Leading from Behind: The Focus on the Financial Investigation of Wildlife Crime Must be Sustained

Over the past 12 months, under its Chinese presidency, the Financial Action Task Force (FATF) has made a welcome effort to engage with and promote the importance of financial investigation as a tool to combat the illegal wildlife trade (IWT). As per his objectives, Xiangmin Liu has used his one-year tenure to build on existing initiatives ‘to develop best practices for fighting money laundering from the illegal trafficking in wildlife’.

For those who have encouraged the FATF – the global standard setter on anti-money laundering – to show leadership in this field for many years, this was welcome news. Since 2014, a series of high-level global conferences have called for action on the finances of IWT; NGOs and multilateral bodies have repeatedly drawn attention to the importance of targeting the finances of IWT; in 2019 the UN General Assembly called for offences connected to IWT to be treated as predicate offences for money laundering; and various finance-based initiatives such as the United for Wildlife Financial Taskforce have been established with the specific intent of following the money to identify and disrupt those profiting from IWT.

A key requirement of the FATF’s standards is the importance of applying the crime of money laundering to all serious offences, ‘with a view to including the widest range of predicate offences’ (Recommendation 3) and conducting parallel financial investigations into any ‘major proceeds-generating offences’ (Recommendation 30). IWT has increasingly become an organised, transnational, industrial-scale crime, by most measures ranking as one of the top five most profitable crimes in the world. Yet despite its profitability, and despite the FATF’s requirements, the financial investigation of IWT is rare.

What Has This Focus Achieved?

First and foremost, FATF leadership ensures that countries around the world can no longer ignore the financial crime dimension of IWT. When the FATF or any of its FATF-Style Regional Bodies evaluate countries where IWT represents a particular financial crime challenge, they are on notice that – one hopes – the evaluators will call out failures to conduct the parallel financial investigation of this crime.

Cementing the importance of this investigative activity, the FATF’s new report echoes those before it, noting that ‘[f]inancial information is not being regularly or proactively collected, developed, and disseminated to initiate or support financial investigations into wildlife crimes’. Even in the rare cases where financial intelligence is collected and shared with anti-money laundering authorities, it is seldom acted on. The same report stated that of the 45 jurisdictions that responded to the FATF’s call for evidence, only 13 had received at least one suspicious transaction report (STR) – a filing made by financial institutions to national law enforcement authorities – related to environmental crime in the past five years.

Furthermore, the report highlights the poor understanding of the risks IWT financial flows pose, the weakness of legislative bases to combat IWT as a financial crime and the commitment of insufficient resources to its elimination. The result, in the FATF’s view, is that jurisdictions are largely prevented ‘from being able to identify and sanction IWT networks’. Put simply, IWT is a low-risk, high-profit crime to which minimal attention is being paid by those responsible for financial crime in many of those states most affected.

The FATF report also makes an important attempt to highlight how many of FATF standards should be applied to IWT as a generator of the proceeds of crime, and thus a predicate offence to money laundering and target for asset freezes and confiscation; and helpfully emphasises how the financial investigation of IWT can be the entry point for uncovering other forms of organised crime. It also offers the global focus missing from earlier reports, drawing attention to the fact that it is not just source and destination countries for wildlife products that are affected. The global scale of IWT leaves no jurisdiction untouched. Several case studies in the report document the misuse of offshore financial and company centres to conceal and launder the proceeds of IWT, as well as wider abuse of the formal financial system. The assumption that all proceeds are moved in cash is therefore no longer a defence for inaction, emphasising the need to focus on not just the obvious source and destination countries, but also on those financial and trading hubs that facilitate IWT.

What Next?

Much of the work of the past year was diagnosis, but extinction looms for far too many species to justify ongoing rumination. ‘Following the money’ holds the key to moving beyond a disproportionate focus on low-level, often vulnerable and easily replaced members of a criminal network. Financial investigations can help identify the controllers and ultimate beneficiaries of the trade, including the corrupt actors who facilitate these crimes. IWT’s convergence with other predicate crimes, from corruption to drug trafficking, means that there is no part of the FATF’s mandate that does not benefit from maintaining its focus on IWT.

When the FATF’s initiative began in July 2019, a group of like-minded NGOs identified seven key issues holding back progress in targeting the finances of those that profit from IWT. One year on, the same NGOs are in consensus that the FATF’s continued attention is essential. The report alone will not guarantee that the financial investigation of IWT is mainstreamed into anti-financial crime systems worldwide – it must be a call to action.

Fortunately, there are early signs of continuing support at the FATF. In his celebration of World Environment Day, David Lewis, executive secretary of the FATF, noted on LinkedIn ‘We’ve barely scratched the surface and there is so much more to do. But I am encouraged that all countries in our global network have embraced this cause and that we are helping to raise awareness with governments around the world’. Promisingly, last Friday, Lewis announced that the FATF will ask all governments to report back within 12 months on the action they have taken against IWT.

Maintaining this level of scrutiny beyond year one is essential. The value the FATF can really bring is in pressing countries to take a systematically proactive approach, particularly by ensuring that environmental crime is addressed in the national risk assessments (NRA) they are required to conduct and making sure that those who do not are called out for failing to do so. Including IWT in NRAs provides local financial intelligence units with a much-needed justification for the allocation of limited resources to this crime type.

Moving forward, one of the struggles will remain the difficulty of creating typologies and undertaking risk assessments when so few financial investigations have been conducted. This calls for the FATF’s leadership in encouraging innovative approaches: from historic case reviews to identify unexplored financial angles to the data mining of STRs and greater collaboration with the private sector.

The impetus of the Chinese presidency should be just the start – the end of the beginning. No organisation is better placed to drive forward the global and systemic targeting of finance related to IWT.

Fortunately, given its national interests and expertise, this is a call to which the incoming German president Marcus Pleyer is well positioned to respond. Germany is already a leader in this field: as of January 2018, it had spent over EUR 190 million on combating poaching and German wildlife authorities are frequent providers of trainings and capacity-building measures at the European and international levels. Given Germany’s commitment to the UN’s Sustainable Development Goals and pre-existing work on this topic, a continued focus on IWT seems natural.

Under Pleyer’s two-year leadership, the FATF should also consider expanding its focus beyond IWT to include other lucrative areas of environmental crime, including illegal timber trafficking and illegal fishing. These crimes are equally as urgent, from both a financial integrity and ecosystem perspective.

Awareness has clearly been raised, but the extent to which countries genuinely embrace this cause remains to be seen. The FATF’s work is not done. It must take responsibility for ensuring that the focus on the financial investigation of IWT is sustained.

The views expressed in this Commentary are the authors’, and do not represent those of RUSI or any other institution.