Money Laundering from Environmental Crimes
28 June 2021 - Environmental crime – such as forestry crime, illegal mining and waste trafficking - is an extremely profitable criminal enterprise, generating billions in criminal gains each year. It fuels corruption, and converges with many other serious and organised crimes, such as tax fraud, drug trafficking and forced labour.
This FATF Report identifies methods that criminals use to launder proceeds from environmental crime, but also tools that governments and private sector can apply to disrupt this activity. When properly implemented, the FATF Recommendations provide effective tools to go after these illicit financial flows.
Environmental crime is a ‘low risk, high reward’ crime. Across many countries, light sanctions for environmental crimes alongside limited efforts to follow and remove the profits, make this is a lucrative but safe source of income for criminals. The FATF therefore conducted this study to increase understanding of the scale and nature of money laundering threats from environmental crime and to strengthen the response across public and private sectors. The G20 Finance Ministers and Central Bank Governors have similarly recognized the need to strengthen action, and the importance of FATF’s role in supporting biodiversity aims.
Building on the FATF’s 2020 report on money laundering from the illegal wildlife trade, this report shows that criminals are making enormous profits by using front companies to mix legal and illegal goods and payments early in the resource supply chains. They also rely on corruption, trade-based fraud, and offshore corporate structures to conceal the ultimate criminals benefitting from these crimes.
As a priority, countries should:
1. Consider the risks of criminals misusing their domestic financial and non-financial sectors to conceal proceeds from environmental crimes. This extends to countries without domestic natural resources as FATF work shows that criminals hide proceeds from these crimes across regions, including trade and financial centers.
2. Countries must also strengthen inter-agency cooperation between financial investigators and environmental crime agencies, to detect and pursue financial investigations into environmental crimes. This includes working with foreign counterparts to share information, facilitate prosecutions and recover assets that are moved and held abroad.
The private sector also has an important role in detecting financial flows from environmental crimes. The FATF’s study identifies good practices and risk indicators to help financial and non-financial sectors detect potential cases.
Going forward, FATF will continue its focus on environmental crime, including exploring whether further policy work is needed. In September 2021, FATF plans to hold a public webinar for non-government stakeholders to discuss the findings of this new study.