Black-market cigarettes could fund terrorism, RCMP fear

Published 5 November 2009

Canadian authorities worry that the booming black market trade in cigarettes could be used to finance terrorism; many Indian reservations are used as bases for the illicit trade

The black market, cross-country tobacco trade has created an underground economy Canadian authorities fear could be used to finance overseas terrorism, internal RCMP intelligence documents obtained by Canwest News Service show. The materials also indicate RCMP intelligence predicted the expansion of the underground tobacco trade shortly after the federal government shelved plans in the early 1990s to invade several Mohawk reserves. The government chose instead to lower tobacco taxes to undercut the financial incentive for smuggling.
The underground tobacco trade now spans the country, with authorities finding Mohawk-made cigarettes from Newfoundland to Vancouver Island, according to an RCMP intelligence analysis from 2008.

Jorge Barrera and Jack Branswell write in the National Post that black market tobacco also greases an underground economy in Canada worth hundreds of millions of dollars, supplying money for a range of illegal enterprises that could include terrorism, according to an RCMP Quebec division intelligence report for January and February 2008, obtained under the Access to Information Act. “By offering tobacco products at a better price, smugglers stimulate an underground economy within which its profits could be used to finance illegal activities,” said the report. “These activities [include] the smuggling of drugs and firearms, the financing of terrorism, money laundering, among others.”

The RCMP claim 105 crime groups are involved, at different levels, in the illegal tobacco trade.

Police, however, have not yet found firm links between tobacco and terrorism, said RCMP Sgt. Michael Harvey, who works out of Cornwall, Ontario, on the doorstep of Akwesasne, a Mohawk reserve straddling the Canada-U.S. border that sits about 100 kilometres west of Montreal.

Sgt. Harvey said police traced money made by a Middle Eastern group from the purchase and reselling of Akwesasne-made cigarettes to a Middle Eastern country. What the money was used for remains unclear and the investigation is ongoing, he said.

Asian groups have also been traced sending home money made off illicit cigarettes, he added.

Illegal cigarette factories on the U.S. side of Akwesasne supply the majority of tobacco contraband in Canada, authoritiessay. Foreign-made cigarettes, including Chinese, are also present.

A source involved in the Mohawk tobacco trade said the RCMP are using the word terrorism to justify another attempt against Mohawk sovereignty. “The cigarette trade is our economy. It has decreased the crime rate with the aboriginal population. It has employed people and it is part of our inherent rights,” said the source.
The RCMP compare the current situation with what it faced in the early 1990s during rampant tobacco smuggling fuelled by high Canadian taxes. In response, authorities planned a major operation targeting several Mohawk communities including Akwesasne, along with Kahnawake and Kanesatake near Montreal. The Canada Security Intelligence Service, commandos from Joint Task Force Two, 2,000 RCMP, 2,000 Surete du Quebec and more than 2,000 Canadian Forces members trained for the operation dubbed Operation Campus and Operation Scorpion-Saxon, according to a recently published academic paper written by Timothy Winegard, an Oxford doctoral candidate who studies the relationship between the military and First Nations.

The threat of “bloodshed” and a “nationwide indigenous uprising” forced the shelving of plans, wrote Winegard, in his paper, “The Forgotten Front of the Oka Crisis: Operation Feather/Akwesasne,” published in the Fall-Winter 2009 edition of the Journal of Military and Strategic Studies.

The cigarette war, though, was far from over. Smugglers, adjusting to lower margins caused by lower taxes, expanded across Canada and diversified their smuggling, a 1996 RCMP intelligence analysis said. “As predicted, this reduction in smuggling was short lived,” said the analysis. “Smuggling networks have become so deeply entrenched that they will transport and distribute any commodity that will result in profit.”

As taxes creep up, the RCMP continues to make noise. It is doubtful anything will change. The cost of shutting down the trade remains too high for both Canada and the U.S., says Mr. Winegard. “Both governments recognize the potential for immediate and prolonged violence, not only within Mohawk territory, but with the possibility of it spreading to other First Nations communities,” Winegard said. “An unofficial, status-quo remains in place.”