A Guide to Anti-Money Laundering for Crypto Firms

The Impact of Illegal Wildlife Trade and Money Laundering on Compliance

AML Compliance Knowledge & Training

Organized crime is a pyramid. That’s true for practically all crimes, including the illegal wildlife trade and money laundering.

That pyramid isn’t a metaphor: the kingpin at the top (who makes all the real money) is dependent on the criminal activity of a network of facilitators who poach the animals, distribute them to intermediaries and sell them to customers. Taking out just one of these factors is sufficient to deal a significant blow to organized crime.

Illegal Wildlife Trade and Money Laundering: FATF’s New Stance

FATF has made illegal wildlife trade a priority issue since China took over the presidency for 1 July 2019 to 30 June 2020. While only one meeting has taken place so far, FATF is currently working on analyzing supply chains, payment methods and the illegal wildlife trade as a whole to develop a best practice approach to the illegal wildlife trade and money laundering.

“We’re really into the grey space of who’s winning here?” – Major Alice Bromage, Ambassador at Black Mambas Anti-Poaching Unit

The illegal wildlife trade and money laundering may depend on network effects to be effective and elusive but by the same token, removing one part of the network is a powerful way to damage the structures in place that keep the industry going. Examples of abuse are unfortunately commonplace with illegal wildlife trade. The video below details the fight that the anti-poaching charity, Black Mambas APU, faces in the fight against rhino poaching.

The Appeal of Money Laundering and the Illegal Wildlife Trade 

Here at ComplyAdvantage, illegal wildlife trade is an issue close to our hearts. We’ve adopted the pangolin, the most trafficked animal in the world, as an unofficial mascot for the company. We care because, well pangolins are adorable, and because illegal wildlife trade is connected to other serious organized crimes, such as money laundering. It’s another data point in tracking who is a legitimate high-net-worth individual and who is just another criminal exploiting the financial system for gain. Typically those who engage in illegal wildlife trade are also connected to other organized crime and use it as a status symbol. Illegal wildlife trade is a crime we’re working to stop alongside drug smuggling, human trafficking and illegal arms trading because it presents an opportunity for money laundering.

Illegal wildlife trade is not always given the same level of focus as the other serious organized crimes despite being the fourth largest type of organized crime in the world, just behind drug trafficking – the UN values illegal wildlife trade at over $23 billion, which creates an attraction for criminals to launder money through the illegal wildlife trade.

Yet while statistics are good for a marker of the size of the criminal industry, it ultimately comes down to the same issue as every other type of crime that fosters money laundering – catching perpetrators in the act.

Current Measures 

Freezing and preventing access to suspected illicit assets is a common move for authorities to take. It can often lead to the sale of illegally obtained high-value goods, as seen with Equatorial Guinea’s vice president, Teodoro Nguema Obiang Mangue and his fleet of supercars. However, it’s a rarely used measure when dealing with cases of illegal wildlife trade and money laundering. 

This is probably due to financial investigations essentially being a non-occurrence in the vast majority of nations. Research by the UNODC states that 79% of jurisdictions do not include their FIUs in multi-agency approaches to illegal wildlife trade and 71% of jurisdictions do not see wildlife crime as a significant money laundering threat in their regions.

The annual value of the illegal wildlife trade market and the upcoming practices to be set by FATF suggest that those jurisdictions are wrong to think that way. And that new compliance standards are going to have to be adopted in the near future. Money laundering in the context of the illegal wildlife trade could easily herald a new wave of compliance changes for a global financial system that’s already struggling to keep up with multiple new rules for the digital economy.

Despite illegal wildlife trade being a predicate offense to money laundering in 80 countries, the issue lacks a coherent international response. Hopefully, this will change in the wake of FATF consideration and fresh calls for oversight by the UN from UK legislators.

The Hidden Impact of the Illegal Wildlife Trade 

One potential reason for the illegal wildlife trade’s lack of enforcement in anti-money laundering circles is likely that its local effects are not particularly visible. For example, drugs flowing more freely can see local drug use increase – but if there’s suddenly an influx of rhino horns in a local market there aren’t many, if any, negative local consequences.

However, that’s only for economies where illegal wildlife trade animals do not live natively. It’s a whole different story for those who are living and working where illegal wildlife trade is sourced – poachers are violent and often deadly. They frequently manage to kill rangers as well as wild animals.

Unfortunately, poachers are often from incredibly poor backgrounds and commit the crime to feed their families. There’s definitely a significant issue of economic weight and class at the heart of illegal wildlife trade, which we’ll discuss in the future. But for now, it’s just worth noting that the major risk of these crimes is borne by those who are paid small amounts and with no chance for advancement.

There is excessive violence in the procurement of illegal wildlife trade, but once the goods reach the intermediaries who sell, that risk diminishes. And then it’s simply a hidden luxury good available on the black market, used for any number of reasons – from meat to rare leathers and to supposedly male performance-enhancing medicine.

However, while these don’t have a measurable impact on the local market, legislators are becoming more aware that global issues need to be treated globally. Many scientists state that the world is going through a sixth mass extinction event and illegal wildlife trade is a contributing factor to that. As the environment and climate have become more politically-charged issues, legislators are recognizing that there is a public good in tackling illegal wildlife crime.

Global Difficulties

One reason that illegal wildlife trade is so difficult to tackle is the lack of coherent global response and standards. It can be the case that illegal wildlife trade crimes fail the dual-criminality test required for anti-money laundering.

If you’re unfamiliar with the concept, it’s that for a crime to be considered as contributory to money laundering the predicate offense must be illegal in both the country of origin and the country the money was moved into.

The common example of dual-criminality is the Spanish matador. If he travels to London and purchases goods using his wages in the UK he would be considered a money launderer, under the predicate offense of animal cruelty. But the activity is legal in his home country where he made the money and it would be unreasonable to jail him for using legitimately obtained money.

For now, it appears that going after poachers, who are at the most economically vulnerable and desperate stage of the illegal wildlife trade criminal pyramid, is the most effective action to take to tackle the crime. But that’s due to political inaction and a focus on other organized crime – an odd irony considering that these crimes are often interconnected with drugs and other serious organized crimes.

Hopefully, this will change in the near future once FATF is able to set standards on how illegal wildlife trade, money laundering and the global financial system interact. And given the lack of regulatory harmonization that’s existed previously, it’s going to be interesting to see what FATF recommends.

Originally published March 9, 2020, updated May 5, 2022

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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