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Prepared by the Republican Staff of the U.S. House Committee on Homeland Security U.S. Rep. Peter T. King (R-NY), Ranking Member
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Recent law enforcement investigations, however, have directly linked those involved in illicit tobacco trade to infamous terrorist organizations such as Hezbollah, Hamas, and al Qaeda.1

These startling discoveries led U.S. House Committee on Homeland Security Ranking Member Peter T. King (R-NY) to launch an investigation of the issue. The following staff report--which will focus on the estimated millions of dollars in illicit tobacco profits being funneled to terrorist groups overseas as well as New York State's refusal to enforce tobacco laws--is the result of numerous interviews with law enforcement officials at the local, State, and Federal level, as well as open-source research. . . .

Conclusion

Experts have long acknowledged that terrorist organizations such as Hezbollah "depend on a wide variety of criminal enterprises, ranging from smuggling to fraud to drug trade to diamond trade in regions across the world,"" including the United States. Terrorist organizations rely heavily on their global web of illicit enterprises to financially support their recruiting, training, arming, and operational objectives. As law enforcement agencies continue to combat terrorist and criminal fundraising schemes, these criminal groups will continue to adapt and exploit emerging vulnerabilities. The ability of these groups to engage in low-risk, cash-based schemes such as cigarette smuggling are critical to the continuation of their operations. The more than $50,000 in profits that smuggling rings can generate from one contraband load (1,500 cartons) is enough to fund as many as 10 USS Cole bombing operations. In just two months of illicit cigarette trade operations, a motivated terrorist cell could generate sufficient funds to carry out another September 11th style attack, in which operational costs were estimated to be $500,000.38

Law enforcement agencies face a daunting task of keeping up with these ever-changing criminal schemes. Simply put, they need more help from State and Federal governments. The last few years have seen a boom in cigarette smuggling around the world and here in the United States; and, thanks to its policy of forbearance, New York State is doing more to facilitate this trade than any other State in the union. On June 3, 2008, New York State taxes on cigarettes are set to increase by another $12.50 per carton. This will only serve to increase the demand for illicitly smuggled cigarettes and inflate the profit margin of these smuggling networks.

This must be brought to an end. It is more than just a matter of hundreds of millions in lost tax revenue-it is a matter of national security.

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