Environmental Crime

Environmental crime is an activity that generates illicit proceeds, qualifying as a predicate offense for money laundering.

Criminals obscure beneficial ownership by creating shell or front companies that are purportedly operating in the same sector (e.g., fishing or logging). These opaque ownership structures enable the commingling of illicit proceeds with legitimate revenue, hindering effective AML measures.

Trade-based laundering schemes exploit vulnerabilities in trade documentation and invoice processes, allowing illicit proceeds from environmental crimes to be concealed as legitimate commercial transactions.

This technique heavily leverages weak legislative environments, corruption, and uneven AML enforcement across various regions to conceal proceeds from illegal resource extraction. Criminals exploit lax regulatory frameworks, moving funds across multiple jurisdictions where oversight is minimal or inconsistent.

• Aggregates negative news/articles and official legal records involving individuals or entities.
• Discloses investigations, indictments, and convictions for illegal deforestation, wildlife trafficking, or related environmental offenses.
• Informs ongoing monitoring of high-risk clients or partners connected to environmental crime.

• Contains import and export records, shipping routes, and associated documentation.
• Allows verification of declared goods and detection of discrepancies in shipments linked to illegal wildlife, timber, or other contraband.
• Identifies unusual or repeated transit routes indicative of laundering through cross-border movements.

• Provides official filings and statements (e.g., balance sheets, tax returns, profit/loss statements).
• Reveals discrepancies in reported revenue or business operations for companies suspected of concealing proceeds.
• Assesses the legitimacy of cash flows from sectors prone to environmental crime (e.g., timber or fishing).

• Presents pricing and market information for commodities, including forests and fisheries.
• Allows comparison of declared transaction values with actual market prices.
• Exposes under- or over-invoicing schemes used to launder proceeds from illegal natural resource exploitation.

• Documents items and financial assets seized by authorities, including wildlife products, timber, or proceeds from illegal environmental activities.
• Identifies arrested or flagged individuals/entities connected to environmental crimes.
• Links seizures to financial accounts or shipments for potential money laundering investigations.

• Encompasses bills of lading, invoices, and shipping manifests for international trade.
• Validates declared goods and quantities, revealing potential misinvoicing or false documentation.
• Highlights suspicious trade-based activities tied to environmental crime proceeds.

• Contains verified identities, addresses, beneficial ownership details, and risk assessments.
• Facilitates thorough examination of clients engaging in sectors with high environmental crime risk.
• Flags inconsistent or false documentation provided by shell entities or politically exposed persons involved in resource exploitation.

• Provides official ownership and registration details for companies.
• Identifies actual and hidden beneficial owners behind front or shell companies.
• Enables the detection of complex ownership structures used to obscure the proceeds of illegal logging or wildlife trafficking.

Assign higher risk scores to jurisdictions known for inadequate environmental protections, widespread corruption, or high-volume illegal fishing or logging. Trigger enhanced scrutiny of cross-border transactions and inbound/outbound flows to or from these regions, ensuring that proceeds from environmental crimes cannot be easily laundered through weak regulatory environments.

Apply specialized Enhanced Due Diligence (EDD) for clients engaged in or suspected of dealing with natural resource extraction (e.g., logging, fishing, waste management). Verify permits and beneficial owners, and check whether purported environmental licenses are legitimate. Cross-reference with corruption or illegal logging/fishing databases. Require senior management sign-off for higher-risk accounts showing red flags such as questionable resource sourcing or incomplete operational documentation.

Develop specific rules and analytics to identify suspicious payments linked to resource extraction and trade, such as sudden large transfers from shell companies claiming to handle timber, wildlife, or waste. Monitor for layering patterns across jurisdictions known for limited environmental regulation or historical evidence of illicit natural resource exploitation.

Include real-case examples of illicit wildlife trade, illegal logging, and other environmental offenses in regular AML training. Equip staff to recognize suspicious product invoices, misrepresented goods, or corrupt permitting in local hotspots. Emphasize the importance of swiftly escalating red flags related to unverified environmental licenses or abrupt changes in reported business volumes.

Create higher-risk customer segments specifically for businesses operating in sensitive environmental sectors (e.g., logging, fishing, wildlife trade). Apply more frequent KYC and ongoing reviews, and monitor large or unusual transactions more closely. This segmentation ensures higher scrutiny where illegal logging, wildlife trafficking, or permit fraud is a known concern.

Use open-source data, such as NGO watchlists, environmental enforcement actions, and local media, to confirm the authenticity of purported resource-extraction activities. Investigate known corruption or past environmental infractions connected to company principals, verifying that reported supply chain details match external evidence and official registries. This helps unearth undisclosed ownership or adverse information tied to environmental crime.

Engage in public-private partnerships and industry consortiums to exchange intelligence on emerging environmental crime typologies, red-flag shipping routes, and suspect actors. Share data and indicators, such as specific transport companies known to smuggle wildlife, to collectively disrupt cross-institution money laundering schemes tied to natural resource theft or illegal trafficking.

Scrutinize trade documentation for natural resource shipments, looking for undervaluation or misclassification of goods (e.g., timber mislabeled as lower-grade wood). Compare declared origins or routes with known smuggling paths for wildlife or illegal logging. Flag mismatches between invoice amounts and usual market costs to uncover potential misinvoicing schemes tied to environmental crime.

• Criminals deposit funds from illegal resource extraction (e.g., unreported logging or fishing) into bank accounts controlled by front or shell companies, obscuring the true origin of the money.
• The ability to commingle legitimate and illicit proceeds in standard business accounts conceals the illicit source.
• Cross-border transfers between multiple accounts in different jurisdictions further layer and disguise criminal proceeds, taking advantage of varying regulatory standards.

• Criminals present forged shipping documents or misrepresent cargo specifications (e.g., actual volumes of illegally sourced timber) to trigger letter-of-credit payments.
• By appearing to fulfill legitimate international trade deals, they secure disbursements from banks, effectively blending illegal proceeds with lawful transactions.
• This exploitation of standard trade finance processes obscures the true source of funds, hindering straightforward AML detection.

• Criminals fabricate or alter key documents (e.g., bills of lading, purchase orders) to move proceeds from environmental crimes through normal trade channels.
• The layering of transactions within complex trade finance structures (e.g., factoring, credit guarantees) hides the revenue's real origin.
• Multiple jurisdictions, each with different oversight, are exploited to legitimize suspicious goods and payments, complicating AML enforcement.

• Fraudulent or inflated invoices are used to claim revenue from purported sales of natural resources (e.g., timber or fish) that were actually harvested illegally.
• Criminals submit these falsified documents to banks or financial institutions to justify incoming funds, disguising illicit proceeds as legitimate receivables.
• The reliance on standard invoice processing reduces scrutiny, allowing criminals to layer and integrate illegal earnings into normal business operations.

• Banks handle collection of payments for perceived commodities shipments, relying on documents that may be forged or inflated.
• This structure makes it harder to detect that goods are illegally sourced or misrepresented to launder funds.

• Criminals manipulate electronic invoicing systems to overstate quantities or declare illegal goods as legitimate products.
• Automated workflows can camouflage suspicious billing, enabling trade-based laundering of funds from environmental crimes.

• Opening accounts as non-residents in certain jurisdictions reduces scrutiny and oversight.
• Criminals use these services to shuttle funds from illegal logging or fishing operations away from their country of origin, complicating AML controls.

• Criminals create front companies in environmental sectors that exist only ‘on paper’ through virtual offices.
• Professional addresses, mail handling, and call-forwarding assure a veneer of legitimacy while concealing actual illicit activities.

• Fraudulent shipping or ownership documents are submitted to trigger letter-of-credit payments, masking the illicit origin of proceeds.
• Criminals inflate or misrepresent goods (e.g., volumes of timber) to launder funds by creating the appearance of legitimate international trade.

• Criminals mislabel or under-declare illegal timber, fish, or wildlife cargo to smuggle them as legitimate goods.
• False documentation during shipping ensures proceeds appear to stem from lawful trade, facilitating money laundering.

• Key documents like bills of lading, certificates of origin, and invoices are falsified to hide the real source or volume of natural resources.
• Such deliberate misrepresentation underpins trade-based laundering by blending illicit goods with lawful commerce.

• Illicit operations involving timber, wildlife products, or other natural resources exploit trade finance instruments to secure payments or credit.
• Falsified documentation (e.g., invoices, shipping records) conceals the true source and nature of the goods, enabling funds derived from environmental crimes to appear legitimate.

• Criminals establish front or shell companies in sectors such as logging or fishing, then open business bank accounts to deposit illicit proceeds from illegal resource extraction.
• Commingling these funds with legitimate commercial transactions disguises their origin, reducing transparency and detection.

• Services that streamline cross-border transactions can be duped by false paperwork masking illegal wildlife or timber flows.
• Criminals leverage trade facilitation to legitimize shipments, commingling licit and illicit cargo, thereby eluding oversight.

• Funds from illegal resource operations are rapidly converted to other currencies to break transaction trails.
• Frequent conversions in loosely regulated locales obscure the origin and ultimate destination of illicit proceeds.

• Criminals transfer profits from environmental crimes to financial institutions in secrecy jurisdictions, limiting transparency.
• Offshore accounts hamper investigators by obscuring beneficial owners and complicating the tracing of illicit funds.

• Complicit or negligent professionals may overlook suspicious resource extraction revenues or fabricate accounts.
• Invalid financial statements facilitate the integration and layering of criminal proceeds under the guise of normal business income.

• Illicit proceeds from environmental crimes are routed through networks of respondent banks in multiple jurisdictions.
• Limited visibility into ultimate beneficiary details facilitates layering and the concealment of funds’ illegal origins.

• Offshore entities are set up to hide true ownership and camouflage illegal logging or fishing operations as conventional enterprises.
• Secrecy laws in certain jurisdictions help criminals circumvent scrutiny, enabling cross-border layering of funds.

• Criminals establish shell or front companies purportedly involved in logging, fishing, or waste management, obscuring beneficial ownership.
• Nominee directors or trustees enable layering of illicit funds from environmental crimes, complicating AML efforts.

Wildlife traffickers generate illicit proceeds by illegally trading protected animals and wildlife products. They:

• Use falsified documentation to pass these goods through normal trade channels.
• Employ shell or front companies within the wildlife sector to intermingle illicit funds with legitimate revenues.
• Move proceeds through various jurisdictions, complicating financial institution scrutiny of transaction origins and beneficiaries.

Politically Exposed Persons (PEPs) wield influence over environmental regulations or resource allocation, which criminals exploit. They:

• Facilitate or benefit from illegal resource extraction by leveraging high-level positions.
• May hold hidden beneficial ownership stakes in entities involved in illegal logging, fishing, or waste dumping.
• Increase challenges for financial institutions, as standard due diligence can be circumvented through their elevated status or network connections.

Organized crime groups carry out large-scale environmental crimes, such as illegal logging or hazardous waste dumping, generating substantial illicit proceeds. They:

• Exploit corruption and bribery to secure or falsify permits, avoiding enforcement.
• Use front companies and layered transactions across multiple jurisdictions to obscure beneficial ownership.
• Employ trade-based laundering schemes with falsified invoices, mingling illegal funds with legitimate commerce.

Import-export companies enable trade-based laundering of natural resources. They:

• File falsified or incomplete invoices to conceal the actual volume or origin of timber, fish, or other resources.
• Legitimize cross-border payments under the appearance of ordinary trade, masking illicit proceeds.
• Serve as cover for shipments of illegally sourced materials, undermining financial institutions’ ability to trace true sources of funds.

Document forgers supply fake permits, customs documents, and other trade paperwork for illicit resource extraction. They:

• Produce falsified invoices or records to obscure illegal origins or quantities of natural resources.
• Undermine standard verification processes, enabling criminals to appear compliant with import, export, or environmental regulations.
• Hinder financial institution due diligence by making records appear legitimate in cross-border transactions.

Shell or front companies appear to operate in sectors like fishing or logging. They:

• Help criminals disguise revenues derived from illegal resource extraction as legitimate sector income.
• Provide minimal transparency regarding actual operations, hindering financial institution risk assessments.
• Facilitate cross-border movement of illicit proceeds under the guise of ordinary business transactions.

Public officials enable environmental crime through corrupt or complicit actions. They:

• Accept bribes to approve or overlook fraudulent permits for resource extraction.
• Use official authority to shield illegal operations from environmental or financial oversight.
• Undermine enforcement efforts, allowing illicit funds to flow into the financial system with reduced scrutiny.