Customs officers stopped nearly 11 million black market cigarettes in the past financial year as organised crime groups target the lucrative NZ market. Photo / Supplied
Customs officers stopped nearly 11 million black market cigarettes in the past financial year as organised crime groups target the lucrative NZ market. Photo / Supplied
Staff at an international airline smuggled thousands of black-market cigarettes through Auckland airport, in a case that highlights a glaring breach of New Zealand's border security.
Three men who worked for Air China, including the branch manager, were arrested after a Customs investigation uncovered the simple ruse used by thetrio at least a dozen times at Auckland International Airport.
One of them would just walk on the tarmac to the Air China flight which had landed and return to the office with the backpack full of cartons of cigarettes - without declaring the goods and paying the duty tax.
If caught, the Air China staff planned to say that passengers had accidentally left the cigarettes behind while disembarking.
With a packet of cigarettes costing around $35 at retailers, black market cigarettes have become a lucrative commodity in New Zealand - estimated to be eight times more profitable than cocaine - which has attracted the attention of organised crime syndicates.
Customs seizes around 125,000 undeclared cigarettes every month in a growing illegal market estimated to cost the Government $287 million in unpaid tax in 2019.
While the Air China staff only cheated the taxpayer out of a few thousand dollars, Customs prosecuted them because of the potential risk to border security by employees who repeatedly abused their position for personal gain.
"We took a very dim view of this," head of Customs investigations Bruce Berry told the Herald.
"It's a big deal because it's a breach of trust in the supply chain. In this case, it was low-level tobacco products. But the risk is that the subversion of the supply chain opens the door for any type of illicit product."
Bruce Berry, investigations manager for New Zealand Customs, with smuggled cigarettes worth about $1.8 million. Photo / Brett Phibbs
The three Air China staff members pleaded guilty to defrauding Customs of revenue and were discharged without conviction by Judge David McNaughton at their sentencing hearing in the Manukau District Court in November.
Berry said the trio no longer worked at the airport. Air China did not respond to a request for comment.
The existence of Operation Waxeye was mentioned in documents released under the Official Information Act to the Herald, which requested briefings about examples of corruption at New Zealand's border.
While there were no known links to organised crime in this case, unlike some recent seizures of millions of black market cigarettes in New Zealand, Berry said international criminal networks were constantly looking to find new ways to exploit supply chains.
"For organised crime to exist, it needs to subvert people and processes. We know organised crime syndicates are actively targeting and looking for weaknesses in the supply chain," Berry said.
Although New Zealand has a reputation as one of the least corrupt countries in the world, in the past 12 months the Herald has revealed several examples of an "inside man" allegedly working for organised crime groups.
Last year, a crew of Air New Zealand baggage handlers was arrested for allegedly helping someone to smuggle drugs into the country during a Covid-19 lockdown.
And in an extraordinary heist, a suspicious shipping container linked to the Mongols motorcycle gang disappeared from the Ports of Auckland on the back of the truck in the middle of the night. A shoebox filled with $90,000 was found in the home of a senior staff member at the port.
This year, a stevedore at the Port of Tauranga was arrested in an alleged Mexican cartel plot to smuggle hundreds of kilograms of cocaine and methamphetamine.
"The targeting of supply chains by organised crime is relatively new in New Zealand, but it's well established overseas," Berry said. "So Customs is looking at those trends overseas and working with our industry to look for unusual activity."
The lucrative profits of black market cigarettes in New Zealand had attracted the attention of global organised crime syndicates, Berry said.
Customs stopped nearly 11 million cigarettes at the border in the 2020/21 financial year, and another 2.5 tonnes of loose tobacco, and Berry said there had been a recent swing to large-scale shipments inside sea containers.
Last year, an Auckland businessman was jailed for smuggling 20 million cigarettes over a three-year period and avoiding more than $18m in tax.
Just two weeks later, another man was charged with allegedly avoiding a $3m tax bill when Customs seized 2.39m cigarettes - the single largest shipment ever discovered in New Zealand.
A report by accounting firm KPMG estimated the New Zealand Government missed out on $287 million in unpaid tax in 2019 because of the expanding tobacco black market.
A security camera image of the shipping container being removed from the Ports of Auckland in July 2019 on the back of a truck. Photo / Supplied
"The money coming through is massive," Berry said. "We're talking revenue in the millions of dollars, in terms of the shipments we're seizing.
"The price of tobacco is making it a more attractive commodity to organised crime, and the sophistication used [in smuggling methods] is commensurate to the amount of money that can be made."
New Zealand was being targeted by the same criminal groups sending cigarettes to Australia, said Berry, so Customs was working with the Australian Border Force, which has a taskforce dedicated to investigating the tobacco problem.
"We're working with our offshore partners and starting to target supply chains at the source," Berry said.
"We don't have the same scale of problem that Europe has. But then again, we used to say that about Australia, and we're front footing it with them now."
