Money Laundering and the Illegal Wildlife Trade: Financial Action at Last?

 

Attention to the financial dimensions of the illegal wildlife trade (IWT) has steadily increased in recent years. The London IWT Conference in October 2018 was the latest global event to call for an increase in the use of financial investigation techniques to tackle IWT. NGOs such as the Wildlife Justice Commission (this author is a member of WJC’s Council), the Environmental Investigation Agency (EIA) and TRAFFIC have conducted specific IWT financial investigations; and research reports such as those produced by this author and his colleagues and UN Office on Drugs and Crime and the Asia Pacific Group on Money Laundering have received a higher profile. 

Yet despite all this, most states across the IWT supply chain have remained slow to engage with the financial dimensions of IWT. At best, investigations and prosecutions focus on the crime of possession, rarely (if ever) undertaking related financial investigations. One major reason for this lack of activity can be ascribed to the apparent past indifference to IWT of the Financial Action Task Force (FATF), the global standard setter for anti-money laundering.

But now, a boost has been provided from an unexpected quarter: Xiangmin Liu, the new, Chinese president of the FATF. In his presidency’s objectives statement, Liu suggests that, for the first time, ‘the FATF may consider the opportunity for work on money laundering from illegal wildlife trafficking’, noting that IWT ‘is estimated to be the fourth most profitable criminal trafficking enterprise, generating revenues of between USD 7 billion and USD 23 billion a year, with links to modern slavery, narcotics and the arms trade’. Although this focus on IWT is only a coda to Liu’s main priorities, for those who have been campaigning for FATF leadership in this field, the prospect of a breakthrough – however tentative – is very welcome.

To date, the FATF’s indifference has held back efforts to tackle the financial dimensions of IWT in several ways. Chief among these is the effect of failing to incentivise inclusion of IWT as a priority in the National Risk Assessments (NRAs) prepared by countries ahead of their FATF evaluations. With limited exceptions, very few NRAs acknowledge IWT as a risk, mainly because few financial cases are pursued and thus the risk from IWT-related finance is deemed low. This is a systemic failure of the NRA process that the FATF has the ability to course-correct with relatively minimal effort, for example by encouraging multilateral organisations, such as the World Bank and Asian Development Bank, that often facilitate, although do not control the NRA process, to prioritise IWT.

By failing to include IWT in their NRAs, countries and their senior anti-financial crime staff are rarely sensitised to the risks that IWT poses to the integrity of their financial systems, and thus less motivated to respond to IWT than to the risks of other forms of organised crime such as the trafficking of weapons, narcotics or humans. As a result, although high-quality training related to IWT and financial crime is being delivered in some locations, implementation is often not prioritised because, among other obstacles, the financial threat is not assessed as sufficiently high (or even present).

Finally, there is a critical lack of financial investigation capabilities in key law enforcement agencies in most of the relevant countries – the development of which is a major part of the FATF’s wider mission. For example, countries in Southeast Asia prosecute hundreds of drugs cases per year yet there are virtually no parallel financial investigations of that crime, let alone of IWT.

Thus, the potential intervention of the FATF – guardian of the integrity of the global financial system and booster of financial investigations – is central to achieving a step-change in global responses to IWT. But how?

A group of likeminded IWT/finance travellers – including RUSI, EIA, TRAFFIC, WWF and WJC – propose seven steps the FATF could take as it prioritises money laundering and IWT over the next 12 months:

1. FATF recommendation 30 – one of the forty standards against which the FATF evaluates countries anti-financial crime efforts – requires countries to conduct parallel financial investigations of ‘major proceeds-generating offences’ . Thus, far greater scrutiny of, and emphasis on, the use of parallel financial investigations of IWT cases is required.  Where this activity is absent in the case of IWT, FATF assessors (and those of its regional bodies) should reveal this deficiency in their reports.

2. In preparing for a FATF evaluation, countries produce an NRA. The FATF, its members and those multilateral organisations who facilitate the production of NRAs must ensure that all risks are captured by creating an effective challenge function during the NRA process. The failure to include IWT where relevant should be systematically called out by FATF evaluators and in FATF assessments, to ensure that a response to IWT is included in and actively monitored via post-evaluation action plans.

3. Lessons can be adapted from positive practice in other areas. As the FATF has done previously with terrorist financing, it should consider conducting a financial investigation and prosecution audit of the top IWT supply, demand and transit countries to determine capacity and commitment to address the finances of IWT.

4. IWT is often associated with other forms of organised crime, with perpetrators often engaged in ‘poly-criminality’. Yet the financial modus operandi related to IWT remain much more simplistic than those connected with other (perceived ‘higher risk’) threats such as narcotics. The FATF should thus emphasise to member states that IWT represents a potentially soft underbelly that can be exploited by law enforcement in responding to organised crime groups involved in a range of threat activities.

5. The FATF should revisit, remind and reinforce the repeated commitments made by countries to tackle the finance related to IWT since the London IWT Conference of 2014 (repeated most recently at the London Conference in October 2018). Countries and their financial sectors should be held to account on these commitments and the FATF should assess progress.

6. IWT is not merely a risk in well-known source and destination countries. The need for action in key transit hub countries such as Turkey, the UAE, Hong Kong and Singaporeshould also be highlighted by the FATF.

7. And finally, the FATF, as global anti-money laundering standard setter and leading evaluator of financial system integrity, must use its position to promote the message on a global scale around the need to fight against IWT-related finance. Just as the FATF president and executive secretary take advantage of high-profile speaking opportunities at the UN and G20 on, for example, terrorist and proliferation financing, so too should IWT-related opportunities be sought out to emphasise the prioritisation the FATF is now considering applying to IWT.

Liu’s initiative is welcome, and expectations are high among the IWT/finance NGO community who have long called on the FATF to show leadership in this area. Here’s hoping the FATF and its member states show the commitment needed to live up to these expectations and that the financial dimension of the illegal wildlife trade will finally be taken seriously in this forum.

Tom Keatinge is Director of RUSI’s Centre for Financial Crime and Security Studies. The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

https://rusi.org/commentary/money-laundering-and-illegal-wildlife-trade-financial-action-last