In 2000, the United States authorities caught two Lebanese brothers for running a multimillion-dollar smuggling operation, moving low-tax cigarettes from North Carolina to high-tax Michigan.
It was a major coup for the Bureau of Alcohol, Tobacco, Firearms and Explosives. But the bureau was shocked when it realised where the profits of the syndicate were diverted to: designated terrorist organisation Hizbollah.
The bureau quickly stepped up its focus on the ties between cigarette smuggling and terrorism.
Today, 16 years later, the links between cigarette smuggling and terrorism are no longer surprising. There is increasing evidence that the nefarious plots of terrorists are often funded by a burgeoning global trade in illicit cigarettes.
During the Charlie Hebdo attack last year, a terrorist involved had traded in counterfeit cigarettes.
The Al-Qaeda in the Islamic Maghreb, a terrorist group operating mainly in Algeria and Mali and responsible for several bloody attacks in northern Africa this year, had banked millions by controlling cigarette-smuggling routes in the region.
When a suicide attack was carried out on Istanbul's main shopping street in March this year, outlawed Kurdistan fighters claimed responsibility. The factions of the Kurdistan Workers' Party have long relied heavily on illegal cigarette sales, funnelled through Iraq, to finance their operations.
Even the Islamic State in Iraq and Syria or ISIS, which has banned smoking in its controlled areas, is not above making money from cigarette smuggling. The Turkish-Syrian border has seen a doubling of such illegal movements since the start of the Syrian civil war.
A new study from the Macdonald- Laurier Institute in Canada in March addressed the links between illicit cigarettes and terrorism squarely.
"Canadian law-enforcement seizures of contraband tobacco routinely include high-powered weapons, hard and designer drugs, stolen vehicles and other merchandise, and lots of cash," it said in a report. "Globally, money from contraband tobacco and cigarettes is a major source of revenue for the likes of ISIS, Al-Qaeda and Hizbollah."
THE LURE OF CIGARETTES
Trading in cigarettes is a popular choice for terrorists because they are easy to smuggle, have low barriers of entry, enjoy a huge market and provide high profits. As a legal product in almost all countries, it does not carry the same risks and draconian penalties as drugs. The wide differences between the prices of legitimately sold cigarettes across countries and even within the same country - as seen in the case of the Lebanese brothers - offer fertile ground for profitable smuggling.
For instance, the price of a packet of the most expensive cigarette brands is about $13 in Singapore, compared with $5.90 in Malaysia just across the Causeway and $2 in Indonesia. This makes contraband cigarettes attractive to illegal cigarette factories that seek to quadruple their earnings in a fraction of the time and cost needed for legal cigarette companies.
These factors make it attractive to terrorists to turn to cigarettes as a valuable source of funding. This is especially so as funding in terrorism has evolved from the big-budget central model to its current localised low-cost style.
While Al-Qaeda transferred money to both the Sept 11 hijackers and the Bali bombers, ISIS has a different modus operandi.
ISIS trained and helped conceive the Paris attacks last year, but the terrorists relied on local funding for their attacks in the French capital. They did not need as much money because of their choice of soft targets.
Security experts have estimated that the Paris attacks required less than €10,000 (S$15,000), most of which went to weapon purchases on the black market, materials to make explosives, as well as logistics and communications expenses such as safe-house rentals, rental cars and mobile phones.
This low-cost budget is largely funded through petty crimes by the terrorists in their European home ground, including the smuggling of illegal cigarettes.
This is possible, said France's Centre for the Analysis of Terrorism in a report in March, because of "porous frontiers, weakness of governments, an absence of checks and corruption".
"In some cases, especially in war zones, cigarette smuggling is organised by terrorist... organisations under the guise of humanitarian aid (former Yugoslavia)," it added.
SOUTH-EAST ASIA'S RESPONSE
Such a transition in the funding stream of terrorism requires the close attention of governments in South-east Asia, as much as their counterparts in Europe.
As it is, this region has been ranked poorly for illicit tobacco use.
A study of 11 countries and territories in 2012 by an international tobacco firm placed Brunei at the top of the list, followed by Hong Kong, Malaysia and Singapore. Closer to home, the latest tobacco industry estimates show that the contraband situation in Malaysia has surged from 36 per cent in August last year to 46 per cent as of last December, following a massive 40 per cent tobacco tax increase.
The 2012 research also showed that 66 billion illegal cigarettes were sold across the region that year, costing the governments US$3.4 billion (S$4.6 billion) in lost taxes. Asean countries such as the Philippines, Indonesia and Vietnam are known to house numerous illegal cigarette- manufacturing factories.
Interpol has warned that the contraband cigarettes in this region could be used to fund terrorism too. As the Immigration and Checkpoints Authority of Singapore frequently says in its media statements related to cigarette smuggling, the same methods of concealment used by contraband smugglers may be used by terrorists to smuggle arms and explosives to carry out attacks in Singapore.
It is critical for governments to not lose sight of the unintended consequences of funding terrorism in their quest to cut smoking rates.
Higher taxes, proposed flavour bans and raising of the legal age for smoking, for instance, may help control tobacco consumption.
But they would also unwittingly offer smugglers the opportunities to undercut legal tobacco products, obtain higher profits and invest more heavily in the lucrative illicit cigarette trade.
The same is true of standardised packaging of tobacco products, an emerging trend that has been adopted in Australia and is about to be implemented in Britain, France and Ireland. Plain packs are also being considered by the health authorities in Singapore and Malaysia.
Late last year, a public consultation was held here to hear views on the plain boxes with graphic health warnings, thus removing all promotional aspects, such as trademarks, logos and colour schemes.
Such a change will almost definitely make it easier and cheaper to manufacture counterfeit, or fake, cigarettes - a new threat in South-east Asia. Thus far, illicit cigarettes in this region have been restricted to contraband, which are cigarettes manufactured legally but smuggled into a territory to avoid duty.
Instead of producing various types of cigarette packaging for different brands and flavours, the syndicates would have to make only plain boxes. It is raising a red flag to smuggling bulls.
Terrorism, as most political leaders in South-east Asia have said, looks like it is here to stay. Its funding ties to illicit cigarettes are also growing stronger.
The authorities in this region must make every effort to stymie the links. Relying on border officials will not be sufficient. Policymakers should also ensure that their decisions do not end up aiding this lucrative flow of money from smokes to bombs.
•The writer is associate professor and head of management and security studies at SIM University.