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Abstract
Objective Document the use of ultraviolet watermark in counterfeit joint New York City/New York State cigarette tax stamps to assess the scale at which distributors of illegal cigarettes adapt to measures protecting the integrity of the system of tobacco tax collection.
Methods In 2016, we collected 2357 empty discarded cigarette packs along a stratified random sample of block groups in New York City (n=114) and analysed 449 joint New York City/New York State tax stamps using long wave ultraviolet irradiation, light microscopy and taggant testers developed by the tax stamp manufacturer, Meyercord Revenue, to determine whether the tax stamps were counterfeit and how they differed from their genuine equivalent.
Findings 23% (n=102) of the joint NYC/NYS tax stamps examined were counterfeit. Subsequent investigation revealed that almost two-thirds (n=58) of the counterfeit sample bore ultraviolet watermark that closely resembled genuine tax stamps in terms of fluorescence, watermark colour and wording. However, microscopic findings revealed that counterfeit tax stamps mismatched the genuine ultraviolet watermark in regards to font style and word orientation.
Conclusion Counterfeiters are using ultraviolet watermarks which makes it difficult to differentiate counterfeit joint New York City/New York State tax stamps from their genuine equivalent when UV irradiation is used as the sole screening tool. Innovations in counterfeiting technology may be the result of fluorescent ink being available for purchase in the mainstream market. Independent monitoring of trends in the illicit market for tobacco products is advised to keep apace of counterfeiting methods.
- illegal tobacco products
- taxation
- surveillance and monitoring
Statistics from Altmetric.com
Introduction
Tax stamps and similar fiscal markings (eg, banderoles) are used in many countries to increase compliance with tobacco tax laws and to help distinguish between licit and illicit tobacco products. In the USA, 48 states, including the District of Columbia, and various local jurisdictions require tax stamps to be affixed to cigarette packs.1 Tax stamps are prone to counterfeiting in schemes that seek to distribute illicit cigarettes through licit distribution channels. In an effort to prevent counterfeiting and bootlegging, four states in the USA (ie, Michigan, Massachusetts, New Jersey and California) use high technology stamps that have advanced features (eg, hologram or encrypted image) that facilitate law enforcements efforts to track and trace products along the supply chain.2 Most states, however, do not use this technology despite evidence showing that it is effective in recouping lost revenue.3 In some high tax jurisdictions like New York City, cigarette tax stamp counterfeiting is a well-utilised scheme in tax evasion.4 In a recent study of covert purchases in licensed cigarette retailers in New York City, Silver and colleagues found that 10.6% of the packs they purchased possessed a counterfeit tax stamp.4
Counterfeit tax stamps in New York City are not a recent phenomenon. There have been several successful attempts at counterfeiting tax stamps that when uncovered by law enforcement and journalists have led to changes in the manufacturing of the tax stamps. For example, in response to an investigative story in 1980 that highlighted the ease with which counterfeit tax stamps could be printed using the Pitney Bowes tax stamp metres,5 6 the City and State tax departments switched to a new manufacturer: Meyercord Revenue.7 Unlike the Pitney Bowes system of imprinting a stamp on the cellophane, Meyercord used heat to paste FUSON tax stamp decals on the packs. However, these decals were not impervious to counterfeiting8 9 and counterfeit tax stamps could be produced using expert print machinery (eg, Multigraphics 1360 offset printer, 26–1K Mercury Exposure System), selling for as little as 4 cents each.10 11
New York City and New York State have since taken a proactive approach towards thwarting counterfeiting by frequently changing the stamp design (eg, colour).12 In addition, the New York State Department of Taxation and Finance has set guidelines on the security measures used for their tax stamps. In 2013, for example, bidders were asked to propose at a minimum seven overt, semicovert and covert security features including (1) roll numbering, (2) stamp numbering, (3) UV watermark, (4) micro imaging, (5) taggants, (6) variable image and (7) chemical reagent (also known as the Base Stamp).13
Currently, New York is among 41 states that use the FUSON tax stamp produced by Meyercord Revenue that contains multiple layers of authenticity (combination of covert, overt and forensic) and can be validated by taggant readers.14 One of the covert layers of authenticity is fluorescence of watermark. Under ultraviolet irradiation (~365 nm) joint NYC/NYS tax stamps fluoresce and bear a watermark that reads: ‘New York State Department of Taxation’. Given the availability of fluorescent inks in the mainstream consumer market and new printing technology, we wanted to test the extent to which counterfeiters had applied this technology to the manufacturing process of counterfeit tax stamps. We tested a subset of verified counterfeit tax stamps (n=102) affixed to discarded cigarette packs collected in New York City in the late summer/early fall of 2016.
Methods
Data
As part of a larger study measuring underground markets in New York City, between late summer and early fall of 2016, research assistants walking in pairs, on opposite sides of the streets, collected empty discarded cigarette packs in a stratified random sample of block groups in all five Boroughs of New York City (n=114). All empty packs (n=2357) found on streets and sidewalks were collected. Packs were not collected from street litter baskets, parks or private garbage on the curbs. Researchers only collected packs during weekdays (between 7 AM and 1 PM) to minimise bias from tourism. Further, they did not collect packs on the days when it rained to minimise the collection of weather damaged packs. Of these packs collected, only 449 (19%) were relevant for our forensic analysis because they had a cellophane wrapper and a joint NYC/NYS tax stamp.
Forensic analysis
In February 2017, the 449 discarded packs with a joint NYC/NYS tax stamp were taken to the New York City Sheriff’s Office and were analysed using IRIS 1 Taggant Tester provided by Meyercord Revenue Inc. (New York State Department of Taxation and Finance, 2018). This taggant reader has been used to validate counterfeit cigarettes in past studies in New York City.4 15 The joint NYC/NYS tax stamps that were identified as counterfeit were then exposed to long wave ultraviolet irradiation for visual inspection (~365 nm; UVGL-25 Compact UV Lamp, 4 Watt, UVP, LLC) in a viewing cabinet (Model C-10, UVP, LLC). Subsequently, we compared differences in fluorescence, words printed, font quality and watermark orientation among samples using a Video Spectral Comparator VSC 6000/HS (foster +freeman).
Results
A genuine joint NYC/NYS tax stamp features a regular font, yellow UV watermark, positioned horizontally and reading ‘New York State Department of Taxation’ (figure 1A). Of the 449 packs analysed by the New York City Sheriff’s Office, 102 (23%) were verified as bearing a counterfeit New York City tax stamp. Additional forensic analysis found that more than half (57%, n=58) of the counterfeit tax stamp sample displayed a fluorescent watermark with yellow lettering that reads: ‘New York State Department of Taxation’. There were two fluorescent counterfeit tax stamp numbers we observed: 6036H13166 (n=16) and 6020HD9786 (n=25). Other tax stamps that fluoresced (n=17) bore tax stamp numbers that were unreadable. Tax stamp numbers 6036H13166 and 6020HD9786 differed from each other and their genuine equivalent. For example, tax stamp number 6020HD9786 was associated with a bold style font, yellow UV watermark, positioned horizontally (figure 1B), while stamp number 6036H13166 featured a regular styled font, and yellow UV watermark, positioned vertically (figure 1C).
Comparisons of genuine counterfeit fluorescent tax stamps. (A) Genuine tax stamp 7328H16401 with regular styled font, yellow watermark positioned horizontally. (B) Counterfeit tax stamp 6020HD9786 with a bold styled font, yellow UV watermark positioned horizontally. (C) Counterfeit tax stamp 6036H13166a regular, styled font, yellow UV watermark positioned vertically.
There was no association between counterfeit tax stamp number and specific premium brands. All of the packs bearing counterfeit tax stamps were premium brands including Marlboro (30%, n=31), Newport (51%, n=52), Parliament (8%, n=8) Winston (1%, n=1), Camel (4%, n=4), Benson and Hedges (1%, n=1), Capri (2%, n=2) and American Spirit (3%, n=3). Overall, there were differences in font style and watermark positioning that distinguished counterfeit tax stamps from the genuine equivalent.
Discussion
We document that counterfeiters have innovated the unauthorised and illegal reproduction of the joint New York City/New York state cigarette tax stamp by adding ultraviolet watermarks. This finding is significant for New York and 40 other states that use this technology. Counterfeiters may be aware that law enforcement agencies are using quick scan tools such as hand held UV lights to screen for counterfeit tax stamps. Thus, counterfeiters have added an additional layer of complexity to their counterfeit tax stamps to avoid primary detection that would warrant additional inspection of covert features (eg, chemical). However, while the mainstream availability of fluorescent ink has made it easy for counterfeiters to add a level of depth to their operation, they do not appear to have mastered this process fully because of visual differences in font quality (ie, orientation, size, colour and font type).
This paper cautions agencies in states where FUSON tax stamps are used that field investigations should be more thorough in preliminary scans of tax stamps. The use of UV lights may be insufficient to ensure that counterfeit tax stamps are not being overlooked. Even tax stamps that fluoresce should be further scrutinised and additional covert features should be examined.
One of the study’s limitations is that we do not have longitudinal data to identify when fluorescence was added to the counterfeit tax stamps. According to information provided by the New York State Department of Taxation and Finance and the New York City Sheriff’s Office, the two types of fluorescent tax stamps we observed were first seized as early as December 2015 and found in Staten Island, Manhattan and Brooklyn.16 17 This information still limits our analysis as there could have been stamps with similar fluorescent properties, but using a different stamp number on the market before our data collection. Nonetheless, we advocate that states and governments worldwide consider the use of encrypted tax stamps and the monitoring of the illicit trade in tobacco products over time by independent investigators to better understand the changes in the marketplace including how counterfeiters benefit from the availability of new technologies (eg, ink fluorescence), and the impact of tax policies and newly designed stamps. Finally, we encourage Parties to the WHO Framework Convention on Tobacco Control, which are preparing to enter into force the Protocol to Eliminate Illicit Trade in Tobacco Products to promote a global track and trace system (set forth in Article 8 of the Protocol)18 featuring anticounterfeiting technology that undergoes frequent systematic changes to overt, covert and semicovert features to stay ahead of counterfeiters.
What this study adds
Counterfeiters have added an additional layer of complexity to their counterfeit NYC/NYS tax stamps to avoid primary detection.
Field investigations should be more thorough in preliminary scans of tax stamps and not rely solely on detecting UV fluorescence.
Acknowledgments
The authors would like to thank our Fordham University student volunteers who helped collect the litter data and the New York City Sheriff’s Office for assisting with the verification of counterfeit tax stamps.
Footnotes
Contributors MKK: conceptualised the project. MK, DQ and YH: analysed the data. MK, KvL, YH and CD: wrote and edited the paper.
Funding This study was funded by Rutgers School of Criminal Justice Dean’s Research Grant.
Competing interests None declared.
Patient consent Not required.
Ethics approval This study was approved by Rutgers University Arts and Sciences Institutional Review Board in August 2016.
Provenance and peer review Not commissioned; externally peer reviewed.