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How can AML beat environmental crime?

In this blog, we talk to Amanda Gore about environmental crime, the challenges involved in tackling it, and how things could be improved.

Napier AI
January 5, 2022

Experts take on FinCrime

In this series, we talk to financial crime experts about the complexities of tackling the scourge of money laundering and its impacts on society.  

We talk to Amanda Gore, Founder and Director of the Centre for Global Advancement. Amanda has over twenty years’ experience as a forensic accountant, supporting multi-jurisdictional financial investigations, specialising in anti-corruption, anti-money laundering, tax crimes and asset tracing. In the last five years, Amanda has focused on applying financial crime techniques to environmental crime, mostly in relation to Wildlife Crime in Africa, Asia and Latin America.

We asked Amanda to define the concept of environmental crime, the challenges involved in tackling it, and how things could be improved.

What is environmental crime?

Defining environmental crime

Environmental crime is the illegal destruction of the environment, including illegal wildlife trading, logging, fishing, mining, pollution, and the trafficking of waste and ozone depleting substances. The perpetrators of these crimes usually fall into two main categories: organised criminals, or big corporations with downstream suppliers involved in illegal activity.  

The scale of the problem

Environmental crime is a huge, complex, and multifaceted problem which, according to INTERPOL, costs the global economy up to $258 billion a year in illicit financial flows. Environmental crime is a crime with layers of complexity that does not occur in isolation. Environmental damage and destruction often converge with the organised crime ecosystem, impacting habitats, people, and wildlife at every level. Environmental crime is also not a new phenomenon, although the world is now starting to wake up to the importance of these crimes.

What are the biggest impacts of environmental crime?

Declining biodiversity

The most pressing consequence of environmental crime is the destruction of biodiversity. Offences such as illegal logging, fishing, mining, and wildlife trafficking all cause huge damage to our ecosystem, raising the risk of extinction for many species. The results make for grim reading: 83% of wild mammals and 50% of plants have already been lost according to recent World Economic Forum reports, and environmental crime is a key driving force that contributes to the loss of biodiversity and extinction.  

"83% of wild mammals and 50% of plants have already been lost."

It causes health issues

Health complications for both humans and wildlife are an important, yet often overlooked, side effect of environmental crime. The illegal gold mining trade serves as an apt case study as the mercury used to consolidate gold can find its way into nearby waterways, gravely affecting the health of the fish in local rivers, tainting their meat with poisonous chemicals and creating long-term problems across the food chain. Furthermore, mercury is incredibly dangerous for the individuals illegally mining the gold to be exposed to, and labourers often work without adequate protective equipment.

Loss of revenue streams

Loss of government revenue is another significant, damaging aspect of environmental crime. These can include lost taxation revenues, the loss of government income from permits, and lost revenue from tourism. Nature and wildlife are a key source of income for several countries across Africa, Asia and Latin America, bringing in foreign currency and creating local jobs. The depletion of resources because of environmental crime endangers the future of these important revenue streams.

What is it about the current AML regime that makes environmental crime so hard to tackle?

It takes too long to prosecute criminals

Currently the biggest issue the anti-money laundering (AML) community faces is the time it takes to achieve results. The current global AML approach is too cumbersome to adequately fight environmental crime.  

Suspicious activity reports (SARs) are filed but take time to reach local law enforcement, which additionally often lack the capacity to act on them to achieve successful prosecutions due to several competing priorities. Instead, we need to develop new strategies to combat environmental crime to reduce the burden on law enforcement - who are by nature a reactive mechanism after a crime has been committed. We must adopt a preventative approach to stop environmental crime before it occurs.

Corruption creates many challenges

Corruption is another key difficulty we face in trying to progress money laundering investigations. This can be through interference in cases, lack of prioritisation of environmental crime, or lack of knowledge in prosecuting the crimes. Many of the financial investigations in Africa still rely on paper case files, which can easily disappear, (and often do) stopping an investigation in its tracks. The manual nature of AML processes in many countries presents significant challenges when fighting environmental crime and the linked financial crimes.

Underground funding channels

Increasingly, illicit funds are simply bypassing financial institutions altogether. The AML regime needs to adapt in order to address this issue. This challenge is particularly prevalent in Africa and Asia, where barter trade economies and underground money movements are frequently used. These allows payments to remain underground and not obtainable as part of financial investigations conducted by both financial Institutions and law enforcement agencies.  

How does law enforcement need to change to effectively fight environmental crime?

Adopt alternative legal and financial strategies

To navigate the lengthy and often unreliable prosecution process for environmental crime - especially across Asia, Africa and Latin America - we need to create alternative pathways to achieve results.  

Building a toolbox of strategies in advance will give us the best chance of securing the right outcome:  

One method is to seek justice through alternative legal frameworks. For example, if a case has ties to a more established jurisdiction, such as the US, it can help to launch the case within a more advanced legal framework, which may be less prone to corruption.  

Elsewhere, the results of a case do not have to include jail time. Asset recovery mechanisms can act as a faster and more effective alternative that can act as a deterrent to criminal groups. Identifying and confiscating assets linked to the proceeds of crime is presently an underutilised strategy when fighting environmental crime, but there is a growing awareness of the impact this can have in destabilising criminal networks.  

What can financial institutions do better to address environmental crime?

Perform effective due diligence  

Financial institutions are an essential component in the fight against environmental crime. Effective due diligence, for example, can identify companies that may be involved in environmental degradation and the banking system can play a key role in preventing further environmental crime from being committed.  

Information sharing

Greater collaboration between financial institutions and the rest of the AML ecosystem is also needed if we are to effectively combat environmental crime.  

Up-to-date training for employees on environmental crime typologies is essential, as financial institutions can act as the first line of defence.  

Public-private collaboration is also key.  

One good example of a public private collaboration is United for Wildlife’s Financial Taskforce, an anti-wildlife crime initiative that links representatives from financial institutions with illegal wildlife trade experts led by the Duke of Cambridge.  

By sharing expertise and information, this taskforce promotes knowledge about new typologies that financial institutions can act on to combat international wildlife crime. Members also receive alerts from the taskforce on emerging trends and financial crime indicators on a monthly basis, which helps financial institutions detect more bad actors in the system.

Use the data

Finally, financial institutions must make use of the myriad of datasets available on environmental crime. Once again, proactive prevention is essential: we need to start leveraging data to detect potential environmental criminals and stop the crime before it can continue.

What does the future of AML look like to you?

More technology needs to be adopted by global AML regimes

To combat environmental crime effectively, there must be broader global adoption of technology to facilitate sharing of real-time data. Delays in receiving information about environmental crimes result in delays in investigations. Traditional AML structures do not achieve desired results, so we must find alternative strategies to see more effective results.

We are only as strong as our weakest link

Environmental crime is a complex international issue. If emerging technological solutions are not adopted across the globe, then investigators and law enforcement will continue to struggle to combat environmental crime effectively.  

While we wait for wide scale technological adoption, we must focus on gathering alternative legal and financial strategies to overcome our immediate challenges. The immediate future of AML will focus on using the existing regime and resources more effectively, until new technologies and structures are available.  

If you would like to understand how Napier can transform your compliance process to be more effective at combating financial crime, please contact us or request a demo.

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