TNRC Blog Mind the gap: Bridging the anti-money laundering (AML) and conservation communities to better address conservation crime and corruption

Mind the gap: Bridging the anti-money laundering (AML) and conservation communities to better address conservation crime and corruption

Judy Deane, Deputy Director, The Terrorism, Transnational Crime, and Corruption Center, GMU | April 2021 | Blog Post

Conservation practitioners and donors who are integrating follow-the-money (FTM) approaches into their programming to better address impacts of crime and corruption on natural resources may get better results if they strengthen their connections to professionals in the anti-money laundering (AML) community and improve their understanding of available AML tools. Under the TNRC project, the Terrorism, Transnational Crime and Corruption Center (TraCCC) is connecting a group of AML professionals in the Washington, DC area with select conservation and natural resource management (NRM) practitioners to seek touchpoints and identify information gaps. This is the first in a series of blog posts that distill key learning from those discussions. The second one is here.

How can AML tools be applied to address conservation crime and corruption?

Financial investigations can support the identification and collection of evidence against mid- and high-level members of criminal networks and others who engage in corrupt practice. Money laundering is the process by which criminals disguise the original ownership and control of the proceeds of crime and corruption by making them appear to have derived from a legitimate source. FTM techniques are starting to be used more to address natural resource crimes, and in 2018, a bank-led IWT Financial Taskforce was established to support that effort. Organizations such as TRAFFIC and World Wildlife Fund (WWF) have established their own financial crime work streams, and mainstreaming anti-corruption perspective into those efforts is important.

ACAMS is the largest international organization dedicated to financial crime detection and prevention, and it includes specialists from a wide range of financial institutions, regulatory bodies, law enforcement agencies and industry sectors. Recent discussion with specialists in the DC-chapter of ACAMS has shed new light on the tools used by the AML community to identify money laundering, protect themselves and their clients from associated risks, and provide information to law enforcement for possible criminal investigations—and how these tools might be relevant in cases of environmental crime and corruption.

A few takeaways:

• Differentiating between corruption and crime remains a challenge, but identification of Politically Exposed Persons (PEPs) who are involved in conservation crimes can help. Distinguishing between corruption and other crime is often difficult, since the same financial processes are often used, and in some cases the corruption precedes the other crime, as in the sale of fishing rights or timber concessions. A PEP is defined by the Financial Action Task Force (FATF) as an individual who is or has been entrusted with a prominent public function. Due to their position and influence, many PEPs are in positions that potentially can be abused for the purpose of committing money laundering offences and related predicate offences, including corruption and bribery. The likelihood of corruption may be inferred from suspicious financial transactions of PEPs and then law enforcement can follow up.
• US banks and financial institutions have a unique ability and requirement to track financial crime and illicit money flows and can do it extra-territorially, as long as a financial transaction touches the US or uses US dollars. The Patriot Act, part of the overall framework of the Bank Secrecy Act (BSA) permits banks to share private financial information with law enforcement and/or other banks, to fulfill their obligation to report “suspicious activities.” More than two million Suspicious Activity Reports (SARs) are filed with the Financial Crimes Enforcement Network (FinCEN) (part of the United States Department of the Treasury) every year by US banks and financial institutions.
• Bank due diligence is a data driven process, with specific tools and information sources, designed to detect anomalies or unusual patterns which may require further investigation. Banks use preventive techniques, including know-your customer (KYC) as well as investigative techniques, and make use of third-party sources as well. Common tools include watch lists, key words, transactional monitoring, business profiles, red flags and typologies.
• A few small pieces of data can sometimes be the key to uncovering criminal behavior. In the case of human trafficking, for instance, it was determined that the posting of ads on Craigslist, and the purchase of red box videos at certain hours, were clues to human trafficking. Conservation and natural resource management practitioners may be in a position to provide initial information that banks can use to trace whether funds entering their systems are derived from illegal exploitation of natural resources or corrupt actions that facilitate such illegal activity.
• Banks are required to file SARs to identify unusual activity, but they are not required to identify what the activity is tied to. Going beyond the first step is a resource-intensive process that many smaller banks can’t sustain. Large banks have investigative units and access to global networks of correspondent banks, so they can dig much deeper.
• A “typology” is a concept that is used somewhat differently in the AML context than in criminology, and refers to a specific money laundering method, or process, such as false invoicing, or payments through shell companies, or a method used by a particular criminal or criminal syndicate. An example of a typology that could raise a red flag for natural resource corruption, would be a research center that makes payments to unrelated individuals, that are then passed on to a shell company. Multiple typologies can be used in one crime. The term “typologies” is typically used more generally by conservation professionals to characterize different types of conservation crime based on factors such as the species/commodities and actors involved, and the money laundering techniques most commonly used. When seeking to bridge the gap between AML and conservation communities, it is important that we understand one another’s languages.
• De-risking is a step that banks take when they decide that a specific customer, institution, industry or country presents an unmanageable risk. In such a case, the bank simply stops doing business with the entity. This is a serious step, and can have political, economic and commercial ramifications, especially when a geographic region or major institution is involved. Before taking the decision to de-risk, the bank’s senior management gets involved, and may hold negotiations to see whether other steps can be taken to mitigate the risk.

The next blog post in this series shares learning from further discussions on topics including information that NRM professionals may have access to that can be valuable to the AML community in identifying money laundering that is linked to natural resources and building cases against bad actors; how AML dimensions can logically fit into conservation programming; and how the private sector can be further engaged to address money laundering that is linked to conservation crime and corruption. It’s likely that more questions will be raised in these discussions than answers, but they’re a step toward further bridging the AML and conservation communities to address conservation crime and corruption via informed programming.

In November 2022, TRAFFIC released a series of good practices for communicating with the finance sector to combat corruption that is linked to illegal wildlife trade and money laundering. Those good practices are available here.

Further Resources

Money Laundering and the Illegal Wildlife Trade

Making the connection: Trade-based money laundering, corruption, and natural resources

Targeting corruption and its proceeds: Why we should mainstream an anti-corruption perspective into “follow the money” approaches to natural resource crime

Why is money laundering a critical issue in natural resource corruption?

Case Digest: Financial Flows and Payment Mechanisms Behind Wildlife Crime