Policymakers Must Consider Bold Policy Proposals to Counter Multiplying Money Laundering Threats from Environmental Crimes

Convening of dozens of activists and experts concludes need for collaboration to tackle environmental crimes related illicit financial flows

The growing nexus of environmental crimes and illicit finance is demanding action, and environment, conservation and anti-corruption advocates alike are taking note. On June 28th and 29th, FACT hosted a virtual convening of over 60 civil society activists, experts, and policymakers to discuss this policy intersection, identify shared priorities, and discuss joint advocacy strategies.

A Growing Concern

Stronger collaboration between environment, conservation, and anti-corruption communities is long overdue. Environmental crime – including illegal mining, logging, fishing, and wildlife trafficking – already produces up to $281 billion in criminal proceeds each year, and as one of the fastest growing criminal activities, that number will only continue to grow. With most authorities under-resourced or under-informed about the risks of environmental crime (or compromised by corruption), it’s no wonder that bad actors have flocked to this low-risk, high-reward business. “This is a great place to go and make money illegally,” as one convening attendee put it. 

It’s not just environmental plunder and profits at stake, however. This lucrative trade has invited illegal networks of all stripes to get involved and diversify their business portfolios. The result has been a malicious criminal convergence. For example, illegal fishing vessels often secure their catch with exploited labor–easily abandoned when authorities catch on. Illegal wildlife traffickers, meanwhile, have grown their business by wedding environmental crimes with more traditional organized crimes like drug trafficking. Consequently, the longer that environmental crimes go unaddressed, these convergences will wear down the ability of authorities to tackle existing crimes of concern – all while degrading our planet’s ability to withstand climate change

Multiplying Money Laundering Threats

In addition to human rights violations and trafficking concerns, environmental crimes pose a massive money laundering risk. After all, where there are profits to be made there are profits to be cleaned. To shift illicit profits and hide their business through incredibly complex corporate structures, criminals have turned to long-standing tools of the illegal trade like anonymous shell companies based out of secrecy jurisdictions around the world. The laundering occurs at each step of the process. In source and transit jurisdictions, export mis-invoicing, and other tricks of trade-based money laundering, are used to flout both export limitations on protected commodities and the taxes that should be collected from their sale, doubly depriving communities of their deserved wealth. Particularly in destination countries, corrupt gatekeepers – professionals like lawyers, precious metal dealers, real estate agents, and company formation agents who hold keys to the U.S. financial system – play a crucial role in moving products to market and laundering profits. 

Gaps in the anti-money laundering defense only complicate this picture further. Cases of famous kleptocrats buying up multi-million dollar properties across the U.S. raise suspicions that criminals could be using secrecy in the U.S. real estate markets to convert dirty cash into legal assets. The same can be said for the nation’s private investments market, already under scrutiny for its connection to global kleptocrats, amid signs that private investors are backing illegal deforestation in countries such as Peru.

As the money laundering threats have multiplied, governing authorities have only just begun to take notice. The most recent U.S. national money laundering risk report included a long-overdue spotlight on illicit wildlife trafficking, but with so many other forms of environmental crime at play it is hardly a sufficient treatment of such extensive risk. In another promising but preliminary turn, the Financial Crimes Enforcement Network (FinCEN) published an advisory last year encouraging greater attention to the myriad threats that environmental crimes pose. 

Towards a Shared Reform Agenda

No amount of increased scrutiny will be enough to turn the tide unless law enforcement has the right tools to go after these criminals. This convening made a strong start toward identifying priority reforms, but there is a long way to go in advancing and implementing them. These challenges call for a united front between environment, conservation, and anti-corruption advocates. As one anti-corruption expert stated during FACT’s convening, “partnerships are not optional.” The June 29th meeting offered civil society on both sides of this intersection an opportunity to identify and strategize around policies that could be passed here in the United States for a positive global impact. 

The participants agreed that the first step to eradicating environmental crimes was for Congress and the Biden Administration to follow through on overdue improvements to its anti-money laundering regime. Chief among them is the implementation of the Corporate Transparency Act (CTA), which would ban the use of anonymous U.S. shell companies. Already behind schedule, the Administration must prioritize the CTA rulemakings and ensure convenient access for international law enforcement partners. The administration should also move forward with rulemakings that have the potential to protect U.S. real estate and private investment markets. Lastly, Congress should enlist U.S. financial professionals in the fight against illicit flows by passing the gatekeepers legislation–like the ENABLERs Act–in line with existing global standards. 

Big Problems Demand Bold Solutions

These reforms would bring the United States up to the bare minimum in fighting environmental crimes utilizing illicit finance. If lawmakers choose, as they should, to go further in this fight, they will have a variety of options to choose from. Firstly, Congress can expand predicate offenses for money laundering to include illegal mining and illegal deforestation, both of which are exempt under current statute. In addition to this, businesses need stronger due diligence guidance that requires them to ensure clean purchases across their supply chains and for more products, including for example agricultural commodities grown on illegally deforested land. Members of Congress are already considering such policies through the proposed FOREST Act. Lastly, giving the public access to export invoices and other trade data, for instance, would foster collaboration with international civil society and law enforcement to track and trap international criminal networks. These would go a long way to disentangling the role of the United States from existing illicit flows.

If the U.S. is truly committed to disrupting environmental organized crime, lawmakers should use their financial tools to go on offensive. One way to do this would be to expand Global Magnitsky sanctions, currently reserved for use against human rights abusers and kleptocrats, to be used against environmental criminals. This would give the administration needed flexibility to go after criminals that operate using dollars beyond our borders. 

There is still work to do be done in researching and detailing bold new policies to tackle the illicit finance and environmental crimes nexus–work that must be done by anti-corruption and conservation communities both in and out of government–but with so many options already on the table, there is no excuse for inaction. With the crisis growing by billions of dollars each year, lawmakers must follow through with overdue money laundering updates–both through existing rulemakings and pending legislation–while putting an eye towards new policies.