Environmental Crime and Money Laundering

Blog / Environmental Crime and Money Laundering

Environmental crimes, sometimes known as green crimes, are a $250 billion business, according to Interpol. However, many governments do not prioritize it since it is considered "victimless" and focuses on the advantages rather than the costs. This has resulted in countless unsuccessful legislation. The lack of attention to these crimes has produced a snowball effect that is difficult to cease. Green crimes are predicted to rise between 5% and 7% year, about double the rate of the world economy.

What is Eco-crime?

Environmental crime is breaking laws designed to safeguard the environment and animals. Criminals exploiting or trafficking resources or animals for profit are known as environmental criminals. Some examples of environmental crimes are:

  • 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 common in low regulation nations where animals and natural resources are numerous and easily abused. Elephant poaching, for example, continues to plague several African states, while Amazon deforestation threatens natural habitats throughout South America. Thus, environmental crime is usually seen as a significant money laundering offense.

What Motivates Environmental Crimes?

Environmental crimes are driven by three basic elements. To begin with, the high gains associated with such acts. Companies and people benefit significantly from most of the definitions mentioned above. Wildlife crimes are expected to generate roughly $23 billion yearly, placing them behind illegal narcotics, human trafficking, and weapons trafficking.

The second issue is the unpretentious recognition of said violations and their penalties. The fact that many countries have minimal knowledge of such crimes encourages and aids crooks to continue their destructive activities. As a result, the hazards are regarded smaller than those of illicit substances or human trafficking.

Third, the massive demand for traditional medicine and its alleged health advantages. Shark fins and rhino horns are used to make ointments and other bogus remedies that have no medical basis. Rhino horns, for example, are highly desired on the black market for both ornamental and medicinal uses. With prices greater than gold, diamonds, and cocaine, the western black rhino was wiped off in 2011. Likely the tiger components such as the head, skin, bones, reproductive organs, and flesh are highly sought for in China by the military, political, and financial elite. They are used for taxidermy, aphrodisiacs, and decorations. The United States presently has more tigers in captivity than any other country.

How Do Eco-terrorists Launder Money?

Money laundering and environmental crimes are intertwined because offenders must launder their illicit gains. Criminals frequently utilize legitimate enterprises to conceal their unlawful activities, either by using a front firm or by mixing green crimes with legal operations to avoid detection. Fur and skins are frequently utilized in the illicit wildlife trade, while warehousing firms may be fronts for the illegal storage of all kinds of protected animals and plants.

According to APG-UNODC research, little is known about the payment mechanisms employed by environmental offenders due to fragmented and incomplete data. However, the minimal evidence provided leads to the employment of anonymous and hard to track equipment. Payments can be made in cash or using pre-paid cards.

Authorities are baffled by the environmental crime-money laundering nexus. The issue is the disparity in environmental crime laws and regulations among jurisdictions. Many governments punish criminals for environmental crimes like poaching but not for money laundering related to dealers and resellers. Money laundering charges or investigations were just one percent of all environmental offenses charged or investigated in Asia-Pacific. Corruption also aids in the spread of green crimes by weakening regulations and reducing assistance from authorities, therefore supporting criminal organizations and cartels.

Companies interested in forestry, animal breeding, medicinal products, hunting, fashion, furniture, and logistics such as warehousing, transportation, and shipping may hide behind moral yet engage in unlawful environmental operations.

What are the Signs of Eco-crime?

Financial institutions can help disrupt unlawful environmental exchanges. These include bribes and payments related to the acquisition or transportation of illegal products. However, financial institutions may unwittingly become involved in unlawful operations if they are uninformed of how green crimes function.

Listed below are several red flags that may assist Compliance Officers and AML Analysts spot green crime suspicious activity:

Shell companies: Shell firms are frequently utilized as shipping intermediaries by environmental criminals. Accept no firms with opaque beneficial owners, sophisticated corporate structures, or tax-havens.

Inconsistent activity: Variation in the amount of transactions compared to your client's business might be a red flag for anything shady.

Cash: as noted earlier, cash provides environmental criminals anonymity. Be aware of numerous cash deposits or withdrawals in different countries or requests for big denomination banknotes.

Shipping paperwork: Incomplete or missing client information on customs and/or shipping documents may indicate suspicious conduct.

Wildlife: Check the plant or animal's origin and familiarize yourself with illicit trading channels if you have any concerns about the transaction. To find out if an animal is protected, look it up on the CITES website.

What New Environmental Laws are There?

To prosecute money laundering, the US Congress approved the Eliminate, Neutralize, and Disrupt (END) Wildlife Trafficking Act in October 2016. President Trump issued Executive Order 13773 in 2017, acknowledging the link between transnational criminal organizations and wildlife trafficking. The Task Force on Wildlife Trafficking was established to boost law enforcement, reduce demand, and foster international collaboration.

The 6th Anti-Money Laundering Directive, 6AMLD, identifies environmental crime as one of the 22 predicate offenses connected to money laundering in Europe.

The Mansion House Declaration, led by Prince William, and signed by 38 financial institutions and international organizations, started the United for Wildlife Financial Task Force in 2018. The task force will engage with financial institutions to combat environmental crimes using RUSI and TRAFFIC's technical knowledge.

Internationally, the Financial Action Task Force (FATF) indicated that illicit wildlife trading will be one of their objectives. Their research will look at environmental criminals' payment methods and supply linkages.

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