In the Wake of UNCAC, U.S. Reforms Must Tackle Illicit Finance Fueling Corruption and Nature Crime

The United Nation Convention Against Corruption (UNCAC) meeting in Atlanta last week presented countries with a crucial opportunity to demonstrate leadership and unwavering commitment in the global fight against corruption. Among the issues that were discussed, environmental crime, the third most profitable crime in the world, stands out as one of the most urgent issues jeopardizing people and the planet. While the UNCAC states parties failed to approve any resolution addressing the intersection between nature crime and corruption, the United States – as this year’s host of the conference – announced its own timeline to pass a slate of anti-corruption measures that will meaningfully address how the criminal and corrupt hide and launder the proceeds of crimes, including crimes that degrade the environment. 

The United States is the world’s largest economy, reserve currency, and premier supplier of financial secrecy. The U.S. Treasury Secretary Janet Yellen has even stated that, “there is a good case that right now, the best place to hide and launder ill-gotten gains is actually the United States.” By cleaning up its own house and plugging holes in its anti-money laundering policy, the United States can be a better partner to the rest of the world in tamping down on the criminal and corrupt funds that fuel environmental degradation. 

Environmental crimes both fuel and are fueled by corruption. For instance, environmental criminals often bribe officials to obtain fake permits for illegal mining, make facilitation payments to permit the export of their illegally obtained products such as gold or timber, or incentivize officials to turn a blind eye to projects of mass deforestation. In one such case, the Brazilian company Odebrecht paid nearly $800 million in bribes to officials in Amazon-basin countries to secure the rights to build an interoceanic highway, paving over miles of previously untouched Amazon forest. It’s clear that corruption only further enables environmental and other convergent crimes. 

The FACT Coalition has explored the connection among environmental crime, corruption, and the U.S. financial system in its recent report, “Dirty Money and the Destruction of the Amazon.” The report has identified several cases in which those contributing to environmental crimes in the Amazon have exploited the secrecy of the U.S. financial system for personal gain. Take, for example, the same Odebrecht scandal: in 2007, former Peruvian President Toledo purportedly took Odebrecht’s bribes in exchange for contracts like the Interoceanic Highway and laundered approximately $1.2 million of the funds into a house in Maryland. The FACT report further identified cases in which U.S. real estate, shell companies, and gold refineries – which apparently fell short on their own due diligence processes – facilitated the trade of illicit gold and timber, as well as their affiliated proceeds. To avert the looming threat of the Amazon’s further destruction, prioritizing the nexus between environmental crime, corruption, and illicit finance must be at the forefront of the UNCAC’s collective efforts. 

The U.S. has at least taken the first step of acknowledging its dirty money problem. In 2021, the Administration released the first-ever Strategy on Countering Corruption, which laid out a whole-of-government approach to cracking down on corruption at home and abroad. This included an ambitious slate of reforms, largely undertaken through the U.S. Treasury Department, to identify the true owners behind otherwise anonymous U.S. entities, as well as to tackle money laundering in the $50 trillion real estate and $11 trillion private investment markets. Furthermore, the United States is starting to look more closely at the intersection between illicit finance and nature crime. In 2021, Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an advisory to U.S. financial institutions noting an “upward trend in environmental crimes and associated illegal financial activity” and called on these financial institutions to pay increased attention to nature crimes. Further, in January 2023, FinCEN established a task force with the South African government to better combat wildlife trafficking. But these are just the first steps. FinCEN has yet to meaningfully address the illicit finance behind nature crimes driving illegal deforestation, like illegal mining and forestry crimes. 

Companies and criminal organizations will continue to take advantage of the U.S. financial system if nothing changes. Though the UNCAC summit has come and gone, the U.S. continues to head the convention body for the next two years. All eyes are on the U.S. to implement its own reforms, to demonstrate a genuine commitment to the mission of the UNCAC. The United States can successfully close its anti-money laundering loopholes, fight corruption, and go after environmental crime by undertaking a few common sense reforms. A comprehensive approach will help law enforcement and private sector partners prevent, detect, flag, and investigate environmental crimes.

First, it is crucial for the U.S. to effectively and faithfully implement the Corporate Transparency Act, which goes into effect on January 1st. The robust implementation of this law would enable law enforcement to identify and understand the true owners behind  U.S. entities.  Such a tool is invaluable for investigating financial and environmental crimes. Critically, the U.S. should ensure that this data is made accessible, according to the law, to international law enforcement partners actively pursuing environmental crime cases. Better data sharing and collaboration will allow other countries to augment their own investigations and position them for stronger cases to prosecute these criminals.

Second, the United States must finalize long-overdue rules to institute anti-money laundering safeguards in the U.S. real estate sector. In 2021, the U.S. initiated a rulemaking  aimed at tackling money laundering within its real estate sector. In the news this week, Treasury has finalized its proposal and sent it to the White House for review. That means the public could comment on rules requiring basic due diligence measures for real estate professionals as soon as February. The regulation of the U.S. real estate sector is pivotal in the fight against corruption and environmental crime, given its established role as a preferred avenue for criminals to conceal illicit funds.

Third, The U.S. Congress should adopt laws that designate environmental crimes as predicate offenses for money laundering. One such bill, the FOREST Act, would, among other things, classify illegal deforestation as a “specified unlawful activity,” or predicate offense. This would give U.S. investigators further tools to prosecute environmental crimes, and would set an international example to adopt such measures. (According to the Financial Action Task Force, while countries in environmentally threatened areas more regularly consider these crimes a predicate offense, destination countries like the U.S. stop short.) The U.S. needs to play a pivotal leadership role in adopting its own new rules, while also supporting other countries in prioritizing environmental offenses. 

It is imperative both for the U.S. to get its own affairs in order, as well as for the world to prioritize environmental crimes within the framework of the UNCAC. By leveraging its influence, the U.S. has the power to shape and bolster global efforts aimed at combating corruption by tackling environmental crimes. As we collectively navigate the challenges ahead, the U.S. must renew its commitment to the actionable tackling of corruption and ending environmental crime and degradation.