SASKATCHEWAN - As more contraband cigarettes are seized in Saskatchewan, police are continuing to look for ways to help stop the distribution.
In July, 8.75-million unstamped cigarettes, 30 pallets full, were seized near Swift Current in a new record for highway patrol. The tobacco was on its way from Ontario to B.C. Illegal cigarettes were also seized in a bust in North Battleford in September.
Rick Barnum is the National Coalition Against Contraband Tobacco's executive director. He recently retired as the Deputy Commissioner of the Ontario Provincial Police Investigations and Organized Crime, so he has a great deal of experience participating in and leading many major investigations related to organized crime groups. For the last 20 years he focused on investigating organized crime.
"What we're seeing right now, according to the RCMP, approximately 145 organized crime groups that are trafficking substantially in contraband tobacco," he told SaskToday. "The reason being, basically for two reasons: number one, for the huge profit."
Barnum said offenders are selling a carton of contraband cigarettes for, depending on the part of the country, but in Saskatchewan for about $45 for a carton of contraband. In comparison, if that was purchased over-the-counter for legal cigarettes, they would cost around $145.
"That's the main reason," he said.
The second reason is that, "there are just not at this point in time any significant penalties for individuals that are caught trafficking contraband cigarettes," Barnum added.
Most of the time, people will face a small fine and sometimes a tax charge.
But he said there is never any jail time or any significant penalty to dissuade offenders from taking part in this crime.
"The profit margin is too hard for them to pass up," Barnum said.
"It's a billion-dollar industry now in Canada," he added. "And, as recently witnessed in Saskatchewan with the meth that was seized, with the contraband cigarettes and everything else, that is not uncommon at all. We're seeing that exactly across the country, the same as what was recently seen in Regina."
For these organized crime groups, depending on the volume of cigarettes they are selling and their connections to the source, there is still a hefty profit margin that can make the trade lucrative and attractive to them.
Supports drug and weapons industry
Barnum also explained how the sale of illicit cigarettes helps fuel the illicit drug and weapons industry for dealers.
"An organized crime group, they are obviously bent on making a profit, that's their number one goal," he said. "If you are responsible for selling cocaine in that group, and I'm responsible for selling the cigarettes, and someone else is selling firearms or meth, or whatever it is. The profits eventually all go into the same bucket. But it does take money to make money. So, when they buy their cocaine or buy their cigarettes, and human trafficking, we're seeing that tied in directly as well, to get the girls. That costs them money. The more money they have and the more low-risk money they have, the better they are to position themselves to take over markets. So, when you circle back to them adding contraband cigarettes to one of their staples, it's a pretty logical decision for them."
Being part of the trade of contraband cigarettes can also impact people's lives in many ways.
"The negative impacts I think for the general public is each year, financially, every government across the country where there is provincial and of course the federal government, they plan on making a certain amount of money through the sale of legitimate cigarettes," Barnum said. "And they put that into healthcare, schools or whatever. That money is starting to shrink in every province across the country. In fact, in Ontario in the last three years, we feel that number is well over a billion dollars that is gone from their economy. Saskatchewan would be less, but everything is per capita and per scale. It is money that is gone for normal spending. That's a problem."
He added another problem from the trade of illicit cigarettes is that it's one thing for governments to focus on legitimate cigarette sales, and "we're not a group that wants people to keep smoking, but what we want is for governments to focus on the organized-crime aspect and the contraband aspect as well as legitimate cigarettes."
Barnum noted that government can't just focus on one side of the equation all the time, by increasing taxes on legitimate cigarettes. By doing so, they would just be driving people to access their cigarettes in the black market.
"There has to be a focus on prevention," he added.
According to the Saskatchewan Ministry of Finance, because illicit cigarettes don't have the federal or provincial tax stamps, they are called "unstamped cigarettes."
The Ministry added that illicit cigarettes often do not meet Health Canada requirements and may actually be more dangerous to consumers than legal cigarettes.
In an effort to stop the sale of contraband cigarettes, members of the Ministry of Finance's Enforcement team often collaborate with municipal police forces, the RCMP and other enforcement agencies on illicit tobacco investigations, "depending on the scope and complexity of the file," they said in an email to SaskToday.
Contraband cigarettes are made mostly in southwestern Ontario and are trafficked across the country, Barnum pointed out.
"The big organized crime groups, the groups that have the connections essentially go right to the source and pick it up by the tractor-trailer full," Barnum said. "That's what we're seeing that's heading across the country in both directions, is major tractor-trailer fulls of contraband cigarettes, heading out to Newfoundland, B.C., Saskatchewan, you name it. They are going everywhere. It's a big, big industry, and a big business."
The cigarettes are packaged from the source with their own pseudo names, not real brand names.
"The contraband smokes have their own names," Barnum said. "Some are goofy names and some are kind of serious."
Contraband cigarette brands are marketed similarly to how traditional cigarettes used to look like in their old packaging.
"Obviously, with government restrictions, what legitimate cigarettes look like now and what contraband cigarettes look like are different, because for the contraband ones, the packaging is more attractive, because there are no guidelines," Barnum said.
The contraband cigarettes are made at factories in southwestern Ontario.
"They are legitimate cigarette factories, mostly based in Indigenous communities," Barnum said. "These cigarette factories are licensed by the federal government to produce cigarettes for different places around the world that have a licence to do so. So, that's all legal. But the organized crime groups have infiltrated. They get in there, and they are buying them [contraband cigarettes] out the back door."
They are packaged professionally, and the cigarettes look like they are professionally made.
"It's a real business," Barnum said. "It's a real thing."
Similar to other organized crime, these cigarettes are distributed through networks.
"Those organized crime networks that exist across the country for various other types of contraband, they use the same networks and the same people," Barnum said. "They would just set it up that way, and infiltrate the cities and the towns with their networking of these cigarettes."
For people purchasing contraband cigarettes, as an example, the seller might wait for a store to close at the end of the day and sell the cigarettes out of a mini-van in the parking lot of the shop after hours.
Barnum said that's what's been seen in B.C.
"It's crippling the small business in that regard, where legitimate small businesses are selling illegal cigarettes as part of how they survive, while people aren't buying those anymore because they are getting the deal in the parking lot," he said. "They are sold anywhere. They are not that hard to find."
The problem of contraband cigarette sales is no worse in Saskatchewan than in other parts of the country, but it is notable.
"Northern Ontario is probably the worse," Barnum said. "We believe the market in northern Ontario is probably 60 per cent saturated with contraband cigarettes. So, 60 per cent of the people there are smoking contraband. In other parts of the country, we see it as high as 40 per cent or 44 per cent. I believe Saskatchewan would fall somewhere in the high 30 or low 40 per cent per cent of people who are smoking are smoking contraband."
To discourage people from purchasing contraband cigarettes, Barnum said, people should think about how each sale impacts society, and themselves personally.
"It's not just about the money in this case," he said. "It's tough right now for Canadians. We see that around the country. A dollar doesn't go very far. So, if you get a chance to save $100 on a carton of cigarettes, it's a pretty easy decision for some folks. However, I don't believe most people understand the connection to organized crime and the damage that is resulting by individuals spending over billions of dollars every year on contraband cigarettes. So, they are really providing and paving a way for these organized crime groups to get stronger, and do more damage to communities, and spread whatever they are doing even more.
"I would say that, just be aware of what you are actually doing."
Barnum also added that another factor people need to keep in mind is that they should think about the lost tax dollars that are needed in the provinces, and how they are lost through contraband cigarette sales.
"If you're going to smoke, eventually you are going to draw down on the health care system," he said. "By putting your money in the black market, that money is not going to be there for when you yourself as a smoker may need it, God forbid. But that's the reality."
"So, there are some pretty logical negative drawbacks once people understand what they are doing," Barnum noted.
