Three more arrested over 2.2 million cigarette bust, thought to be linked to Malaysian criminal syndicate

Customs has now made four arrests over attempts to smuggle 2.2 million cigarettes into New Zealand. Photo / NZ Customs

More people have been arrested over a 2.2 million cigarette border bust and an attempt to evade $2.72 million in excise tax, with authorities now believing they are linked to a Malaysian organised-crime syndicate.

The find was Customs' highest single-seizure for illicitly imported cigarettes at the time.

After a New Zealand-bound shipment, sent from Malaysia and declared as 175 roof extension units, arrived in mid-July, Customs found some 2.2 million cigarettes inside the stacks of metal frames.

Initially a 30-year-old Malaysian man, who has interim name suppression, was arrested for attempting to evade $2.72m in duty tax and GST. He is the sole director of what Customs alleges to be a "shell" company linked to the shipment.

However, the investigation continued and Customs today announced three more arrests in the case after about 30 staff and police raided three homes in the Auckland suburbs of Mount Roskill, Flat Bush and Albany this morning.

About $20,000 in cash and some more cigarettes were also seized, Customs said in a statement.

The trio of arrested Malaysian nationals were scheduled to appear in the Auckland District Court this afternoon.

The men, all aged in their 30s, face joint charges of defrauding Customs of revenue and participating in an organised criminal group.

Customs investigations manager Bruce Berry said the three people arrested today are believed to be linked to a Malaysian organised-crime syndicate operating in New Zealand.

"In recent years, Customs has conducted a number of investigations involving Malaysian syndicates, which show that members are often sent to New Zealand to smuggle and distribute the commodities," he said.

"These syndicates often use a shell or inactive company to try to give the appearance of legitimate operations, and we believe this case is no different. We are not ruling out further charges."

In mid-July 2020, Customs intercepted 2.2 million cigarettes which had been exported from Malaysia and declared as 175 roof extension units. Photo / NZ Customs

Today's arrests come after the Herald last month revealed New Zealand's largest ever single-seizure tobacco smuggling case, which came just two weeks after the previous record find.

It also involves a Malaysian businessman, who has been charged over allegedly importing 2.39 million cigarettes inside a container from Malaysia on July 27 and trying to avoid a $3m tax bill.

Customs said it has seized three Malaysian cigarette shipments in Auckland within a six-week period, the third being a shipment intercepted in late August of 2.31 million cigarettes, concealed in a similar way to evade $2.85m in duty and GST.

"In the past, Customs has largely seen Chinese-branded cigarettes exported from China," Berry said.

"The Malaysian-exported cigarettes have been a game changer in terms of the distinctive packaging, sophistication of concealment, and the significant volumes per shipment. This is something that our partners in Australia have been seeing for some time – it's all driven by greed and profit."

Some of the country's biggest tobacco cases have already resulted in sentences handed out by the courts, including for Customs' largest ever cigarette smuggling investigation.

In that case, code-named Operation Whitethorn, a businessman and his company avoided $18.73m in tax by smuggling nearly 20 million cigarettes into the country from China between 2015 and 2018.

The businessman, who has interim name suppression while a woman also charged remains before the courts, was sentenced in June to five years and three months' imprisonment.

The company involved was only fined $9800, but some $4m in cash has also been seized during Operation Whitethorn.

New Zealand Customs investigations manager Bruce Berry. Photo / Brett Phibbs

In another case, Auckland businessman Bo Lin was sentenced to nine months' home detention last month.

He imported a shipping container of foodstuffs from China under his business trading name, Enternal Trading Limited. However, an inspection by Biosecurity New Zealand revealed the container held 2418 cartons of Chinese-branded cigarettes hidden inside boxes of food, which accounted for some 483,600 individual cigarettes.

Lin and his company, of which he is the sole director and shareholder, were charged with defrauding the revenue of Customs in an effort to dodge more than $537,500 in excise tax.

Enternal Trading, which was described by the judge as Lin's "alter ego", was ordered to pay $25,000 fine.

In July the Herald also broke the news that New Zealand's increasing tobacco black market saw the Government miss out on $287.4m in tax revenue for 2019.

Some politicians have criticised the effectiveness of the annual tobacco products tax hike, which has led to cigarette prices in New Zealand being among the highest globally and behind only Australia in the Pacific-South East Asia region.

Deputy Prime Minister and New Zealand First leader Winston Peters said last year "the price point has reached such a level that organised crime groups see economic opportunity".

More legislation to help combat the problem came into effect last month in the form of the Customs and Excise (Tobacco) Amendment Bill. It closed a loophole allowing people to import cigarettes and loose leaf tobacco for manufacturing cigarettes and "roll your owns" for black market sales without excise tax.

Only Act voted against it, party leader David Seymour arguing further legislation simply creates more bureaucracy and continues to drive the tobacco supply underground.

Customs Minister Jenny Salesa said she believed the new law gave authorities enough powers to stem the flow of illicit tobacco into New Zealand.

For the first time in four years, no increase to the tobacco tax was also announced as part of the Government's 2020 Budget.

The yearly race for smokers to stock up and beat the January 1 price lift, however, has helped keep the Government's books in surplus.