Countries should view environmental crimes such as illegal forestry, mining, land clearances and waste trafficking – and the associated trading – as a money-laundering (ML) risk, according to the Financial Action Task Force (FATF).
“Anti-money laundering is often not part of the public policy dialogue on environmental protection,” the Paris-based organisation says in a new report, Money Laundering from Environmental Crimes.
“Despite the significant proceeds involved in many cases, jurisdictions are mostly addressing environmental crime as a conservation issue rather than a serious financial crime.”
Yet the report cites UN studies showing that the proceeds from environmental crimes are of around the same magnitude as other financial crimes.
“As a priority, countries should ensure that they consider the ML threats posed by environmental crimes, even for countries that do not have domestic natural resource industries.”
That may require input from organisations not traditionally associated with AML/CFT efforts, such as environmental crime and protection agencies and authorities responsible for forestry or mining concessions.
The FATF also recommends countries should fully implement the task force’s standards to disrupt money laundering from environmental crimes. The report gives the example of financial intelligence units having sufficient powers and operational capacity to investigate and trace assets from the illegal activities.
The report also suggests AML/CFT “outreach” to sectors not covered by the standards, like logging, mining and refining companies which it describes as key intermediaries in environmental supply chains.
In addition, the FATF calls for establishment and strengthening of public-private sector partnerships to share risk information plus programmes to bolster due diligence of supply chains and their financial flows.
“These initiatives can play a significant role in raising awareness about suspicious financial activity and addressing comingling by finding means to demonstrate the legitimate source of goods,” the report said.
Those involved in environmental crimes frequently rely on mixing legal and illegal goods to hide their illicit origin and mask the nature of the proceeds, according to the report.
“This can make it difficult to detect suspicious financial flows later in the value chain, to an extent not previously examined by the FATF,” it states.
Trade-based fraud and cross-border smuggling are used to conceal goods and assets from illegal logging, illegal mining and waste trafficking, according to the report.
“Further, enabled by corruption, actors involved rely on corporate structures, third-party transfers and offshore jurisdictions to obfuscate the beneficial owners,” it adds.
The FATF also comments: “The low-risk, high-reward nature of environmental crime makes for a lucrative and safe source of revenue for criminals.”
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