MasterCard Bans Illegal Internet Tobacco Sales

March 15, 2005
MasterCard is warning its customers that they cannot accept charges for illegal tobacco sales, which would include most sales over the Internet in the United States.

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The US Department of Justice and state attorneys general throughout the country have warned that such transactions nearly always run afoul of one or more of the following federal and local provisions: wire and mail fraud, contraband trafficking, counterfeiting, money laundering, tariff, smuggling, or state tobacco laws.

New York Attorney General Eliot Spitzer commended MasterCard for "taking this important step to help stop the illegal sale of cigarettes over the Internet."

"In addition to violating state and federal laws, Internet cigarette sales increase smoking rates, which in turn lead to increases in smoking-related illnesses and deaths," Spitzer said. "MasterCard's announcement demonstrates its commitment to assist law enforcement in addressing these issues."

MasterCard said that financial institutions can continue to provide MasterCard acceptance for Internet tobacco sales if they have documented evidence to substantiate that the merchant is in compliance with all applicable federal, state, and local laws to the satisfaction of the Bureau of Alcohol, Tobacco and Firearms and any applicable State Attorney General.

"We put out the bulletin to remind our global membership that MasterCard does not tolerate illegal activities of any kind. Strict adherence to MasterCard's standards has become increasingly important as the use of the Internet for e-commerce has exploded," said MasterCard senior vice president Joshua Peirez.

"Consumers purchasing cigarettes from an out-of-state merchant cannot avoid paying state-mandated tobacco taxes and other tariffs, and vendors need to be mindful of properly documenting and reporting such sales and shipments."

MasterCard said it is working closely with law enforcement officials to address situations where the legality of activities related to payment card transactions is in question. In the U.S., for example, MasterCard is working with a variety of federal and state law enforcement agencies including: the ATF; the Drug Enforcement Administration; the Food and Drug Administration; the U.S. Secret Service; and the Federal Bureau of Investigation.

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