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By Tim Driscoll, Senior Vice President and General Manager, Currency & Tax Stamp, Authentix

World Health Organization’s Framework Convention on Tobacco Control

 

“The WHO Framework Convention on Tobacco Control (WHO FCTC) is the first treaty negotiated under the auspices of the World Health Organization. The WHO FCTC represents a paradigm shift in developing a regulatory strategy to address addictive substances; in contrast to previous drug control treaties, the WHO FCTC asserts the importance of demand reduction strategies as well as supply issues.

The WHO FCTC was developed in response to the globalization of the tobacco epidemic. The spread of the tobacco epidemic is facilitated through a variety of complex factors with cross-border effects, including trade liberalization and direct foreign investment. Other factors such as global marketing, transnational tobacco advertising, promotion and sponsorship, and the international movement of contraband and counterfeit cigarettes have also contributed to the explosive increase in tobacco use.”WHO Framework Convention on Tobacco Control

The WHO FCTC treaty was enacted in 2005 and passed its last milestone on May 20, 2019, which focuses on compliance directives and guidelines. To date, the treaty has 168 signatories and is legally-binding in 181 ratifying countries.

Following the treaty’s ratification, the WHO realized the issue of illicit trade in tobacco and tobacco-related products (e.g., smuggling) required its own treaty. The WHO’s second international treaty, The Protocol to Eliminate Illicit Trade in Tobacco Products (the Protocol), builds upon and complements Article 15 (see call out below) of the FCTC which addresses means of countering illicit trade in tobacco products and the measures member states must take to take to eliminate it.

Article 15 concerns the commitment of Parties to eliminate all forms of illicit trade in tobacco products. The Protocol to Eliminate Illicit Trade in Tobacco Products builds on this article. It includes obligations concerning the marking of tobacco packaging to enable tracking and tracing, the monitoring of cross border trade, legislation to be enacted, and confiscation of proceeds derived from the illicit trade in tobacco products. Parties are also required (in accordance with national law), to cooperate with each other and with international organizations in combating illicit trade

The Protocol was adopted in 2012 and open for signature January 2013–2014. It went into effect September 25, 2018 after the mandatory 40 member states had acceded to, ratified, accepted or approved it.

The Protocol: Track and Trace Programs

The Protocol focuses on the global tobacco epidemic from both a demand reduction and supply regulation position. It requires that signatories not only monitor and regulate manufacturers and distributors, but also apply other measures that address how the public interacts with tobacco and tobacco-related products (e.g., education, cessation programs, transitioning farmers from tobacco to other crops).

A key component in the Protocol (Part 3, Article 8) is the supply chain track-and-trace program which requires all tobacco and tobacco-related products to have a unique ID placed on the packaging. This ID enables products to be tracked throughout the supply and distribution chain (track), from manufacturer to first retail sale. Those movements are recorded and the data is stored with independent data storage providers. This data must be made available to government entities to help them determine where the item has been in the supply chain (trace) and support enforcement purposes.

Benefiting the Public

By eliminating the illicit trade in tobacco products, the track-and-trace program can help revenue authorities recover lost taxes needed to fund public programs. Fundamental is its efforts to protect the health and welfare of the public, particularly young people, by curbing tobacco use and protecting them from the even more harmful aspects of contraband cigarettes. It addresses issues from secondhand smoke exposure to lobbying standards to social economic programs to seizing contraband. Compliance with the FCTC promotes these efforts, helps protect public health and welfare, and enables a safer market for legal tobacco products − and that’s good news for everyone.

Choosing the Right Authentication Partner

To comply with the FCTC, signatories must use an independent party to register entrants and generate and issue ID codes for tobacco products. However, choosing the right authentication partner that understands your country’s challenges, supply chain, tax revenue laws and the types of illicit trade impacting your citizens, can seem daunting. Authentix collaborates with finance ministries, revenue agencies and custom departments to better understand their tax collection challenges and the complexity of supply and distribution chains operating within their country. Leveraging our experience as a provider of comprehensive tax stamp solutions, Authentix works with FCTC signatories to help them comply with the Protocol. In addition, as a stakeholder in the EU’s Tobacco Products Directive (EUTPD). Authentix enables a European Ministry of Finance to serve as the designated ID issuer for two EU Member States. As a result, we have developed effective implementation strategies to meet WHO and individual signatory mandates.

Our experience combined with AXIS®, our data collection, analysis and reporting software platform, enables us to provide actionable insights to our customers, delivering a deeper understanding of the collected data to help refine tax stamp programs and improve compliance, increase tax revenue and prevent fraudulent activities.

Authentix has been implementing excise tax recovery programs for more than 25 years. As an independent provider, our position allows us to effectively work with all involved parties, including both tobacco manufacturers and government agencies. This ability enables us to reduce the friction inherent in any compliance program and smooth the way for our customers’ success.

With the recent acquisition of Security Print Solutions Limited, the United Kingdom’s leading tax stamp printer, Authentix is further expanding its capabilities and technologies for an even stronger partnership with Finance Ministry and Revenue Agency customers.

Authentix. The Authority in Authentication.

Authentix provides advanced authentication solutions for governments, central banks and commercial products, ensuring local economies grow, banknote security remains intact and commercial products have robust market opportunities. Authentix offers both comprehensive tax stamp programs as well as customized point solutions to assist in tax collection.

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Fuel integrity failures lead to significant revenue losses, brand damage, environmental pollution, poor vehicle performance and increased consumer complaints. To avoid these industry challenges, many branded fuel companies and government agencies are implementing fuel authentication programs throughout the supply chain. As more of these programs are implemented worldwide, stakeholders are finding significant return on investments as fuel quality is greatly improved, revenue and tax collections increase, and the overall integrity of the downstream supply chain is confirmed.

Digital Transformation in the Fuel Supply Chain — Right Data, Right Time

“Digital transformation in fuel authentication programs such as Wi-Fi-enabled mobile devices that communicate directly with our data analysis and reporting platform, AXIS®, can reduce data collection and reporting time in the field by 50 percent or more. The automated data uploads increase the speed and accuracy of data entry, eliminating errors resulting from manual processes used in the past.”Jeff Conroy, Chief Technology Officer, Authentix

The responsibility of managing the complex fuel supply and distribution chain falls on multiple stakeholders within a commercial brand or governmental agency. The value added through a reliable flow of accurate and timely data provides actionable insight for these stakeholders to measure and reconcile information quickly and enforce, react and remediate fuel fraud. In national fuel integrity programs for example, the agencies responsible for the collection of fuel excise taxes use data analytics to quickly detect the introduction of illicit fuel in the supply chain and, through fast enforcement action, increase tax collections and provide tremendous societal benefits.

Additionally, reliable digital data flow enables branded fuel owners to answer critical business questions about their downstream retail operations. Using a fuel marking program, coupled with digital data analytics, can ensure that premium additized fuel products are being distributed correctly under the right brand retail operations.

“Only one in four (25%) professionals believe they have the data needed to assure their brand’s fuel integrity.”Downstream Fuel Manipulation: The threats that could cost you, Oil & Gas IQ, 2018

Authentix has been a pioneer in combining physical fuel marking programs and the collection and automated analysis of supply chain data, and it has led the way on this digital transformation.
Advancements in digital technologies have made fuel authentication programs and the resulting data analytics easier to collect, secure and provide both enterprise and mobile reporting capabilities for its customers, driving improved supply chain security and integrity. Instead of gathering, entering and storing data manually, as in the past, Authentix field inspectors use portable, handheld analyzers digitally connected to the cloud. These advanced mobile
devices record supply chain data and communicate directly with our cloud-based data analysis and reporting platform, AXIS® (Authentix Information System).

The slow collection and reporting velocity of manually supplied data greatly increases the risk of fuel manipulation. Today, with advances in mobile or electronic telemetry data collection technology, AXIS® can enable users to quickly correlate fuel supply chain data with other correlated data from field devices and lab-based results for rapid response capability. For over 20 years, Authentix has been executing data reporting for our customers in real-time, analyzing supply chain results and creating actionable insights for improved program management and decreased opportunities for fuel manipulation or adulteration.

How Does AXIS® Work?

AXIS® is an integrated set of software applications designed to aggregate, store, analyze and present data from multiple and disparate sources to solve for potential supply chain integrity problems. Accessible through a remote web application, the system also presents dashboards and user-configurable reports to enable data-driven decisions and confident actions. Collected data could include geolocation, date and time of collection, retail or terminal IDs, and other identifiers and contextual data.

These identifiers ensure data integrity by establishing a chain of custody and providing contextual informa- tion to ingest and analyze. The correlation and analysis processes generate alerts and insights to ensure any needed revisions and optimization. For example, contextual data (e.g., truck tracking, bills of lading, retail pricing, etc.) provides insights beyond simply providing fuel integrity confirmation. It can also help determine how, when and where fuel supply chain fraud has occurred.

The insights and analytics provided by a robust information system like AXIS® can help prevent supply chain interruptions, program stoppage and lost revenue, while employing strict cybersecurity controls to ensure IT environment security. By generating answers and recommended actions through data analytics, AXIS® helps commercial brand owners and governments better understand and secure their fuel supply chains for the long-term.

Understanding Your Fuel Supply Chain

• What has happened? Historical data is gathered — including store and terminal IDs, and date and time stamps — and correlated with similar data. Through data analysis, patterns and anomalous behavior become evident, potentially indicating manipulation or fraud. These descriptive insights are used to flag those incidents.
• Why did it happen? Diagnostic insights from sales and supply chain data can help determine how a retail location received illegal or illicit fuel and point to specific transactions and individuals involved. Using that data, AXIS® can help users ascertain if all the non-compliant retail stations in a designated region received their fuel from the same terminal, implying that the exceptions noted could be quality control problems and not fraud. Data such as temperature and voltage records also help field inspectors monitor portable device performance, flagging potential servicing requirements that may be needed.
• What will happen? Authentix is accelerating digital transformation for customers with a focus on advancing predictive analytics capabilities. For example, AXIS® can correlate and analyze program data and other external data sources to spot patterns and anomalous behaviors. This provides unique insight into new threats and accelerates detection and learning to provide a significant competitive advantage.
• Can it be repeated? Prescriptive insights can help define possible actions needed to prevent fraud, enabling branded fuel companies and governments to create processes and improve supply chain management.

Leveraging Data Analytics to Drive Actionable Insights

Organizations often discover illicit fuel in certain markets, such as tax-evaded fuel sold as premium or transit fuel outside of an intended designated region. Comprehensive, end-to-end fuel authentication programs — from marker injection at the terminal down to field or lab testing results, and data analytics and resulting actionable insights — empower organizations to discover the origin of illicit fuels and prevent these events from happening in the future. By providing contextual information, Authentix fuel authentication programs help pinpoint trouble spots in the fuel supply chain that would not be discovered through normal security audit processes. With the technology to collect, upload and aggregate data using portable web-based devices, the workflow becomes truly automated, assuring greater fuel and data integrity through increased insights and accuracy.

Authentix: Accelerating Digital Transformation for Competitive Advantage

Authentix’s 25 years of industry experience and advanced technology provides customers with a distinct competitive advantage. Our secure marking technology, flexible implementation, proactive program support and actionable insights through the AXIS® platform, help customers thrive in a global economy. For more information, visit authentix.com.

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By Kevin McKenna, Chief Executive Officer, Authentix

Leveraging Data to Drive Actionable Insights

In a recent survey conducted by Oil & Gas IQ, over 200 downstream industry leaders were asked about the importance of supply chain fuel integrity in delivering on their brand promise. Not surprisingly, 76 percent of respondents said it was very important and 19 percent responded it was somewhat important. Despite the importance of this matter, only 26 percent of the respondents said that they had access to the required data to assure supply chain fuel integrity.

This lack of supply chain data and subsequent corrective and preventative actions exposes brand owners to the ubiquitous risk of fuel manipulation. Fuel manipulation can occur through negligence, system failures, or deliberate illicit acts. Regardless of the cause, when it occurs it can have damaging and lasting effects on consumer confidence and the integrity of branded products – resulting in lost revenue and competitive advantage.

View the full Fuel Quality Industry Report

The Looming Risks of Fuel Manipulation

Many think fuel manipulation isn’t happening in their country or market, or that it is happening at a scale that can be considered part of the cost of doing business, perhaps in the range of five percent of the volume of product sold. Our experience at Authentix is that the volume is typically much higher – in many cases more than 30 percent of the volume of product sold. Petroleum products present a lucrative opportunity for those who wish to deliberately manipulate fuel supplies for their illicit gain. Perpetuating the crime is a simple exercise of price arbitrage – obtain a product at a low price and sell it at a higher price. Lower prices can be obtained from outright theft, subsidized products, smuggling, lower grade products, or adulteration of products with solvents, waste oils, or any low-cost liquid criminals can obtain. This is big business that often goes undetected as represented in a 2017 Ernst & Young report that estimated the illicit fuel market to be $133 billion a year.

Minimize Risks with a Comprehensive Fuel Integrity Program

When a comprehensive fuel integrity program is deployed with sampling, testing, analysis and enforcement, our customers have been able to effectively stop fuel manipulation and achieve returns on investment in many cases of over 10 times. A key tool Authentix uses to combat fuel manipulation and facilitate the tracking and authentication of fuel products is the application of unique chemical markers coupled with proprietary analyzers to detect and measure the markers in the fuel. This lock and key combination of markers and analyzers facilitates the rapid and definitive authentication of products throughout the supply chain – enabling you to detect manipulation from multiple sources. To date, we have marked and protected over two trillion liters of petroleum products across the globe to identify and ameliorate issues such as grade swapping, product adulteration, or quality issues (e.g., incorrect additive dosing, water contamination, etc.).

Over the last few years, we have transformed our solutions to merge the physical authentication results from fuel sampling and testing with ubiquitous data sources (e.g., volume flows, pricing information, truck tracking, etc.) to aggregate and analyze data via the Authentix Information System (AXIS®). AXIS enables our customers to proactively operate their supply and distribution chains for competitive advantage. This transformation has been enabled and accelerated by four ongoing industry trends:

• Increase in data collection, enabled by better connectivity and the Internet of Things (IoT)
• Cheap computing power and cloud infrastructures available
• Improved analysis algorithms and inexpensive machine learning software available
• Excellent open-source software options for data science programming and analysis

Today we are leveraging cloud architecture, simplifying data collection solutions while accelerating adoption of additional IoT sensors, and investing in proprietary data solutions to increase our ability to provide actionable insights to our customers. AXIS delivers insightful data analytics to isolate anomalies, reveal opportunities for fraud, and identify trends in unauthorized product placement, so you can act to maintain the integrity of the supply chain. By extracting the full value of customer, market, and supply chain data, and combining that with the integrity and responsiveness of our people, our customers gain a significant competitive advantage.

Enabling our customers to thrive in today’s complex supply chains requires more than a chemical marker and a device for measurement. It requires nuanced sector expertise and the means to collect, aggregate, and analyze supply chain data from multiple sources. It requires collaborative partnerships to leverage the growing ecosystem of IoT applications and data sources to deploy solutions quickly, and then learn, adapt, and drive toward predictive analytic solutions built on the AXIS platform. All of this contributes to our vision of creating a world of confident commerce – consumers can be confident they are getting what they pay for, and brand owners are confident they are competing on a level playing field to deliver on their brand promise.

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By Chad Crouch, Vice President, Authentix.

Fuel manipulation can have a major impact on your revenue and brand reputation (and you might not even know it’s occurring).

Fuel integrity is a key component of brand protection for oil and gas companies distributing fuel to its consumers. Unfortunately, fuel manipulation is a widespread problem that can severely undermine your brand. How big is the fuel manipulation problem? Ernst and Young estimates that stolen, adulterated and defrauded fuel contributes to $133 billion of losses each year.

Fuel manipulation can be notoriously difficult to detect in the supply chain, but when discovered, the magnitude of the problem can be enormous. In a U.S. court case, for example, a petroleum wholesaler was found guilty of diluting medium and premium grades of gasoline with regular unleaded fuel. The company also represented and sold non-branded, low-grade fuels as branded fuels. Executives at the wholesaler were found criminally guilty and the firm was fined 30 million USD.

Sometimes fuel manipulation is a criminal act, sometimes it’s accidental. Improper dosing or blending of additives into fuels at terminal and retail sites can be caused by equipment failure, human error, or negligence. When that happens, oil companies lose revenue and suffer brand erosion.

Do you feel confident that your branded fuel that leaves the terminal is the same quality as what reaches the retail site and is ultimately sold to consumers? Without the right tools and technology to detect manipulation, you can’t really be sure.

Brand degradation occurs when customers unknowingly purchase adulterated fuels that result in poor engine performance or mechanical problems with their vehicles or other equipment. This will often trigger complaints (directly or on social media) and can result in negative coverage in the news media. Any type of fuel manipulation, irrespective of whether it occurred knowingly or unknowingly, is an exposure that can result in consumer mistrust of your products and cause irreparable damage to your brand.

Environmental damage can be caused by fuels that have been under-additized, leading to greater vehicle emissions, and consequently, more air pollution due to the mixing of waste products or non-petroleum products with your branded fuel.

Damage fuel claims can be devastating for oil and gas companies. If the damage claim stems from a single station operator, damage to the brand can be quickly localized. However, if the source of the problem is broader in scope (i.e., a large retail chain, a route operator, or fuel distribution terminal), the effects of complaints and damage claims can quickly gain momentum, harming the brand’s reputation and running up significant operating costs.

You must defend your downstream supply chain.
The supply chain for an oil and gas company is becoming increasingly complex. The more complex, decentralized and variable the supply chain, the greater the risk of manipulation. When fuel enters your supply chain, it moves through fuel terminals to wholesalers and retailers that may include franchisees, oil marketing companies, sub-distributors, carriers, open dealers, and independent store owners. Fuel integrity can be compromised at any “link” in this complex supply and distribution chain.

The disparity in price between a differentiated or branded fuel and a lower-grade or non-branded fuel creates an enticing arbitrage opportunity that can result in fraud and illicit gain. For example, unethical operators can illegally dilute a high-price and high-value product with low-cost and lower-grade fuel and pocket the difference. Diluting premium fuels with regular fuels of the same brand can place an additional 10% of income in a perpetrator’s wallet, more if the diluent is an unbranded fuel. If the diluent is not fuel but is instead water or a waste product (i.e., used motor oil), the return could be as much as 100 percent.

You can be sure of fuel integrity with an advanced fuel authentication solution.
An effective fuel authentication solution illuminates the supply chain to identify the opportunistic, fraudulent or accidental manipulation of differentiated and branded fuels. This can be accomplished by incorporating covert chemical markers into refined petroleum products and utilizing analyzers to validate the authenticity.

Fuel marking is an extremely effective solution to enable your organization to defend against manipulation and achieve revenue targets for your branded and differentiated fuels. By understanding where you have been compromised in the supply chain, your organization can then take corrective action to prevent future manipulation and ensure your fuel’s authenticity in the long term.

Another benefit of a well-designed fuel authentication solution is its powerful deterrent effect. When fuel retailers know their stations are being randomly audited, and they know the range of penalties that other operators have incurred for diluting fuel, they tend to be much more resistant to temptation and the level of contract compliance increases dramatically. After all, no one wants to be the next case study for the effectiveness of the fuel authentication solution.

You can be your company’s brand protector.
If your company was a football/soccer team, you’d be the goalkeeper. Your team depends on you to protect what matters most. Every day you are protecting your downstream supply chain from unpredictable threats that range from terminal issues to intentional acts of fuel manipulation. If even one ball gets past you into the net, it can have devastating consequences—lost revenue, harm to the environment, and damage to your brand reputation.

Your customers trust you to deliver a quality product, and it is your job to deliver on that promise. With the right fuel authentication solution, you can confidently assure the integrity of your supply chain—from the terminal to the pump.

Chad Crouch is Vice President at Authentix, the authority in authentication solutions. Authentix helps you thrive in supply and distribution chain complexity by providing advanced authentication solutions for governments, central banks and commercial products. These solutions ensure that local economies grow, banknote security remains intact, and commercial products have robust market opportunities. Our partnership approach and proven sector expertise inspires proactive innovation, helping you mitigate risks to promote revenue growth and gain competitive advantage.

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