When Excise Tax Becomes an Engine of Crime: How Australia's Black Market Tobacco Uses the Hawala System to Funnel Profits to Dubai

An underground conflict in Australia that media have dubbed a "tobacco war" is intensifying, fueled by the government's steep excise tax and chronically under-resourced law enforcement. According to ABC News, a clandestine financial network exploiting the ancient Hawala remittance system is funneling tens of millions of Australian dollars in profits from black market tobacco through money changers in Melbourne and Sydney to Dubai, where the funds are controlled from exile by the deported Iraqi crime boss Kazem Hamad. This is the first time Australian authorities have publicly detailed how the country's tobacco crime kingpins move money across borders.

Citing Australian Bureau of Statistics data, ABC News reported that black market tobacco now accounts for 80 percent of all tobacco consumption in the country. Illicit cigarettes sell for around 12 Australian dollars a pack—and with federal excise duties pushing legal tobacco among the most expensive in the world, that price gulf has driven consumers into the illegal market.

According to an investigation obtained by ABC News, the real muscle of the criminal empire lies in its cross-border financial pipeline. A "runner" shuttling up and down Australia's east coast—an asylum seeker on a protection visa—reportedly collected the proceeds in suitcases and cardboard boxes from tobacco shops controlled by criminal syndicates, before transferring the money to Dubai through the Hawala system. Hawala is an ancient remittance mechanism built on trust between money changers, in which cross-border payments require no physical movement of funds and are settled periodically through ledger entries; it has long been exploited by terrorist organizations and organized crime.

"Every day there are messengers with suitcases, shoe boxes and backpacks shuttling money around the world," a former federal law enforcement official, who spoke anonymously to ABC News, said. "The system is essentially impossible to stop."

According to ABC News's investigation, the "commission" group led by or linked to Hamad is alleged to control almost the entire black market. Hamad was earlier deported from Australia for drug trafficking and was sentenced to life in prison in Iraq earlier this year, but law enforcement believes his criminal network has barely skipped a beat. A serving federal police source told ABC News: "We always catch the small fish, we never put enough resources into going after the bosses behind it, we never get the big heads. Once you establish an import network, it's a small step to move into harder drugs."

The cost of the violence has landed directly on ordinary communities. According to anonymous sources cited by ABC News, the tobacco war has produced hundreds of arsons and mafia-style assassinations, and led to the mistaken killing of an innocent woman in Melbourne by a low-level operative.

ABC News also revealed that criminal syndicates use private ATMs as "mini banks," circumventing source-of-funds scrutiny through unlimited top-ups and feeding the cash into legitimate retail and money changer networks. A 2023 Queensland Police report tendered in court identified members of the Al Dilami family—widely linked in intelligence to illicit tobacco—as also allegedly tied to the financial pipeline. According to ABC News, the man identified as the "runner" was caught with millions of Australian dollars in cash in a rental vehicle and admitted to dealing in criminal proceeds, but was sentenced only to a community correction order. In court he said he had fled his home country because he opposed local militia activity: "I came to Australia because I am against illegal things." Sources note that his conviction has done almost nothing to stem the flow of money out of the country.

Federal and state governments are responding with legislation. According to ABC News, Victoria last month granted inspectors and police new powers to shut down shops selling illegal tobacco; over the past four weeks, 61 outlets have been closed and 2 million cigarettes, more than 40,000 vapes, over 120 kilograms of loose tobacco and 500,000 Australian dollars in cash have been seized. Legal tobacco sales have risen notably in Queensland since tougher powers were introduced there in November. The Albanese government has meanwhile put forward a package of bills to stiffen penalties for illicit imports. Assistant Minister for Customs Julian Hill said Queensland's results showed that "strong laws and enforcement are turning the tide."

But a serving federal police source told ABC News that illegal tobacco remains a "low risk, high reward" business for criminal networks—especially those run remotely from overseas. The aforementioned anonymous former federal law enforcement official offered a more drastic prescription: "This is the biggest fraud in Australian people's tax history, and it is the neglected part. We are talking about a legal product whose only criminality comes from the government's excise tax. They could have fixed this overnight, or paused it for two or three years, and ended the killings."

According to ABC News, health bodies such as the Cancer Council strongly oppose any excise cut, arguing that even without tobacco tax, illegal products would still be cheaper and that making legal tobacco affordable would only push smoking rates up and undo decades of tobacco control gains. The very shape of this policy fight exposes the structural tension between excise design, enforcement priorities and public health goals—while the streets of ordinary communities bear every dollar of its spillover.