Police have seized $1 million from a black market vape operation. The Australian Federal Police are warning of violence on city streets. The Australian Criminal Intelligence Commission has recorded a 21 per cent surge in illegal drug consumption in a single year. Together, these developments tell a story that is hard to ignore. Australia’s illicit tobacco crisis has moved well beyond a tax compliance problem. It is now a serious organised crime emergency, and the policy tools deployed so far are not keeping pace.

The Excise Problem: How High Taxes Fuelled the Black Market

The logic behind Australia’s tobacco excise was always simple: raise the price high enough, and people will stop buying. What policymakers did not fully account for was the criminal opportunity that logic created.

The Australian Border Force told a federal inquiry that black market operators were exploiting what it called “profitable price differentials” between taxed and untaxed products. When legal cigarettes cost dramatically more than illegal ones, the market does the rest. The illicit tobacco crisis was not an unintended consequence. It was a foreseeable one.

Australia’s nicotine consumption has since risen by 4 per cent, according to the ACIC’s latest wastewater analysis. That figure cuts directly against the stated goal of the excise regime and reflects a consumer base that has shifted, in large part, to untaxed supply.

Organised Crime Takes Over the Black Market Tobacco Supply Chain

What sets the current wave of the black market tobacco trade apart from earlier iterations is scale and ambition. The AFP told the federal inquiry that criminal syndicates now manufacture illicit tobacco offshore at an industrial scale. They draw on networks spanning the Middle East, Southeast Asia and the Pacific before moving product into Australia through layered distribution chains.

Syndicates reinvest that Australian revenue into what the AFP described as “legitimate offshore manufacturing companies and facilities.” This is not opportunistic tax evasion. It is vertically integrated organised crime, with Australian consumers at one end of a supply chain that circles the globe.

The AFP also noted that demand, not oversupply, is driving the market. This directly contradicted claims from Assistant Minister for Customs Julian Hill, who had argued the black market was driven by an oversupply of cigarettes already in circulation.

Violence, Corruption, and Escalating Consequences

The AFP’s most alarming finding concerns what the illicit tobacco crisis is doing to communities beyond the market itself.

Trusted insiders are increasingly recruited into the criminal business model. The AFP warned this poses “broader risks to institutional integrity and community confidence.” When corruption enters the supply chain at multiple levels, enforcement becomes exponentially harder.

The violence component is already real. Police confirmed that consequences of the illicit tobacco crisis had “already spilled over into violence on Australian streets.” As profits increase and enforcement pressure intensifies, the AFP cautioned that organised crime groups will rely more heavily on “coercion, arson, assaults and threats” to protect market share and enforce supply chain compliance.

“There is a growing risk that competition within the illicit tobacco market will continue to drive violence, intimidation and corruption, mirroring patterns observed in other high-profit illicit commodities,” the AFP submission read.

The Vaping Dimension: A New Criminal Frontier

The illicit tobacco crisis has a digital sibling. Alongside traditional cigarettes, a parallel black market in vaping products has taken hold. It typically operates through websites designed to look like legitimate retailers.

In one case reported by The Australian, police seized more than $1 million in suspected criminal proceeds after a civil action against the operator of a black market vape website. A joint investigation by Austrac, the Therapeutic Goods Administration and the AFP led to the NSW Supreme Court ordering those funds passed to the Commonwealth.

The site, ivapeman.com, marketed itself as a legitimate business offering “24/7 customer support” and “same day dispatch.” Two Instagram accounts linked to the site remained online months after the raids, though inactive. Police raids on storage units in Waterloo and Auburn uncovered branded vape inventory and handwritten sale logs. Operator Wenyun Yan, 24, faced additional allegations of holding wholesale distribution proceeds destined for tobacconists across Sydney.

ANZ’s financial crime chief, Milan Gigovic, said the case showed the “important role financial institutions play in tracing funds and disrupting alleged criminal activity.” That banks now form a frontline in combating the black market tobacco trade says much about how deeply embedded these operations have become.

Record Drug Use: The Broader Context

The illicit tobacco crisis does not exist in isolation. The ACIC’s latest wastewater intelligence report put the combined street value of illegal drugs consumed in Australia in 2024 to 2025 at $14.3 billion, up from $11.5 billion the previous year. That is a 21 per cent increase in 12 months.

Australians consumed 26.8 tonnes of cocaine, MDMA, methamphetamine and heroin in that period. Methamphetamine dominates the market, accounting for roughly 77 per cent of total illicit drug revenue and generating about $11 billion in street sales alone.

The state-by-state picture is stark. New South Wales led the nation, with residents using 4.6 tonnes of meth alongside record highs in cocaine, MDMA and heroin. Victoria recorded 3.8 tonnes of meth. Queensland saw meth spike 29 per cent to 3.2 tonnes. Western Australia recorded the highest regional meth use in the country at 2.1 tonnes. South Australia saw meth surge 27 per cent to 1.4 tonnes. The Northern Territory recorded a 36 per cent jump in meth use. Tasmania saw a 38 per cent spike to 255 kilograms. The ACT reported record figures for both meth and cocaine.

ACIC chief executive Heather Cook said criminal groups are “not only persistent but highly innovative.” She noted: “Every time law enforcement closes a door, they find a window and then attempt to climb through it with increasingly complex concealment strategies.”

Law Enforcement Response: Too Little, Too Late?

The AFP has pointed to record seizures and expanded taskforces as evidence of progress. Forfeited funds from the ivapeman case will flow into community prevention and diversion programmes. The Criminal Assets Confiscation Taskforce continues to lead federal seizure operations.

But the AFP’s own submissions tell a more sobering story. The agency acknowledged that limits on early intervention powers had constrained its ability to disrupt illicit tobacco activity before it entrenched itself. It also noted that penalties for supplying and distributing black market tobacco were not consistently aligned with the seriousness of the offending across every state.

AFP acting commander Tim Underhill acknowledged that storage facilities were already at capacity and that seizure volumes did not reflect true market size. Offshore manufacturing hubs were likely to grow more sophisticated as domestic demand increased. These are not the words of an agency that believes it is winning.

What Needs to Change: Policy Recommendations

The federal government is pressing ahead with stronger penalties, longer jail terms and expanded asset confiscation laws targeting organised crime profits. These measures address the supply side. They do not fully address why demand remains so high.

Several priorities stand out. Stronger minimum penalties and consistent sentencing across states would close gaps that criminal networks currently exploit. Expanding asset confiscation laws to target illicit tobacco profits directly would raise the financial cost of operating in the black market tobacco trade. Better coordination between the AFP, Austrac, the TGA, the Australian Border Force and financial institutions would sharpen the intelligence picture and close operational gaps. The ivapeman case showed what joint agency action can achieve. It should be the rule, not the exception.

Perhaps most importantly, the excise model itself needs review. A tax structure that creates a price gap large enough to sustain industrial-scale criminal manufacturing is not functioning as intended. Addressing the illicit tobacco crisis means confronting that reality directly.

Conclusion

Australia’s illicit tobacco crisis is no longer a revenue problem. It is a community safety crisis, an organised crime emergency and a public health failure rolled into one. The black market tobacco trade has moved offshore, scaled up and embedded itself in broader criminal networks that now deal in drugs, violence and corruption.

Record drug consumption, a $14.3 billion illegal market and AFP warnings of escalating street violence all point to a system under serious strain. Incremental enforcement measures have not reversed these trends. A coordinated national response, one that combines harder enforcement with a genuine review of the policies that created the conditions for this crisis, is long overdue.

Source: drugfree