From: Research Institute for European and American Studies (RIEAS)
Daveed Gartenstein-Ross
(Senior Fellow, Foundation for Defense of Democracies)
Kyle Dabruzzi
(Terrorism Analyst, Gartenstein-Ross Group)
Copyright: http://www.manhattan-institute.org
Note: At the end of the article, information about the Authors.
Executive Summary:
The Convergence of Crime and Terror: Law Enforcement Opportunities and Perils provides an analysis of the increasingly important link between traditional criminal activities and terrorism. By cataloging a number of relevant cases, the authors have illustrated that terrorists routinely resort to “traditional” crimes, from drug trafficking to financial scams, to further their objectives.
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Cigarette Smuggling
Cigarette smuggling is an arbitrage scheme that has been used to raise funds for terrorist groups from within the United States. Central to such smuggling schemes is the variance in cigarette tax rates between the states. Some states, such as Virginia and North Carolina, have low cigarette taxes. Others, like New Jersey and New York, have higher cigarette taxes. In a cigarette smuggling scheme, the smugglers purchase large volumes of cigarettes in states that have low tax rates and resell them below market prices in states with high cigarette taxes. They’re able to undersell the market since the smugglers don’t pay taxes on the cigarettes they resell. Steven Emerson has explained that such schemes can yield extraordinary profits: As a senior ATF [Bureau of Alcohol, Tobacco, Firearms and Explosives] official explained, such smuggling is quite lucrative. For example, a smuggler could buy a carton (ten packs) of cigarettes for around $20 in Virginia (where, until September 2004, the cigarette tax was 2.5 cents per pack), and then resell it in New York City (where the tax is $1.50 per pack) for about $40 a carton. A single truckload of cigarettes can yield a $2 million profit.[51]
The best-known case of cigarette smuggling involved a cell in Charlotte, North Carolina, that raised money for Hizballah. Brothers Mohamad Hammoud and Chawki Youssef Hammoud would buy van loads of cigarettes in North Carolina, where the tax was 5 cents per pack, and transport them to Michigan, where the tax was 75 cents a pack. Douglas Farah has noted that “[t]he brothers could clear $8 to $10 per carton, and each van load netted them up to $13,000.”[52]
This is not the only case in which profits from cigarette smuggling were diverted to terrorist groups. By mid-2004, the ATF had more than 300 open cases of illegal cigarette trafficking, and an official reported that several of these were linked to terrorist fund-raising. Assistant ATF director Michael Bouchard told the Washington Post: “This is a major priority for us. The deeper we dig into these cases, the more ties to terrorism we’re discovering.”[53]
