WAYNE BUCHHORN: Ah, pretty much.

LEIGH SALES: Nick McKenzie reporting.