State Ags And Atf Announce Initiative With Credit Card Companies To Prevent Illegal Internet Cigarette Sales

Attorney General Spitzer today announced a joint public/private initiative to prevent the illegal sale of tobacco products over the Internet. Participants in the initiative include state Attorneys General from across the country, the federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and credit card companies.

"Cigarette sales over the Internet in New York are not only illegal; they are also a direct threat to public health, because they increase smoking rates, which leads to increases in lung cancer and other smoking-related illnesses," said Attorney General Spitzer. "By working with all the major card companies, we will severely restrict the ability of the Internet retailers to make these illegal sales."

"Today, public and private partnerships are the key to success for law enforcement. ATF investigations show that millions of dollars ea ch year in illegal sales of cigarettes are diverted to fund terrorists and criminal organizations," said Michael Bouchard, ATF Assistant Director for Field Operations. "ATF will aggressively continue to pursue violations of law. However, through today's initiative. We are addressing the problem of illegal sales across multiple jurisdictions with tremendous support from the country's largest credit card companies. We welcome the help."

Negotiations with the companies were led by the Attorneys General of New York, California and Oregon. Details surrounding the initiative were discussed today at a meeting in Washington, D.C. attended by representatives from 10 states (New York, California, Colorado, Oregon, Idaho, Louisiana, Maryland, Pennsylvania, Vermont and Wisconsin), the ATF, and the major credit card companies. All participants agreed to work together to prevent the processing of payments for illegal Internet tobacco sales.

Attorney General Spitzer launched the initiative in August 2004 when he contacted the credit card companies and requested that they stop processing transactions for Internet retailers selling cigarettes into New York

In November, a federal, state and local task force led by ATF seized a planeload of contraband cigarettes at Kennedy Airport, and in December ATF formally advised the credit card companies that their payment systems were being used by numerous Internet cigarette retailers to conduct illegal business. In January 2005, 42 Attorneys General sent a letter to each of the credit card companies, again asking that they not allow their cards to be used for illegal Internet purchases.

Attorney General Spitzer, the ATF and the other Attorneys General commended the credit card companies for agreeing to take aggressive measures to prevent the illegal sale of tobacco products over the Internet, and for agreeing to work cooperatively with law enforcement agencies in shutting down these illegal operations.

New York State law expressly prohibits the direct shipment of cigarettes to consumers, and all Internet sales into New York violate that law, as well as New York's age verification statute. In addition, virtually all Internet cigarette sales violate other state and federal laws, including tax laws, the federal Jenkins Act (which requires that such sales be reported to state authorities), federal mail and wire fraud statutes, and the federal Racketeer Influenced Corrupt Organization (RICO) law. Many of the sales made by foreign websites also violate federal smuggling, cigarette labeling, money laundering and contraband product laws.

In addition to being illegal, Internet cigarette sales present a significant risk to public health. In particular, cigarettes sold on the Internet are much cheaper than cigarettes sold by brick-and-mortar retailers, because the Internet sellers falsely advertise that their cigarettes are tax-free. These lower prices lead to increased smoking rates, which in turn lead to more smoking-related illnesses and deaths.

Moreover, while brick-and-mortar retailers check photo IDs to prevent children from buying cigarettes, the vast majority of Internet sellers have age verification systems that are completely inadequate – often simply requiring the purchaser to click a button stating that he or she is over 18 years old. The earlier someone begins to smoke, the more likely it is that they will become addicted to smoking. As a result, age verification through photo IDs is essential to protect children from a lifetime of addiction and smoking-related illnesses.

All credit card companies have long-standing policies that prohibit the use of their credit cards for illegal transactions. During the meeting held today, state and federal authorities outlined the many laws that are being violated, and the companies agreed to take a variety of steps to ensure that their services are not used to facilitate these illegal transactions.

Among the many actions the credit card companies have adopted to stop illegal online sales are:
1.) Adopting policies to prohibit the use of credit cards for the illegal sale of cigarettes over the Internet; and, 2.) Agreeing to investigate and take action with respect to any internet sellers identified by law enforcement agencies as using credit cards for illegal online cigarette sales.

"I want to applaud all the companies that have agreed to stop processing these illegal sales," said Attorney General Spitzer. "This is exactly how public-private partnerships are intended to work, with government and the private sector coming together to stop illegal conduct and protect public health."