Money Laundering Bulletin, 9 August 2022
Criminal dealing in ‘protected’ rare and endangered species is serviced by networks of illicit finance, which are coming under increasing scrutiny, finds Paul Cochrane, in Pietermaritzburg, South Africa.
The Financial Action Task Force (FATF) issued a dedicated report, ‘Money Laundering and the Illegal Wildlife Trade’ in June 2020 (1) and has followed up with further analysis on a topic that is being researched in depth by a wide range of NGOs.
Call of the wild
The criminal trade is estimated to be worth up to US$23 billion a year, with more than 100 million plants and animals trafficked annually, according to UN figures. (2)
The 2020 FATF report noted that “criminals are making enormous profits by using front companies to mix legal and illegal goods and payments early in the resource supply chains. They also rely on corruption, trade-based fraud, and offshore corporate structures to conceal the ultimate criminals benefitting from these crimes.”
FATF expanded on the issue in 2021, with a report on Money Laundering from Environmental Crime, which includes forestry crime, illegal mining and waste trafficking (3), and generates “around USD110 to USD281 billion in criminal gains each year.”
Friends in high places
Awareness about the illegal wildlife trade has been driven by high-profile support, for example, from the Duke and Duchess of Cambridge: Prince William addressed FATF in December 2021 on environmental crime.
“We are definitely seeing more focus on environmental and illegal wildlife crime. The cynics will say Prince William’s patronage has had a lot to do with that, and I will not dispute that,” Denisse Rudich, a senior policy advisor at The Sentry, a US-based investigative and policy organisation, told MLB. “In terms of industry adoption, it has been about making that link between elephants being poached and how that shows up in the supply chain. Some regulatory technology [regtech] firms are asking: ‘What do we look for? How do we set the rules, and the standards?’.”
The regtech sector is certainly focusing on IWT, especially in Europe and North America, with some vendors changing their services to address the challenges “From what I have seen, financial institutions are concerned about taking it seriously but worry they may not have all the data, and how to record transactions and things like that,” said Dr Janet Bastiman, Chief Data Scientist at UK-based AML technology vendor Napier. “Generally, financial institutions are receptive to any tools and help we can give them to identify IWT. Fundamentally they don’t want to be party to any of these crimes.”
ESG context
The spotlight on IWT and environmental crime has come at the same time as the financial industry increasingly focuses on environmental, social and governance (ESG) criteria. Sustainability reporting standards are being developed this year (2022) by the International Sustainability Standards Board (ISSB), the USA’s Securities & Exchange Commission (SEC) and the European Financial Reporting Advisory Group (EFRAG), the latter for mandatory reporting from 2025 under a European Union sustainability reporting directive.
“The ESG and AML worlds are coming together on this, as big financial institutions are making quite strong ESG commitments. The rising tide of ESG responsibility is a nice motivator for businesses, and understanding the role of corruption, politically-exposed persons (PEPs) and money laundering that underpins the trade is a very good way to show the threat IWT presents,” said Ben Brock, Wildlife Crime Analyst at TRAFFIC, a UK-based non-governmental organisation (NGO) working globally on trade in wild animals and plants.
Joint initiatives
Awareness and cooperation between regulators, law enforcement and the private sector have been driven by initiatives by international NGOs the World Wide Fund for Nature (WWF), TRAFFIC, United for Wildlife, and the Basel Institute on Governance.
New tools to identify illegally traded species and body parts is also aiding investigations: TRAFFIC has launched a new online Learning Centre to provide resources around IWT, including 3D replica shark fin scans to identify protected shark fins (4), while the Arcadia charity, a TRAFFIC Wildlife Trade Portal, tracks global seizures of illegal wildlife products (5), and the USAID Reducing Opportunities for Unlawful Transport of Endangered Species (ROUTES) Partnership, provides capacity building materials for the aviation sector. (6)
WWF and TRAFFIC have developed a compliance protocol to manage stockpiles of shark fins in Hong Kong to prevent co-mingling those listed by the UN Convention on International Trade in Endangered Species (CITES), which require permits to be traded, with non-CITES listed varieties. The Hong Kong authorities recorded their largest seizure, in May 2020, of 26 tonnes of protected Thresher and Silky sharks.
The implementation of CITES has key to fighting illicit wildlife trades. It has 184 signatory states (as of January 2022), and received a boost in May (2022) when another UN agency, the International Maritime Organisation (IMO), adopted new ‘Guidelines for the Prevention and Suppression of the Smuggling of Wildlife on Ships Engaged in International Maritime Traffic’. (7)
TRAFFIC welcomed the move, given shipping accounts for an estimated 72%-90% of wildlife trafficking volumes.
At the national governmental level, in March (2022), the United Arab Emirates (UAE) and the UK jointly launched a toolkit to support financial institutions to tackle illicit financial flows in IWT.
An Eastern-Africa TWIX (Trade in Wildlife Information eXchange) network has also been expanded, with Djibouti joining Kenya, Tanzania and Uganda this year to share online information about wildlife crime that passes within and through their borders. (8) Another dedicated online platform was launched in 2021 to support members of the East Africa Association of Prosecutors (EAAP) in combatting wildlife crime: participating countries are Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan. (9)
Train for free
US-based AML training body the Association of Certified Anti-Money Laundering Specialists (ACAMS) has also adopted the cause, in 2020 developing a free-of-charge online certificate on Ending Illegal Wildlife Trade, developed with WWF and supported by the Basel Institute on Governance, United for Wildlife and the Royal Foundation of the Duke and Duchess of Cambridge. (10)
In July (2022), ACAMS partnered with TRAFFIC to launch a Simplified Chinese version of the certificate, which outlines the complex methodologies used to circumvent import-export and AML laws, and features case studies highlighting recent ivory, timber and wildlife-trafficking investigations in Thailand, Tanzania and China. ACAMS is planning to design a further two programmes to enable AML practitioners to identify IWT-related activity, said an association note.
“The fact that we are seeing big organisations like ACAMS issue this kind of guidance shows that there is demand from customers to know more about IWT,” said Brock. “But the first thing that needs to happen, that has not happened across all organisations and countries, is to assess the threat... There are a lot of unknown unknowns, as countries don’t know their exposure.”
Distinctive features
Brock said financial institutions should focus on the specificities of IWT rather than adopt a generalist approach: “Talking about IWT from an AML perspective as a whole is like talking about the drugs trade as a whole. The cocaine trade has different geographic preferences compared to say European home-grown cannabis or Afghan heroin, as does IWT,” he said.
“If you look at rhino horn and elephant ivory trafficking, they look like other typical crimes like drugs, but if you start to look at illegal fishing or illegally harvested wood, it is a completely different profile, as it is very much enmeshed in legitimate trade and you have tainted supply chains,” he said.
Rudich highlighted how difficult it is to identify typologies and raise red flags related to IWT, despite some commonalities with the trafficking of humans, drugs and weapons. “There are also new crimes that need to be looked at more closely, such as green-washing and what the world is doing to tackle climate change – there is fraud in carbon trading, food security issues such as illegal fishing, and the dumping of waste and technology. There needs to be an evolution in what crimes are looked at, but also more work done specifically on financial flows and how they go through the international system,” she said.
South Africa – model of collaboration
Analysts think more public-private partnerships (PPPs) should be created, emulating the South African Anti-Money Laundering Integrated Task Force (SAMLIT), a PPP that is especially focused on tackling IWT. (11) “When I work in other parts of the world, I frequently cite SAMLIT as the most successful and proactive PPP in the world on IWT. It is Financial Intelligence Centre [FIC, the country’s FIU] led; there’s really good public sector engagement; they have engaged NGO expertise; and the financial institutions themselves seem to be proactively engaged. I am not aware of any European FIU that is engaged in a PPP on environment crime,” said Brock.
PPPs may be given a push by the July (2022) appointment of Xolisile Khanyile, the FIC director as chair of the Egmont Group of FIU’s for a two-year term. “It is definitely good Khanyile is becoming the head of Egmont as she has made IWT a priority as an economic crime, unlike other countries,” added Brock.
NOTES:
1 - http://www.fatf-gafi.org/media/fatf/documents/Money-laundering-and-illegal-wildlife-trade.pdf
2 - https://www.traffic.org/about-us/illegal-wildlife-trade/and https://www.sciencedirect.com/science/article/abs/pii/S0006320717312478
3 - https://www.fatf-gafi.org/media/fatf/documents/reports/Money-Laundering-from-Environmental-Crime.pdf
5 - https://www.wildlifetradeportal.org/#/login
6 - https://routespartnership.org/
8 - https://www.easternafrica-twix.org/
9 - https://www.traffic.org/news/prosecutors-in-east-africa-set-their-sights-on-wildlife-criminals/ and https://eaaprosecutors.org/
10 - https://www.acams.org/en/training/certificates/ending-illegal-wildlife-trade
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