Attorneys General and ATF Announce Joint Initiative With Credit Card Companies to Prevent Illegal Cigarette Sales Over the Internet
Cooperative effort will prevent loss of millions of dollars in federal and state revenues

FRANKFORT, KY (March 17, 2005) - Attorney General Greg Stumbo today announced a joint public/private initiative to prevent the illegal sale of cigarettes over the Internet. Participants in the initiative include Attorneys General from across the country, the federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and credit card companies.

"We are taking a multifaceted, multijurisdictional approach to halting illegal Internet cigarette sales,” National Association of Attorneys General (NAAG) President and Vermont Attorney General William H. Sorrell said. "We believe this is the most effective and efficient strategy to enforce state and federal laws regulating online sales. We are very appreciative of the work by these companies."

“My Office has been active in making sure that shippers and credit card companies avoid these illegal activities,” said Attorney General Stumbo. “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. It is well-established that lower cigarette prices lead to increased smoking rates, which in turn lead to more smoking-related illnesses and deaths.”

"This partnership is an excellent example of how Attorneys General and ATF can work together successfully with support from private businesses," said Idaho Attorney General Lawrence Wasden, co-chair of NAAG's Tobacco Committee.

"Today, public and private partnerships are the key to success for law enforcement. ATF investigations show that millions of dollars each 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 Attorney General offices of New York, California and Oregon. Details surrounding the initiative were discussed today at a meeting in Washington, D.C. that included the Attorneys General of Colorado, Oregon, Pennsylvania and Vermont and representatives from the offices of the Attorneys General of California, Idaho, Louisiana, Maryland, New York and Wisconsin. Other participants included ATF and the major credit card companies. All participants agreed to work together to prevent the processing of payments for illegal Internet cigarette sales.

The Attorneys General and ATF commended the credit card companies for agreeing to take affirmative actions to prevent the illegal sale of cigarettes over the Internet, and for agreeing to work cooperatively with law enforcement in shutting down these illegal operations.

Virtually all sales of cigarettes over the Internet are illegal because the sellers are violating one or more state and federal laws, including: (1) state age verification laws; (2) the federal Jenkins Act (which requires that such sales be reported to state authorities); (3) state laws prohibiting or regulating the direct shipment of cigarettes to consumers; (4) state and federal tax laws; (5) federal mail and wire fraud statutes; and (6) the federal RICO law. Many of the sales made by foreign websites also violate federal smuggling, cigarette labeling, money laundering and contraband product laws.

Moreover, Attorneys General said, 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 inadequate, often simply requiring the purchaser to click a button stating that he or she is over 18 years old. Numerous studies have shown that the earlier an individual begins to smoke, the more likely it is that the person will become addicted to smoking, and thus 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 card for illegal transactions. During the meeting held today, the 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 some of 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 as using their credit cards for illegal online cigarette sales.