Japan Tobacco - Anti-Illicit Trade Compliance

Anti-Illicit Trade Compliance

Japan Tobacco Inc, through its international operating divisions JT International S.A. and JT International Holding BV, signed a Cooperation Agreement with the European Commission in 2007 to combat the illicit trade in cigarettes under Article 9 of which the company agreed to “pro-actively disclose” to the European Commission’s Anti-Fraud Office (Office Europeen de Lutte Antifraude – OLAF) “…all material information coming into (its) possession after the Execution Date relating to potentially Illegal Product.” The Agreement defines “Illegal Product” as Contraband or Counterfeit Cigarettes. Both Japan Tobacco Inc and JT International S.A. claim to adhere to a “zero-tolerance approach” to illicit trade.

JT International S.A. and several of its distributors, including Megapolis in Russia and IBCS Trading in Cyprus, however, have been implicated as recently as 2011 in widespread smuggling to include selling cigarettes to a buyer in Syria subject to EU, Swiss, and US Sanctions and diverting cigarettes from Russia into the European Union and smuggling Winston and other popular cigarette brands into Iran. A JT International S.A. executive told the Wall Street Journal in August 2012 that the firm had continued to ship cigarettes to Syria until as recently as February 2012, almost a full year after the imposition of EU and US sanctions. The Journal cited Syrian dissident sources who claimed that the government of Syrian President Bashar al-Assad uses cigarettes as payment for the irregular military forces and militias, known as the shabeeha, who have had a central role in its violent crackdown.

Company documents show that in 2010 the head of the JT International SA security office – who performed a similar function at the former Gallaher Group PLC – sought to destroy evidence linking up to 13 company officers to smugglers in the Balkans region; a parallel effort was then being run by company management to hack into the emails of company anti-smuggling investigators, competitors, and law enforcement.

The firm also announced in 2011 that it had purchased the largest cigarette producer in Sudan and South Sudan as part of an effort to expand sales in the war-torn region, which has emerged as an entrepot for cigarette smuggling.