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The coronavirus pandemic has reinforced the hunger to urge world leaders to take consistent action to fight climate change. The yearning for a profound change and not a “back to normal” has been seen in the past months with the open letter signed by 200 scientists and celebrities published in Le Monde and the open letter signed by 200 organizations representing 40 million health workers and presented to G20 leaders. But a radical change can only occur if one of the main causes of pollution, deforestation, and wildlife extinction is given the importance that it deserves – environmental crimes.
Environmental crimes, also known as green crimes, are a true global industry which Interpol estimates to be worth roughly $250 billion a year. Often perceived as “victimless,” as it involves no humans, and with more focus on the gains than on the damages that it causes, it is not viewed as a priority in many countries. This has led to numerous lax and insufficient laws to tackle the problem.
The blind eye turned toward these types of crimes has created a snowball effect that is complicated to stop. It is estimated that green crimes grow between 5% to 7% yearly, which is approximately 2 to 3 times the rate of the global economy.
What constitutes an environmental crime?
There are no international agreements that give a clear definition of what constitutes an environmental crime.
In the United States, title 5, ENRD, section 5-11.000 of the Justice Manual, divides environmental crimes into four categories: pollution crimes, wildlife crimes, animal welfare crimes, and worker safety crimes.
The European Directive 2008/99/EC on the protection of the environment through criminal law, adopted on the 24th of October 2008, and transposed by EU Member States in December of 2010, describes the following offenses in the chart below.
What is the driving force behind environmental crimes?
There are three main factors that are the driving force behind environmental crimes. The first of these is the high gains associated to such acts. Most of the definitions listed above are highly profitable to many companies and individuals. Crimes associated with wildlife are estimated to make around $23 billion annually, making it the 4th most profitable crime just after illegal drugs, human trafficking, and weapons trafficking.
The second factor is the modest recognition of said breaches and the punishments correlated to them. The fact that there is little awareness towards such crimes in many countries facilitates and encourages criminals to continue carrying out their destructive schemes. The risks are also considered to be lower as penalties in certain countries are much inferior than those of illegal drugs or human trafficking.
The third factor is the high demand for traditional medicine and the arguable health benefits associated to them. The use of various body parts of endangered animals, such as shark fins or rhino horns, for the creation of ointments and other dubious cures with no medical proof are a big factor in the hunting and killing of wildlife.
Rhino horns, for example, are a greatly sought out item in black markets both for decorative purposes and traditional medicine. The price of a one kilogram horn is higher than that of gold, diamonds, and cocaine, which led to the extinction of Africa’s western black rhino in 2011.
Tiger parts such as head, skin, bones, reproductive organs, and meat are in great demand in China, principally from military officials, politicians, and business elite. They are used for a variety of means including taxidermic mounts, aphrodisiacs, and ornaments. There are now more tigers in captivity in the U.S. than in nature anywhere else in the world.
What are the consequences of green crimes?
Environmental crimes are not victimless, as they are often perceived, but have a profound impact on human lives and the nature that surrounds us. They produce irreversible effects on our climate and help to propagate climate change, cause environmental disasters, and contaminate the food chain which can lead to human disease, shortened life expectancy, and in many cases death.
The coronavirus outbreak, which at the time of the publishing of this article has so far infected 7.7 million people with 428.000 confirmed deaths worldwide, is thought to have originated from the exploitation of protected wildlife. China has since banned the trade and consumption of protected animals.
Green crimes also endanger the planet’s ecosystems by creating pollution, diminishing biodiversity, and disrupting the frail ecological balance of nature. It is estimated that 7.000 animal and plant species worldwide are traded illegally in black markets, placing many on the list of endangered fauna and flora.
How do eco-criminals launder their money?
Money laundering and environmental crimes are directly linked as criminals will need to launder the proceeds of their illegal activities.
Criminals often use legitimate businesses as covers for their illicit endeavours by either hiding the true nature of their enterprise behind a front company or by mingling green crimes with legal operations to arouse the least suspicion. Fashion industries are often used for the illegal trade of wildlife, particularly regarding furs and skins, while warehousing companies may be front businesses for the illegal stock of all manner of protected animals and plants.
According to a report by the Asia-Pacific Group of the United Nations (APG-UNODC), little is known about the payment methods used by environmental criminals due to the fragmented and incomplete reports on the subject. However, the limited information that is available points to the use of instruments that allow anonymity and that are hard to trace. These include cash, pre-paid cards, Hawalas, and cryptocurrencies.
The link between environmental crimes and money laundering is challenging to authorities. The difficulty lies in the different laws and regulations of various jurisdictions concerning environmental crimes. In a variety of countries criminals are charged for the environmental crime they committed, such as poaching, but not for the aspects regarding money laundering that are connected to traders and resellers. A survey in the Asia-Pacific region showed that only 1% of all environmental crimes resulted in charges or investigations for money laundering. Corruption also plays a large role in the success of the propagation of green crimes in certain jurisdictions as it helps to weaken laws and diminish the support of authorities, thus strengthening criminal groups and syndicates.
Entities that hide behind legitimate facades but carry out illegal environmental activities may include companies involved in forestry, animal breeding, medical products, hunting, fashion, furniture, and logistics such as warehousing, trucking, and shipping of said products.
What are the red flags regarding eco-crime?
Financial institutions are an important piece of the puzzle in disrupting illegal trades linked to the environment. These include payments linked to the purchase or transport of illegal goods, or payments linked to bribes and corruption. However, if they are unaware of how green crimes work, what may be legitimate or not, and how environmental criminals operate, financial institutions may unknowingly find themselves involved in illicit activities.
Below are a series of red flags that may help Compliance Officers and AML Analysts detect suspicious behaviour linked to green crimes:
1
Shell companies – these are often used by environmental criminals to serve as shipping agents. Do not accept companies that have obscure beneficial owners, complex structures regarding the nature of their business, or are located in tax havens.
2
Inconsistent activity – beware of inconsistent volume of transactions compared to the scale of your client’s business. This may be a clear indication that something fishy is going on.
3
Cash – as previously stated, cash gives environmental criminals the anonymity they seek. Be wary of multiple cash deposits or withdrawals in different countries or the request for high denomination bank notes as these were behaviours found among environmental criminals.
4
Shipping documents – Scarce or incomplete customer information on customs and/or shipping documents may be a clear indication that suspicious activity is happening.
5
Wildlife – if you are uncertain about the legal use of animal products or the trade of wildlife used by one of your clients, check the plant’s or animal’s origin and familiarize yourself with illegal trade routes to understand if there are any suspicions regarding the transaction. To check if the animal is protected, search the Convention on International Trade in Endangered Species of Fauna and Flora (CITES) to see if it is listed.
What are the recent legislation to fight environmental crimes?
In October of 2016, U.S. Congress passed the Eliminate, Neutralize, and Disrupt (END) Wildlife Trafficking Act, which allows prosecutors to use wildlife trafficking as a predicate offense for prosecuting a money laundering crime. In 2017, President Trump signed the Executive Order 13773, calling for a decisive approach to the dismantlement of organized crime syndicates and recognizing the connection between transnational criminal organizations and wildlife trafficking. Further progress has been made with the creation of the Task Force on Wildlife Trafficking whose approach is to strengthen law enforcement, reduce demand, and build international cooperation.
In 2021, President Biden revised and reinvigorated the 1994 Executive Order 12898 (EO 12898) on Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations to include the creation of a first ever White House Environmental Justice Advisory Council, amongst other actions.
In Europe, the 6th Anti-money Laundering Directive, 6AMLD, which will be transposed into law on the 3rd of December of this year, 2020, and will need to be implemented by financial institutions by the 3rd of June, 2021, includes environmental crime as one of the 22 predicate offenses linked to money laundering. In December of 2021, the EU adopted a new proposal for an EU Directive on environmental law which aims to introduce new criminal offences, increase sanctions, and improve enforcement. The Directive is yet to be approved.
In 2018, the U.K. launched the United for Wildlife Financial Task Force with the signing of the Mansion House Declaration, convened by the Duke of Cambridge, Prince William, and signed by 38 financial institutions and international organizations. Together with the technical expertise of RUSI and TRAFFIC, the task force is designed to work with financial institutions in the fight against environmental crimes.
On the international level, the Financial Action Task Force (FATF) published in July 2021 a report titled “Money Laundering from Environmental Crime” which highlights methods used by criminals and identifies tools for governments and entities to disrupt the activity. The UN 2030 Agenda for Sustainable Development includes a target to "take urgent action to end poaching and trafficking of protected species of flora and fauna, and address both demand and supply of illegal wildlife products."
The difficult path to eco-progress
While slow progress is being made, there is still a long path towards successfully disrupting green crimes. According to a study published in 2018 by Legal Atlas, no country appears to be in full compliance with environmental crimes and money laundering laws. In many jurisdictions, fines and sanctions directed towards such crimes are far less than those related to money laundering and the financing of terrorism.
Until green crimes are actively recognized and taken seriously the world over, the fight against climate change and the protection of our planet’s ecosystem cannot be complete.
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Red FlagsMon 01 April 2019
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Such on interesting post, Thank you for compiling the financial legislation related to environmental crime.