Counterfeit cigarettes: Smoking out the bandits

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A grey-haired pensioner whiles away a warm summer's afternoon hunched over a jigsaw-map of Great Britain as her husband tends lovingly to their three small dogs in the living room. A brimming ashtray sits on a coffee table and the smell of stale smoke hangs in the air.

The retired couple have lived inthis semi-detached house in a leafy hamlet in the south of England for more than a decade and are well-known around the neighbourhood. But they harbour a secret.

Stashed within their garage and garden shed amid a large collection of eggs and tropical flowers is an £11,000 haul of counterfeit cigarettes and rolling tobacco, boxed and ready for sale. Upstairs, hidden under the master mattress, lies £20,000 in cash.

This is an illegal "tab house" – the final stop on Britain's vast illegal tobacco trade network. Outside 10 police and customs officers stride silently towards the front door. A loud knock sparks a yapping frenzy from the dogs, and the husband hobbles hurriedly towards the back door. But two burly officials block his escape.

A search of the property unearths 36,000 counterfeit cigarettes and 16.5kg of smuggled rolling tobacco, a haul that accounts for just 0.002 per cent of the 1.7 billion illegal cigarettes seized in the UK by HM Revenue & Customs (HMRC) each year.

HMRC conducts raids like this every day throughout Britain on shops, warehouses and residential "tab houses" in its war on the thriving tobacco trafficking underworld, which costs the taxpayer some £2 billion a year. And that figure could rise as fears grow over the revenue's ability to stifle smugglers' increasingly creative attempts to beat the border controls.

The National Audit Office recently revealed that the agency is struggling to meet Government targets to slash £1.6 billion from its budget and shed 10,000 jobs by 2015.

But despite these hurdles, HMRC has vowed to smoke the criminals out.

"This is more than meddling in small crime," says HMRC Higher Officer Jennie Kendall, speaking on the lawn of the house. "Those selling counterfeit cigarettes have no regard for their customers and would not hesitate to sell them to young people and children. This is highly organised criminal activity headed up by international crime gangs who infiltrate and exploit the system."

Counterfeit tobacco begins its journey in factories set up in regions of the world with weak controls and high levels of corruption, such as the crime-ridden Russian exclave of Kaliningrad, Guangdong province in China, or South America's notorious Tri-border area between Argentina, Brazil and Paraguay.

Despite the threat of up to seven years in prison in Britain, smugglers are constantly inventing new ways of feeding the voracious black market. Customs officers say they have seen packets stuffed into teddy bears, children's toys, wood flooring, air-conditioning units and even hollowed-out Christmas trees.

"They can fit 8.1 million cigarettes into a single shipping container," explains HO Kendall. "We do pick many up at the point of entry but some unfortunately do slip through the net."

The cargos that are seized are shredded, turned into "power blocks" and burned in power stations for the national grid.

But those cargos that get through often end up in the hands of British organised crime gangs who pump them into a network of storage facilities dotted throughout the country.

From there they are farmed out to local dealers, to whom profit margins far outweigh the dramatically increased risks to their clients' health.

"They are not subject to the same checks as legal brands," says HO Kendall. "The rubbish that is put into counterfeit cigarettes makes them far more dangerous."

Criminal manufacturers often lace their tobacco with a myriad of unwelcome ingredients, from sawdust and rat droppings to camel dung and excessive levels of toxic chemicals.

Earlier this year, HMRC smashed a £3 million smuggling ring when officers uncovered 12 million faked Chinese cigarettes in a warehouse on the banks of the River Tyne in Gateshead. It was the team's biggest haul to date.

But for the international cigarette-smuggling fraternity, business is booming. Its distribution systems are complex and the smuggling routes circuitous and hard to track.

Manufactured for 9p, a packet of 20 counterfeit cigarettes enjoys a near-4,000 per cent mark-up by the time it lands on the UK's streets, selling for around £3.50.

The typical price of a popular premium brand in the UK is around £7, according to the Tobacco Manufacturers' Association.

Back in the hamlet, the sun beams onto the two-storey house where the couple are being grilled by Detective Sergeant O'Brien, who led the joint sting by local police and HMRC.

There's still a locked garage outside, but the husband claims he hasn't a key. When DS O'Brien threatens to break down the door and leave him liable for the damage, the man conjures it from a cabinet drawer.

The garage yields four more large boxes filled with illegal smokes. Many have names such as Gin Ling, Westbury and Richman, but all are packaged to in some way resemble the world's best-known brands.

"We had received intelligence that the address was dealing in contraband cigarettes and alcohol," says DS O'Brien. "This address has been under surveillance for a while now. Today we identified someone coming to this address who is linked to thefts that we believe are funding illegal local tobacco trafficking."

He said this double-pronged attack between local police forces and HMRC is an example of how agencies often have to pool resources to beat the swingeing austerity measures that are crippling their crime-fighting capacity.

Illegal alcohol is another major concern. Alcohol fraud costs the UK about £1bn a year in lost revenue, including £300m from illegal spirit sales, according to Government estimates. In July, five Lithuanian men died in an explosion at a bootlegged vodka distillery in Boston, Lincolnshire.

Following a painstaking four-hour search of the illegal tobacco property, the wife is finally cuffed and taken to a police van. She tries to hide her face with a scarlet coat as her husband dodders up the van's ramp behind her.

Behind them are more officers, their arms full with cardboard boxes.

As the van pulls away, a female neighbour runs into two officers, weeping. "You have no hearts, do you?" she cries. "It wasn't a lot of stuff. How can you do this to a woman with cancer?"

"Contraband cigarettes are a massive problem in the area, especially in view of the economic climate," says DS O'Brien. "This raid may seem small scale but it is linked to organised crime. And make no mistake; these people are thieves, stealing from the taxpayer.

"Arresting them will not only disrupt organised crime but also make a dent in the smuggling routes into and through the country."

The couple's dogs, DS O'Brien insists, will be well looked after.