A new United Nations (UN) report has warned that illicit tobacco trade is helping finance non-state armed groups and criminal organizations operating in Mindanao, turning cigarette smuggling from a revenue-loss issue into a broader peace, order, and national security concern.

According to the UN Office on Drugs and Crime (UNODC), interviews with officials in Zamboanga in March 2026 indicated that some armed groups in Mindanao are benefiting from the illicit tobacco trade.

The report said this steady cash stream may be used to sustain criminal operations, logistics, recruitment, and the movement of other contraband.

The shift has reportedly contributed to a decline in kidnappings, as tobacco trafficking provides a lower-risk, high-volume alternative to kidnap-for-ransom (KFR).

Philippine authorities led by the Department of Interior and Local Government and the Philippine National Police (PNP) have reported near-zero KFR cases over the past six months.

Unlike high-profile crimes, illicit cigarette routes exploit porous borders, private ports, enforcement gaps, and local distribution networks while generating funds for smugglers, lookouts, corrupt facilitators, transport, storage, and other organized criminal activity.

The UN report said illicit cigarettes dominate the market in the southern islands of Mindanao, creating a profitable ecosystem for smugglers, financiers, corrupt facilitators, and armed groups that may provide protection, transport, storage, or distribution services.

It also cited a 2025 study showing that more than 80 percent of cigarettes sold in monitored Mindanao sites were illicit.

The PNP has identified Caraga as the country’s tobacco smuggling epicenter based on seizure volume and value from January to June 2026.

PNP data presented during the Third International Tobacco Summit showed authorities seized an estimated P8.63 billion worth of smuggled cigarettes and manufacturing equipment nationwide with Region 13 accounting for one of the largest hauls at about P3.31 billion to P3.38 billion.

The US State Department has earlier identified direct links between cigarette smuggling and terrorist organizations such as the Irish Republican Army (IRA), the Kurdistan Workers’ Party (PKK), and Hezbollah, underscoring how illicit tobacco proceeds can help sustain extremist and organized criminal networks.

Similarly, a 2017 special news report highlighted how former Algerian al-Qaeda leader Mokhtar Belmokhtar profited extensively from cigarette smuggling, reinforcing concerns that tobacco trafficking can serve as a funding source for extremist groups.

UNODC further said the cigarettes are often manufactured legally in Indonesia or Vietnam but smuggled into the Philippines outside lawful import channels, bypassing taxes and regulations. It described the trade as an “unbroken line” in Mindanao, with low barriers to entry allowing even small players to invest and profit.

The UN body also noted acts of violence against those attempting to disrupt tobacco smuggling networks and repeated allegations of local government corruption enabling the trade.

It placed illicit tobacco within a wider Southeast Asian criminal ecosystem in which criminal actors increasingly share trafficking routes, financial flows, logistics, and service providers across multiple illicit markets.

UNODC nevertheless stressed that international cooperation is vital in reducing the illicit trade market.

"All countries of the region should consider becoming Parties to the Protocol to Eliminate Illicit Trade in Tobacco Products, which could facilitate this cooperation,” it said.

The UN body added: “The countries of the region must protect their regional partners from illicit tobacco manufacturers in their own countries. This requires both domestic enforcement and monitoring of cigarette exports."

The EU-ASEAN Business Council and Euromonitor International study has estimated that the Philippines lost P141 billion in revenues to illicit tobacco and illegal e-vapor products between 2024 and 2025.