A recent Subcommittee (National Security, International Development and Monetary Policy) hearing at the United States House Committee on Financial Services heard testimony from the Director of Illicit Trade of Global Financial Integrity (GFI), a group of Washington, DC based think tank focused on illicit financial transactions. flows, corruption, illicit trade and money laundering.
The testimony, which is publicly available as a stand-alone document called From wood to tungsten highlights the link between the exploitation of natural resources and the financing of conflict, violence, transnational criminal organizations (TBTs) and terrorist groups. The scale of this crime has also been demonstrated because the profit from these crimes against wildlife and the environment (especially wildlife trafficking, illegal logging, illegal and unreported fishing, mining crime and the theft of crude oil) is estimated at $ 275 billion annually, making it one of the most prolific and lucrative financial crimes.
One of the recommendations made during the hearing was that greater AML / CFT (anti-money laundering / anti-terrorist financing) responsibilities should be introduced for the custodial sectors which are currently uncovered. or exempt. This is consistent with other jurisdictions that are increasingly imposing AML / CFT responsibilities, eg Designated Non-Financial Businesses and Professions (DNFBPs) – this trend is likely to continue.
Another related activity that individual businesses should be aware of is performing a supply chain due diligence so that they are aware of the origin of the goods supplied to them. For example, most well-run businesses should want to know if their suppliers are involved in unethical or illegal activities such as wildlife trafficking, abuse of workers’ rights, human trafficking, etc. slavery and illegal mining, logging, fishing or other environmental crimes. Failure to identify this type of risk is not only bad for the environment but can damage a company’s brand and expose it to the risk of legal and regulatory proceedings.
To help manage this risk, the Financial Action Task Force (FATF) developed and published earlier in 2021 a set of environmental crime risk indicators. These were discussed in a recent Article Clyde & Co and are a good starting point for businesses to help them manage this risk.
Natural resources have long been used to finance conflict and violence, perpetrated by state actors as well as non-state actors such as transnational criminal organizations (TCOs), terrorist groups and armed groups.