The United States Treasury’s Financial Crimes Enforcement Network (FinCEN) – the government body responsible for combatting domestic and international money laundering and terror financing – recently released an eye-opening notice on environmental crimes and their growing association to illicit financial activity. The first advisory of its kind to be issued by the agency, FinCEN pleads with banks and covered financial institutions to pay increased attention to transactions that may be linked to various illicit activities that have threatened environmental biodiversity and the overall longevity of our natural resources on the global scale. While not issues that many would directly correlate with the workings of international financial system, practices such as illegal logging and mining, unregulated fishing and the illegal wildlife trade, among others, collectively account for hundreds of billions of dollars in revenue for cross-border criminal enterprises. Environmental crimes appear to be growing exponentially in scale since the onset of the COVID pandemic (as global enforcement efforts largely stalled in wake of this novel health threat), recently eclipsing human trafficking to rank as the third largest illicit transnational industry in the world, currently trailing only counterfeiting and drug trafficking, respectively.¹

            Environmental crimes are loosely defined as illegal activities that can harm human health, and harm nature and natural resources by damaging environmental quality, including increasing carbon dioxide levels in the atmosphere, driving biodiversity loss, and causing the overexploitation of natural resources.¹ Unfortunately, many of these crimes now frequently involve both organized crime and corruption, with the proceeds of the former often aiding in continuing crime cycles both domestically and abroad. As part of President Biden’s growing crusade to mitigate the causes of climate change, FinCEN has too sought to raise awareness to activities that threaten both financial integrity and environmental sustainability. Given that financial institutions are required by law to screen customers and their financial transactions to monitor for any questionable activity, FinCEN notes that the filing of suspicious activity reports (SAR) in conjunction with all proper Bank Secrecy Act (BSA) components are a critical step in both identifying and thwarting environmental crimes and the illicit financial activities that often accompany them. FinCEN utilizes the data collected from SAR filings to identify trends while making said information available to local and federal law enforcement officials to pursue investigations into the origin of the crimes. 

            Other international coalitions combatting money laundering and pertinent financial crimes have too released their own reports on this growing problem in recent years. The Financial Action Task Force (FATF) for example released a special report titled Money Laundering and the Illegal Wildlife Trade just last year that delved deep into the continued issues in prosecuting those behind these illegal practices.  Despite international authorities regularly seizing illegal wildlife and products, many countries continue to fail in conducting appropriate financial investigations in relation to said seizures to better identify the parties involved and limit the overall profitability of these crimes. Despite being on the uptick, the relatively low number of financial investigations conducted into environmental crimes in the United States and overseas to date have led to both the private and public sectors having limited exposure and awareness to the various trends, methods and techniques used to launder proceeds from the IWT as compared to other major transnational crimes. In most countries, the penalties for money laundering offenses are generally far more severe than those for wildlife-related crimes. As such the FATF has gone as far as to suggest that by pursuing money laundering charges in addition to wildlife claims (should the proper relationship between the two be established), countries can in turn shift the growing perception that environmental crimes are essentially a low-risk/high-reward avenue for financial criminals to explore.

            Now more than ever before, financial institutions must remain vigilant with respect to these schemes given their growing involvement in criminal activity that can more directly affect them. While the illegal wildlife trade remains somewhat of an obscure topic in the world of compliance with AML/CFT requirements, increased oversight on behalf of banks large and small could lead to the recovery of millions – if not billions – of dollars in ill-gotten cash while potentially contributing to preserving our unique and profound resources for generations to come.

The FinCEN environmental advisory can be read in its entirety here. For additional information on the illegal wildlife trade and other unconventional means of laundering illicit funds, download our free eBook: The Art of Money Laundering.  

Citations

1. “FinCEN Calls Attention to Environmental Crimes and Related Financial Activity” Financial Crimes Enforcement Network – FinCEN Notice, U.S. Department of the Treasury, 18 Nov. 2021,