Environmental Crime Investigations and Financial Intelligence

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Environmental crime is a growing threat that affects natural resources, peace, development and security. For decades, it was not covered in its true essence in many parts of the world, resulting in critical effects to humans and the environment today. Environmental crime investigations and financial intelligence are significant responses to prevent natural resources and human beings from environmental criminal activities.

Environmental crime is an illegal act that directly harms both humans and the environment

Environmental crime is an illegal act that directly harms both humans and the environment. It is a negligent, knowing or willful violation of an environmental law within jurisdiction. Examples of environmental crimes include illegal wildlife trade; smuggling ozone-depleting substances; illicit trade in hazardous waste and pollution; illegal mining; illegal, unregulated and unreported fishing; and illegal logging and associated trade in stolen timber. As per the “Enhancing the Detection, Investigation and Disruption of Illicit Financial Flows from Wildlife Crime” report, financial investigation unveiled a wildlife and timber smuggling network in Thailand.1 Another case study of cross-border wildlife crime is an organized crime group operating in Sweden, the United Kingdom and Finland who were suspected of having illegally traded wild bird eggs on a large scale.2

The above-mentioned environmental crimes can be separated into the following categories:

  1. Climate
  2. Forests
  3. Ocean
  4. Wildlife

Major drivers of environmental crime include economic benefits, sustainable demand, poverty, as well as institutional and regulatory failures. Environmental crime has not been regarded as a priority in some countries, which has resulted in a lack of appropriate and proportionate governmental responses. Perceived as a “victimless” and low priority crime, environmental crime often fails to prompt the required response from governments and law enforcement. Key destinations for large-scale shipments of hazardous wastes—such as electrical and electronic equipment—include Africa and Asia. In addition, lack of resources for monitoring or control for an emerging market makes it a low-risk business for organized criminal networks, which makes hazardous waste to bypass or deceive law enforcement authorities as secondhand goods.

Interlinkages with Other Crimes

Below are examples of how environmental crimes can be interlinked to other crimes:

  • There are different environmental crimes where each violation is needed to conduct the other. For example, illegal logging is done to clear forests for illegal mining or palm oil and subsequent poaching to feed workers.
  • Criminals use established smuggling routes for different types of commodities, such as illegally exploited minerals, timber, drug trafficking and human trafficking.
  • Other serious crimes like tax fraud, trafficking, forced labor, threat finance, money laundering and forgery are all used to conduct independent environmental crimes.

Environmental Crime Investigation Model

The environmental crime investigation model is based on the following areas:

  • Investigation methods: Criminal investigations of environmental crimes target the most harmful violations of environmental laws that pose significant threats to human health and the environment. Criminal investigations are carried out via methods including interviews, searching a person or document, examining documents or objects, use of force for self-defense (where required), and subject expert area, i.e., environmental crime (illegal logging, dumping of hazardous waste and their trade, etc.). This requires well-trained special agents and investigators.
  • Science and technical expertise: Environmental crime investigations require in-depth investigations with scientific methodologies and technical expertise. Sampling and testing of materials (e.g., chemicals or colored liquids) to obtain evidence against environmental criminals is a critical and specialized area. Scientists and specialized technical experts are required to collect this evidence.
  • Legal and prosecution aspects: The legal and prosecution aspect of environmental crime is significantly increasing in demand. Environmental laws and regulations developed are at all levels (i.e., criminal, administrative and environmental liabilities levels) including sanctions, prison sentences, fines and restoration of damage. Cost of legal and prosecution cases are high and are conducted by specialized environmental law experts.

Financial Intelligence of Environmental Crime

Environmental crime creates huge profits for transactional criminal groups. Concealing origins of environmental crime proceeds, saving funds and further making them available is a major goal of money launderers. Cases involved in money laundering reported to financial intelligence units (FIUs) lead to enhanced investigations and prosecutions found to be connected to environmental crime.

Combating environmental crime via financial intelligence must be of great importance to compliance professionals at financial institutions (FIs). Detecting and reporting suspicious transactions involved in suspected environmental crime to competent authorities can help mitigate risk of harm to the environment, natural resources and human health.

FIs should consider know your customer/customer due diligence (KYC/CDD) financial intelligence.

KYC/CDD

KYC/CDD is the key in mitigating environmental crime risk at the time of customer onboarding. Appropriate risk management, senior management approval, details of sources of funds/wealth and enhanced ongoing monitoring of business relationships are all important.

Environmental crime frequently occurs on the sidelines of legitimate business; therefore, enhanced due diligence must be carried out for individuals/entities involved in the business of antiquities trade and transport logistics providers. These businesses could be involved in supplying, producing or distributing forestry resources, hunting, exotic/wild animal keeping or breeding, traditional medicine, animal bone carving, furs/skins for the fashion industry or shipping, trucking, container leasing, warehousing companies, etc.

In addition, environmental criminals often establish shell companies to serve as shipping agents to send and receive products as well as to hide or obscure beneficial ownership. FIs must carefully apply the steps of customer identification and verification processes and establish the true ownership structure of the customer.

Payment structure

Financial transactions must be expertly analyzed as criminals involved in environmental crime demonstrate an organized payment structure such as the following examples.

Method

Environmental crime networks appear to operate largely as cash-courier businesses and maintain multi-jurisdiction accounts to conduct cross-border financial transactions in a complex way

Environmental crime networks appear to operate largely as cash-courier businesses and maintain multi-jurisdiction accounts to conduct cross-border financial transactions in a complex way. Hawala and hundi are attractive payment methods usually adopted by Asian criminal networks whereas foreign jurisdiction networks make payments via various money services business providers.

Route

Foreign FIs may be particularly exposed to risk as many banking systems in weak or unregulated jurisdictions denominate or clear in high demand foreign currencies and have correspondent banking relationships with foreign FIs.

Transactional behavior

Environmental crime transactions appear to be inconsistent with the customer’s business activities, which does not make them economically viable. They could also involve incorrect third party payments, inadequate customer information on custom documents, over- and under-invoicing, frequent cash deposits/withdrawals in multiple jurisdictions and requests for high denomination bank notes.

Conclusion

Environmental crime control is in high demand. For example, there has been national legislation created to criminalize environmental crime; enhanced investigations; information sharing between law enforcement authorities, FIUs, FIs, civil society organization, etc. It is spreading at a fast pace in developing and underdeveloped part of the world. A better understanding of environmental crime consequences, which cannot be combated by a single person or entity but by all of society, will lead to the quick adaption and implementation of the environmental criminal investigation model around the globe.

Syeda Mehar Zehra, CAMS, MLRO and manager AML/compliance, HBL Currency Exchange, Pakistan, syedamehar15@yahoo.com

  1. “Enhancing the Detection, Investigation and Disruption of Illicit Financial Flows from Wildlife Crime” Asia-Pacific Group on Money Laundering and United Nations Office on Drugs and Crime, September 13, 2017, file:///C:/Users/d40831837/Downloads/APG%20UNODC%20Wildlife%20Crime%20Report.pdf
  2. “Eurojust News Issue No. 10,” Eurojust, December 2013, http://www.eurojust.europa.eu/doclibrary/corporate/newsletter/Eurojust%20News%20Issue%2010%20(December%202013)%20on%20environmental%20crime/EurojustNews_Issue10_2013-12-EN.pdf