Money Laundering and the Illegal Wildlife Trade

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Victims of a crime, as individuals or as corporate entities, are legally entitled to restitution. The Mandatory Restitution Act of 19961 established procedures for determining the amount of restitution to which a victim may be entitled. Banks are often a victim of a variety of crimes such as automatic clearing house fraud, check kiting, ATM...

This is a picture of a Black Rhinoceros.  It is one of two Rhinoceros species in Africa.  It is estimated that there were approximately 125,000 Black Rhinoceroses in 1960.  Now, there are less than 6,000. Three subspecies are already extinct. Although loss of habitat is certainly a contributing factor, much of this decimation is attributable to poaching and the illegal wildlife trade (“IWT”).

The Financial Action Task Force (“FATF”) just released an important report entitled Money Laundering and the Illegal Wildlife Trade (the “Report”).  The lengthy and detailed Report makes clear that the IWT is pernicious cocktail of animal slaughter/abuse and complex financial crime, often run by highly organized groups that thrive on international cooperation by complicit actors and the use of shell companies.  The Report bemoans the fact that the IWT benefits from a lack of focus and priority by law enforcement. Accordingly, the Report seeks to spread awareness of the IWT, provide general guidance on combatting it, and propose action steps.  One theme of the Report is that effectively combatting the IWT requires financial investigations and money laundering charges.

According to the Report, the IWT

. . . . is a major transactional organised crime, which generates billions of criminal proceeds each year. IWT fuels corruption, threatens biodiversity, and can have a significant negative impact on public health and the economy. To move, hide and launder their proceeds, wildlife traffickers exploit weaknesses in the financial and non-financial sectors, enabling further wildlife crimes and damaging financial integrity. Despite this, jurisdictions rarely investigate the financial trail left by this crime.

The Report therefore urges law enforcement and regulators to “follow the money”:

Firstly, following the money allows countries to identify the wider network of syndicate leaders and financiers involved and to reduce the profitability of the crime (and thus reduce the supply of poached or trafficked wildlife) over the longer term. Secondly, in many countries, penalties for [money laundering] offences are more severe than for wildlife crimes; therefore, by pursuing [money laundering] and confiscation charges alongside wildlife offences, countries can help shift the perception of IWT as a low-risk/high-reward crime. Thirdly, . . . syndicates involved in wildlife crime are often involved in broader criminality; therefore, by identifying and dismantling the networks that engage in IWT, countries can help prevent and tackle associated crimes, such as corruption and complex fraud. Finally, combatting criminal organisations through their financial flows is a significant legal and investigative tool to prevent wildlife trafficking and potential proliferation of zoonotic diseases.

In sobering and comprehensive detail, the Report illustrates the vast scope and relentless nature of the IWT.  The Report strives to shift assumptions and complacent mindsets by urging countries to recognize and address the IWT as a global financial threat — one increasingly using online marketplaces and mobile and social-media based payment systems — and not “just” a problem for the local jurisdictions where wildlife is illegally harvested, transited or sold.

The Report first analyzes how the IWT launders its proceeds and recommends the adoption of a global legal framework to address the many current gaps in fighting the IWT and related financial flows.  Noting that savvy criminals often exploit legislative gaps and the differing approaches among countries to wildlife crimes and related laundering offenses, the Report then discusses how enhanced international cooperation — currently often lacking — and enhanced public-private collaboration (in particular, the reporting of suspicious activity by financial institutions) can help combat the IWT.  The Report finally proposes action steps for the global community, and contains two appendices: (1) a three-page list of potential red flags for financial institutions to consider when attempting to determine whether a customer is laundering proceeds of the IWT; and (2) and list of  “other good examples” of financial investigations into the IWT.

As always, shell companies facilitate the laundering of illicit funds. The Report highlights that “wildlife traffickers often use front companies that have connections to import-export industries to help justify the movement of goods and payments across borders (e.g., plastics, timber, frozen foods, or artwork). Another common trend is the misuse of front companies with connections to the legal wildlife trade, e.g., taxidermists, farms, breeding facilities, pet shops and zoos[.]”  As just one example of a potential IWT supply chain, the Report includes this graphic:

In regards to action steps, the Report makes certain general proposals under these four topic headings:

  • Risk Understanding, National Policies and Legislation, which in part proposes that countries ensure that IWT crimes represent predicate offenses for money laundering statutes, and that law enforcement and relevant regulators receive sufficient resources, training and expertise to pursue money laundering investigations relating to the IWT.
  • Financial Investigations, which in part similarly proposes that law enforcement must pursue parallel financial investigations and pursue money laundering charges whenever feasible.
  • International co-operation, which in part proposes that communication and cooperation must be enhanced in particular between the countries which serve as the transit points or destinations of IWT financial flows, and the IWT origin countries.
  • Private Section Supervision and Public-Private Collaboration, which in part proposes that financial institutions and other relevant businesses be required to identify and assess their exposure to money laundering risks relating to the IWT and take the appropriate mitigating measures, and that countries ensure that institutions reporting suspicious activity be aware of the new payment technologies being exploited by IWT syndicates to launder their illicit proceeds.

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