How Telegram helps sellers of illegal cigarettes and why they can’t be stopped
Despite the shutdown of the largest producers of illegal cigarettes by law enforcement, counterfeit tobacco products continue to be freely sold through Telegram, the most popular messenger among Ukrainians. BusinessCensor checked whether law enforcement officers are able to close this channel of illegal trade and what prevents them from doing so.
Business Censor continues its series of materials about shadow schemes that cause the budget to lose hundreds of billions of hryvnias. Read the previous materials about where three annual budgets for drone production are hidden and about schemes involving the export of "black grain" worth billions of US dollars by link.
Under pressure from international partners, Ukrainian law enforcement agencies have stepped up efforts to combat the illegal tobacco market. Since May, the BES has blocked the work of four domestic cigarette manufacturers suspected of illegal tobacco production.
In turn, the Kyiv City Council has banned the sale of cigarettes in architectural accessories and kiosks in the capital, where most illegal tobacco products are traditionally sold. This decision has not yet been fully implemented. The Verkhovna Rada could have introduced such a ban throughout Ukraine, but the relevant amendment to draft law No. 10346 did not receive the required number of votes. However, its author, the head of the Tax Committee, Danylo Hetmantsev, promises to submit it to the parliament again.
At the same time, illegal cigarettes continue to be sold freely online, mostly through Telegram, the most popular messenger among Ukrainians. Business Censor decided to check whether law enforcement officers are able to close this channel of illegal trade and what prevents them from doing so.
How much money does the state budget continue to lose from the illegal cigarette market?
The efforts of lawmakers and law enforcement agencies to combat the illegal production and distribution of tobacco products are yielding the first results, according to the latest study "Monitoring of the Illegal Trade in Tobacco Products in Ukraine" conducted by Kantar Ukraine.
Thus, in April, the level of illegal trade in tobacco products in Ukraine decreased to 18%, compared to 19.1% in early 2024, after rising to a record high of 25.7% in October 2023.
Due to a law adopted in August last year banning the sale of cigarettes and alcohol produced in Ukraine with Duty-Free labeling, the share of such products illegally sold on the Ukrainian market decreased from 9.2% at the beginning of the year to 5.7%.
At the same time, the share of counterfeit cigarettes of international brands increased from 8.7% to 10.1%, significantly exceeding the share of products labeled for sale in Duty-Free stores for the first time. At the same time, more than a third of counterfeit cigarettes have signs of fake excise stamps (40%).
However, the state still loses tens of billions of hryvnias from the illegal cigarette trade during a full-scale war. As of the first half of 2024, the losses of the state budget of Ukraine in 2024 are estimated at UAH 23.4 billion, and the volume of the shadow cigarette market in Ukraine is 6.8 billion units.
In 2022-2023, during the full-scale war with Russia, the illegal trade in tobacco products caused losses to the state budget of UAH 42.5 billion (over $1 billion). According to estimates of the American Chamber of Commerce in Ukraine (ACC), these funds could have been used to purchase 20 F-16 fighter jets.
Currently, kiosks and shops are still the main channels for the illicit tobacco trade: 66% of illicit products are sold there. Another 19% of illicit cigarettes are bought from street vendors, and 11% are purchased at open markets.
At the same time, the online sale of illegal cigarettes via popular messengers, primarily Telegram, is becoming increasingly common. It is impossible to estimate its volume, as a significant portion of the products distributed in this way are resold through physical points-of-sale.
How does the illegal cigarette trade on Telegram work?
A keyword search makes it easy to find at least a few dozen Telegram channels and more than a dozen websites that offer buyers a wide range of illegal tobacco products.
When ordering a minimum batch (usually several blocks of 10 packs), prices for illegal products are almost half of those for original products. For example, while a pack of legal premium cigarettes costs about 100 hryvnias, counterfeit products with the same name can be found here for as little as 50 hryvnias.
This is not surprising, as the share of direct taxes in the retail price of a pack of cigarettes reaches 70-80%. Producers and sellers of illegal products do not pay any taxes, which Ukraine uses to support the Armed Forces and purchase weapons.
In addition, some Telegram channels specialize in small wholesale trade, offering even lower prices for orders of 500 packs or more, promoting the resale of illegal cigarettes by traditional retail channels. For economy cigarettes (e.g., without a filter), this difference is even greater.
In addition, there are also unpackaged cigarettes on sale. Thus, retailers do not even try to hide the illegal origin of the goods.
Usually, illegal cigarettes can be ordered from the administrator of a Telegram channel, transferred to the card number provided by him or her, and picked up at the post office of one of the postal operators.
The widespread use of illegal tobacco sales via the Internet is evidenced by the numerous cases of fraud recorded by law enforcement. In other words, "sellers" are increasingly only imitating the sale of tobacco products online, deceiving buyers. Due to the fact that Telegram allows channel administrators to remain anonymous, fraudsters receive prepayments for illegal cigarettes from potential buyers but do not send anything.
What are law enforcement agencies doing to combat illegal cigarette sales on Telegram?
In response to a request from Business Censor, the Department of Cyberpolice explained that they are constantly analyzing web resources, including communities on Facebook, accounts and groups in the Telegram messenger, which sell excisable goods (alcoholic beverages, tobacco products and e-liquids, etc.).
"Subsequently, based on the results of the measures taken by the Cyber Police Department, the necessary materials on the relevant websites are sent to the Bureau of Economic Security (BES) to obtain court decisions to close access to them," the Cyber Police said, calling cooperation in this area with the BES effective.
Apart from this, the Cyberpolice continues to document 19 criminal offenses opened under Article 204 (Illegal manufacture, storage, sale or transportation for sale of excisable goods) of the Criminal Code. Investigative actions are ongoing in these cases.
At the request of Business Censor, the Bureau of Economic Security (BES) reported that in 2023, BES detectives initiated the blocking of 444 websites and Telegram channels involved in the sale of excisable goods, and since the beginning of 2024 - another 281.
"In addition, the BES, together with the National Center for Operational and Technical Management of Telecommunications Networks of the State Service for Special Communications and Information Protection of Ukraine, is working to block 16 websites used for illegal trade in excisable goods. At present... measures are being taken to block 21 websites," the BES said in its response to the request.
"One closed, two opened": Why are there more Telegram channels with illegal tobacco?
While the number of websites selling illegal excisable products has indeed decreased, the situation on Telegram is different, and channels that have been shut down due to the work of the BES are quickly being replaced by new ones.
For example, in April 2023, the Temporary Investigation Commission of the Verkhovna Rada to investigate possible violations of the law by officials of the BES, state authorities and other state bodies exercising powers in the field of economic security (hereinafter referred to as the PIC (provisional investigatory commission) on Economic Security) handed over to law enforcement officers materials on 16 Telegram channels used for illegal trade in cigarettes and tobacco products.
The report of the PIC published in December 2023 states that at least until October last year, most of these Telegram channels continued to operate. At the same time, the total number of channels with illegal tobacco products identified by the PIC increased to 28.
Business Censor checked the list of these Telegram channels in July 2024. We will not publish their list in order not to advertise illegal businesses that deprive the Ukrainian Defense Forces of funding during the war.
It turned out that out of the 28 Telegram channels identified by the PIC on economic security, 11 have completely stopped working. Another 11 continue to operate and have mostly increased the number of subscribers. The remaining 6 Telegram channels probably just changed their address and opened several related new pages in this messenger. This is evidenced by similar names, assortment, and distinctive design style.
At the same time, a number of new Telegram channels have emerged that offer illegal products. As a rule, they are organized into small networks, and the average number of subscribers of each of them is higher than in the list submitted to law enforcement last year.
However, the illegal business of Telegram channel owners suffered a serious blow when they lost most of their product range. This happened after massive searches conducted by the BES in May at the production facilities and warehouses of four domestic cigarette manufacturers suspected of involvement in the production of illegal products. According to Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Taxes and Finance, illegal production at all of these companies has been stopped. Therefore, the range of products available from some sellers of counterfeit cigarettes on Telegram currently looks like this:
At the same time, other sellers do not have a significant shortage of illegal goods, which allowed them to raise prices slightly. At the same time, Telegram channels themselves continue to operate, expanding the offer for unpackaged cigarettes in bulk or in transparent zip bags and electronic cigarettes, apparently hoping to find new channels for supplying illegal products.
Financial channels and goods: How to stop illegal trading via Telegram?
According to Yurii Vykhodets, head of the Cyber Police, it is difficult to stop the illegal trade in cigarettes via Telegram, as the administrators of the messenger founded by Russian Pavel Durov refuse to cooperate with Ukrainian law enforcement.
"Blocking Telegram channels that sell excisable products remains a problematic issue in this area, as the messenger's administrators are currently outside the territory of Ukraine and do not cooperate with law enforcement agencies," the head of the Cyber Police said in response to a Business Censor request.
Yaroslav Zhelezniak, chairman of the Verkhovna Rada's PIC on Economic Security, agrees. He notes that despite certain results of law enforcement in the fight against illegal trade in excisable goods, it is not easy to quickly close new channels with illegal cigarettes on Telegram.
Therefore, it is necessary to complicate their work as much as possible, explains Zhelezniak. It means not only to deprive sellers of access to cheap illegal products by stopping their production but also to close the financial gateways that allow them to receive payment for the goods sold.
"Sellers of illegal cigarettes do not accept payments on their personal cards," the deputy said.
Most of the time, such transactions are carried out using the so-called "money mules" scheme, or bank cards issued to front persons, Zhelezniak explains.
"That is, the same p2p (person-to-person transactions - ed.) transactions when sellers give a number and a card to transfer money to. This is now the main scheme for illegal gambling, selling cigarettes through Telegram channels, and pirate websites," the deputy adds.
He reminded that the NBU has already initiated restrictions on card transfers between individuals (p2p, person-to-person transactions). At present, they will only affect outgoing transfers, meaning that it will be possible to receive transfers without restrictions. According to NBU Governor Andrii Pyshnyi, the regulator's board will approve the relevant changes this week.
However, this is only the first step in the fight against "money mules", and the deputies have suggestions on how to make it more difficult for illegal traders on Telegram to use this scheme.
"We have several ideas that will make this 'business' much more difficult," Zhelezniak said.
Among the proposals voiced at the last meeting of the PIC on economic security were the introduction of a register of accounts, tightening of banks' requirements for financial monitoring and limiting the turnover of funds without proof of income, ️restriction of attracting new customers for banks that do not provide enhanced control, and ️introduction of technical means of monitoring the use of cards in the "money mule" system.
The People`s Deputy notes that in addition to illegal trade and tax evasion, this scheme is used to finance Russian agents in Ukraine.
"Everything is there. From gambling to drugs. The SSU reported to the PIC that the financing of criminal actions inside Ukraine by Russians is also realized through this scheme with money mules. That's why we really need to put things in order here," Zhelezniak adds.
