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“The problem out there is the shit-obvious shops that just say ‘Tobacco’ on them,” one underworld source said. “They’re going to clamp down on them very easily. That’s going to be toned down; it’s going to be less blatant.
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“There are a lot of other people now selling them too that aren’t obvious. Like a local hairdresser. Laundromats. Cafes. Some local shopfront. They’re going to be available at lots of different places.”
There has also been a growing trend for sales to occur via word of mouth by “retailers” who operate out of nondescript warehouses where people can turn up to buy cartons of cigarettes or vapes.
A plan is also being developed to offer a delivery service – a kind of Uber for cigarettes.
The government crackdown, which is coming as federal authorities attempt to tighten up the border, is expected to cost the syndicates hundreds of millions of dollars.
Adding to this is the mounting resistance from banks and financial service providers to offering point-of-sale terminals for credit card transactions to businesses that are clearly selling an illicit product. This is leading to a shift to cash-only transactions.
“That’s killed a lot of sales, too,” the source said.
The syndicates have also supposedly hatched a long-term plan to reduce their reliance on brands such as Manchester, which are illegal to import and sell because they do not meet plain-packaging requirements and are obviously contraband.
This would involve sourcing a supply of legal cigarettes from third parties linked to manufacturers for big tobacco companies.
“They’re going to buy them overseas with the right packaging. They’re going to bring them in without paying the taxes, and they’re going to sell them in shops. Legit shops selling a legit-looking brand that’s actually cheaper. It’s a whole new way to get into the market,” the source said.
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But tobacco industry sources say the scheme could struggle to get off the ground, given that legitimate tobacco manufacturers and suppliers would be able to detect large-scale “leakage” of their products onto the black market.
Another possible solution is shifting production to counterfeiting hubs in countries such as Cambodia, where illicit tobacco could be inserted into fake packages that appear to meet Australian packaging standards and then smuggled into the country.
The new regulator, Tobacco Licensing Victoria, is already facing an uphill battle to gain control of the illicit market, which has been running almost unchecked for years and is plagued with violence and firebombings by competing gangs.
The new rules require any shop selling tobacco to have a licence by February 1. Unlike in other states, inspectors in Victoria do not have the power to shut down illegal retailers, only to prosecute them.
Illustration by Dionne Gain
But there already appear to be hiccups with the program, including a major delay in appointing someone to head the enforcement unit.
The role of chief operating officer was still being advertised online in late November and being “finalised” in mid-December.
The unit is also likely to be swamped with work after the government chose to hire only 14 enforcement officers for a state with an estimated 8000 tobacco retailers, including as many as 1300 shops selling illicit tobacco products and vapes.
Delays in stamping out the black market could be significant due to the need to travel large distances around the state and the fact that safety concerns mean inspectors would not be sent alone to carry out compliance checks.
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Police, industry and underworld intelligence suggests hundreds of shops are directly controlled and operated by the Hamad cartel, the strongest organised crime force in the illicit tobacco market.
Kazem Hamad launched the so-called tobacco war in early 2023, toppling an emerging group of organised crime gangs seeking to control the importation and sale of illicit tobacco.
Earlier last year, Hamad – who has been based in Iraq – created a new cartel that controls vast swaths of the illicit market around the country. He was arrested in Iraq on Tuesday. It is unknown how his detention might affect the operation of the cartel in the future.
A Victoria Police spokesperson said it “will support where and as required the newly established Tobacco Licensing Victoria”.
More than half of the tobacco market in Australia is now believed to be illegally sourced, according to a recent report by the Illicit Tobacco and E-cigarette Commissioner.
Sources also say the regulator will face an uphill battle prosecuting those who run the shops, which often exist with little or no genuine paperwork and employ staff for cash who have no understanding of who they are actually working for.
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