Environmental Crime, A Global Security Issue

Interpol’s Rory Corcoran says environmental crime is funding global terrorism and organised crime, while also impacting the sustainability agenda.

FinCEN has recently called attention to an upward trend in environmental crimes, highlighting a need to enhance reporting and analysis of financial flows related to such activity.

Environmental crimes include wildlife trafficking, illegal logging, illegal fishing, illegal mining, and waste and hazardous substances trafficking, FinCEN explained in its notice.

Hotspots for such crimes named in the notice include – among others – Cambodia and Laos for wildlife trafficking, and China, Vietnam and Indonesia for illegal fishing. India and Japan are said to be among the top consumers of illegal logging, with China often serving as a processing centre for illicit timber.

FinCEN describes these crimes as “relatively low risk activities with high rewards”, due to limited enforcement efforts, high demand for the products and services they generate, and relatively less severe criminal penalties compared to other illicit activities.

According to FinCEN, environmental crimes frequently involve transnational organised crime and corruption, and are often associated with other crimes such as money laundering, bribery, theft, forgery, tax evasion, fraud, human trafficking, and drug trafficking.

Environmental crimes also contribute to the climate crisis, including by threatening ecosystems, decreasing biodiversity, and increasing CO2 in the atmosphere, the notice says.

Follow the Money

In June, the FATF (Financial Action Task Force) published a new report identifying methods that criminals use to launder proceeds from environmental crime, as well as tools that governments and the private sector can apply to disrupt this activity.

The report highlighted that criminals are profiting by using front companies to mix legal and illegal goods and payments early in the resource supply chains, while also relying on corruption, trade-based fraud, and offshore corporate structures to conceal the ultimate beneficiaries from environmental crime.

While calling for governments to consider measures to combat environmental crime proceeds, the report also emphasised the role of the private sector in detection and prevention, amid findings that banks may be unwittingly providing financing and loans for such activity.

Yet, the FATF recognises the challenges FIs face in detecting environmental crime, which are often due to information gaps in CDD (customer due diligence), unreliable data in public registries, and a lack of “in-depth expert-led review and analysis” of underlying contracts and activities.

At its October Plenary, the FATF agreed to add indicative examples of environmental crimes to the FATF Glossary to clarify for countries the types of offences that could fall within this category, depending on their risk and context.

This is aimed at addressing the differences in how countries define environmental crimes, which alongside broader capacity challenges can impact the extent to which they pursue financial investigations for these crimes. The new examples will help authorities ‘follow the money’ and stop the criminal networks behind environmental crime, the FATF said.

Global Security Issue

Environmental crime has also been a particular focus for Interpol, which operates an environmental security programme under its illicit market sub-directorate, which sits within its organised crime directorate.

In a recent webinar hosted by Refinitiv, Interpol assistant director for organised and emerging crime, Rory Corcoran, described environmental crime as a “global security issue”, as it is funding terrorism and other forms of organised crime such as drug trafficking, as well as destroying natural resources.

Yet, environmental crime is an area that remains misunderstood and “almost unrecognised” by many governments and law enforcement agencies. This, Corcoran says, represents a “clear obstacle” hindering the ability of countries to address climate change and global warming.

“Corrupt and criminal actors along the supply chain are facilitating environmental crime, as well as other types of crime such as fraud, human trafficking and money laundering,” Corcoran said. “The money laundering aspect is very important because the money generated from environmental crime has to enter the legitimate system at some stage.”

He called for the financial sector to work together to identify the known risk indicators, adding that Interpol is planning to provide FIs with access to its own records in the coming months, so that banks can use the information in their KYC and due diligence processes.

The records include over 113 million police records and over 100 million records of stolen or lost travel documents. FIs will be able to use this data to ensure, for example, that criminals are not opening bank accounts using stolen passports.

It Takes a Network

Interpol deploys to 194 countries around the world – offering its policing capabilities, coordinating operations, and providing expertise and training to law enforcement agencies and FIUs (financial intelligence units).

Corcoran revealed that there are currently three intelligence-led global operations currently underway, coordinated by Interpol and involving 200 countries, specifically targeting forestry, fisheries and wildlife crimes – key priorities for Interpol.

Still, Corcoran says the fines imposed for environmental crimes are not high enough, and the arrests made to date only “scratch the surface”, given the extent of the problem. To try and maximise its efforts in the past year, Interpol has increased its engagement with both the public and private sectors, including the financial sector, to locate persons involved in environmental crimes and arrest them.

“We have been pioneering and recognising environmental crime as a priority for Interpol,” Corcoran said. “We are committed to lead this fight against criminal and corrupt elements who are destroying our natural resources for personal gain while having complete disregard for the future of our planet.”

“It is Interpol’s role to tackle the criminality that is fuelling this global crisis, but we cannot do it alone. Collectively, we must be as committed and organised as the people who are perpetrating these crimes. It takes a network to defeat a network.”

Special Interest Categories

During the same webinar, Refinitiv product manager Holly Pelesko provided a look into a new feature that is being released within World-Check to help combat the environmental crime threat.

The so-called ‘Special Interest Categories’ feature seeks to provide users with a more granular view of the reason for a record’s inclusion within the World-Check database as well as its associated potential risks.

Using a combination of AI, natural language processing, machine learning, specific taxonomy and human review, Refinitiv has been quietly tagging its adverse media records according to the risk categories they represent.

The end result is that all adverse media content will be labelled with the relevant Special Interest Categories, which represents a taxonomy of 67 civil and criminal predicate offences to money laundering, aligned with the FATF principles.

Importantly, environmental crime and wildlife crime are two of the Special Interest Categories being tagged. Already more than 40,000 records have been tagged with one or both of these labels.

Crime Convergence Picture

Pelesko says the new feature will enable FIs to better focus on the areas of risk that are most applicable to their risk-based approach and legal and regulatory requirements. The targeted approach to screening will also help to reduce false positives and alleviate remediation workloads, while providing deeper insights into crime convergence.

“As we label these records with the Special Interest Categories, you’ll really be able to see clearly and easily that crime convergence picture,” Pelesko said. “Such as if an individual is involved in wildlife crime and human trafficking. Or narcotics trafficking and environmental crime.”

In addition to the new labels on records, the full history and set of information sources will be provided to enable FIs to perform further remediation work and obtain the full historical details on individual cases.

“From a financial crime risk perspective, we’re providing FIs the tools they need to detect risk, and specifically in this case environmental crime risk, so that they can act upon it and ensure they’re not unknowingly engaging in illicit activity,” Pelesko said.

Listen to this webinar on-demand to hear more from Interpol’s Rory Corcoran and Refinitiv’s Holly Pelesko about environmental crime.

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