WASHINGTON — Sen. Orrin Hatch, R-Utah, says terrorists are raising money through the sale of contraband cigarettes at low cost by avoiding state regulation and taxes.

He has thus persuaded the Senate to beef up penalties against it.

By voice vote just before adjourning for the year, the Senate passed Hatch's Prevent All Cigarette Trafficking (PACT) Act.

"Contraband cigarettes contribute heavily to the profits of organized crime syndicates, specifically global terrorist organizations," Hatch said. "The PACT Act is designed so that the profits of those currently benefiting from contraband cigarettes will go up in smoke."

He added, "Our bipartisan efforts led to legislation designed to prevent the funding of global terrorist organizations and ensure the collection of all excise taxes from the sale of cigarettes and smokeless tobacco, including those sales which take place on the Internet, so states can utilize their rightful revenue."

"I'm pleased that the Senate unanimously agreed to choke off this channel of financing for terrorist and other corrupt organizations," said Hatch's chief co-sponsor, Sen. Herb Kohl, D-Wis. "Illegal cigarette trafficking diverted revenue away from our financially strapped states into the pockets of criminals."

The bill, which now goes to the House for consideration when it reconvenes next year, would make violation of interstate cigarette reporting requirements a felony instead of a misdemeanor.

It also strengthens reporting requirements, including lowering the threshold for cigarettes to be treated as contraband from 60,000 to 10,000. It also creates substantial civil penalties for violating reporting requirements and allows state attorneys general to prosecute violators.

E-mail: leed@desnews.com