Why Illegal Wildlife Trafficking Matters
And how the financial sector can do more …
A couple weeks after World Environment Day, the Financial Action Task Force (FATF) released its first ever report addressing the illegal wildlife trade (IWT) and money laundering.
The analysis reveals that a fairly marginal number of financial investigations have been conducted in this area. Yet IWT is a pronounced environmental crime generating as much as 23 billion USD per year, making it the fourth largest type of organized crime in the world, right behind drug trafficking. The lucrative trade boasts big profits and weak penalties, while bringing dire economic, social and environmental consequences.
While the report helps shed much-needed attention on this issue, there is another reason why discussions around IWT may come to the fore.
By now, most people have heard the theory of how COVID-19 came to be — the coronavirus likely spread from bats through pangolins and into humans. The role wet markets played in the spread of the virus is now a part of the scientific debate, just as the 2003 SARS outbreak was traced to one in China, through civet cats.
Pangolins, Pandemics & Profit
The prime suspect, pangolins, are the most illegally trafficked mammals in the world. This is in spite of a January 2017 international ban on pangolin trade, which sought to help remedy their dwindling numbers in the wild. Pangolins are mainly sourced from Africa to satisfy demand in African and Asian markets, where they are popular in treating a number of ailments. In Chinese medicine, the meat is used as a tonic and the scales to promote blood circulation and increase lactation in pregnant women. In many countries, the consumption of exotic animals like the pangolin also bears a cultural significance, being tied to wealth and prestige.
In early June, after pressure from the Chinese NGO, China Biodiversity and Green Development Foundation, the Chinese government announced their removal of pangolins from the official list of traditional Chinese medicinal treatments.
But for some, this is not enough.
Environmental groups are demanding the government to burn stockpiles of scales as a symbolic gesture and to send a clear message — just as stockpiles of ivory tusks have been burned in countries like Kenya.
But it’s not just about pangolins.
Other trafficked wild species including birds, tigers, bears, iguana eggs and turtles are consumed by humans, often in conditions which “escape any hygiene or sanitary control”. Non-sentient beings, including the gravely endangered and most trafficked flora or fauna in the world, the rosewood tree, are smuggled across borders — decimating environments in Madagascar and fuelling corruption. The UNODC’s World Wildlife Crime Report for 2020 will surely illuminate this further.
The multitude of source, transit and destination countries clearly make IWT a global issue.
Since around 70% of emerging infectious diseases are zoonotic, meaning they originate from the transfer from animals to humans, the potential human health risk posed by this industry looms. So does the realization that preventing IWT could potentially prevent the proliferation of zoonotic diseases.
In fact experts believe in the long term, wildlife trafficking may be understood as the ultimate cause of COVID-19. This could lead to enhanced coordinated international policy, stronger enforcement crackdowns and a cultural and societal shift that significantly tarnishes the view on the consumption and trading of illegal wildlife products.
Laundering the proceeds
In its research, the FATF report found that during the placement and layering phase of the money laundering process, cash deposits, e-banking platforms, licensed money value transfer systems, and third-party wire transfers were used. Money mules and low-value payments were also employed to conceal the identities of sellers and buyers, as well as avoid thresholds.
In Africa and Asia, criminals commonly use prepaid cards, mobile apps, and social-media based platforms to transfer and launder proceeds. It was found that in Africa especially, mobile banking is extensively used to facilitate IWT payments.
To help justify the “movement of goods and payments across borders” front companies related to import-export industries, including in the plastics, timber, frozen foods or artwork sector were used, as were companies connected to the legal wildlife trade, such as taxidermists, farm breeding facilities, pet shops and zoos. While shell companies were common in both source and destination countries, other jurisdictions with weak regulatory environments were also exploited. This results in the prevalence of complex company structures, often multi-jurisdictional and entailing multiple layers of ownership.
The report notes in the integration stage of the money laundering process criminals laundered proceeds quite typically — through real estate and luxury items, including vehicles, jewelry and artwork.
What are the Recommendations?
The FATF report breaks its suggestions down into 4 realms:
- Risk Understanding, National Policies and Legislation: Understanding, assessing and allocating resources to risk for source countries, transit countries and third countries. Countries without wildlife susceptible to IWT should still consider risk in being a transit country. Enhanced intelligence and information sharing with other countries FIUs, CITES, management authorities, law enforcement agencies and supervisory authorities. IWT should be treated as predicate offences for money laundering.
- Financial Investigations: Multi-agency coordination mechanisms should be in place to allow for intelligence sharing between FIU, financial investigators, investigative agencies and prosecutorial authorities. Authorities should receive additional and specific training concerning IWT and assets extending beyond trafficked products should be identified, frozen and seized. Parallel investigations (that is, investigations focusing on a predicate offence and money laundering offence simultaneously) are encouraged.
- International Cooperation: Coordination mechanisms like bilateral and multilateral dialogues, informal intelligence exchange, and spontaneous disclosure for urgent action should be encouraged. The UN Convention on Transnational Organized Crime and UN Convention against Corruption should also be utilized.
- Private Sector Supervision and Public-private Collaboration: Institutions, both financial and non-financial, should assess their exposure to IWT. Public-private collaboration and information exchange should be encouraged and promoted.
Fulfilling these recommendations requires high-level political will, which is possibly more palatable thanks to the current extraordinary circumstances posed by the pandemic, and the growing understanding of how IWT can impact human health.
There is a lot to be improved upon. Currently, there is no regular collection or dissemination of financial information to assist investigations into wildlife crimes. In fact, the report notes that out of 45 jurisdictions studied, only 13 received at least 1 IWT-related suspicious transaction report in the last 5 years.
Instead, custom seizures and human sources (whistle blowers, undercover agents, confidential informants) were typically found to be at the front lines in discovering this crime.
While the pandemic may have temporarily stalled wildlife trafficking due to stringent borders, what’s nearly certain is that when borders reopen the trade will resume in full force. In fact, some reports have shown criminals have been adapting and resuming the trade to somewhat normal levels in South East Asia. To mitigate this, it is crucial that concrete steps be taken by governments, financial institutions and international organizations to put into action the measures proposed in this report.
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