cigarettes, open cigarette pack
© Frank May / Global Look Press
The federal and provincial governments are planning to put more money into the fight against contraband tobacco − a thriving black market that is rife with organized crime, costing billions of dollars a year in lost tax revenue.

In Ontario, it's believed that roughly one third of cigarettes are from an illicit source, OPP Detective Sergeant Luc Bouvier of the Contraband Tobacco Enforcement Team said.

His small unit - which falls under the OPP's broader organized crime enforcement bureau - has spent the past two years investigating the smuggling and trafficking of contraband tobacco across Ontario.

The new provincial budget, released Wednesday, proposes boosting police resources in order to better address the market's linkages to organized crime.

"We know [organized crime is] involved in anything where they can make money," Det. Sgt. Bouvier said. "And you can make a lot of money with contraband tobacco ... it's very, very profitable."

Canadians think of contraband tobacco "as a nuisance at best, or a tax-revenue problem at worst, not in terms of organized crime or terrorism," researcher Christian Leuprecht observed in a 2016 Macdonald-Laurier Institute study on contraband tobacco and cigarette trafficking in Canada.

The RCMP has estimated that there are roughly 175 organized-crime groups in Canada with ties to the illicit tobacco market.

Earlier this month, the Sûreté du Québec announced the takedown of a mass tobacco-importation scheme that they allege had ties to Italian and Indigenous organized-crime groups.

Project Olios, which began in June of 2016 and was conducted in partnership with the Canada Border Services Agency and partners on both sides of the border, focused on individuals illegally importing tobacco from the United States, through the Lansdowne and Fort Erie border crossings, to be sold on the Kahnawake territory in Quebec.

At least 48 cargo shipments had been imported from the United States since June, 2016, the police service said − an estimated 744,000 kilograms of tobacco, which represents more than $200-million in tax revenue loss.

Contraband tobacco is "systematically" trafficked alongside other goods," Mr. Leuprecht noted in his study − including narcotics.

The 2018 federal budget, released last month, also allocates more money toward the fight against contraband tobacco.

Scott Bardsley, press secretary for Canada's Office of the Minister of Public Safety and Emergency Preparedness, said in an e-mail Thursday that the funding "will enable Public Safety Canada to maintain Indigenous and non-Indigenous capacity to address contraband tobacco and its associated links with organized crime."

They will also undertake research to better understand and assess Canada's evolving contraband tobacco market.

Currently, OPP Det. Sgt. Bouvier said, police rely on academic studies to determine the prevalence of contraband cigarettes. This often involves "butt counts" - surveys that involve sweeping up and analyzing a sample of cigarette butts from a given community (usually outside locations with high smoking rates such as hospitals, schools, government offices and casinos).

While Det. Sgt. Bouvier said the majority of Canada's black-market cigarettes are manufactured domestically, a lot of the fine-cut tobacco used to make them is smuggled in from elsewhere.

Raw-leaf tobacco (a bail of which weighs roughly 720 pounds) goes for roughly two dollars a pound in the legitimate market, he said − but on the black market, it can go for upward of 10 or 12 dollars a pound.

The Ontario Liberals' budget proposes amendments to the Tobacco Tax Act that it says would make it easier to track the movement of raw-leaf tobacco as it moves through the supply chain, as a way of preventing diversion.

The government has been criticized in the past for not taking an aggressive enough stand on contraband tobacco.

Possessing unstamped cigarettes for the purpose of trafficking has only been an offence under Canada's criminal code since 2016. Even today, the laws around contraband tobacco remain complex, Det. Sgt. Bouvier explains.

Separate from unmarked or unstamped cigarettes, there are also 'peach-stamped' cigarettes (bearing a peach-coloured stamp), which are supposed to be sold only on reserves to First Nations customers. If a non-Indigenous person is caught with cases of peach-stamped cigarettes, they could be subject to a fine under the Tobacco Tax Act − rather than a criminal charge.

In addition to concerns around the involvement of organized crime, Det. Sgt. Bouvier said there are also potential health and safety issues with contraband tobacco and the makeup of black-market cigarettes.