Role of Financial Institutions in Combating Wildlife Trafficking

Role of Financial Institutions in Combating Wildlife Trafficking
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Let me start by showing you following video prepared by Financial Action Task Force (FATF) highlighting wildlife crime as a serious financial crime and importance of "Following the Money" to counter this crime effectively:

Wildlife trafficking is the fourth largest multi-billion dollar illicit economy in the world. In this illicit economy wildlife is traded as a commodity generating huge financial profits for the wildlife criminal syndicates. Combating this illicit economy requires multi-pronged strategy involving public-private partnerships. Financial Institutions have a very important role in fight against this transnational organized crime.

Various methods are used for payment of money to procure wildlife contrabands and for flow of monetary profits across the supply chain of transnational wildlife trafficking such as domestic bank transfers, international wire transfers, underground banking methods i.e. Hawala, money transfer services e.g. Western Union, cash, cheque, mule accounts, mobile payment services such as WeChat Pay, Ali Pay etc. Following infographic shows the payment methods and money flow across a fictional supply chain:

Source: Case Digest: An Initial Analysis of the Financial Flows and Payment Mechanisms Behind Wildlife and Forest Crime - Wildlife Trade Report from TRAFFIC

Wildlife traffickers exploit the Financial Institutions for moving, hiding and laundering the proceeds of illegal wildlife trade. In order to conceal the sender and the receiver of the funds, and to avoid the country-specific threshold reporting by financial institutions, wildlife criminal syndicates rely on money mule accounts and low-value payments. They also use shell companies to hide the real beneficiaries of proceeds of wildlife crime and to move the profits between various players of supply chain. Front Companies are also used by wildlife traffickers for co-mingling of illicit proceed generated from wildlife crime and the licit proceeds generated from legitimate business activities. Transnational wildlife traffickers use front companies involved in import-export business to facilitate the cross-border movement of wildlife contrabands and proceeds of crime through formal banking system. Wildlife criminals also use virtual assets, mobile apps or social media-based platforms, linked to bank accounts, to transfer and launder funds from illegal wildlife trade.

As per FATF Recommendation 1, countries should require financial institutions to identify, assess, and take effective action to mitigate their money laundering and terror financing risks associated with proceeds of crime. As per FATF Recommendations 4 and 38, countries investigating wildlife crimes should, as a priority, identify, freeze, seize and confiscate associated assets. Financial Institutions can help Wildlife Law Enforcement Agencies in fighting IWT in following ways:

  • Generation and sharing of financial intelligence to the Wildlife Law Enforcement Agencies in the form of Suspicious Activity Report (SAR), Suspicious Transaction Report (SAR), Cash Transaction Report (CTR), Cross-Border Wire Transfer Report (CBWR) etc. related to transactions suspected to be linked to the proceeds of illegal wildlife trade. Such financial intelligence may help law enforcement agency in identifying and taking appropriate legal action against the wildlife criminal syndicates.
  • Providing details of financial assets of the accused of wildlife trafficking to the agency that is conducting financial investigation into wildlife crime so that those proceeds of crime can be forfeited and the accused can be tried in the court of law and convicted for money laundering offences also.
  • Enforcing the targeted financial sanctions against the individuals and entities accused of wildlife trafficking.

As per FATF Recommendation 10, financial institutions are required to undertake Customer Due Diligence (CDD) while establishing business relationships and when carrying out transactions which are of suspicious nature e.g. pertaining to money laundering or terror-financing by criminal actors like wildlife traffickers. Similarly, as per FATF Recommendations 20 and 23, if a financial institution has reasonable grounds to suspect that funds may be the proceeds of a criminal activity such as illegal wildlife trade, it should report promptly its suspicions to the Financial Intelligence Unit (FIU) which may, after analysis, forward the same to concerned wildlife enforcement agency for taking appropriate action.

Following risk indicators pertaining to financial transactions suspected to be associated with illegal wildlife trade have been identified by Financial Action Task Force (FTATF) in its Report titled "Money Laundering and the Illegal Wildlife Trade" and which may be incorporated by the financial institutions in their Transaction Monitoring System (TMS) to flag suspicious transactions:

  • Inbound cross-border transfers to customers from jurisdictions considered to be at higher risk of illegal wildlife trade.
  • Outbound cross-border transfers to customers in higher risk regions for illegal wildlife trade.
  • Frequent cash deposits into and withdrawals from accounts of persons living around the wildlife protected areas which don't match with their customer profile.
  • Transactions related to international trade companies, including import-export, freight forwarding, customs clearance, logistics, shipping etc. which are dealing with commodities like raw or squared wooden logs, plastic waste or pellets, frozen food, fish maws, various kinds of beans, stone or quartz block in high-risk corridors or ports known for wildlife trafficking.
  • Transactions related to Politically Exposed Persons (PEPs). Irregular large cash or other deposits, wire transfers, multiple cash deposits and withdrawals, and/or unexplained wealth from government officials working in forestry agencies, wildlife management authorities, zoo and wildlife park employees, CITES Management Authorities (CMAs), customs and border control officials.
  • Irregular large cash or other deposits, multiple cash deposits and withdrawals, and/or unexplained wealth from government officials from environment or other ministries who have specific management or oversight authority of government stockpiles of seized ivory, rhino horn, timber, or other illegal wildlife products.
  • Transactions related to wealthy businessmen/women who are in environmental or wildlife related businesses.
  • Transactions related to legal wildlife trading entities such as private zoos, breeders, exotic pet shops, safari companies, pharmaceutical companies making medicines containing ingredients of wildlife, wildlife collectors and game reserves etc.
  • Financial transactions related to import/export of ingredients or products to be used in traditional medicinal industries and which refer to CITES or other protected flora and fauna species.
  • Wire transfers/cash deposits to, or withdrawals by, known wildlife poachers and traffickers.
  • Financial transactions between licensed pet shops / captive wildlife breeders and known wildlife poachers and traffickers.
  • Inbound cross border wire transfer to licenced pet shops / captive wildlife breeders that originate from overseas and which are incommensurate with their stated business activities.
  • Large financial transactions to licenced pet shops / captive wildlife breeders where there is significant discrepancies between the wildlife species/product ordered and their transaction value.
  • Airline passengers who are traveling on high-risk wildlife trafficking routes on tickets paid for by a third person or in cash.
  • Payments from companies/industries which are vulnerable to use wildlife contrabands, such as traditional medicine manufacturers, leather producers, auctioneers of wildlife products, exotic food providers, to known wildlife traffickers or their associates or other entities that have been identified as involved in illegal wildlife trade.

As wildlife crime converges with many other serious crimes, following the money trail may also help enforcement agencies in identifying and dismantling associated  crimes such as drugs trafficking, corruption, arms trafficking, human trafficking etc. Also, to obfuscate the source and destination countries, wildlife traffickers transit wildlife contrabands through third countries. This involves complex web of shell & front companies in different jurisdictions. Financial institutions may help enforcement agencies in connecting these dots by providing details of money flow between such entities. As per FATF Recommendation 30, jurisdictions are expected to launch parallel financial investigations in appropriate cases to identify broader criminal networks and to prevent criminal proceeds and instrumentalities from getting disappeared or disposed of.

 Wildlife Crime & Financial Investigation Agencies should provide the risk indicators on regular basis to the financial institutions through their  Financial Intelligence Units (FIU) such as names of the wildlife criminals, their passport number & other national identity card details, their bank details, related shell & front companies details, details of their family members & other accomplices, description of goods used for smuggling of wildlife contrabands, origin & destination ports frequently used for willdife trafficking etc. so that they can update their transaction monitoring system and raise red flags whenever any suspicious transaction takes place. This information sharing has to be done through secure information exchange system to ensure data protection and also to ensure that ongoing investigation is not compromised. 

Source: https://www.traffic.org/publications/reports/wildlife-money-trails/

Wildlife Crime & Financial Investigation Agencies should also share the feedbak to financial institutions in respect of STR, CTR, CBWR, SAR etc. received from them so that they keep refining their risk indicators to avoid raising false red flags in future. Financial Institutions may also collaborate with Wildlife NGOs and Think Tanks or Research Institutes to find the risk indicators for money laundering or terror finacing associated with wildlife crimes. Financial Institutions can also develop Artificial Intelligence based Tracking Model for identifying risk indicators related to wildlife crimes from news articles, various reports, resarch papers etc. from various digital platforms and incorporate them into their transaction monitoring system to red flag and share suspicious transactions with willdife enforcement agencies.

As wildlife trafficking and associated financial crimes is a global phenomenon affecting various jurisdictions either as a source, transit or destination country; it is imperative that jurisdictions put in place enabling legislative provisions regarding sharing of financial intelligence by financial institutions amongst themselves within and outside the country of their operations with proper safeguard measures to maintain data privacy and security for timely and quck action against wildlife traffickers.

Constitution of "United for Wildlife Finanacial Taskforce" (also known as "Mansion House Declaration") in 2018 by Royal Foundation of U.K. was a major breakthrough in bringing financial institutions on board in fight against wildlife crimes. Following are the six commitments of Mansion House Declaration:

  • Take measures to increase awareness of IWT and the role of the financial industry in combatting it.
  • Provide training to relevant staff within financial crime compliance functions to enhance their ability to identify and investigate potentially suspicious activity that may be related to IWT.
  •  Utilise current suspicious activity reporting mechanisms to provide intelligence related to potential IWT activity to the relevant regulatory body or law enforcement agency, where permitted by law.
  •  Review intelligence alerts received through the Taskforce and where relevant take appropriate action including due diligence screening and steps to identify, investigate and report potentially suspicious financial activity related to IWT.
  •  Consider additional actions, examples include policy amendments that would support the aims of the Taskforce in addition to financial crime related mechanisms.
  • Support the work of the Taskforce, promote the Declaration and where possible support external mechanisms that enhance the ability of the financial industry to identify potentially suspicious activity related to IWT.

Wildlife trafficking is a profit-driven crime. To effectively combat this crime, financial gains made by these traffickers need to be taken away from them. Finacial institutions can play very crucial role in disincentivising this crime by extending their help to enforcement agencies in making it a "High Risk, Low Profit Crime".

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Go to the profile of Christine
7 months ago

R=Thank you for sharing great wealth of information in understanding and combating wildlife crime