Customs officers arrested a local businessman and a Spanish man in the early hours of Wednesday morning, after surprising them as they were about to load 165 cartons of cigarettes onto a small boat at Watergardens.
The haul is said to be worth about £3,500.
One of the men, a local shop owner, was found to be in possession of a bag containing 4,000 euros, which has also been confiscated as part of the investigation.
The two suspects were released on bail until December.