How the US financial system helps shelter profits from environmental organized crime

Environmental organized crime is a massive global enterprise that brings in hundreds of billions of dollars each year, and the U.S. financial system appears to be helping to hide its profits.

Interpol estimates that environmental crimes such as poaching and illegal logging generate up to $281 billion annually, making it the third most lucrative illegal business in the world.

Julia Jansula, program director for environmental crime and illicit finance, said the crime itself occurs all over the world, but vulnerabilities in anti-money laundering infrastructure make the U.S. financial system vulnerable to storing and laundering proceeds. The environment is said to be optimal. In the Financial Accountability and Corporate Transparency (FACT) Coalition.

The illegal industries behind these crimes vary in size and organization, from small, poorly organized networks involved in the illegal wildlife trade, to large, lucrative industries such as illegal logging and illegal gold mining. The levels are very different. The latter have economic ties with other companies. Illegal economies such as drug trafficking, terrorism, and financing of political corruption.

Money laundering through shell companies and other entities, which often involves moving funds between countries, is an important mechanism in these illicit economies, allowing criminals to hide the origin of their illicit profits. It makes it possible.

Suzanne Breitkopf, deputy director of forest campaigns at the Environmental Investigation Agency, said the Florida-based couple sold wood harvested in Russia and made into plywood in China through multiple chains that obscured the true supply chain. He points out a recent case of smuggling using a shell company. and evaded the mission.

There are two major weaknesses in the U.S. anti-money laundering infrastructure that enable this type of activity, Jansula said.

First, she said, the information required to register a company in this country is “shockingly low,” making it easy for those involved in environmental crimes to set up shell companies or fronts. She pointed to a coalition study showing that most states require less information from businesses than public libraries require to obtain a library card.

“The problem is, we have all these companies, but we know almost nothing about them, the government knows almost nothing about them, and who owns them? I really don’t know,” she said. “This creates a huge loophole for financial and environmental criminals to exploit.”

She cited the example of Colombia, the second largest gold exporter. allegedly laundered It raised more than $1 billion through a series of shell companies to hide the illegal mining, and exported almost all of it to two oil refineries in Miami.

In another case, former Peruvian president Alejandro Toledo is said to have been accepted He accepted more than $1 million in bribes from a Brazilian company involved in deforestation of the Amazon, then bought property in Maryland to hide the money.

“Obviously, this is very problematic. It’s a problem from an anti-money laundering perspective. It’s a problem from a national security perspective. [and] From an environmental point of view, that’s worrying to me,” Jansula said.

It also runs counter to the Biden administration’s efforts to take international leadership on climate and environmental issues, he added.

“Whatever the United States is doing to combat foreign environmental crimes, we do not clean up our side of the equation and ensure that these proceeds are not laundered and used in the U.S. financial system. If so, it’s a little counterproductive,” she said.

Many of the country’s current efforts to combat transnational environmental organized crime are based on the 120-year-old Lacey Act, which prohibits the trade of illegally obtained or transported wildlife and plants.

Breitkopf said the Lacey Act is not a panacea, but can be applied in conjunction with anti-corruption and anti-money laundering laws. She added that the strategy places particular emphasis on collaboration between government agencies to ensure all aspects of this “complex web of criminal activity” are covered.

The Financial Crimes Enforcement Network (FinCEN), a department within the Treasury Department, is tasked with “tracing the funds,” a FinCEN official told The Hill. The official added: [environmental crime] We deal with all types of crime, but this one is especially important. ”

However, FinCEN officials noted that the agency does not have its own criminal investigation authority and instead provides assistance to other agencies with investigative authority, such as the Fish and Wildlife Service and the Department of Justice’s Division of Natural Resources. . “We will take action so law enforcement can take action,” officials told The Hill.

In testimony before the House Financial Services Committee in February, FinCenter Director Andrea Gacchi also said the agency’s budget and attempts to cut it are limiting its options to address environmental crimes.

“Of course, we will fulfill our Congressional obligations in terms of enforcement. But what I am actually concerned about is that we are devoting resources to important things like the recent FinCEN exchange on illegal wildlife trade.” “The question is whether we can do it,” she told Rep. Ayanna Pressley (D-Mass.). “We are making record demands for a growing number of exchanges focused on illegal wildlife trafficking. [and] environmental crime. I think these projects will be difficult due to lack of funds. ”

But Jansula said there is also a silver lining in efforts to address these loopholes. For example, he pointed to FinCEN’s move earlier this year to introduce a register of corporate “beneficiary owners” – those who directly and effectively control a company or own 25 percent or more of its shares.

“This is really good news. From a transparency, anti-money laundering, environment, etc. perspective, this is good news,” she said. “From our perspective, we would like to see that implementation continue.”

But even with increased transparency, real estate transactions can still be problematic, as prepayments without a mortgage can obscure parties, she added.

“We have seen environmental criminals take advantage of this loophole to launder the proceeds of environmental crimes into the U.S. economy,” she said.

Breitkopf said another step that would help solve the problem would be to add illegal deforestation to the list of predicate offenses that would be subject to federal money laundering laws, adding: “It would give authorities more tools. It will happen,” he said.

The Foreign Rule of Law and Fostering Environmentally Responsible Trade (FOREST Act), legislation introduced by Sen. Brian Schatz (D-Hawaii) in 2021 and 2023, would add deforestation as a condition. However, it was rejected in committee in 2021, and no bill has been introduced yet. Since its reintroduction in 2023, it will receive a vote in the Senate Finance Committee.

Breitkopf said the measure, if taken, would help crack down on accomplices in environmental crime syndicates and “force companies to trace the origins of their goods.”

“We need more financial transparency, but we also need supply chain transparency, and that includes beneficial ownership transparency,” he said. “All these crimes are the product of rampant corruption, especially in the timber sector, and crime thrives in the shadows. To stop it, we need to bring it to light, and that is only possible through transparency. It means it is necessary.”