Alcohol & Tobacco Fraud

With an estimated £2.5 billion in revenue being drained from the public purse each year by tobacco smugglers alone and a further £215 million lost through alcohol smuggling, the problem of excise fraud is a real one and one which both the Government and Customs and Excise are determined to crack.

This year, the Government invested a massive £209 million in Customs' efforts to hit the tobacco smugglers where it hurts - their pockets. These funds will mean, among other things, 950 extra officers (not all the new staff will be front line - 310 NIS, 95 NID, 30 Sols Office, the rest will be in key locations both at the ports and airports and inland) to halt and reverse the rocketing trend in tobacco smuggling.

Bootleggers
Often called bootleggers, alcohol and tobacco fraudsters are not "enterprising rogues". They are criminals cashing in at the cost of honest taxpayers and businesses. They have also become increasingly sophisticated over the past decade:

• they often operate in large gangs
• a large proportion already have criminal records
• many have a history of violence and benefit fraud

Some of these criminals have even resorted to guns and violence to protect their lucrative but illegal trade. And evidence suggests some drug smugglers are turning to tobacco smuggling because they find the profits higher and the sentences lower. And it isn't just the organised criminal, although this is obviously the most worrying trend. Previously law-abiding citizens, from a wide range of backgrounds, are also becoming involved in this illicit activity.

A growing problem
Since the introduction of the European Single Market in 1993 and the relaxation of border controls that went with it, travellers have been allowed to bring large quantities of alcohol and tobacco into the UK from abroad. Duty is paid on the goods in the country where they are bought, but usually at much lower rates than in the UK. There is nothing wrong with bringing these goods back into the UK, but they MUST be for the personal use of the traveller who is bringing them into the country. There are in fact no limits on the amount of duty-paid alcohol and tobacco products which travellers from other EU countries can import into the UK for their own use - including goods intended as gifts. This is a fundamental freedom of the Single Market.

However, Customs and Excise is guided by EU levels on the maximum amount of alcohol and tobacco which are regarded as reasonable for personal use. Travellers who are challenged by Customs officers anywhere in the UK, must satisfy the officer that the goods are solely for personal use. Some criminals think it is worth the risk to abuse these relaxed rules, but their actions often land them with heavy fines and stiff jail sentences.

The money motive
So why do people deliberately break the law? For money - often huge amounts. Customs and Excise estimates that around £1.2 billion in tax and duty revenue is lost to the Government each year as a direct result of cross-Channel alcohol and tobacco smuggling. The amount of tax and duty lost is more than the current annual expenditure by the NHS on buildings and equipment in England. This means major losses to society, but major gains for the smugglers.

Selling the goods on
Once the alcohol and tobacco goods are smuggled into the UK, they are then sold on to others at prices below the UK market rate, but still representing a hefty profit margin for the criminals. Sales operations for the illegal goods vary from the pub hawker selling from plastic bags, to more elaborate house or warehouse-based set-ups. Markets, car boot sales, factory floors and pop festivals are popular venues for bootleggers, especially for hand-rolling tobacco and cigarettes. But unscrupulous pubs and shops have also been prosecuted for selling illegal tobacco and alcohol on their premises.

The role of Customs and Excise
The Government is determined to crack down on those profiting at the expense of the public purse. It is the job of Customs and Excise to translate these tough policies into front-line action through:

• a larger ground force of specially skilled officers
• partnerships with others
• tougher penalties

Customs officers
Customs and Excise has a nation-wide force of specially skilled officers who work together to:

• detect and apprehend those involved in alcohol and tobacco fraud
• investigate major criminals and bring smuggling cases to court
• build up detailed intelligence on the bootleg market and the fraudsters who feed it. Some of these officers are called excise verification officers (EVOs). They were introduced in 1993 specifically to target criminals who were already beginning to exploit the freer Single Market rules. EVOs work in port and inland areas. As well as targeting those who organise and finance the smuggling trips, they carry out visits to markets, traders and wholesalers

Working with others
The size of the bootlegging problem means that no one organisation can tackle it alone. Of all customs partners, the public is one of the most vital in the fight against smugglers and fraudsters. The 24-hour hotline - Customs Confidential - is a free telephone service, which the public can use to pass on any information about possible fraud, including bootlegging activity. Customs also work in close partnership with the police, other customs organisations, the Benefits Agency and Immigration, other government departments and the European Commission.

They take part in special joint exercises with the police and other government bodies, including road-check operations, which have yielded some impressive results for each of the agencies involved. One of their key partners is the trade itself. In 1995, Customs and Excise set up a special forum - the Excise Alliance - with various trade associations. This is to encourage a co-operative approach to detecting the alcohol and tobacco smugglers and to make it easier for Customs and the alcohol and tobacco trade to exchange information.

Tougher penalties
Criminals who are caught and successfully prosecuted can expect severe penalties, including jail sentences and heavy fines. Jail sentences can be given for revenue evasion of even a few thousand pounds, with the more serious criminals liable to a maximum term of 7 years in prison. In fact, Customs now urges the courts to use all sanctions available against offenders, including driving disqualifications, seizure of their vehicle, compensation orders and confiscation of their assets. Offenders belonging to the licensed trade - pubs, off-licences, clubs and so on - are all subject to prosecution and may even have their licences revoked.

Unscrupulous hauliers also risk the removal of their operating licences and vehicle rental companies who persistently hire vehicles to smugglers face steep payments to gain their vehicles back.