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Crossing into Romania from Bulgaria on the Danube Bridge ('Friendship Bridge')

On Tap Europe: Organised Crime and Illicit Trade in Romania: Country Report

Cathy Haenlein and Jonathan Eyal
Occasional Papers, 13 October 2017
AML/CTF, National Security and Resilience Studies, Organised Crime, Europe
This is the fourth in a series of five country-level papers on the role of organised crime groups in the illicit trade of tobacco, alcohol and pharmaceuticals across Europe, focusing on Romania as a case study.

The criminal networks behind illicit trade in Romania are sophisticated, often internationally connected, and capable of adapting to exploit opportunities to maximise profits and avoid detection. As in a number of other cases across Europe, there is evidence that OCGs in Romania are moving away from trafficking in high-risk commodities, such as drugs, to engage in illicit trade in products such as tobacco, alcohol and pharmaceuticals. In some cases, OCGs will deal in different commodities simultaneously, as new opportunities and potential profits arise.

Against this backdrop, attention to illicit trade among law enforcement has increased. The issue is now understood to be one driven by organised crime and is addressed alongside other forms of fraud and corruption, to which a concerted response has been mounted. Despite this, domestic demand for illicit goods persists, with illicit consumption largely viewed without social stigma. While there is insufficient data to compare shifts in consumption of illicit alcohol and pharmaceuticals over time, available evidence indicates that consumption of illicit cigarettes in Romania is increasing, and continues to sit well above average European levels.

Romania plays numerous roles in facilitating the illicit trade in tobacco, alcohol and pharmaceuticals, acting at different times as a source, transit and destination country for different products. This paper identifies five core drivers that underpin illicit trade across the country.

The first is the broad social acceptability of purchasing illicit goods. Despite signs of growing recognition that illicit trade has contributed to the country’s historic economic challenges, the presence of a persistent domestic market for illicit goods is clear. Often, those involved in illicit trade may be viewed as providing a service to disadvantaged citizens, with many individuals quick to excuse participation in smuggling activities on this basis.

A second driver is linked to the country’s geographic position between EU and non-EU states, and the resultant price differentials across neighbouring states. Notably, the low price of tobacco and alcohol in Romania’s non-EU neighbours acts as an incentive for smuggling into the country. In the case of tobacco, further price differentials with other EU states drive Romania’s role as a transit state, as cigarettes are smuggled on to European markets further afield.

A third driver applies specifically to the illicit trade in pharmaceuticals, and concerns the Romanian government’s cap on the price paid for medicine. This policy makes the country vulnerable to illicit trade, as pharmaceutical companies have retreated and legal stocks have dried up. Demand for illicit sources has grown as patients have found themselves without the drugs they need, with gaps in domestic supply increasingly met by illicit sources.

A fourth driver concerns the inconsistent application of sanctions for illicit trade. Existing legislation offers relatively stringent penalties, yet these are infrequently applied fully; particularly for alcohol and tobacco, fines are the most common penalty. The result is that sanctions do not act as a consistent deterrent: in many cases, the same individuals return to illicit trade following the payment of fines, often with greater knowledge of law enforcement techniques.

Fifth, corruption has historically been recognised as a challenge, with numerous cases of arrests of officials for involvement in illicit trade at both land borders and ports. However, perceptions may also be influenced by a more stringent response in recent years, as a concerted attack has been launched on high-level corruption and considerable strides made in tackling the issue at a systemic level.

Key Findings

  1. Disparities in the level and type of data available vary by commodity, making reliable comparative analyses difficult. As for other countries in this series, the data on illicit trade in tobacco dwarfs that on alcohol and pharmaceuticals, complicating efforts to establish the extent of illicit trade and potentially distorting perceptions of the threat landscape. Particularly in relation to alcohol and pharmaceuticals, few statistics are publicly available and while some studies have covered specific aspects of the problem, much of the information is anecdotal.
  2. The role of OCGs in illicit trade is recognised by Romanian authorities, and the issue is addressed alongside other forms of serious criminality. Yet there are reports of an imbalance in the extent of efforts to tackle illicit trade in different commodities. Interviewees stressed particularly the tendency to take a reactive approach in the case of illicit alcohol, and to relegate this below efforts to disrupt other forms of illicit trade.
  3. The criminal networks behind illicit trade demonstrate a clear ability to adapt to market opportunities, varying their modus operandi accordingly. Nowhere is this clearer than in the response of OCGs to Romania’s healthcare crisis: as the government has capped the rates paid for prescription drugs, legal supplies of pharmaceuticals have shrunk, creating gaps that OCGs have been quick to exploit. The shortage of drugs to treat chronic illnesses, in particular, has created opportunities: while OCGs have traditionally dealt in ‘mass market’ lifestyle products, an emerging trend has seen the growing illicit supply of ‘niche’ expensive drugs directly to consumers.
  4. The legislative framework in Romania offers moderately strong penalties for involvement in illicit trade, bolstered in recent years by the strengthening of existing laws on tobacco and pharmaceuticals. Yet while law enforcement agencies have demonstrated successes in disrupting smuggling activity, the current application of sanctions has been inconsistent. There is thus a degree of persistence among the groups involved; alongside debates about legislative reform, further action is required to ensure that prosecutors and the judiciary can use existing laws effectively.
  5. Successful operations by Romanian authorities to disrupt smuggling activity have taken place mainly at ports and land borders. While there is a strong focus on the problem at the border, however, there appears to be less of a focus on inland investigations. The country’s external borders undoubtedly constitute a crucial area for intervention, and effective action here represents a key success. However, the use of Romania as a storage point, the exploitation of postal and courier services for delivery, and domestic illicit production demand an enforcement approach that covers the whole of the national territory.

ABOUT THE ON TAP EUROPE SERIES

According to Europol, commodity counterfeiting and illicit trade in substandard goods are major emerging criminal activities in the EU. The low risks and high profitability associated with illicit trade increasingly attract organised crime groups and the number of counterfeit products seized by law enforcement agencies across Europe continues to grow. The eighteen-month On Tap Europe study provides a comparative analysis of the role of organised crime in the illicit trade of tobacco, alcohol and pharmaceuticals across the EU, gathering evidence from a number of member states.

The six-part series explores the scale, methods and routes of these organised criminal networks, and identifies best practice in policy and law enforcement responses. The final report examines how these issues affect Europe as a whole; it features a series of recommendations for the European Commission, its agencies and EU member states.

Author

Cathy Haenlein
Research Fellow, National Security and Resilience
Cathy Haenlein is a Research Fellow in RUSI’s National Security and Resilience Studies group, specialising in... read more
Jonathan Eyal
Associate Director, Strategic Research Partnerships

Dr Eyal is the Associate Director, Strategic Research Partnerships, and International Director, at the Royal United Services Institute... read more

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