A Guide to Anti-Money Laundering for Crypto Firms
The US Financial Crimes Enforcement Network (FinCEN) has warned that wildlife trafficking is on the rise, and that financial institutions are not capturing the full extent of the problem.
FinCEN’s latest Financial Threat Analysis, focusing on wildlife trafficking threat patterns and trend information, is based on an analysis of Suspicious Activity Reports (SARs) filed between 2018 and October 2021.
It shows 212 SARs related to wildlife trafficking were filed during this time, with the number filed in 2021 on track to meet or exceed 2020 filings, based on current trends.
“While SAR filings have increased, they still appear low in comparison to the estimates of the scale of wildlife trafficking. We assess that the SARs are likely capturing only a small percentage of all wildlife trafficking-associated illicit financial activity,” the 14-page report states.
It is estimated that illegal wildlife trafficking – trading in protected animals and body parts – is worth between $7bn and $23bn per year, and accounts for a quarter of all wildlife trade. FinCEN is particularly concerned because of the trade’s strong association with corruption and transnational criminal organizations.
The report addresses two of FinCEN’s national anti-money laundering and countering the financing of terrorism (AML/ CFT) priorities published in June 2021: corruption and transational criminal organization activity.
“Today’s report demonstrates the critical role that financial institutions play in identifying wildlife trafficking and protecting the US financial system from associated illicit finance through compliance with their BSA obligations,” said FinCEN Acting Director Himamauli Das.
Following the money
For compliance teams, differentiating between legal and illegal trade of wildlife (domestic and international) is difficult, and typically cannot be achieved through financial analysis alone. The report shows that illicit financial activity is usually identified through a connection to public or already known trafficking activity, or because of a law enforcement referral related to wildlife trafficking.
Financial intelligence can play a key role in detecting this illegal activity and helps identify offenders, when combined with other information. SARs in this dataset identified various levels of potential foreign government corruption. Screening for politically exposed persons (PEPs) and adverse media screening can help detect potential offenders.
At a high-level international conference in December, Financial Action Task Force (FATF) President Dr. Marcus Pleyer, called for a global move against illicit profits generated from environmental crimes.
Following the proceeds of wildlife trafficking is increasingly leading to transnational criminal organizations (TCOs), who are attracted by an increase in the movement of bulk wildlife products using established trade routes consistent with their experience, organization, and sophistication; and by wildlife trafficking’s low-risk and high-reward appeal.
Apparent money laundering activity was reported in 80% (170 SARs) of the wildlife trafficking-related SARs. Key takeaways for compliance teams include:
- The laundering of proceeds generated by potential wildlife trafficking is similar to the laundering of proceeds generated by other major crimes, including using typologies such as the comingling of licit and illicit proceeds, or the proceeds of two or more illicit activities
- While the majority of wildlife trafficking-associated illicit proceeds typically end up in the country where the leader(s) of the wildlife trafficking network are based, laundering also occurs at other stages in the wildlife trafficking supply chain
- TCOs engaged in wildlife trafficking may handle the laundering of proceeds generated by wildlife trafficking themselves, or potentially outsource to a third-party or money laundering organization
- Funds transfers between depository institutions are identified by FinCEN as the most common wildlife trafficking-related payment mechanism in SARs
- Lockdown measures may have forced organized criminal groups to adapt their dynamics
- The US, China and Hong Kong were the most referenced locations for sending and receiving parties
- Before determining if transactions are connected with potential wildlife trafficking activities, firms should consider additional contextual information and the surrounding facts and circumstances, such as a customer’s historical financial activity, whether the transactions are in line with prevailing business practices, and whether the customer exhibits multiple wildlife trafficking related indicators
FinCEN also notes the importance of clear and detailed descriptions of the activity that is being identified in a SAR, for effective use of the information.
To explore the key indicators of wildlife trafficking in more detail, visit pages 12-13 of the report.
Originally published December 23, 2021, updated December 23, 2021
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