Banks step up to disrupt illicit tobacco profits

Banks have taken decisive action to disrupt the financial flows underpinning Australia’s illicit tobacco trade, strengthening oversight to more effectively cut off criminal cash flows.

Australia’s illicit tobacco market presents a serious organised financial crime problem, generating significant criminal profits and driving violence, tax evasion and community harm.

In late 2025, AUSTRAC and the Illicit Tobacco and E-Cigarette (ITEC) Commissioner wrote to the banking sector, warning of the growing risks linked to tobacco retailers and convenience stores using cash, private ATMs and EFTPOS terminals to move and disguise illicit tobacco proceeds.

Banks were asked to strengthen monitoring and reporting under their existing AML/CTF obligations.

AUSTRAC Chief Executive Officer Brendan Thomas said the response from the banking sector had been strong and constructive.

“We asked banks to refocus their attention on high-risk transactions linked to tobacco retailers, including cash deposits and EFTPOS activity, because these channels can be used to pay for illicit tobacco and to launder criminal profits,” Mr Thomas said.

“The response from the banking sector has been strong. Many institutions have implemented tighter controls, increased reporting to AUSTRAC and, where risks couldn’t be managed, exited high risk customers.

“That directly helps cut off the financial lifeblood of organised crime.”

In November, alongside the letter, AUSTRAC provided banks with a unique reference code to use in suspicious matter reports, enabling illicit tobacco activity to be more easily identified, tracked and disrupted.

Since then, AUSTRAC has received 337 suspicious matter reports using that code, improving the intelligence available to law enforcement to disrupt criminal supply chains and money flows.

Based on these reports, AUSTRAC made 76 referrals to its partner agencies where the primary and secondary threat types were illicit tobacco, combined with money laundering.

Around 20 per cent of reporting entities exited high risk customers with exposure to illicit tobacco, while others imposed enhanced controls and monitoring arrangements to manage identified risks.

More than 1,000 customers have been exited or recommended for exit, driven by reviews undertaken following the November correspondence.

Almost 90 per cent of banks and authorised deposit taking institutions responded to AUSTRAC’s request, with many uplifting transaction monitoring, strengthening governance and increasing scrutiny of tobacco related customers.

AUSTRAC said the engagement demonstrates how existing AML/CTF laws can be used to disrupt serious crime when government and industry work together early and clearly.

“Illicit tobacco isn’t just a health or border issue – it’s also a financial crime issue,” Mr Thomas said.

“Following the money is an effective way to disrupt organised crime, and banks play a critical role in protecting Australia’s financial system from being abused.”

AUSTRAC continues to work closely with banks, the ITEC Commissioner, customs and law enforcement partners to ensure illicit tobacco linked financial activity is identified, reported and acted on, while avoiding unnecessary disruption to legitimate businesses and communities.

The ITEC Commissioner, Amber Shuhyta, said the response highlights the impact of strong collaboration between AUSTRAC and the banking sector.

“Disrupting criminal cash flows is a critical part of the broader, multi‑pronged strategy underway to shrink the illicit tobacco and e-cigarette market, reduce crime and minimise harm to community and public health,” Ms Shuhyta said.

“I thank the banking sector for helping us tackle a complex issue by increasing scrutiny and shutting down suspicious customer accounts. The growing momentum across the country of strategic partnerships and information sharing like this will drive strong outcomes against illicit tobacco networks.”

Proposed reforms to enhance information sharing across the financial system could further strengthen banks’ ability to identify and avoid high risk customers, making it harder for criminal networks to move undetected between institutions.

Assistant Minister for Customs, the Hon. Julian Hill, said Australian banks are critical to fight these criminal syndicates because cutting off the money flow and cutting off the profits is key to stopping this illegal trade.

“Australians are rightly sick to death of criminals running sleazy illegal tobacco shops in broad daylight – in shopping strips and malls, in suburbs and towns right across the country,” Minister Hill said.

“Australia's strong anti-money laundering laws are being used to disrupt this trade and change the 'risk vs. reward' calculation for serious and organised criminals.

“If you are funnelling illegal funds through the legitimate banking systems, you will be caught, and you will be penalised.”

Media contact

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