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OPINION: In this exclusive article for AML Intelligence, FATF President Dr Marcus Pleyer warns of the devastating impact of environmental crime, says governments must act now to tackle the $281BN illegal activity

Money laundering linked to environmental crimes is a major problem often overlooked by governments. The illicit cash from crimes such as illegal logging and waste dumping helps fund organised crime and fuels corruption.

At the same time, natural habitats and ecosystems are destroyed, wildlife killed and precious resources plundered. That is why the Financial Action Task Force (FATF) has prioritised helping countries understand the risks they face and how to take effective action. 

Environmental crimes generate an estimated US$ 110 to US$ 281 billion in criminal gains each year. They are a relatively ‘low risk, high reward’ crime, as the international criminal organisations that make billions from looting the planet know they rarely face investigation or prosecution.

As the global money laundering and terrorist financing watchdog, the FATF is leading international action to change that, but we need others to make it a priority issue. In short, it is time for governments and the private sector to act.  

Tackling the illicit cash that fuels environmental crimes should be part of a much larger solution to helping save our climate. During COP 26 in Glasgow last November, US$ 19 billion was pledged to end and reverse deforestation by 2030. Compare that amount to the scale of the problem.

Illegal logging alone is worth US$ 152 billion a year, according to estimates. The illegal timber industry is responsible for up to 90% of tropical deforestation in some countries. Hence, while the world is ready for substantial pledges to fight deforestation, we should at the same time try to reduce the profitability of illegal logging.

Greater police awareness, stronger operational capacity, improved transnational cooperation and anti-corruption measures will all make a difference. However, following the dirty profits linked to environmental crimes can also play a crucial role in bringing down the criminal organisations involved.  

Numerous issues need to be resolved. To begin with, few countries have considered their exposure to dirty money from environmental crimes, FATF research shows. National money laundering risk assessments often do not consider environmental crimes.

Very few authorities routinely carry out financial investigations to detect the broader criminal networks involved. This is problematic because without following the money, it is very difficult to detect the wider criminal syndicates and their heads. It also prevents law enforcement from using stronger powers and penalties provided for under anti-money laundering laws. At the moment, fines for environmental offences are generally very low.  

A FATF report into the risks of money laundering from environmental crime, released last year, showed how criminals use front companies to mix legal and illegal goods and payments in supply chains.

Last month, the heads of the FATF, UNODC, UNEP and CITES met for the first time to consider how countries and the private sector can assess their exposure to financial flows from environmental crimes and tackle the threat through increased partnership. 

The Duke of Cambridge, Prince William, gave a stark warning to attendees, saying we face a global crisis and now is the time for action. At the same event, Primatologist Dr. Jane Goodall emphasised the need to go after the people at the top of the international cartels involved in environmental crime and the illegal wildlife trade. I agree with both.  

Strengthening anti-corruption efforts, prioritising the collection of data, and the effective implementation of FATF standards, such as knowing who owns and controls anonymous shell companies, were discussed as key areas of action. 

Some of these are already priorities. Tackling the dirty money pouring into companies in tax havens has been an issue for a long time. Anonymous front companies, which obscure the true owners, are often the vehicle of choice for hiding illicit profits gained from environmental crimes.

Unfortunately, existing regulatory loopholes have allowed criminals to use shell companies to get away with their ill-gotten gains. In 2021, the FATF agreed to revise the global rules on beneficial ownership to crackdown on this practice.  

The FATF shared proposed changes for public consultation, including the need for countries to set up a beneficial ownership registry or use an alternative system that gives efficient access to ownership information.

This will ensure that authorities have good access to adequate, accurate and up-to-date information on the true owners of companies operating in their countries. If adopted by the FATF next February, the changes will help eliminate corporate secrecy by aiding national authorities’ ability to trace the funds of criminals involved in environmental crimes and other forms of illicit finance.  

But more needs to be done. It is vital that banks and non-financial sector businesses assess their risks and consider extending financial crime controls to environmental crimes. Countries need to develop and deepen cross-border partnerships.

National financial crime strategies should be coordinated with national environmental and protection enforcement policies, and vice versa. Law enforcement need to coordinate with environmental crime experts, routinely integrating financial investigations into environmental crime cases. And Financial Intelligence Units (FIUs) must deepen their understanding of this issue, and provide relevant intelligence and guidance to law enforcement and the private sector.  

It is a lot of work. But we must not ignore or neglect these issues. The illicit cash from environmental crimes fuels further crime, corruption and environmental destruction, contributing to the climate emergency we all face. 

Countries cannot create sustainable economic growth while being laundering pots for dirty money. By working together, sharing insights and taking collective action, we can make a difference. It is time to make forestry crime, illegal mining and waste trafficking ‘high risk, low reward’ crimes. 

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