A new report published by the Financial Action Task Force (FATF) shows the significant role of trade-based fraud and misuse of shell and front companies to launder gains from illegal logging, illegal mining, and waste trafficking. Criminals meanwhile comingle legal and illegal goods early in resource supply chains, making illicit funds difficult to detect later in the value chain (Trade-based Financial Crime, 28 June 2021).
To address this reality, Money Laundering from Environmental Crime highlights the need for anti-money laundering (AML) authorities to build working relationships beyond traditional partners such as financial institutions, including environmental crime investigators and environmental protection agencies, and to establish multi-stakeholder dialogues.
The report identifies three key priorities. The first is that all members of the FATF global network should consider whether criminals may be misusing the financial and non-financial sector to conceal and launder gains from environmental crimes. This includes countries without domestic natural resources.
Members must also strengthen their operational capacity to detect and pursue financial investigations into environmental crimes. This includes working with foreign counterparts to share information, facilitate prosecutions, and effect the recovery of assets that are moved and held abroad.
Countries should fully implement the FATF standards as an effective tool to combat money laundering from environmental crime. This includes ensuring AML outreach to relevant intermediaries covered by the FATF Standards, such as dealers in precious metals and stones, as well as trust and company service providers.
More work needed
The FATF says its new landmark study has strengthened its understanding of money laundering risks from illegal logging, illegal mining and waste trafficking but also highlights the need for further work.
This includes further understanding the financial flows specific to waste trafficking, due in part, to the lack of existing money laundering cases for this specific crime. In addition, the report highlights the importance and opportunities for further regulatory and policy work.
Environmental crimes not studied
The FATF says it recognises that other environmental crimes such as those associated with illegal, unregulated and unreported fishing or illegal carbon trading also generate significant gains.
But these activities are not included within the scope of the new report to keep it sufficiently focused FATF says. Similarly, an earlier FATF report covered money laundering from the illegal wildlife trade so this latest report does not address this issue.
The FATF report, Money Laundering from Environmental Crime, can be found here.
The FATF report, Money Laundering and the Illegal Wildlife Trade, can be found here.
Categories: Trade Based Financial crimes News