In June 2012, the international police cooperation organisation Interpol accepted a donation of 15 million euros, to be paid over a three-year period, from US tobacco company Philip Morris International. The funds were to be used in combating black market cigarette trafficking.
One year later, Interpol had adopted Codentify, a product traceability system developed by Philip Morris International, British American Tobacco, Imperial Tobacco Group and Japan Tobacco International.
The tobacco companies are currently lobbying the European Union to also adopt this marking system, placed on each packet of cigarettes, which allows for the identification of genuine or counterfeit products as they pass through the supply chain from producer to customer. Quite simply, the four big tobacco companies propose a system that places themselves in control of checking the authenticity of products bearing their names.
With increasing pressure on its finances, Interpol appears to have overlooked the fact that the tobacco industry has for decades fed the black market traffic in cigarettes and in close cooperation with underworld networks. “Twenty years ago, almost all the tobacco industry was involved,” commented Luk Joossens, an international expert on the black market cigarette trade and who has served as an advisor to the World Bank and the World Health Organisation. “Billions of cigarettes were exported, officially as ‘duty free’. These cigarettes arrived on the illicit market in Europe. A police organization cannot work with companies suspected of organizing smuggling, it’s unacceptable.”
The donation was just one of several received by the intergovernmental police cooperation organisation in new partnerships it has developed with the private sector. These include funding of 20 million euros from the International Federation of Association Football (FIFA) in 2011, and funding of 4.5 million euros from the pharmaceutical industry in a deal mapped out earlier this year.
Enlargement : Illustration 1
In a joint letter sent to Interpol secretary general Ronald K. Noble in late 2012, senior police officers from several European countries called for more transparency over the deals with the private sector. Since then, a working group under the leadership of Jürgen Stock, head of the German Federal Police Office, the BKA, has been set up to establish a code of ethics for Interpol’s funding.
“In any case, whatever the industrial sector with which we deal, there will always be suspicion,” objected Interpol’s General Counsel and Director of Legal Affairs, Joël Sollier, in an interview earlier this summer with Mediapart. “Are you going to work with the arms industry? With the pharmaceutical industry? With the tobacco industry? I can demonstrate to you that, from a certain point of view, one shouldn’t. And on the other hand, I can show you that there are no other possibilities, because there are only those who are interested in this particular market who could finance the combat against the misdemeanours of this market.”
Mediapart has obtained a copy of a report by Europol, the European Union’s criminal intelligence agency, entitled ‘Threat Assessment – Organised Crime in Montenegro’ (see the report here). Dated August 2012, it indicates that the tobacco industry still plays a role in contraband trafficking in the state that was once part of the former Yugoslavia. The report observed that in Montenegro: “Cigarette smuggling continues, with ships used to transport large quantities with a legally declared cargo of cigarettes into and out of the Port of Bar. The presence of a Philip Morris factory in Montenegro is a crime relevant factor.”
Questioned by Mediapart, both Philip Morris International and Interpol described the Europol report as erroneous. In fact, Philip Morris does not have a factory in Montenegro, but it does have offices.
Europol itself has now backtracked on its assertion. "The wording unfortunately is not valid,” said a Europol press officer. “It is a misunderstanding that PMI has a factory in Montenegro and as such no single company should have been mentioned, since the idea behind the statement is that any cigarette factory in the [Montenegrin] territory is to be considered a crime relevant factor."
That error of vocabulary aside, the report illustrates the passivity of the tobacco industry towards contraband. In its study of organised crime in Montenegro, carried out between 2010 and 2012, Europol found that tens of millions of cigarettes were illegally smuggled every year from Montenegro to European Union (EU) member state Greece. Once inside the EU, the cigarettes are destined for the black market. While the quantities involved are significantly less than during the 1990s, at the height of the gang-led smuggling activities that became dubbed ‘the Montenegro Connection’, the trafficking is being carried out under the nose of Philip Morris which has a base in Montenegro since 2007.
“Cigarette smuggling causes significant damage to businesses like ours which is why we work with numerous organizations and commit significant resources to tackle the problem,” Philip Morris International told Mediapart in a statement.
A system as yet only adopted by Interpol
In the 1990s and up until the beginning of the following decade, billions of cigarettes, mostly produced in the Netherlands, Switzerland and countries in eastern Europe, transited via Montenegro en route to black markets within EU member states. They were handled through Montenegro by criminal gangs before being resold, duty free, notably in Italy, Spain and France. Montenegrin Prime Minister Milo Dukanovic, who also served in the post between 1991, and 1998, when he became president, was even accused by an Italian prosecutor leading a criminal investigation based in Bari as having developed the cigarette trafficking with the help of the tobacco industry.
Mediapart contacted a man who once worked as an intermediary between a major multinational tobacco company and cigarette-trafficking gangs in Montenegro during the 1990s. Speaking on condition of anonymity, he recalled: “During the 1990s, there were 1,000 illegal truckloads per year, representing 1.2 million crates that each contained 10,000 cigarettes.”
“Interpol financed by Philip Morris, I have problems with the logic [of that],” he added.
Montenegro is not the only country where the tobacco industry is suspected of feeding the contraband market. In January 2012, British weekly newspaper The Observer reported how the world’s third-largest tobacco company, Japan Tobacco International, was under investigation by the European anti-fraud service OLAF over a duty-free shipment of 90 million of its cigarettes to Syria. The shipment was sent to Syria Duty Free Shops Ltd, a company run by Rami Makhlouf, cousin of Syrian dictator Bashar al-Assad.
Japan Tobacco International is one of the four tobacco companies behind the development of Codentify, the product tracing and verification system now adopted by Interpol after it accepted the donation from Philip Morris International, also behind the scheme.
In an exchange by email, an Interpol spokesperson vigorously denied that the agreement with Philip Morris International (PMI) compromised the organisation’s independence. “INTERPOL’s agreement with PMI is not unusual,” read the statement. “In 2004, 2007 and 2010 the European Community entered into agreements with Philip Morris International, Japan Tobacco International, British American Tobacco and Imperial Tobacco for a total of almost USD 2 billion to combat the illicit trade of cigarettes. This amounts to well in excess of 100 million per year.”
“Has anyone questioned the European Community’s ability to fight the trafficking in illegal tobacco products in complete independence after having signed these four agreements totaling almost USD 2 billion? Of course not. Why not? Because independence is guaranteed as part of their agreements, and the same is true for INTERPOL's modest agreement of EUR 5 million per year for three years." (The full text of Interpol’s reply to questions raised in this article can be found on page 4).
In the early 2000s, the European Commission began legal proceedings for “money laundering” and “involvement in organised crime” against the big four tobacco firms cited in Interpol’s reply. In a conciliation agreement, Philip Morris International agreed to pay out 1 billion euros to the Commission, spread over a period of 12 years, in compensation for the loss of tax received from tobacco sales by a number of EU member states.
The agreements reached between the EU and the tobacco industry included the imposition on the latter of an effective traceability system for its products notably to control exports. It took Philip Morris International, Japan Tobacco International, British American Tobacco and Imperial Tobacco almost ten years to develop ‘Codentify’, a digitally generated 12-number algorithm that is placed onto a cigarette pack.
No public authorities in Europe or elsewhere have yet decided to adopt the recently-launched system. But in April this year, speaking at the 7th Global Congress on Combatting Counterfeiting and Piracy, held in Istanbul, Interpol secretary general Noble presented a new platform it had developed for identifying stolen or illicit products, called the INTERPOL‐Checkit programme, or I‐Checkit. "Interpol’s platform will be compatible with the industries’ systems, such as PharmaSecure, a leader in drug authentication technologies and software verification systems and Codentify, the authentication solution provider of the tobacco industry,” announced Noble.
A choice between public or private control
The following month, on May 8th, the association that controls Codentify, the Digital Coding and Tracking Association (DCTA) was launched. Co-founded by the big four tobacco companies, the DCTA has begun styling itself as an expert body in identifying illicit goods, providing the tobacco industry with what might be regarded as a respectably-named lobbying tool for Codentify.
The DCTA has a major competitor in the form of Swiss multinational company SICPA, a specialist in traceability and authentication systems, from banknotes to commercial goods. It has developed a product traceability system called Sicpatrace which has now been adopted by several countries, including Brazil, Turkey and Morocco. “Our system is independent, so it cannot be distorted by the industry that could, in certain countries, manipulate data,” said Sicpa director Bruno Frentzel. “We are the operator, but all the data belongs to a State’s public authorities.”
The EU’s draft Tobacco Products Directive, amendments to which were voted through the European Parliament earlier this month, and most of which could become law in 2014, sets out a number of regulations concerning the sales and exports of tobacco products among member states. “Article 14 of this directive, which concerns traceability, carries constraints for the cigarette makers because it involves a marking system for all 28 EU countries. The industry would like to weaken the traceability chain and limit control to the first buyer [in the supply chain],” commented Luk Joossens.
“Excise taxes in Europe are estimated to total 316 billion euros, of which almost a third concern cigarettes, one of the main products, along with oil, that are submitted worldwide to excise taxes,” added SICPA’s Frentzel.
But the European Commission has yet to decide whether to adopt an independent traceability system or one proposed by the tobacco industry. It has invited tenders for the process of researching the most adapted system, and no decision is expected before 2015.
In the meantime, SICPA and the DCTA are separately lobbying, country by country, for their own system to be adopted. “In France, in the Netherlands, [and] in Germany, negotiations with Codentify are well advanced,” a well-informed source, whose name is withheld, told Mediapart. “The advantage of Codentify is that it is simple and free of charge.”
In France, where taxes on cigarette sales represent a very significant source of revenue for the state, SICPA has been lobbying politicians with the promise of creating thousands of jobs. “We’re working with the industry minister,” claimed Frentzel. “It could see the creation of 3,000 jobs in France, the country which would house a part of our production activity.” But the company faces a major obstacle in the form of French tax law. This contains, in its Article 569, a provision that a traceability system for tobacco products should be “put in place by, and at the expense of, those involved in the activity”. The stipulation was included in the draft bill of public finances that went before parliament last December, when Jérôme Cahuzac was still budget minister.
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See page 4 for a list of questions sent to Interpol about issues raised in this article and the reply given by the organisation.
Mediapart contacted Interpol on several occasions for a response to the issues raised in this article and another, published earlier this month, on its funding by the pharmaceutical industry (Interpol’s multi-million-euro deal to play policeman for the drugs giants). Below is a list of questions concerning both addressed to the organization’s press office, followed by the full text of its reply, which was a general statement and not a response to each question
The questions:
- Questioned about the donation to Interpol of 15 million euros by Philip Morris International, Sanna Palo, a Finnish member of Interpol’s Executive Committee, told us: "One should guarantee for the future that the Executive Comitee should be involved, even if it's an urgent case, and not just when it's already signed." Can you confirm that the members of the executive committee were not involved in the negotiations between Philip Morris International and Interpol before the signature of this agreement?
In his speech to the Dolder group on November 10th 2011 in Madrid, Ronald K. Noble thanked the Sanofi group for its financial support given to Interpol. What was the amount and nature of this support?
The training programme included in the agreement between Interpol and the pharmaceutical industry will be carried out in cooperation with IRACM. Of the 4.5 million euros in funding provided by the pharmaceutical industry, how much will be paid to the IRACM?
Why does Interpol not disclose the financial and historic links between IRACM and Sanofi?
How do you justify the double-post occupied by Aline Plançon, who is at the same time a director of Interpol in charge of the fight against fake medicines and also Interpol’s representative with the United Nations in Geneva?
Is it planned that the pharmaceutical industry will sponsor events or conferences promoted by Interpol ?
According to information we have received, Interpol is considering an exchange of information with the pharmaceutical industry. What is the nature of the information that you wish to share with the industry? What is the framework you plan for this exchange of information? Will the pharmaceutical industry have direct access to Interpol’s database?
On July 8th 2013, at the forum Technology Against Crime (TAC), Ronald K. Noble said he wanted to work with airline companies, hotels and also banks. How will you proceed with information exchanges with the private sector?
Interpol’s reply, as provided by its Chief press Officer Rachael Billington:
“INTERPOL's mission is to prevent and fight crime through enhancing international police cooperation to the widest extent possible worldwide. To achieve this, INTERPOL has accepted support from governments and from the private sector.
On all occasions acceptance of such support has been in total accordance with the Organization’s rules. Moreover, our agreements explicitly acknowledge INTERPOL’s independence and neutrality, and make clear that the Organization retains full control of when, where and how to spend any funding. Any claim to the contrary is simply false.
Where either Executive Committee or General Assembly approval of cooperation agreements has been required, we have received it following full disclosure and thorough discussion.
Every year since 2000 INTERPOL’s accounts have been verified by independent external auditors from Belgium, France and currently from Norway. Every audit, without exception, has found that INTERPOL has properly managed its finances in full compliance with INTERPOL’s financial regulations and the relevant legislative requirements of the Organization.
As a result of the support INTERPOL receives, every year thousands of police officers worldwide are provided with essential training to help them better investigate criminal cases, protect citizens and arrest thousands of international fugitives.
With the trafficking of counterfeit and illicit medicines a global phenomenon affecting all countries and endangering the lives of millions of people around the world, it is only logical that INTERPOL should work with the pharmaceutical industry to combat this type of crime.
INTERPOL’s involvement in large-scale cross-border operational activities aimed at disrupting trade of counterfeit medicines dates back to 2004. In 2006, INTERPOL was elected co-chair of the enforcement group under the World Health Organization’s International Medical Products Anti-Counterfeiting Taskforce (IMPACT).
In March 2013, INTERPOL announced an agreement with 29 of the world’s largest pharmaceutical companies to further strengthen the work being done by INTERPOL’s Medical Product Counterfeiting and Pharmaceutical Crime (MPCPC) unit to combat the various types of pharmaceutical crime.
As part of the three-year deal, INTERPOL will receive EUR 4.5 million which will be spent entirely on INTERPOL-led activities including capacity building, training and joint health-law enforcement operations. None of this funding has been or will be given to any other organization.
Prior to this agreement, INTERPOL received assistance from several pharmaceutical companies, both financial and otherwise, particularly in relation to their expertise in identifying fake medicines.
In sum, INTERPOL has and will continue to work with both the public and private sectors in a manner that is in compliance with its rules and regulations while enhancing police cooperation to the widest extent possible worldwide.”
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English version by Graham Tearse