Environmental Crime and Money Laundering

Environmental Crime
According to Interpol, environmental crimes, often known as green crimes, are a $250 billion industry. Many governments do not emphasize it because it’s “victimless” and focuses on the benefits rather than the costs. This has resulted in a slew of failed legislation. The lack of attention paid to these crimes has resulted in a difficult-to-stop snowball effect. Green crime is expected to increase at a pace of 5% to 7% per year, roughly double that of the global economy.

What is Environmental Crime?

Environmental crime refers to the violation of laws intended to protect the environment and wildlife. Environmental criminals benefit from the exploitation or trafficking of natural resources or animals.
The following are some examples of environmental crimes:
  • Illegal capture or slaughter of animals for their parts
  • Smuggling of ivory or rhino horns
  • Waste production
  • Water, air, and soil pollution
  • Unreported fishing
  • Illegal logging
Environmental crimes are widespread in countries with little regulations, where animals and natural resources are plentiful and exploited. Elephant poaching continues to be a problem in African countries, while deforestation in the Amazon is threatening natural areas all throughout South America. As a result, environmental crime is as a serious money laundering infraction.

What Makes People Commit Environmental Crimes?

Three main factors contribute to environmental crime. To begin, there are the large profits that come with such actions. Most of the definitions mentioned above are beneficial to both businesses and individuals. Wildlife crimes generate $23 billion per year, putting them ahead of illegal narcotics, human trafficking, and weapons trafficking.
The second point to consider is the unpretentious recognition of violations and their consequences. The fact that many countries have only a rudimentary understanding of such crimes encourages and aids criminals in their destructive activities. As a result, the risks are regarded as minor in comparison to those posed by illegal drugs or human trafficking.
The third factor is the enormous demand for traditional medicine and its purported health benefits. Shark fins and rhino horns are used to make bogus ointments and other non-medical remedies. Rhino horns, for example, are sought after for both ornamental and medicinal purposes on the black market. The western black rhino was wiped out in 2011 with prices higher than gold, diamonds, and cocaine. The military, political, and financial elite in China are likely to be interested in tiger parts such as the head, skin, bones, reproductive organs, and flesh. Taxidermy, aphrodisiacs, and decorations are all made with them. There are currently more tigers in captivity in the United States than in any other country.

How Do Eco-terrorists Launder Money?

Because offenders must launder their illicit gains, money laundering and environmental crimes are linked. To avoid detection, criminals use legitimate businesses to hide their illegal activities, either through the use of a front firm or by mixing green crimes with legal operations. Fur and skins are used in the illegal wildlife trade, and warehousing companies may serve as fronts for the illegal storage of a variety of protected animals and plants.
Due to fragmented and incomplete data, according to APG-UNODC research, little is known about the payment mechanisms used by environmental offenders. Yet, the lack of evidence leads to the use of anonymous and difficult-to-trace equipment. Cash or pre-paid cards can be used to make payments.
The link between environmental crime and money laundering is perplexing authorities. The problem is that different jurisdictions have different environmental crime laws and regulations. Governments punish criminals for crimes against the environment, such as poaching, but not for money laundering involving dealers and resellers. In Asia-Pacific, money laundering charges or investigations accounted for less than 1% of all environmental offenses charged or investigated. Corruption also contributes to the spread of green crime by weakening regulations and reducing government help, thereby assisting criminal organizations and cartels.
Forestry, animal breeding, medicinal products, hunting, fashion, furniture, and logistics such as warehousing, transportation, and shipping companies may hide behind moral guises while engaging in illegal environmental activities.

What are the Signs of Environmental Crime?

Financial institutions can aid in the disruption of illegal environmental transactions. Bribes and payments related to the acquisition or transportation of illegal products are examples of this. But, if financial institutions are unaware of how green crimes work, they may become involved in illegal activities.
Red flags that may help Compliance Officers and AML Analysts spot green crime suspicious activity:
Shell companies: Environmental criminals frequently use shell companies as shipping intermediaries. Accept no companies with unidentified beneficial owners, complex corporate structures, or tax havens.
Irregular activity: Differences in the number of transactions compared to your client’s business could state that something isn’t right.
Environmental criminals can hide behind cash. Look for a lot of cash deposits or withdrawals from different countries, as well as requests for large denomination banknotes.
Client information on customs and/or shipping documents that is incomplete or missing may state suspicious behavior.
If you have any concerns about the transaction, check the origin of the plant or animal and familiarize yourself with illicit trading channels. Look up an animal on the CITES website to see if it is protected.

What Environmental Laws Have Passed Recently?

In October 2016, the US Congress passed the Eliminate, Neutralize, and Disrupt (END) Wildlife Trafficking Act to combat money laundering. In 2017, President Trump signed Executive Order 13773, recognizing the connection between transnational criminal organizations and wildlife trafficking. The Wildlife Trafficking Task Force was formed to strengthen law enforcement, reduce demand, and foster international cooperation.
Environmental crime is one of the 22 predicate offenses linked to money laundering in Europe, according to the 6th Anti-Money Laundering Directive, or 6AMLD.
The United for Wildlife Financial Task Force was founded in 2018 by the Mansion House Declaration, led by Prince William and signed by 38 financial institutions and international organizations. Using RUSI and TRAFFIC’s technical knowledge, the task force will engage with financial institutions to combat environmental crimes.
Illicit wildlife trade is one of the goals of the Financial Action Task Force (FATF) on the international level. Their investigation will focus on the payment methods and supply chains used by environmental criminals.

Discover next-generation financial crime compliance technology

Book a demo to find out how Omnio can strengthen your AML defences and compliance capabilities.

More Articles

3 Stages of Money Laundering

Top Features to Look for in AML Software: Everything You Need to Know

Reputational Risk in Financial Compliance

Sanction Screening Quick Guide