Following the news from the UK that tougher sanctions are being introduced on illicit tobacco sellers, this article takes a closer look at the close-knit network of organisations engaged in tackling illicit trade at retail level in the country.
In particular, the article focuses on Trading Standards authorities – teams of investigators dotted around the country, who ‘walk the streets’ in search of non-compliant activity.
In the UK, the two principal actors in the fight against illicit tobacco are HM Revenue & Customs (HMRC) and UK Border Force. Supporting them are various institutions with different investigative and enforcement roles. These include the National Crime Agency, UK’s lead agency against organised crime (and the UK point of contact for foreign agencies such as Interpol), and the police.
Meanwhile, operating at local level are Trading Standards officers, located across 200 local authority offices countrywide. The officers enforce a wide range of consumer protection laws, with activities that include developing local intelligence, carrying out inspections, and detecting and seizing non-compliant products – especially illicit tobacco products.
Trading Standards was originally known as ‘Weights and Measures’, from the time when its primary function was to maintain the integrity of commercial weighing and measuring by means of routine testing of equipment and goods. As time passed, Trading Standards departments were bestowed with other laws to enforce, including, more recently, those relating to the UK tobacco track and trace system.
Trading Standards officers operate according to an intelligence-led approach, based on analyses of information received from sources such as consumer complaints and a business’s history.
The officers’ main powers include the right to enter business premises, carry out inspections, and secure or seize material required as evidence. They then have the power to issue cautions or fixed-penalty notices, conduct reviews with the aim of revoking business licences, and pursue criminal prosecutions.
The collaboration between Trading Standards and HMRC has been a successful one. For example, in 2021, both parties launched an initiative called Operation CeCe, with the goal of disrupting the illegal tobacco trade at street level. Acting on Trading Standards’ intelligence, HMRC officers were able to seize illegal tobacco from retail and residential premises across England and Wales.
Within its first two years of operation, more than 27 million illicit cigarettes and 7,500kg of hand-rolling tobacco were seized under Operation CeCe.
This on-the-ground action was part of a broader HMRC / Border Force strategy to address three ‘tiers’ of criminality, with the other two consisting of shutting down illegal factories abroad, and intercepting smuggled products and cash at the border.
Tough new sanctions
The new sanctions against illicit tobacco selling, which came into force in July this year, are accompanied by enhanced enforcement measures that build on the successful partnership between HMRC and Trading Standards.
The sanctions are focused on deterring small-scale regular offenders involved in the street-level distribution and sale of illicit products.
‘Although large criminal gangs coordinate the supply of illicit tobacco, most illicit sales are made by small-scale operators, usually retail outlets and individuals. This makes the scale of illicit distribution difficult to contain,’ explained HMRC, which manages the administration and issuing of sanctions.
The new sanctions include a penalty of up to £10,000 for repeat offenders found in possession of illicit products, as well as the seizure and potential destruction of such products, and deactivation of the economic operator ID code that retailers need to be able to purchase and sell tobacco products under the mandatory national track and trace system.
The new measures also allow Trading Standards authorities to make referrals to HMRC upon finding evidence of a contravention of the track and trace regulations.
Examples of non-compliant products include packs not carrying the unique identifier required for track and trace, or those without the requisite authentication label (the UK does not employ tax stamps). In addition, the label must be designed according to HMRC specifications, and must carry five specific security features: colour-changing ink, guilloche pattern, microprint, anti-Stokes ink (ink that becomes visible when exposed to near-infrared light), and a molecular taggant.
Any businesses in possession of products not carrying these elements – or carrying elements that don’t fit the specifications – are in contravention of UK track and trace regulations and therefore subject to possible sanctioning.
Comes at the right time
These tougher measures against non-compliant products come at the right time, given that, according to the latest ‘Trading Standards Survey’ 1. ‘IP crime, in the form of brand and identity theft, is now at the heart of organised crime. The need to guarantee the validity of products on and offline, to protect the public against commercial fraud and to prosecute counterfeiters, smugglers and fraudsters on the streets and online has never been greater,’ said the survey.
The survey is published every year by the UK Intellectual Property Office (IPO) and includes data on intellectual property crimes investigated by individual Trading Standard authorities.
The data shows that 80% of authorities responding to the survey flagged cigarettes/tobacco fraud as their most investigated illicit product. And over 40% identified electronic vaping products as a product category connected to criminality.
Similarly, the survey highlighted subtle shifts in the location of IP crime. Investigations via social media and websites have declined in volume since 2020, whereas investigations into shops are now at an all-time high.
‘The war against IP crime has become a complex operation, combining insights into transformative online technology and age-old investigative techniques acquired through experience on the streets. This report characterises how Trading Standards officers have been putting theory into practice over the last year,’ said the survey.
The survey also describes how Trading Standards has increased its engagement with IPO’s intelligence hub, which reached a five-year peak in the last reporting period. Furthermore, it continues to work with the Anti-Counterfeiting Group (ACG), its most important industry partner. ACG acts as a trusted conduit of information and intelligence sharing between brand owners and enforcement authorities.
Cooperation with other anti-counterfeiting groups, including REACT and FACT, also increased over the last three years. Finally, 30% of Trading Standards authorities reported engaging, for the first time, with an independent IP crime investigator called WRi, as a further demonstration of their deepening engagement with the issue of IP crime.
1 - www.gov.uk/government/publications/trading-standards-ip-crime-survey-and-successes-2022-to-2023/trading-standards-survey-2022-2023.