Illicit tobacco is cash-intensive, high-margin and historically low-risk for the criminal — the FATF's dedicated typologies report found exactly that combination is what makes the trade, and the businesses around it, attractive for money laundering.
The rating above is indicative — it reflects inherent risk as assessed in the published frameworks, not a verdict on any business. Entire industries serve these sectors as business as usual; the rating your firm actually applies comes from its own business-wide risk assessment, where the sector factor combines with your customer base, controls and risk appetite.
The FATF's Illicit Tobacco Trade report (2012) assessed the money-laundering and terrorist-financing vulnerabilities of the trade: it is cash-intensive and highly profitable, while detection rates, seizures and penalties have historically been low relative to other contraband. Excise and duty fraud generates criminal proceeds that then need placing and layering — often through cash-heavy front businesses.
The international response includes the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products (in force since 2018) and the EU excise framework; for an island economy with busy ports on non-EU supply routes, the smuggling channel is a standing feature of the risk picture.
Obliged entities serving the sector should treat it as cash-intensive and elevated-risk: scrutinise source of funds, reconcile declared trade against excise documentation where visible, and report suspicion. Sector risk combines with geography, the customer’s profile and the product to set the overall rating — and every client still needs sanctions, PEP and adverse-media screening on the parties themselves.
