In announcing an Illicit Tobacco National Disruption Taskforce – the third major Federal government initiative in recent years – to try and halt the illicit trade in tobacco and vapes, Home Affairs Minister Tony Burke made it clear on Sunday that anyone taking payments for these products is potentially enabling criminal gangs.
“The same criminal groups are involved in organised tobacco; you’ll have some of them involved in forms of arson, you’ll have some of them involved in the drug trade, they’ll be involved in child exploitation — all of these things start to interlink,” Burke said.
The companies who are currently enabling these gangs – be it directly or at “arms length” providing backend payment connections – may include Australia’s big banks CBA, NAB and Westpac, backend payments providers CUSCAL and Fiserv, and card schemes Visa, Mastercard, eftpos and AMEX.
They also may include payments service providers like Square and ANZ Worldline, Smartpay, Zeller and many other smaller companies.
It’s worth naming them because despite published and publicly repeated motherhood statements – mainly from the banks – the trade is largely proceeding full steam ahead.
It should give all these companies pause for thought that the taskforce will target mid-level criminals and enablers operating within small business, intermediaries and sole traders who import, distribute or sell illegal tobacco and target the sale of illicit tobacco at the consumer level.
Yesterday, Payday News carried out more spot checks on illegal smoke peddlers, this time in Sydney – just a few kilometers from bank head offices in the CBD.
In a short period we came across illegal tobacco stores serviced by terminals from Westpac, St George, CBA, Fiserv and ANZ Worldline.
A similar spot check in a New South Wales country town last week, found POS machines provided by Fiserv – one Clover branded, while our previous audits have discovered terminals from NAB, Smartpay, Zeller and Square.
Illicit-tobacco outlets have multiplied often masking as gift shops, mini-marts and convenience stores selling legitimate products and sometimes legitimate tobacco, alongside illegal products.
While enforcement has ramped up via major multi-agency taskforces and record seizures, the trade continues to exploit the retail payments layer.
The retail equation is very, very simple.
If people can’t buy illicit tobacco/vapes then the criminals behind them don’t make money.
And if shops selling these products don’t have point of sale terminals, it makes it much harder to sell them.
Amongst the authorities in charge of clamping down on this criminal trade – and where the government seems desperate for better coordination – there is a round of finger pointing going on and Payday News has learned that so far, the announcement is just that.
“The establishment of the Illicit Tobacco National Disruption Group (ITNDG) will be delivered in early 2026 with discussions currently ongoing across federal, state and territory agencies regarding the co-design.
The innovative business model of the ITNDG will harness the powers and capabilities of a wide range of federal and state/territory partners for a rapid, effective and strategic disruption outcome,” an Australian Border Force spokesperson said.
So nothing until at least February, given the lengthy summer break ahead.”
Neither ABF nor the Illicit Tobacco and E-Cigarette Commissioner which was established on July 1, 2024 would answer questions about payments.
“The majority of your questions relating to payment providers are best referred to the Australian Transaction Reports and Analysis Centre (AUSTRAC),” an ABF spokesperson said.
AUSTRAC’s stated mission: “AUSTRAC is responsible for preventing, detecting and responding to criminal abuse of the financial system to protect the community from serious and organised crime.”
Yet when asked about POS terminals AUSTRAC said: “A point of sale terminal is simply a technical interface between a customer’s card and the business’s bank account.
It is not exempt from monitoring by the receiving bank, which is obliged to report suspicious activity to AUSTRAC.
AUSTRAC doesn’t regulate payment terminals directly but any transaction that moves through a bank is subject to bank monitoring.
AUSTRAC expects banks to manage and monitor the risks associated with the use of payment terminals, including in higher-risk businesses.”
It’s worth noting that a percentage of these stores are cash only and many have installed their own ATMs – for which they earn money as well – as a way of facilitating them.
ATM players have begun to withdraw ATMs from illicit tobacco stores.
Yet, as Payday News reported last week, many remain.
Yet there still seems to be a blind spot about the main payments game here: point of sale terminals (POS) and that’s where the banks, PSPs and their infrastructure providers are on the hook.
Like it or not, they are enabling the arson, drugs and child exploitation that criminal gangs can be involved in.
It’s hard to reconcile the know-your-customer laws that payments providers are supposed to adhere to with the continued presence of their terminals and services both in store and at the backend.
The push by banks to onboard smaller merchants online seems at odds with KYC laws.
As one insider said: if you self describe as a convenience store, the contract will just get waived through.”
It’s telling that despite being asked detailed questions by Payday News only one bank or PSP would prove any detail (and that was on background) about programs that they have in place to check all their merchants or the numbers of clients that have been cut off.
Insiders say that risk appetite at a number of PSPs is “very high” as they fight for a bigger share of a saturated market.
The payments sector has been here before – and indeed again this year – facilitating both gambling and pornography.
Ahead of its IPO last year questions were raised about CUSCAL’s risk management.
As Burke said on the ABCs Insiders on Sunday: “In addition to joining forces with federal agencies, we have also harnessed the powers of state and territory agencies to fight the illegal tobacco trade at the border, the warehouse and retail environment.
Our message is clear: if you profit from illicit tobacco in Australia, you are operating illegally, and you will be the target of the Illicit Tobacco National Disruption Group.”
At present, there are a raft of players in the Australian payments sector who are potentially profiting from illicit tobacco each day.
If they are smart they would get their houses in order before the new push early in the new year – and hopefully the authorities will also wake up by then.
Clearly doing the right thing is no longer a business driver but fear of being caught – and the concomitant brand damage just may.
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