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Stop money laundering; stop green crime

We recently gathered a panel of industry experts to share their opinions on and possible solutions to green crime, which generates up to $281 billion a year.

Napier AI
October 5, 2021

FATF released a report recently stating that environmental crimes, such as illegal logging, illegal mining and waste trafficking generate up to US$281 billion a year. But little has been done to address this rising problem.

The gangs involved often engage in other crimes such as corruption, human trafficking and tax fraud, using trade-based fraud and shell companies to launder proceeds from environmental crime. There is a terrifying human cost too, as these crimes can involve conflicts that claim lives.

As with many forms of crime globally, the financial institutions and banks can offer a rare ray of hope in the darkness and provide a way to detect and nail down foul players through tracing their suspicious financial behaviour and submitting intelligence to the authorities.

We recently assembled a panel of industry experts, to platform what they had to say on the topics of green crime and money laundering. The panel comprised:

Rob began by highlighting one of the frightening statistics around green crime, that it was one of the most profitable criminal enterprises according to FATF, as it generates around $110-281 billion (£81-206 bn) in criminal gains each year.  

Not only are they highly profitable, but these crimes are also wide-reaching and affect us all as global citizens, as they:

  • Rob the world of its natural resources
  • Undermine efforts to achieve sustainability and combat climate change
  • Tear apart societies and disrupt peace that’s often hard won
  • Facilitate atrocities like modern slavery and human trafficking

A poll was put to the attendees of this session, to gauge opinion on where they thought the current weaknesses lay in the global response to green crime:

Q: What is the biggest hurdle to overcome in response to environmental crime?

44% of attendees voted: lack of data, knowledge and awareness

23% voted: lack of national and international cooperation and information sharing among authorities

12% voted: lack of institutional will and governance

Che explained that green crimes aren’t necessarily new, but they have gone largely unnoticed. The term ‘green crime’ itself was launched in early 2020 with the World Economic Forum as an umbrella term for environmental crimes such as illegal fishing and illegal logging, as these are often perpetrated by the same organised criminal networks and the same corrupt government officials. Che stressed that green crime is a multifaceted issue, and that the figure of around $250 billion (£184b) quoted by Interpol is likely just the tip of the iceberg, as there aren’t just the illegal proceeds to consider but also the environmental cost to our planet and emerging economies that results from these types of crimes.

The human cost of green crime

Denisse echoed Che’s sentiment that green crime is multi-faceted, affecting a variety of industries and groups. She specifically highlighted how it contributes to financing of conflict, atrocities, political instability, and the spread of disease among other consequences. She also reiterated just how recent the awareness around these types of crimes is and mentioned that it wasn’t until 2019 that the UN called for environmental crimes to be criminalised.

Despite awareness being significantly up in the last few years, Denisse expressed pity that the issues surrounding green crime are not yet being talked about and taken to task at the very top levels of politics where there is the most power to enact change.

When it comes to green crime, the countries most detrimentally impacted tend to be those with emerging markets, and often are relatively unstable, low regulation countries with poor governance and high levels of corruption. The impact of crimes such as waste dumping, for example, can cause health issues in the local populations for several generations, including lung problems, high blood pressure, birth deformities, and infertility to name a few.  

“Green crime is an existential issue” - Denisse Rudich, Director of Rudich Advisory and CCO & Co-Founder at ElementaryB

What is the link between financial crime and the environment?

Mark explained that financial crime itself is wide-reaching, but the acquisitive crimes that create the revenue that financial crime centres around are even more broad. Financial crimes like money laundering exist because a prior crime, like green crime, has taken place.

From the perspective of law enforcement, Mark noted that the financial and organised crimes are often more prosecutable and prioritised. Green crime is perhaps not as clear cut as your ‘average’ crime where there is a defined criminal and victim, as the victims are often entire communities or animals, so the victim is more abstract. He added that green crimes are also characterised by the presence of third, fourth, even fifth parties, as there are often several layers to unravel beyond just what can be tangibly observed or is presently being investigated.

Mark pointed out that SARs benefit from the inclusion of a ‘juicy’ crime to make them stand out, and ultimately to motivate law enforcement to follow up and pin down the criminals involved.

We hear about the low percentage of financial crime that is detected in the system, what’s holding us back?

In financial crime more generally, it’s widely acknowledged that there is a very low detection and recovery rate compared to the number of financial crimes committed each year. Anti-money laundering (AML) policy intervention, for example, only recovers around 0.1% of criminal proceeds of the $2 trillion (£1.47t) currently laundered each year (2-5% of global GDP).

Julian explained that this figure is in part due to a lack of a coordinated attitude toward financial crime among regulators, technology companies and financial institutions. He highlighted that the criminal prosecutions for financial crime are as low as single-figure percentages due to the complex nature of the industry and that even a small increase in prosecutions would be a huge improvement upon the current state of affairs.

Prosecuting crime isn’t quite the same as preventing it, and Julian is passionate about reducing demand - in the West especially – for goods that are the product of green crimes. Every day, we make purchasing choices without any knowledge as to the origin or impact of the goods we consume. He suggested that some form of standards scheme like kitemarking would lessen this opacity and allow consumers to make more informed choices. Julian also mentioned that the unwitting participation in environmentally harmful behaviour may also be an issue for the large companies producing these goods - although of course some will be fully aware.  

How do law enforcement agencies tackle environmental crimes?

Mark drew upon his experience as a police detective at New Scotland Yard, pointing out that international collaboration exists for the investigation of other crimes in a way that it does not yet seem to for green crimes. One reason is that green crime isn’t like the crimes you’re likely to see in cop shows, it doesn’t necessarily have all the excitement of a high-speed car chase or the busting of a drug ring. These crimes already have a lot of awareness around them, whereas few people globally understand the complexities of green crime – which may go some way to explaining global law enforcement’s current approach to it.

What is the role of data and technology?

Che stressed that partnerships between private and public entities are important for greater communication, connection and data sharing in the fight against green crime. Tech and data companies are well placed to partner with law enforcement and other public organisations that perhaps don't have the capacity or in-house expertise to handle data of that kind and scale.

Data is crucial in the fight against green crime, but it’s not enough to just have data. – It’s also about how data is used, distributed and made available to those who need to access it. Che said the data and the tools do exist within AML functions to identify green crime; and that will from organisations to engage and use these tools is now required

There’s no difference between green crime and any other form of crime in terms of the way the proceeds are laundered, so Julian argued that they should all receive equal attention. He also highlighted that larger banks are typically favoured by criminals for laundering money (from green crime or other), therefore these larger banks have a responsibility to have robust AML programmes that utilise the latest technology. By their nature, these banks operate globally across many different areas, so they can be quite siloed across different arms of the organisation – which is where solutions like Napier’s can help by aggregating data and creating a single view of the customer. Noticing behavioural patterns and thoroughly knowing your customer can help financial institutions to identify abnormal behaviour when it occurs, which is key to flagging potential foul play and financial crime.

What of the future?

Green crime seems like a victimless crime, and combined with many other complex factors, this seems to be one of the big ones that our panel members pointed to why has taken so long for the global community to prioritise green crime. There is hope, though, in the links green crime has with financial crime, as charges like money laundering can represent something more concrete and prosecutable to pin down criminals participating in this environmentally detrimental industry.  

Moves to combat financial crime (through use of technology and SARs) helps law enforcement to go after green criminals. Perhaps in the future, as awareness of green crime grows, there will be greater global collaboration at all levels, and eventually more answers on how we can prevent green crime before it occurs.

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