Hong Kong customs officers arrested three men and confiscated HK$77 million (US$9.8 million) worth of black-market cigarettes in a series of raids in the early hours of Sunday, netting the biggest haul of illegal tobacco products hidden in storage facilities in a single operation in two decades.

The 28 million illicit cigarettes were uncovered after officers placed some members of the syndicate under surveillance for about a month. A law enforcement source said the investigation suggested the gang had been in operation for about the same length of time and it used three industrial units in Chai Wan and Ap Lei Chau to store and repackage the cigarettes.

“The three storage facilities were used in turns,” he said. “We believed the tactic minimised the risk and reduced financial losses in case one of them was discovered by law enforcers.”

Customs officer Lam Wai-Kit at a press conference.

The gangsters also worked cautiously in an attempt to evade detection, the insider explained.

“They usually operated around midnight, making it more difficult for us to tailgate them and carry out surveillance, especially in the two industrial areas which turned quiet at night,” he said.

After the month-long surveillance, officers from the revenue crimes investigation bureau swooped into action at around midnight as three suspected members of the syndicate made a delivery to the industrial unit on San Yip Street in Chai Wan.

Inside the unit, officers found 7.7 million illicit cigarettes and three suspected gang members, one of whom was a mainland Chinese national holding a two-way permit, a travel document used to enter Hong Kong.

A subsequent investigation led officers to the two other industrial units in Chai Wan and Ap Lei Chau.

They found 11.4 million cigarettes in the storage unit on Ka Yip Street in Chai Wan and another 8.9 million untaxed cigarettes in the Ap Lei Chau one. The Chai Wan units are in two buildings just 200 metres apart.

According to the Customs and Excise Department, the haul has an estimated street value of HK$77 million. If legally imported, the contraband would have generated HK$53.4 million in tax revenue.

The three men were detained on suspicion of dealing with illicit cigarettes – an offence punishable by up to two years in jail and a HK$1 million fine under the Dutiable Commodities Ordinance.

“We believe part of the seized goods were intended for the local market and the remaining was to be repacked and shipped to places such as Australia, New Zealand and Europe,” the source said.

An active investigation was continuing and further arrests were possible, he added.

It was the third major seizure of illegal tobacco products by customs officers in three weeks. They arrested a truck driver and confiscated HK$74 million worth of illegal cigarettes in two separate operations on May 4 and 5.

The seizures were made as part of the fight against black-market cigarette smugglers attempting to stash their haul in the city while finding overseas buyers, according to the source.

So far this year, Hong Kong customs have confiscated about 140 million illegal cigarettes with an estimated street value of HK$392 million. If legally imported, the products could generate HK$266 million in tax revenue.

In the same period last year, officers seized 152 million illicit tobacco products worth HK$425 million.