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Money-laundering through illegal logging

The impact of the logging industry in the Amazon can be brutal. Find out why in our latest blog on green crime.

Napier AI
July 7, 2021

Earth’s most threatened tribe

They’ve been called “Earth’s most threatened tribe”. The Awá,  a group of around 350 indigenous people in the Brazilian rainforest, have lost a third of their territory to illegal loggers. Despite support from the tribal peoples’ charity Survival, and occasionally the Brazilian government, their numbers are slowly dwindling. The most vulnerable of all are the 100 or so Awá tribespeople who still have no contact with the outside world.

As nomads, they carry the things they need with them as they move: bows and arrows, children, pets,” a spokesperson for Survival explained  “Everything comes from the forest: the baskets made from palm leaves, the loops of vine used to climb trees, and the tree resin burned to provide light.”

However, the charity warns of the threats the Awá face from the outside world. “Despite their extreme self-sufficiency, the uncontacted people are also uniquely vulnerable. The common cold could kill an entire group, and, if they run into illegal loggers, their bows and arrows will be no match for the invaders’ guns.”

The human cost of illegal logging

The impact of the logging industry in the Amazon can be brutal.

In 2011, an eight-year-old Awá girl who wandered out of her village was captured by loggers and, according to tribal leaders, tied to a tree and burned alive in an attempt to frighten the rest of her tribe off their land.

In April 2017, in a remote area of Brazil’s Mato Grosso state, a gang of four men armed with knives, machetes and guns tortured a group of villagers, eventually murdering nine of them. It was an act of terrorism designed to drive the locals off the land so that illegal loggers could set up business in their place.

This is just the tip of the iceberg.

According to the Brazilian NGO Comissao Pastoral da Terra (Pastoral Land Commission) over 300 people have been killed during the last decade or so through land conflict in the Amazon, “many of them by people involved in illegal logging”.

International NGO Human Rights Watch says the “perpetrators of violence are rarely brought to justice” because “crimes tend to occur in remote communities or places that are far from the nearest police station”.

The economic cost of illegal logging

It’s not just a cost to human life that logging exacts.

There are vast economic costs, too. Illegal logging in the Amazon is a multi-million dollar business. Human Rights Watch explains how the ipê species of tree – popular among loggers because its dense wood is ideal for furniture and decking – is so valuable that a single trunk can be sold for between 2,000 and 6,000 Brazilian reais (between US$500 and $1,500).

“Loggers launder timber by making it pass as legally-harvested lumber that ends up in domestic and international markets,” the NGO says. No wonder the Brazilian government has given these crime groups the nickname “ipê mafias”.

In an effort to protect their forests, Brazil and other heavily forested nations impose laws. Sometimes these are strictly enforced; in remote areas, though, it’s often impossible to police this destructive activity.

In the case of Brazil, President Bolsonaro has been disappointingly lenient.

Even when laws are enforced, they are often easy to circumvent, as a recent report from Greenpeace Brazil called Blood-Stained Timber points out.

Many loggers falsify documents such as logging licences, timber credits and transport documents, or else they bribe officials.

“Most of the timber entering the market with fraudulent papers comes from areas where harvesting is not allowed, such as protected areas, indigenous territories and public lands without authorisation for logging,” says Greenpeace Brazil. “And this is precisely what generates logging-related violence in rural areas. When traditional and indigenous populations oppose the theft of timber from the land over which they have rights, they themselves become the target of ruthless criminals.”

The worst culprits of illegal logging

The problem is by no means limited to the Amazon. Forests in Central Africa, Russia and Asia are also being ravaged by illegal forestry.

In a report published in December 2020, Interpol claimed that, globally, the illegal timber industry is worth almost US$152 billion a year.

“It accounts for up to 90% of tropical deforestation in some countries and attracts the world’s biggest organised crime groups,” they stated. “It causes serious economic, environmental and social damage, and fuels conflict in forest regions where criminal gangs compete for available markets. Tax evasion, corruption, violent crime, fraud and money laundering, and even the hacking of government websites to obtain permits, are commonplace.”

In 2017, the World Bank Group estimated the true costs of illegal logging in heavily forested nations all over the world.

They concluded that Indonesia was the worst culprit, with a total of 41 million cubic metres of illegally sourced timber, and an estimated $1,804 million in lost tax revenue. It was closely followed by the Russian Federation at 38 million cubic metres of illegal timber, and $1,656 million in lost tax revenue. Then came Brazil (19 million cubic metres and $1,450 million), India (18 million cubic metres and $773 million), Nigeria (9 million cubic metres and $383 million) and China (8 million cubic metres and $336 million).

Money-laundering methods associated with illegal logging

One key expert in the field of environmental crime is Mark Nuttall, from risk management company Hill & Associates.

A former detective in the Metropolitan Police in London, he used to work at Interpol on their Organized and Emerging Crime Directorate.

Mark points out how companies working within or close to the logging industry have a duty to keep an eye out for money-laundering activity. Some criminals, he says, pose as legitimate shipping agents by setting up shell companies, in order to make financial transactions more difficult to trace.

“Agents will choose offshore jurisdictions which are more secretive, and which have been created to limit taxation,” he explains. And he warns of the need to be wary of suspicious paperwork, cash payments or inconsistent business activity.  

Nuttall says it’s easy for us, in our comfortable Western homes, to wag our fingers at illegal loggers, far away in tropical rainforests. “You can hardly say to a man who is starving in the middle of a forest: ‘Sorry, don’t cut that tree down!’” he explains. “If you stop illegal logging, you’re stopping an individual’s income stream. In any case, the locals believe the assets are theirs in the first place.”

Ultimately, it’s us – the consumers – who benefit from this illegal trade.

“Where does the education need to take place? In the country that holds the final consumer product,” he adds.

But how can we possibly know for sure if the furniture in our houses or the decking in our back gardens is a result of legal or illegal logging?

“When you’re sat on that chair of teak or rosewood, how can you start criticising a logging company, or an organised criminal?” Nuttall adds. “The vast majority of the population don't know where their furniture comes from.”

Greenpeace Brazil explains just how complicated the trail from forest to consumer product can be. They suggest the companies buying the timber should “invest additional resources in site visits, third-party auditing, or origin verification technology such as DNA or isotope testing”.

In the absence of such expensive and forensic checks, there is another way to keep tabs on the illicit timber trade, and that’s by curbing illegal money laundering using specially designed computer software. This is where Napier can help.

Find out how to improve your AML processes with award winning technology.

Get in touch to see how our Intelligent Compliance solution can help your organisation or request a demo to see it in action.

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