2023 marks the 53rd anniversary of Earth Day – a day set aside to raise global awareness of the damage
caused by pollution and emissions.

While government regulations like the Clean Air Act have helped curb pollution, one of the biggest
threats to the environment is also one of the biggest challenges to the global financial system:
environmental crime. This can range from international activities such as poaching endangered species
and illegal logging to the local scourge of fly-tipping. It is a cycle of criminality that usually includes
bribery, money laundering, and corruption.

The perils these activities pose are real: many species are at risk of extinction, their habitats are being
destroyed, and, as we all know, the rise of CO2 in the atmosphere is perpetuating climate change and
resulting in extreme weather events. In other words, environmental crime is not “victimless.” It affects
everyone.

The challenge with tackling environmental crime is that it is both incredibly broad and highly lucrative.
The illegal wildlife trade alone is estimated to be worth £17 billion. And the range of environmental
crimes includes:

Illegal logging

• 94% of deforested areas in the Amazon and Cerrado may be due to illegal activity
• in Africa, illegal exports of rosewood are estimated to be worth about half of Gambia’s total exports,
  about 10 percent of their GDP, and over 20 times the budget of their Environment Ministry
• in Europe, ClientEarth has said “Romania continues to breach EU nature laws by approving logging
  permits in protected areas of its forests without assessing the impact these activities will have on nature
  and wildlife”

Illegal wildlife trade (including fishing)

• there’s a significant convergence between illegal fishing and modern slavery – ‘slave ships’ that are out
  at sea for years at a time, with enslaved people traded between boats, catching fish which ultimately go
  into the food chain for farmed prawns that end up in supermarkets both here and the US
• bribes make up between 4 – 10% of the final sales value of the illicit ivory wholesale trade in Asia

Illegal waste

• 18% of all waste in the UK is said to be illegally managed [source]
• poor plastic waste management harms the environment, leaving deposits of plastic and microplastics
  on land and in rivers and oceans worldwide. Plastic also contributes to climate change through
  greenhouse gas emissions from production to waste management

While global regulation of environmental crime is inconsistent, various international organisations and
intergovernmental bodies have looked at breaking the chain by making it more challenging to legitimise
the proceeds. Environmental crime is now considered a predicate offense to money laundering – this
means that financial institutions and other regulated entities are required to screen and monitor for
indications of environmental crime – just as they would for drug trafficking, human trafficking, or any
other serious offense.

In our annual survey of financial compliance executives, we asked which predicate offenses were most
important to their organisations. More than one in four selected environmental crime, making it one of
the top offenses that concerned them. This trend coincides with growing public activism about the
importance of conserving the environment and a desire to give business to ethical companies that
match consumers’ values. These two factors create a significant reputational risk for any organisation
that does not proactively screen who they do business with.

There are five easy steps that every business can take to help fight environmental crime:
(1) understand what constitutes an “environmental crime” in their countries of operation
(2) carry out environmental crime risk assessments
(3) train staff on environmental and wildlife trafficking crime
(4) adopt enhanced Know Your Customer & Know Your Business measures for higher-risk clients
(5) monitor adverse press and media at onboarding and on an ongoing basis

Businesses play a valuable role in protecting the environment that goes beyond monitoring their energy
use and moving towards a paperless office. By understanding the larger criminal enterprise that
threatens ecosystems across the globe, they can be a partner to law enforcement and end
environmental crime by breaking the funding cycle.

by Iain Armstrong, ComplyAdvantage Regulatory Affairs