copy the linklink copied!6. Proceeds of Crime, Illicit Financial Flows and Money Laundering

This chapter examines responses of national enforcement agencies and the international community to tackle illicit financial flows associated with the illegal wildlife trade. The findings indicate that most of the focus countries have not reportedly used anti-money laundering provisions or “follow the money” approaches to tackle the illegal wildlife trade. Financial investigations are an exceptional occurrence. Greater strategic planning and engagement with anti-money laundering authorities is necessary to determine if money laundering investigations are useful and what further planning, programming, resourcing and co-ordination is needed to ensure successful investigations and prosecutions of money laundering for wildlife crime.

    

copy the linklink copied!Introduction

Profit is the most important driver behind the global illegal wildlife trade. The sale of illegal wildlife products generates billions in revenue annually (Nellemann; et al, 2016[160]). Meanwhile, the illicit financial flows from illegal wildlife trade transit around the globe through the global financial system and into the hands of criminal networks. Along the way, the proceeds of crime run afoul of laws and international conventions, weaken institutions by fuelling more poaching expeditions and reward corruption. Proceeds of crime are integrated into the legitimate financial system through Money Laundering, the process of concealing illicit gains that were generated from criminal activity (OECD, 2019[161]).

Financial Intelligence Units (FIUs) and police can conduct, or provide support to parallel investigations of financial crimes addressing proceeds of crime and money laundering. These investigations can be useful in targeting a wider network of actors and increasing institutional capacities against wildlife crimes (FATF, 2012[162]). Despite this, evidence suggests that “follow the money” approaches, notably the involvement of FIUs, remain scarce for wildlife crimes in nearly all countries (OECD, 2018[49]) (UNODC/APG, 2017[163]) (Haenlein and Keatinge, 2017[164]). Indeed, across the four focus countries, the OECD has found that just one has successfully employed a financial investigation in only two instances.

Without asset seizure, forfeiture and penalties for money laundering, wildlife crime remains a “low-risk, high-reward” form of criminality (OECD, 2016[9]). This chapter identifies what factors have prevented the widespread use of money laundering laws to prosecute illegal wildlife trade in Southeast Asia and what further measures may be needed to integrate financial investigations into the broader efforts to tackle illegal wildlife trade.

copy the linklink copied!Overview of Frameworks to Combat Money Laundering

International Standards on Combatting Money Laundering

The International Standards on Combatting Money Laundering are set by the Financial Action Task Force (FATF) Recommendations, which “set standards [and] promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and the financing of proliferation, and other related threats to the integrity of the international financial system (FATF, 2012[162]).” The Asia Pacific Group on Money Laundering (APG) is the FATF Style Regional Body (FSRB) co-ordinating implementation of the FATF standards in the region (FATF, 2019[165]). The APG is composed of over 41 member jurisdictions and several other observer countries, including all ASEAN members. The APG and FATF co-ordinate to conduct mutual evaluation reviews (MERs) to measure technical compliance and effectiveness of national and international policies against money laundering (FATF, 2019[166]). In addition to assessing technical compliance and effectiveness of existing money laundering standards (via mutual evaluations), the APG group and the FATF share methodologies, research and best practises with FIUs and relevant authorities to identify money laundering risks and vulnerabilities.

If implemented fully, the FATF recommendations are designed to protect the economy from the threats of money laundering, financing of terrorism and proliferation, inclusive of the money laundering risks that would be generated from the illegal sale of wildlife products.

National Legal Frameworks

Of the countries studied, all four consider wildlife trafficking to be a predicate offense either directly or by inference (ASEAN-WEN, Freeland, 2016[96]). All of the countries have robust laws and penalties to tackle money laundering. For example, Singapore’s maximum term of imprisonment for money laundering is over five times longer than the maximum term of two years for illegal wildlife trade:

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Table 6.1. Relevant institutions, laws and penalties to tackle illegal wildlife trade

Relevant Institution

Money Laundering Predicate Offense (direct or inferred)

National Laws on Anti- Money Laundering

Max Fine for person

($USD or multiple)

Max Penalty

Max Penalty ratio to illegal wildlife trade Max Penalty

Indonesia

Indonesia Financial Transaction Reports Analysis Center (PPATK)

Y

Act No.8/2010 on the prevention and eradication of money laundering Article 3-5

79,470,000

20 years

200%

Singapore

Steering Committee for combating money laundering and terrorist financing1

Y

Monetary Authority of Singapore Act (Ch. 186, rev 1999,

MoneyLenders (prevention of money laundering and financing of terrorism rules 2009, 2008 Section 11

Corruption, Drug Trafficking and other serious Crimes Act, Chapter 65A, 1992

369,823

10 years

500%

Thailand

Thailand Anti-Money Laundering Offices (AMLO)

Y

Anti-money laundering Act B.E. 2542 (1999) as amended to Anti-Money Laundering Act (No. 4) VE 2556 (2013)

6,105

10 years

142%

Viet Nam

Viet Nam Anti-Money Laundering Department (VAMLD)

Y

Law on Prevention and Fighting against money laundering No. 07/2012/QH13 Article 35

Penal Code 1999, Article 251

3 x value seized

15 years

214%

Source: (ASEAN-WEN, Freeland, 2016[96]).

As the table above has shown, the legal framework for tackling money laundering with illegal wildlife trade as the predicate offense is relatively robust. However, the effectiveness of the laws and measures taken is drawn into question by several institutional gaps reported, notably in the investigation and prosecution of the numerous trafficking cases. As the section below details, it appears that a link between wildlife crime and proceeds of crime and money laundering is not being made.

copy the linklink copied!Assessing Implementation of Anti-Money Laundering

Several of the forty FATF Recommendations are relevant to tackling and enforcing the predicate offense of illegal wildlife trade. For example, the first FATF recommendation calls for a “risk-based approach to money laundering” (FATF, 2012[162]). Recommendation one explains that countries should have a good understanding of what sectors are most vulnerable to money laundering risks. If wildlife crime is understood to be a prominent form of criminality which generate large amounts of proceeds of crime, common responses to wildlife crime should therefore include financial investigations. However, as demonstrated in the interviews with relevant officials and experts, there is no common response to wildlife crime that involves money laundering of proceeds of crime investigations.

FATF Recommendation two calls for cooperation and coordination between relevant national authorities to exchange information through frameworks of co-operation to include parallel money laundering investigations (FATF, 2012[162]). For wildlife crime, such co-ordination might take place between the relevant investigating authority (CITES or Police) and the FIU. Furthermore, recommendations 36-40 focus on international co-ordination, stating for example that FIUs in each country should have in place relevant information sharing arrangements with international counterparts and joint training and learning programmes. For instance, FATF Recommendations 37 and 38 call for the use mutual legal assistance treaties (MLAT) to facilitate the exchange of information and requests for asset seizure and forfeiture (FATF, 2012[162]). Technical compliance with these recommendations is often a pre-requisite to tackling money laundering for the crime in question, however it is not sufficient to address the effectiveness. Indeed, in the case of wildlife crime, with the exception of Thailand, there have been no notable applications of mutual legal assistance for the exchange of financial data, despite the legal groundwork permitting these exchanges.

The APG has held consultations and conducted research on money laundering aspects of illegal wildlife trade. From these, a series of results have emerged that indicate where the status of illegal wildlife trade stands within the region and among other governments. In a recent joint APG and UNODC report summarizing 45 jurisdictions surveyed (APG and non-APG), 86% responded that they were affected by wildlife crime, however over 71% did not consider illegal wildlife trade to be a serious money laundering threat. Furthermore, only 26% of the 45 countries reported any financial investigation into wildlife crimes at all, with less than 1% of all wildlife cases leading to any money laundering investigation, charges or prosecution. Nearly 80% reported that FIUs do not feature on wildlife multi-agency task forces (or WENs) (UNODC/APG, 2017[163]).

The APG’s findings are echoed in the research and primary information collection conducted during the OECD surveys across the four focus countries. For instance, Thailand and Indonesia have specifically included FIUs in their multi-agency task forces whereas Viet Nam and Singapore have not (Indonesia PPATK, 2018[56]) (Thailand AMLO, 2018[71]). Thailand is also the sole country to have reported the involvement of its anti-money laundering offices in the investigation, asset seizure and forfeiture of proceeds of crime related to illegal wildlife trade cases. The below case highlights one such recent success, in addition to providing clear evidence of the corruption and money-laundering nexus in wildlife crime:

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Box 6.1. Thailand Anti-Money Laundering Case

In 2011, a Thai national was arrested in South Africa for arranging the illegal poaching and importing of rhino horns from South Africa into Thailand. This was done obtaining false licenses for “hunts” in order to kill 24 rhinos over a period of two years through a corrupt network of officials in South Africa who sold permits to kill the endangered rhinos in “hunts”. To justify poaching incidents as “hunts” by foreign nationals (which are legal under South African Law), the suspect hired Thai prostitutes in South Africa to pose next to the illegally killed animals. To conduct the joint-investigation, the Thailand AMLO co-ordinated closely and exchanged financial information on bank accounts, properties and contacts with the South African counterparts. According to the investigation from the Thai AMLO, money from proceeds of sale in a Laos based company was wired from the suspect’s wife into his accounts (Thailand AMLO, 2018[71]). The smugglers working for the suspect bribed the police officers and customs in Thailand. Smugglers bribed the customs official was paid to ensure that the goods avoided scanner checks upon arrival, and the police officers were paid to escort the suitcases through the airport checkpoints (Freeland, 2018[94]) (Thailand AMLO, 2018[71]). Thanks to the joint investigation, the AMLO seized a number of vehicles, bank accounts and several properties. The suspect is now serving a 40-year jail term in South Africa.

Capacity and Prioritisation Gaps for Money Laundering Investigations for Wildlife Crime

In Thailand, the OECD found two reported investigations involving money laundering charges (one of which is cited in the section above). The exceptional use of Thailand AMLO for the investigation and prosecution of transnational illegal wildlife trade is an example of how such investigations can assist in the dismantling of syndicates. The AMLO case above could also be used for future reference as a good practise guidance for future investigations. Nevertheless, this case remains an exceptional instance of a money laundering investigation related to illegal wildlife trade. Evidence collected by OECD on the seizures of illegal wildlife trade and recent arrests in Thailand throughout the interviews suggests that the vast majority of cases and large-scale seizures do not involve parallel money-laundering investigations.

In Indonesia, the PPATK FIU is included in the “multi-door” inter-agency task force to tackle wildlife crime; however, the nation’s FIU has not yet assisted in the investigation or prosecution of money laundering for illegal wildlife trade. Technical gaps and prioritisation of illegal wildlife trade remain the two main obstacles: According to respondents, police must lay charges within two months of arrest whereas the length of time required to collect evidence from domestic and foreign transactions (often through requests to FIU counterparts and institutions abroad) can take substantially longer. In addition to technical barriers, investigators also noted that PPATK is not a standalone investigative body. Therefore, the PPATK must defer to the authority of police to select and conduct investigations. Investigators familiar with the issue also noted that illegal wildlife trade is not a high-level priority for the Indonesia National Police and other relevant administrations that enlist the PPATK to provide investigatory support. For example, the national police most often directs PPATK to focus its resources on major crimes, such as government corruption cases, drug offenses, and tax crimes (Indonesia PPATK, 2018[56]).

The issue of illegal wildlife trade also remains a lesser-known financial crime, and one that appears to be “flying under the radar” with less high-level political support. According to several respondents, the perception among relevant agencies is that wildlife crimes involve smaller sums from illegal wildlife trade transactions (Indonesia PPATK, 2018[56]). Even in the case of large-scale, multi-million dollar seizures, money-laundering investigations were not undertaken. Experts also noted that there is little knowledge of the modus operandi and practises in the financial system for wildlife crimes: wildlife traffickers are still widely perceived to work through cash transactions in small sums, or through money couriers (Indonesia PPATK, 2018[56]). Other respondents noted that the reasons why money laundering is not investigated may also be due to lack of precedent, and the low relative recognition given to this issue among political decision makers (in contrast to logging, for example) (NG-2, 2018[45]).

Perceptions of wildlife crime in Indonesia as a smaller scale financial crime contrast with the perceptions and prioritisation of illegal logging crimes in Indonesia. The latter is recognized as a large multi-million dollar scheme with severe environmental impacts and clear economic damages. The PPATK has been actively involved in several high-level money laundering investigations tackling logging crimes. The case featured below highlights the capabilities of anti-money laundering investigations in prosecuting one such case and highlights how the tracing of assets and multi-agency co-ordination can also assist in tackling the underlying corruption that facilitates environmental crimes:

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Box 6.2. Indonesia Money Laundering Investigations for Illegal Logging Cases

In 2014, the supreme court of Indonesia charged a West Papuan police officer with corruption, environmental crimes and money laundering crimes related to illegal logging. The Police officer in question had sold and exported wood illegally cut from forests in Indonesia to destination markets in China, Europe, Australia and the United States. Upon arrest, PPATK investigations revealed that over USD $127 million had passed through connected bank accounts in the years of this scheme, and the investigation unveiled a network of assets, as well as payments for bribery and corruption. In all, PPATK froze 60 bank accounts connected to the suspect in addition to barges, fuel stocks and containers belonging to the company of the suspect. Asset seizure included some 80 containers full of logs destined for export at the time of the arrest (Jakarta Post, 2013[167]).

Upon conviction, the suspect was found guilty of money laundering under the Money Laundering Law No. 25/2003 and No. 8/2010 and sentenced to 15 years in prison and a fine of USD $342,000.

The case in question also revealed the strong corruption-money laundering nexus as well. The convicted person detailed a series of payments and transactions to a number of senior police and state officials over the years and, during the sentence served, the convicted person paid off police and prison officials to leave the prison and remain free for several months at a time (EIA, 2016[168]).

The corruption and money-laundering nexus has been highlighted in the above case of illegal logging schemes. Other cases have documented higher-level political interference relating to logging crimes that have involved politically exposed persons and high-level officials handling millions in proceeds of crime (EIA, 2017[169]). However, in the case of money laundering for wildlife crime, the OECD study did not find any strong evidence suggesting that political pressures from politically exposed persons is preventing parallel investigations. Instead, it appears that there are simply few to none of the already scarce resources within FIUs dedicated to wildlife crimes. This may be due to the perception that this is a labour intensive process that is relatively lower impact than other environmental crimes. However, this does not preclude the involvement of high-level corruption in the illegal wildlife trade chain. The OECD’s research can only highlight a lack of knowledge around this particular topic with more immediate and obvious causes, such as lack of awareness of the economic impact from wildlife crime.

copy the linklink copied!Public-Private Co-operation to identify Money Laundering

Financial institutions play a vital role in the exchange of data and information to assist FIUs with identifying high-risk activities that suggest money laundering has taken place. The use of suspicious transaction reports (STRs) are a pillar of the anti-money laundering regimes, and represents a compliance mechanism that enlists the expertise and abilities of banks to detect instances of money changing hands. Banks and financial institutions also use ‘Know Your Customer’ (KYC) approaches to mitigate high-risk clients, criminal activities and fraudulent users2. These practises are mutually beneficial as they also offer the bank cover for high-risk, criminal activities (World Bank, 2006[170]).

STRs and KYC guidelines can assist authorities in identifying high-risk transactions specific to illegal wildlife trade. To this end, in 2018, a number of private sector actors and the United Kingdom Based Royal Foundation launched the Financial Task Force for Wildlife Crimes under its United for Wildlife Project to assist with the effort in identifying high-risk activities and developing typologies for money laundering for wildlife crime. The mission of the Financial Task Force also involves raising awareness of how illegal wildlife trade is facilitated by illicit financial flows, providing training to identify suspicious activities, providing intelligence to government bodies and offering policy guidance and support to governments. The financial task force has 39 financial institution signatories.

From a regional perspective, a number of important steps remain to effective implementation of this private-public institution. First, the Task Force does not yet include strong buy-in from Southeast Asian financial institutions (to-date, only three signatory banks are located in Southeast Asia -two in Singapore and one in Viet Nam). The relatively minor participation of financial institutions from Southeast Asia suggests insufficient uptake of this initiative among the major source of illegal wildlife trade illicit financial flows. Furthermore, in order to operate within the region this Task Force will require active participation from FIUs who can offer typologies, suspicious transaction reports, and respond with investigations into the “red-flags” that are raised by the members of this Task Force.

The Financial Task Force hints at the role of public-private engagement in countering money laundering that finances illegal wildlife trade and the corruption that facilitates it. It remains however clear that further uptake is necessary among banks in the Southeast Asian region to work more effectively against illicit financial flows in the region.

copy the linklink copied!Conclusion

The findings from this chapter have shown that that there is no consistent record of financial investigations for money laundering or proceeds of crime in illegal wildlife trade investigations and prosecutions in the focus countries. This finding points to a substantial rift between calls from the international community for a “follow the money approach” to wildlife crime, and the reality in countries most-affected by the illegal wildlife trade. Of the four focus countries, half of all FIUs have a specified role in multi-agency strategies, and only one country (Thailand) has actively employed financial investigations to aid in the investigation and prosecution of wildlife crimes.

Despite the consideration that illegal wildlife trade and the antecedent crimes (such as smuggling) are considered predicate offenses, responses from FIUs and past research indicates that this crime has a relatively lower ranking of priority in comparison to other offenses. Indeed, financial crimes and money laundering from high-level corruption cases and other transnational organized crimes (including logging and forestry crimes) garner more attention than wildlife crimes in Southeast Asia. This is in part due to the nature of wildlife crimes.

The findings from this chapter point towards a greater need to focus resources on financial crime as a component of any wildlife trafficking investigation. Without adequate sanctions in place, such as asset identification, seizure and forfeitures, the crimes from illegal wildlife trade will remain low-risk and high-reward.

References

[10] ASEAN-WEN, Freeland (2016), ASEAN Handbook on Legal Cooperation to Combat Illegal Wildlife Trade.

[17] EIA (2017), Repeat Offender: Vietnam’s persistent trade in illegal timber www.eia-international.org EIA US, Environmental Investigation Agency, http://www.eia-international.org (accessed on 29 April 2019).

[16] EIA (2016), On-the-run timber crime cop surrenders, EIA, https://eia-international.org/hes-gone-again-jailed-timber-crime-cop-on-the-run/ (accessed on 15 January 2019).

[8] FATF (2019), Asia/Pacific Group on Money Laundering (APG), http://www.fatf-gafi.org/pages/asiapacificgrouponmoneylaunderingapg.html.

[9] FATF (2019), FATF Standards.

[3] FATF (2012), FATF Recommendations.

[13] Freeland (2018), Interviews with Freeland (multiple), Bangkok Thailand, July 2018.

[6] Haenlein, C. and T. Keatinge (2017), Follow the Money Using Financial Investigation to Combat Wildlife Crime, http://www.rusi.org (accessed on 14 January 2019).

[11] Indonesia PPATK (2018), Interview with Indonesia Financial Transactions Reports and Analysis Center (PPATK), October 19, 2018.

[15] Jakarta Post (2013), Papua cop with fat bank accounts faces legal charges, Jakarta Post, https://www.thejakartapost.com/news/2013/05/17/papua-cop-with-fat-bank-accounts-faces-legal-charges.html (accessed on 15 January 2019).

[1] Nellemann; et al (2016), The Rise of Environmental Crime – A Growing Threat to Natural Resources, Peace, Development and Security, Norwegian Center for Global Analyses.

[14] NG-2 (2018), Interview with Non-governmental organisation 2, Indonesia, October 17, 2018.

[2] OECD (2019), Money laundering - OECD, https://www.oecd.org/cleangovbiz/toolkit/moneylaundering.htm (accessed on 14 January 2019).

[4] OECD (2018), Strengthening Governance and Reducing Corruption Risks to Tackle Illegal Wildlife Trade: Lessons from East and Southern Africa, Illicit Trade, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264306509-en.

[7] OECD (2016), “Illicit Trade: Converging Criminal Networks”, OECD Reviews of Risk Management Policies, http://dx.doi.org/10.1787/9789264251847-en.

[12] Thailand AMLO (2018), Interview with Thailand Anti-Money Laundering Authority, Bangkok, Thailand, July 5, 2018.

[5] UNODC/APG (2017), Enhanging the Detection, Investigation and Disruption of Illcit Financial Flows from Wildlife Crime.

[18] World Bank (2006), Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism Second Edition and Supplement on Special Recommendation IX, http://siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871/Reference_Guide_AMLCFT_2ndSupplement.pdf (accessed on 15 January 2019).

Notes

← 1. Steering committee comprising the Permanent Secretary of the Ministry of Home Affairs, Permanent Secretary of the Ministry of Finance and Managing Director of the Monetary Authority of Singapore.

← 2. “Such profiles would include standard risk indicators such as personal background, country of origin, possession of a public or high profile position, linked accounts, and type and nature of business activity”

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6. Proceeds of Crime, Illicit Financial Flows and Money Laundering