The European Court of Auditors warns that fragmented enforcement and uncoordinated policies across the EU are failing to curb illegal tobacco trade, with a shift toward illicit production sites and unregulated nicotine products increasing health risks and reducing public revenues by about €13 billion annually.

Artificial intelligence is aiding criminal gangs in expanding illicit tobacco networks, according to the EU auditor.

The EU lacks a reliable, independent EU-wide measure of the illicit market, its structure, and its fiscal impact; official reporting relies mainly on seizures and misses a full picture.

Authorities emphasize the need for collaboration with tech platforms and financial institutions to disrupt AI-driven trafficking practices.

The report highlights cross-border cooperation gaps, irregular information sharing, and persistent border-crossing networks that evade enforcement.

Auditors acknowledge potential benefits of industry cooperation but insist that traceability and public health protections remain independent from tobacco firms and must comply with WHO FCTC Protocol guidelines.

Gaps include divided responsibilities between finance and health ministries, divergent sanctions, and a lack of unified strategic direction, data collection, and transparency, impeding enforcement and tracking of illicit trade.

Illicit trade involves contraband and counterfeit production, exploiting price and tax differentials at border crossings.

Law enforcement has uncovered large operations, including a cross-border network supplying Lille, France, and a raid in Spain that seized millions of packs, five tonnes of tobacco, and led to multiple arrests.

Exclusive footage shows workers in an illegal cigarette factory living in dormitory-like conditions with limited resources, indicating prolonged detention.

There is tension between AI-enabled insights claimed by criminals and auditors’ caution not to overstate the role of specific tools in the report.

Call for better data, harmonised EU-wide laws, and improved coordination to counter cross-border arbitrage that benefits illicit traders.