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A look at the illicit financial flows from wildlife crime and illegal wildlife trade

International Compliance Association

AML , Big Compliance Conversation , Illicit flows

On 11–12 October, the UK government is hosting the 2018 Illegal Wildlife Trade Conference in London. This conference aims to tackle illegal wildlife trade (IWT) as a serious organised crime. Part of this involves increasing collaboration across the world to tackle the illicit financial flows and corruption that are associated with IWT, and it is this issue of illicit financial flows and corruption that I want to discuss in more detail here.

 

What is illegal wildlife trade?

 

When asked to consider IWT, many people would think of ivory and tiger skins; but it is so much more than that. IWT can be broadly defined as ‘any action which contravenes current legislation (nationally or internationally) governing the protection of animals and plants’ (NPCC). This can involve illegal products or illegal acts, for example ivory/rosewood (a fragrant hardwood used to make furniture) or poaching, but also includes the illicit transportation of wildlife that is still alive and exploited for the exotic pet trade.

 

Now you may think that although IWT can involve cruel and horrific crimes, it is nevertheless a conservation or animal welfare issue and therefore the concern of authorities associated with these areas. However, while the IWT does threaten some of the world’s most iconic species with extinction, it is also a serious organised crime and can count as a predicate offence, meaning any property or benefit from these crimes could be classed as money laundering. The relatively high-profit, low-risk aspect has quickly transformed IWT into a serious, multi-layered international crime.

 

Furthermore, it’s worth around £17 billion per year and is stated by the UK government to be the ‘fourth most lucrative transnational crime after drugs, weapons and human trafficking’.

 

As you would expect, behind these serious organised crimes are serious and organised criminal gangs. Frequently the criminals involved with IWT are also involved in drug or human trafficking. This is because there is already an established ‘network’ and trafficking in wildlife just involves a different ‘product’.

 

The IWT doesn’t just involve wildlife trafficking and laundered proceeds of crime. Most IWT would not be possible without a network of corrupt officials who can be bribed to falsify paperwork or licences (wildlife trafficking can be legal depending on when, where, and how the goods were acquired) or to look the other way to ensure that shipments are not seized during transit. It is this corruption aspect that poses a considerable threat to state integrity, governance and human security.

 

On a side note, several studies have found, despite frequent assertions to the contrary, that IWT is unlikely to be linked to terrorist financing and any involvement is liable to be opportunistic or exceptional rather than being correlated.

 

Crime doesn’t occur in silos, and neither should the authorities that are engaged in combating wildlife crime.

 

Wildlife crime and illegal wildlife trade

 

How can we combat IWT?

 

In a study conducted by the Asia-Pacific Group on Money Laundering (APG) and the United Nations Office on Drugs and Crime (UNODC), only 35% of respondents stated that wildlife crime is recognised as a money laundering risk in their national AML/CFT risk assessment with 71% of respondents not regarding wildlife crime as a key money laundering threat in their jurisdiction. Therefore, to ensure the IWT is properly considered as a threat, it needs to be treated not only as a serious and organised crime, but as a predicate offence under national legislation, as well as a high-risk area for money laundering in order to be compliant with FATF Recommendation 1.

 

In relation to this, national legislation should allow the use of alternative offences, for example money laundering, to pursue wildlife crimes. This would allow law enforcement to ‘follow the money’ which has resulted from the crime and trace it back to the traffickers.

 

Recalling how authorities that are engaged in combating wildlife crime shouldn’t act in silos, national multi-agency co-operation, joint investigations and information sharing between, for example, law enforcement, customs, financial intelligence units (FIUs) and financial institutions (FIs), is essential and should be encouraged. This will allow targets and patterns of behaviour to be identified, including the targeting of criminal networks – not just the lower-level offenders. Co-operation between different agencies and authorities has been used effectively to tackle other serious crimes, such as drug trafficking, for some time.

 

High-risk indicators

 

In order to help identify and manage any high-risk indicators/suspicious activity related to IWT, FIs would benefit from information and guidance from law enforcement, including:

 

  • jurisdictions involved in the wildlife supply chain
  • existing and emerging typologies and risk indicators
  • names of individuals or legal entities known to be involved in IWT
  • feedback from the authorities in response to suspicious activity reports (SARs) submitted.

 

However, due to the limited financial information actually available and the few financial investigations carried out relating to wildlife crimes, it is difficult to identify specific high-risk indicators/areas.

 

Therefore, as you would expect, many of them are very similar to red flags for money laundering, but as IWT is a predicate offence, this isn’t surprising. These include but definitely aren’t limited to:

 

  • the transaction appears to be inconsistent with the customer’s regular business activities
  • the transaction does not appear to be economically viable
  • multiple cash deposits and withdrawals
  • the use of prepaid cards, store value cards, and cryptocurrencies such as Bitcoin
  • multi-country accounts and financial transfers conducted across geographic boundaries.

 

There are a few high-risk areas/indicators that are more specific to IWT, including the following points.

  • As wildlife crimes frequently occur as a side-line of legitimate business, FIs should apply further due diligence to customers operating in environmental/natural resource fields, the antique trade, or transport logistics providers. This includes businesses that are connected to:
    • supplying, producing or distributing forestry resources
    • hunting
    • exotic/wild animal keeping or breeding
    • traditional medicine
    • furs/skins for the fashion industry
    • shipping
  • Criminals engaged in IWT will often create shell/front companies to function as shipping agents in order to send and receive illicit wildlife products and obscure the beneficial ownership and source of the goods.

 

FIs should also have systems in place to allow them to determine whether the customer is affiliated with the wildlife supply chain to enable them to conduct enhanced due diligence. This system should also screen for names associated with IWT.

 

Going forward

 

Thankfully, it appears that the focus on IWT and the illicit financial flows that come from these crimes is increasing. This should raise general awareness of these crimes and how serious they are, and amplify the importance of preventing them, meaning more education and resource will be devoted to doing just that.

 

The hope is that with this will come an increased level of international co-operation and the number of financial investigations into illicit financial flows will increase, meaning that high-risk areas and indicators can be further developed and become more specific and targeted. This will then really enable financial institutions to lend a hand in tackling illegal trade and wildlife crime.

 

Further reading:

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