State of Financial Crime 2023 Report

The Illegal Wildlife Trade & Money Laundering

AML Compliance Knowledge & Training

The illegal wildlife trade (IWT) is a global problem that threatens the survival of many species, from small reptiles and amphibians to large mammals like elephants, rhinoceroses, and tigers. IWT is driven by various factors, including poverty, the demand for exotic wildlife products, and the availability of technology that makes transporting wildlife across international borders easier. 

What is Illegal Wildlife Trade (IWT)?

Illegal Wildlife Trade (IWT) includes any type of criminal activity involving illegal poaching, smuggling, collecting, and trafficking of endangered and protected wildlife. Examples of IWT can range from poaching tigers for their skins to hunting elephants for ivory. While not all wildlife trade is illegal, it can become critical when an increasing proportion is illegal and unsustainable. 

Generating between USD 7 and 23 billion yearly, IWT is currently considered the world’s fourth largest internationally-organized crime.

As with most types of organized crime, wildlife trafficking syndicates often work with a kingpin at the top who depends on a network of facilitators who poach the animals, distribute them to intermediaries, and sell them to customers. 

However, the impacts of IWT go far beyond the economic impact, or the financial rewards criminals enjoy. Collectively, these crimes adversely affect life support systems. From biodiversity loss to threatening extinction, the threats of wildlife trafficking are not only wide-reaching, they are time-sensitive. 

Methods used to Launder Money from Illegal Wildlife Trade

To move and launder the proceeds from their crimes, traffickers often use import-export shell companies and front companies to disguise their activities. According to research conducted by the Financial Action Task Force (FATF), criminals are relying on “established” methods to launder proceeds from IWT. Some of these methods include placing and layering funds through:

  • Cash deposits (under the guise of loans or payments)
  • False receipts 
  • E-banking platforms 
  • Licensed money value transfer systems
  • Third-party wire transfers through banks
  • Money mules

The FATF says that criminals also purchase high-value goods, such as real estate, luxury vehicles, jewelry, and artwork, to launder the proceeds from IWT at the integration stage. 

The Challenge of Abuse

Wildlife trafficking and money laundering may depend on network effects to be effective and elusive. However, removing one part of the network is a powerful way to damage the industry’s structures. Examples of abuse are unfortunately commonplace with IWT. The video below details the challenge the anti-poaching charity, Black Mambas APU, faces in the fight against rhino poaching.

Guidance on Combating the Illegal Wildlife Trade

Despite the growing scale of IWT, in 2020, the FATF noted that suspicious activity reporting (SAR) had been underutilized as a source of intelligence to initiate or support financial investigations into wildlife trafficking. 

The FATF subsequently announced its concern about the lack of financial focus on the IWT and published its first global report on the issue. In the report, the FATF advises countries to:

  1. Identify and assess their money laundering risks relating to the IWT
  2. Ensure that national laws and powers for law enforcement allow authorities to go after the finances of wildlife traffickers and to pursue financial investigations

Following this report, the FATF released an additional advisory on money laundering from environmental crime in July 2021. The advisory notes that one of the common challenges financial institutions face is being able to distinguish between the legal and illegal wildlife trade. Collating diverse data from different sources during the customer due diligence (CDD) process is key to strengthening this risk awareness.  

The United Nations Office on Drugs and Crime (UNODC) echoes the FATF’s guidance in its recommended step-by-step approach to disrupting illicit financial flows stemming from IWT:

  1. Follow the money – Think about a financial profile when questioning couriers and suspects
  2. Start a financial investigation – Examine how a suspicious shipment was paid for
  3. Work with financial intelligence units (FIUs) and partner agencies 
  4. Work with the financial sector to identify indicators for suspicious transactions –  Identify opportunities to enhance relationships between wildlife and forest crime investigators and officials in both public and private sectors involved in the transportation of wildlife or forest products, including: 
      • Customs authorities
      • Port authorities
      • Airlines
      • Shipping companies
      • Financial institutions

Global Regulations on IWT

Despite IWT being a predicate offense to money laundering in 80 countries, the issue lacks a coherent international response. According to the FATF, inconsistent regulatory standards and legal environments worldwide have contributed to criminals’ “low-risk, high-reward” perception of IWT. 

The main international regulation for IWT is the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), also known as the Washington Convention. Established in 1975, it is a global agreement between governments to ensure that international trade in specimens of wild animals and plants does not threaten the survival of the species. However, participation in the agreement is voluntary, and the types of protected wild animals and plants can differ from country to country. 

Additionally, as countries commit to meeting the UN sustainable development goals (UNSDGs) and pledge to limit increases in global temperatures, anti-money laundering and combatting the financing of terrorism (AML/CFT) regulations have been revised to reflect some of the latest criminal trends. For example, the EU’s ‘original’ 6AMLD has added environmental crime as a predicate offense to money laundering. Additionally, FinCEN has issued warnings on wildlife trafficking, highlighting the critical role financial institutions play in protecting the financial system from associated illicit finance.

The Hidden Impact of the Illegal Wildlife Trade 

One potential reason for IWT’s lack of enforcement in anti-money laundering circles is that its local effects are not particularly visible. For example, drugs flowing more freely can result in increased drug use – but if there is a sudden influx of rhino horns in a local market, the negative local consequences are not as apparent. 

However, that is only true for economies where trafficked animals are not native. It is a different story for those living and working where wildlife is sourced to be illegally traded. In these instances, poachers can be violent and often deadly. They frequently manage to kill rangers as well as wild animals.

There is excessive violence in IWT, but the risk diminishes once the goods reach the sellers. From then on, the goods are simply a hidden luxury available on the black market. 

Due to the secretive nature of IWT, calculating the measurable impact of trafficked goods is difficult to ascertain. However, as the environment and climate have become more politically charged, legislators recognize that there is a public good in tackling illegal wildlife crime.

 

Originally published March 9, 2020, updated February 3, 2023

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