ATF’s Alcohol and Tobacco Diversion Criminal Enforcement

ATF’s Alcohol and Tobacco Diversion Criminal Enforcement

The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is the federal law enforcement agency that enforces laws and regulations related to the manufacture and distribution of alcohol, tobacco, firearms and explosives. A major part of ATF’s mission is to combat criminal organizations that illegally divert alcohol and tobacco products outside of lawful channels of commerce.

ATF works to disrupt and dismantle criminal enterprises that traffic in contraband alcohol and tobacco products. This involves complex investigations into organized criminal groups that seek to make profits by evading taxes and regulations on alcohol and tobacco. ATF agents use sophisticated investigative techniques to identify and prosecute violators of federal laws such as the Contraband Cigarette Trafficking Act.

Key Laws Enforced by ATF

There are several federal laws that form the backbone of ATF’s enforcement efforts against alcohol and tobacco diversion:

• Contraband Cigarette Trafficking Act (CCTA) – makes it illegal to possess, transport, receive, or distribute more than 10,000 untaxed cigarettes.
• Jenkins Act – requires anyone shipping cigarettes across state lines to report the sale to state tax administrators.
• Webb-Kenyon Act – prohibits the interstate shipment of alcohol into states in violation of state law.
• Federal Alcohol Administration Act – regulates the distribution of alcohol at the federal level.

Violating these laws allows criminal groups to avoid paying state and federal taxes on tobacco and alcohol, enabling them to sell the products more cheaply and earn large profits. ATF agents use the statutes to build cases against traffickers.

Investigative Focus

ATF prioritizes investigations that target and dismantle entire criminal organizations, rather than just arresting low-level smugglers. Agents use techniques such as controlled deliveries, inspections of federal firearms licensees, and firearm tracing to identify and prosecute groups at the top of the supply chain.

ATF also conducts parallel financial investigations focused on seizing assets and funds connected to criminal activity. This allows them to disrupt the financial operations that allow these groups to funnel profits into further criminal enterprises.

Submitting Tips to ATF

Members of the public can assist ATF’s enforcement efforts by submitting tips on potential alcohol or tobacco diversion crimes. Tips can be submitted via the ATF website, the Report It app, or by texting information to 63975.

When submitting a tip, it is helpful to provide details like:

• City and state where activity is occurring
• Descriptions of persons involved
• Details on the illegal activity

Tips from the public provide critical leads that can launch in-depth investigations. All tips can be submitted anonymously.

Tobacco Diversion Enforcement

A major emphasis for ATF is combating the diversion of tobacco products like cigarettes and smokeless tobacco. Tobacco diversion occurs when individuals or criminal groups illegally transport, distribute, and sell tobacco products while evading state and federal tobacco taxes.

By avoiding tobacco taxes, traffickers are able to sell tobacco more cheaply, creating huge illicit profits. These profits also often fund other criminal activities by organized groups. Common techniques used in tobacco diversion include:

• Smuggling tobacco products across state lines without paying taxes
• “Bootlegging” – buying tobacco products in low-tax states and illegally reselling them in high-tax states
• Counterfeiting state and federal tax stamps
• Establishing fictitious businesses to buy tobacco tax-free

ATF agents use sophisticated investigative methods to detect and shut down tobacco diversion schemes. This includes inspecting shipments, tracing contraband tobacco back to its source, conducting surveillance, and making undercover purchases.

Contraband Cigarette Trafficking Act

The main law used to prosecute tobacco diversion is the Contraband Cigarette Trafficking Act (CCTA). Under the CCTA, it is illegal to possess, transport, receive, or distribute more than 10,000 untaxed cigarettes. Violations are punishable by up to 5 years in prison.

The 10,000 cigarette threshold distinguishes casual bootlegging from large-scale criminal trafficking. ATF focuses enforcement on major traffickers who illegally distribute tens of thousands or millions of cigarettes.

In fiscal year 2020, ATF conducted 182 CCTA investigations leading to the arrest of 372 defendants. Over 48 million contraband cigarettes worth $12.7 million were seized.

Tobacco Diversion Penalties

The penalties for tobacco diversion depend on the scale of the operation and where the violations occurred. For example:

• In New York, illegally possessing more than 10,000 cigarettes is a felony punishable by 1-4 years in prison and fines up to $100 per carton.
• In California, possessing or transporting contraband cigarettes can lead to fines of $5,000-$20,000 plus imprisonment up to one year.
• Federal CCTA violations can result in up to 5 years in prison.

ATF agents also pursue the seizure of assets connected with tobacco diversion activities. This includes bank accounts, vehicles, property, and cash proceeds derived from illegal tobacco sales.

Alcohol Diversion Enforcement

In addition to tobacco, ATF agents investigate and disrupt schemes to illegally divert alcohol outside of regulatory control. This commonly occurs when individuals or groups try to avoid paying federal and state excise taxes on alcohol sales.

Techniques used in alcohol diversion include:

• Operating an unlicensed distillery
• Counterfeiting tax stamps and labels
• Smuggling alcohol between states to evade taxes
• Illegally reusing alcohol bottles refilled with untaxed products

These methods allow alcohol to be sold without regulatory oversight and taxes, funding criminal activity. ATF uses methods like undercover purchases, surveillance, and record analysis to uncover diversion schemes.

Key Alcohol Laws

ATF enforces various federal laws related to proper alcohol regulation, including:

• Federal Alcohol Administration Act – requires all alcohol manufacturers, wholesalers, importers, and warehouses to obtain a federal permit from ATF.
• Internal Revenue Code – levies federal excise taxes on alcohol and requires tax stamps on alcohol containers as proof of tax payment.
• Webb-Kenyon Act – prohibits transporting alcohol into a state in violation of that state’s laws.

Violating these statutes allows criminals to introduce untaxed and unregulated alcohol into illegal markets. ATF agents use the laws to prosecute traffickers and dismantle criminal networks.

Alcohol Diversion Penalties

Much like tobacco crimes, the penalties for alcohol diversion vary based on the specific violations involved. For instance:

• Operating an unlicensed distillery carries a federal fine up to $10,000 or up to 5 years imprisonment.
• In Florida, illegally filling reused liquor bottles is a felony with up to 5 years imprisonment.
• Smuggling alcohol between states evading over $500 in taxes can be punished by up to 2 years in prison.

ATF pursues asset forfeiture against property and money derived from illegal alcohol trafficking. This allows them to dismantle the financial infrastructure supporting criminal organizations.

Preventing Diversion Crimes

While enforcement and prosecution are important, ATF also strives to prevent alcohol and tobacco diversion through cooperation with industry members. For example, ATF works closely with tobacco manufacturers to identify counterfeit tax stamps and with common carriers to profile suspicious shipments.

ATF also engages in community outreach and education to raise awareness of the links between alcohol/tobacco diversion and organized criminal activity. Reducing demand for illegally trafficked products helps dry up the sources of funding for violent enterprises.

Through this balanced approach of enforcement, cooperation, and education, ATF makes substantial progress against the complex challenge of combating illegal alcohol and tobacco trafficking.

References

[1] Submit a Tip | Bureau of Alcohol, Tobacco, Firearms and Explosives – ATF

[2] The Bureau of Alcohol, Tobacoo, Firearms, and Explosives’ Efforts to Prevent the Diversion of Tobacco

[3] Alcohol & Tobacco | Bureau of Alcohol, Tobacco, Firearms and Explosives – ATF

[4] Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)

[5] ATF Tips | Bureau of Alcohol, Tobacco, Firearms and Explosives

[6] Fact Sheet – Tobacco Enforcement | Bureau of Alcohol, Tobacco, Firearms and Explosives – ATF