Money Laundering and the Illegal Wildlife Trade
Report by the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, an inter-governmental body setting international standards that aim to prevent these illegal activities and the harm they cause to society.
The illegal wildlife trade (IWT) is a major transnational organised crime that fuels corruption, threats biodiversity, and can have significant public health impacts. In particular, the spread in recent years of zoonotic diseases underlines the importance of ensuring that wildlife is traded in a legal, safe and sustainable manner, and that countries remove the profitability of illegal markets. According to the 2016 UN World Wildlife Crime report, criminals are illegally trading products derived from over 7 000 species of wild animals and plants across the world. This includes iconic mammals, but also lesser-known species of reptiles, birds and amphibians.
To reflect the serious nature of this crime, the UN General Assembly has adopted several resolutions to combat IWT, and in September 2019, reiterated its call for all members “to amend national legislation, as necessary and appropriate, so that offences connected to IWT are treated as predicate offences for money laundering (ML) ” (UN General Assembly Resolution 73/343)7.
Criminal syndicates involved in wildlife crime continue to be highly organised, and are often involved in other forms of serious crime. For example, the large-scale ivory seizures and mixed shipments of multiple protected species suggests that transnational syndicates are continuing to grow and diversify. Wildlife traffickers also continue to rely heavily on the bribery of officials (e.g. including rangers, customs agents, prosecutors, and judges), as well as complex fraud and tax evasion, to enable their crime. Several investigations provided for this study showed convergence between IWT and transnational drug trafficking networks and/or illegal logging and associated trade (ILAT).
However, the convergence of IWT with other types of transnational organised crime appears to take place only occasionally.
Despite billions of dollars generated from IWT, most efforts taken by countries to date have rarely focused on the financial aspect of this crime. While competent authorities around the globe regularly seize illegal wildlife and products, countries are still rarely conducting financial investigations in parallel as a tool to identify and bring to justice those involved. This is in part due to the particular challenges that IWT presents.
For example, the fact that criminals take advantage of the substantial legitimate wildlife trade to co-mingle licit and illicit proceeds presents challenges for detecting illicit activity. Laundering of proceeds from wildlife crime generally involves activity to either conceal or disguise the source, movement and ownership of those funds. Due to the low number of financial investigations to date, both the private and public sector have a less developed knowledge of the trends, methods and techniques used to launder proceeds from IWT than for other major transnational crimes. This further inhibits an effective response.
There are a number of reasons why following the financial flows, identifying ML, and recovering the proceeds and instrumentalities of this crime are important.
Firstly, following the money allows countries to identify the wider network of syndicate leaders and financiers involved and to reduce the profitability of this crime (and thus reduce the supply of poached or trafficked wildlife) over the longer term.
Secondly, in many countries, penalties for ML offences are more severe than for wildlife crimes; therefore, by pursuing ML and confiscation charges alongside wildlife offences, countries can help shift the perception of IWT as a low-risk/high-reward crime.
Thirdly, as mentioned above, syndicates involved in wildlife crime are often involved in broader criminality; therefore, by identifying and dismantling the networks that engage in IWT, countries can help prevent and tackle associated crimes, such as corruption and complex fraud.
Finally, combatting criminal organisations through their financial flows is a significant legal and investigative tool to prevent wildlife trafficking and the potential proliferation of zoonotic diseases.
The illegal wildlife trade (IWT) is a major transnational organised crime, which generates billions of criminal proceeds each year. IWT fuels corruption, threatens biodiversity, and can have a significant negative impact on public health and the economy.
To move, hide and launder their proceeds, wildlife traffickers exploit weaknesses in the financial and non-financial sectors, enabling further wildlife crimes and damaging financial integrity.
Despite this, jurisdictions rarely investigate the financial trail left by this crime.
The Financial Action Task Force (FATF), as the global standard setter on antimoney laundering (AML), countering the financing of terrorism (CFT) and countering proliferation financing (CPF), is concerned about the lack of focus on the financial aspects of this crime, and has conducted this study to support jurisdictions to combat related money laundering.
The FATF Standards (i.e. 40 Recommendations) provide a useful framework for jurisdictions to address these threats by strengthening their national laws, policies, and co-operation at the domestic and international level.
The study is the FATF’s first global report on IWT. It builds on previous studies by two of the FATF-Style Regional Bodies (FSRBs), work by other international bodies and recent initiatives by the private sector. The study by the FATF makes a unique contribution by assessing the money laundering (ML) aspects of wildlife crimes, and by demonstrating how jurisdictions should apply the FATF standards to combat IWT. The findings in the report are based on inputs from around 50 jurisdictions across the FATF Global Network4, as well as expertise from the private sector and civil society.
The study highlights that jurisdictions should view the proceeds generated by IWT as a global threat, rather than as a problem only for those jurisdictions where wildlife is illegally harvested, transited, or sold.
In particular, criminals are frequently misusing the legitimate wildlife trade, as well as other import-export type businesses, as a front to move and hide illegal proceeds from wildlife crimes. They also rely regularly on corruption, complex fraud and tax evasion. Another key theme of the study is the growing role of online marketplaces and mobile and social media-based payments to facilitate movement of proceeds from wildlife crimes. These trends highlight the increasing importance of a coordinated response from public authorities, the private sector and civil society to identify and disrupt financial flows from IWT.
As in prior studies, the FATF has found that despite IWT’s global impact, public and private sectors in many jurisdictions have to date not prioritised combatting the financial flows connected to IWT in line with risk.
Jurisdictions often do not have the knowledge, legislative basis, and resources required to assess and combat the threat
posed by these funds. This limited focus on the financial side of IWT has largely prevented jurisdictions from being able to identify and sanction IWT networks.
To address these challenges, jurisdictions should consider implementing the following good practices that were observed during the study:
• Prioritise combatting the financial flows associated with IWT proportionate to risk.
• Provide all relevant agencies with the necessary mandate and tools to conduct successful financial investigations into IWT.
• Improve co-ordination between authorities responsible for combatting wildlife crimes and those responsible for conducting financial investigations to ensure authorities more regularly exchange information and follow the financial trail.
• Cooperate with other jurisdictions, relevant international organisations and the private sector to combat IWT.
A comprehensive list of proposed actions to strengthen measures to tackle the financial flows associated with IWT is included in the report. Including recommending countries should consider establishing multi-agency co-ordination mechanisms that allow for the sharing of intelligence and information between the FIU, financial investigators and agencies involved in investigating wildlife crimes (including environmental agencies with investigative responsibilities), and prosecutorial authorities.
Countries should consider how they can increase co-operation with foreign countries to strengthen measures to identify and combat ML from IWT. This could involve more proactive engagement with foreign counterparts and appointing contact points responsible for financial and ML inquiries into IWT. It may also involve organising regular bilateral or multilateral dialogues, or participation in multilateral co-ordination mechanisms. Importantly, these initiatives should seek to connect countries used as transit points or destinations for IWT financial flows with the IWT origin countries.
The study also greatly improves the FATF Global Network’s understanding of the financial flows from IWT, including through presenting IWT risk indicators relevant for public authorities and the private sector. However, there is still work to be done.
The report shows the need to further improve the FATF Global Network’s collective understanding of the risk relating to IWT, including work on the role of non-financial entities in combatting IWT financial flows, greater understanding of the differing geographic supply chains, and good practices to address unique challenges in managing assets recovered during wildlife crime investigations.
It is essential that jurisdictions maintain their focus on IWT financial flows to achieve meaningful progress in addressing the challenges identified in this study.