Combating money laundering

Banks and governments must do much more to detect suspicious transactions linked to wildlife crime and use anti-money laundering laws to prosecute the culprits and seize the fruits of their crimes.

Julian Newman, EIA Campaigns Director

 

How blood money follows the global illegal wildlife trade

The illegal wildlife trade is the fourth largest type of crime in the world after arms, drugs and human trafficking. It’s said to generate between $7 and $23 billion in profits every year.
Iconic species such as elephants, pangolins and tigers continue to be hunted to supply this trade. They are the targets of organised criminals who see wildlife crime as a high-profit and low-risk opportunity.

But crime syndicates have to find ways to launder the money they make, washing it clean through the world’s financial systems so their vast profits appear to be legitimate.

This blood money fuels further environmental crime, drives corruption and undermines sustainable development and conservation. However, it is all too rarely targeted in criminal investigations.

But there have been some successes:

Our work to combat money laundering in wildlife crime

As a charity that specialises in environmental crime, we have more than 30 years’ experience of investigating the illegal proceeds of wildlife crime.

We work to combat this lethal trade by:

Milestones in our fight to expose money laundering in the illegal wildlife trade

Over the years, we have consistently worked to expose the blood money trails that result from money laundering in the illegal wildlife trade.

2014 Released days before the landmark London Conference on Illegal Wildlife Trade, our In Cold Blood report outlines how to combat organised wildlife crime.
2016 The EIA Time for Action report calls for action to end the criminality and corruption fuelling wildlife crime in 15 key countries.
2017 Our report The Shuidong Connection exposes the global hub of the illegal ivory trade, tracking the profits of wildlife crime.
2020 The Royal United Services Institute (RUSI) and EIA launch new resources that use financial intelligence to crack down on the illegal wildlife trade.
2020 EIA is one of five non-profits that contribute to a major new report by the Financial Action Task Force (FATF) on Money Laundering and the Illegal Wildlife Trade
2020 A wildlife criminal is jailed in China for ivory smuggling following EIA investigations into The Shuidong Connection.
2020 EIA’s Money Trails report identifies the financial flows that are linked to illegal wildlife trafficking.

Wildlife under threat

African pangolin

African pangolin

A million pangolins have been taken from the wild in Asia and Africa during the past 10 years.

Tiger

There has been a 96 per cent decline in the number of wild tigers in Asia over the past 100 years.

Elephant

Between 2014-17, there was a 30 per cent decline in numbers of African savannah elephants, primarily due to poaching.

The scale of the problem

The global illegal wildlife trade is now recognised as a serious transnational organised crime.

Analysis of historical seizure data shows that the incidence of illegal wildlife crime is far more geographically widespread and diverse in terms of the range of species than formerly believed.

Scrutiny of 164,000 seizures between 1999 and 2015 records cases in 120 countries, with no single country the source for more than 15 per cent of the seizures and suspected traffickers coming from 80 countries.

  • 7,000

    different species of wildlife seized in 1999-2015
  • 18%

    of monetary value represented by elephants
  • 5%

    of monetary value represented by pangolins

Wildlife crime threatens biodiversity and ecosystems

Over the past decade, a dramatic surge in poaching and wildlife trafficking, spurred by a range of factors including growing wealth in main consumer markets and global connectivity, has led the international community to belatedly recognise the menace posed to biodiversity, ecosystems and the rule of law by rampant wildlife crime.

Laws have been reinforced

A range of declarations and policy responses have ensued and in some of the regions worst hit by poaching, such as East Africa, there are signs the tide is turning.

Laws have been strengthened in key jurisdictions, regional law enforcement cooperation mechanisms developed, domestic markets for certain wildlife products closed and consumer awareness campaigns launched.

Authorities fail to follow the money

Yet some of the key tools deployed to combat other forms of transnational organised crime are still largely absent in the fight against wildlife crime, especially the use of anti-money laundering laws and financial investigations to go after the billions of dollars being made.

Money laundering investigated in one per cent of wildlife crime

This failure has been borne out by the findings of two reviews carried out into the use of anti-money laundering laws in illegal wildlife crime cases.

A joint report by the UN Office on Drugs and Crime and the Asia Pacific Group on Money Laundering found that out of 45 countries surveyed:

  • 86 per cent reported being affected by wildlife crime;
  • 71 per cent regarded wildlife crime as a significant money laundering threat;
  • only 11 per cent of the countries had conducted further investigations into the wider criminal network beyond the poacher or courier;
  • money laundering investigations, charges or prosecutions were conducted in just one per cent of wildlife crime cases.

A survey by the Eastern and Southern African Anti-Money Laundering Group uncovered similar failings through a survey of Financial Intelligence Units – the key government agencies that detect and analyse suspicious financial activity.

The survey found that wildlife trading in the region was a lucrative business with significant financial gains, but almost none of the countries could provide details of financial flows such as methods and techniques used to fund poaching activities in cases investigated. It also found that the Financial Intelligence Units in member countries were hardly involved in investigating wildlife crimes.

All too often, major seizures of illegal wildlife products such as elephant ivory tusks or pangolin scales do not trigger a parallel financial investigation. Opportunities to pursue the syndicate heads are squandered and if anyone is arrested it is usually a lowly courier. A multi-tonne seizure which, if investigated from a financial perspective could yield important evidence and clues, becomes merely a business expense for the traffickers involved.

Money Trails, EIA report

A low-risk, high-profit crime

For trafficking syndicates, the authorities’ failure to employ anti-money laundering laws in prosecutions perpetuates the notion that illegal wildlife crime is a low-risk, high-profit opportunity.

Reasons to use financial intelligence to fight the illegal wildlife trade

There are three main reasons for using financial investigations and intelligence in illegal wildlife trade cases:

  • to obtain compelling evidence of the crime, such as proof of payments made to transport illegal wildlife products;
  • to charge suspects with additional offences under anti-money laundering legislation, which can significantly boost the success of prosecution and length of sentencing;
  • to identify and confiscate criminal assets (such as money, property and vehicles purchased using the proceeds of crime), which can go a long way to neutralising the high profits associated with the illegal wildlife trade.

Financial investigations are a key but still underused tool in the fight against the illegal wildlife trade. Today, there is a global consensus that this needs to change, but most countries need help in rolling out these approaches.

How money is laundered through the illegal wildlife trade

EIA is one of a number of NGOs that contributed to a major 2020 report into Money Laundering and the Illegal Wildlife Trade, which was produced by the Financial Action Task Force. This extensive report contains case studies produced by EIA, as well as an in-depth look at the scale of the problem, financial investigations, international co-operation, public-private collaboration and suggested actions.

The infographic below is taken from this report. It shows the formal and informal exchanges of money at every stage of the process.

Source: FATF report on Money Laundering and the Illegal Wildlife Trade.

Attacking the heads of the criminal syndicates

The kingpin leaders at the head of criminal syndicates direct the trafficking process, but rarely get their hands dirty. Our undercover investigations on the ground identify where poaching is taking place and the routes that transporters use to smuggle the contraband. But if we can interrupt the flow of money that the heads of the syndicates receive from the illegal wildlife trade, we can hit at the heart of their operations and curb this lethal trade.

The guys at the higher echelons of the wildlife crime syndicates are doing it purely out of economics. They just want to get rich. If we can identify who the bosses are and start going after their money, we can seize their assets – their sports cars, mansions and yachts – and start putting them behind bars.

Julian Newman, EIA Campaigns Director

The role of financial institutions

Private sector financial institutions have a crucial role to play in identifying and reporting suspicious transactions linked to the illegal wildlife trade to the relevant authority, which will often be the country’s Financial Intelligence Unit. Obstacles to the effective involvement of banks in efforts to disrupt illegal wildlife trade syndicates include:

  • a focus on other priority crime types;
  • an overall lack of cases and awareness of the illegal wildlife trade among bank compliance officers.

The recent leak of the FinCEN files reveals the scale of the money laundering problem that faces financial institutions. The 2,500 documents that were leaked showed that some of the world’s biggest banks had moved $2tn of dirty money around the world for people involved in organised crime, terrorism and drug trafficking.

From our perspective, it was interesting to see that illegal wildlife crime was not mentioned in the news reports. Yet we know that it is the fourth largest type of crime in the world after arms, drugs and human trafficking. Therefore, undoubtedly, a significant percentage of that £2tn must have been related to illegal wildlife crime.

On a positive note, progress was made in October 2018 with the formation of the United for Wildlife Financial Taskforce, which has more than 40 financial institutions as members.

EIA is a member of the United for Wildlife Financial Taskforce. The UK Royal Foundation launched the United for Wildlife Financial Taskforce in October 2018, which is designed to transform the detection, reporting and investigating of the illegal wildlife trade as a financial crime. This taskforce includes more than 30 financial institutions from around the globe, including Africa, Asia, Australia, the Americas and Europe, and subject matter experts, including not-for-profit organisations involved in combating the illegal wildlife trade, such as TRAFFIC, RUSI and EIA.

The taskforce assists banks to identify suspicious transactions linked to the illegal wildlife trade by issuing regular alerts on trends and seizures. It also distributes a list of common ‘red flags’ to further aid detection. For their part, member banks undertake to provide training on the illegal wildlife trade to compliance staff and to include illegal wildlife trade factors in due diligence screening.

NGOs involved in researching and investigating illegal wildlife trade cases also have a role to play in assisting banks by providing appropriate information. For example, information provided by EIA to “Know Your Customer” databases, one of the tools to vet potential new clients, has led to the creation of 850 new profiles on individuals involved in wildlife crime since June 2018.

The role of governments

Many governments have established comprehensive systems to combat money laundering. Frequently, such systems include:

  • making money laundering a criminal offence;
  • giving investigative agencies the power to trace, seize and confiscate assets that have been acquired illegally;
  • enabling the relevant agencies to exchange information both within their country and with other jurisdictions.

Anti-money laundering activities are often directed by a country’s Financial Intelligence Unit, but these agencies are not always involved in cases related to the illegal wildlife trade.

Every country has a Financial Intelligence Unit – a government body that’s supposed to enforce the rules against money laundering. They have the potential to do some good work in tackling the illegal wildlife trade. But in many cases, they are side-lined from the multi-agency taskforces whose job it is to combat wildlife crime.

Julian Newman, EIA Campaigns Director

Another problem for governments is that criminal syndicates are constantly evolving new ways to beat the system and are highly motivated to cover their tracks and evade capture.

The global anti-money laundering taskforce

The inter-governmental Financial Action Task Force (FATF) is the global standard setter on anti-money laundering measures. As such, it has a potentially vital role to play in tackling illicit financial flows linked to the illegal wildlife trade.

A key tool is the National Risk Assessment (NRA) process through which a country’s Financial Intelligence Unit must assess the risk of money laundering posed by different crime types – such as the illegal wildlife trade – and demonstrate measures to mitigate the risk. Failure to do so can lead to the country being placed under review as part of the mutual evaluation process and ultimately face actions which can affect access to the global financial system.

Until recently, the FATF had been largely silent on the illegal wildlife trade, but in June 2019 the incoming Chinese presidency pledged to focus on this area during its year-long tenure. This served to raise the profile of the illegal wildlife trade within the organisation and national Financial Intelligence Units, which should leverage the wider inclusion of the illegal wildlife trade as a significant risk in more NRAs.

Other potential measures by the FATF include ensuring one of its key recommendations of carrying out parallel financial investigations in criminal cases is applied to the illegal wildlife trade and bolstering training of financial investigators in countries prone to offences in this field.

EIA’s work to combat money laundering in the illegal wildlife trade

Discover more about our work:

Investigating how the proceeds of wildlife crime are laundered

These three case studies from EIA reports illustrate how we track the systems and approaches used by transnational criminal syndicates and follow blood money linked to the illegal wildlife trade through the global financial system.

Case study: Blood money flows through formal banking system

EIA’s Vanishing Point report included a case study of ivory trafficking from Tanzania to China. Our research revealed that between 2009-14, approximately 40 tonnes of ivory originating from Tanzania was intercepted outside the country en route to the consumer market, with 22 tonnes seized inside the country. Based on a conservative figure of $2,100 per kilo for raw ivory tusks in China, the main destination, the 62 tonnes seized had an end market value of $130.2 million.

It is inconceivable that such large amounts of money could be moved around in cash rather than through the banking system, but no anti-money laundering investigations occurred in relation to these seizures.

One case in particular illustrates how opportunities to track the money flows associated with ivory seizures – and so to target the bosses of smuggling syndicates – are being squandered.

In November 2013, Tanzanian police raided a house in the upmarket Mikocheni area of Dar es Salaam, following a surveillance operation. At the location, three Chinese nationals were discovered packing 706 elephant tusks in preparation for export. Documents found at the scene indicated a similar shipment had already been despatched to the port of Zanzibar for export; inspection of a shipping container at the port uncovered a stash of 1,023 tusks.

This was clearly the work of a major crime syndicate. Subsequent investigations revealed that two businesses, Evergo International and YQP International, were being run from the Mikocheni house, ostensibly importing garlic and chemicals from China as a front for ivory smuggling.

Documents showed substantial money flows between the companies’ bank accounts in Tanzania and companies in Hong Kong and mainland China. Company records also identified two Chinese nationals, Deng Jiyun and Zhang Mingzhi, controlling the companies.

Lengthy jail sentences were handed down to the Chinese packers and the two Tanzanian dealers. Yet the Chinese coordinators have never been caught.

Despite all the evidence that was discovered related to illicit financial flows, nobody connected to the case was charged with money laundering.

Case study: Money laundering penalties don’t fit the crime

In 2018, Malawi’s Financial Intelligence Authority (FIA) released a report on money laundering trends, recognising illegal trade in wildlife as an emerging risk and identifying as a red flag those accounts benefiting from the international inward transfer of funds from destinations associated with the ivory trade.

It quotes the case of two Malawians caught in 2013 transporting 2.6 tonnes of ivory, stating: “There was information that the two Malawians were part of a syndicate of foreign nationals who were not identified and arrested. FIA noted that one of the two convicted individuals received funds from Hong Kong through Western Union.”

EIA has conducted extensive research into this case, which aptly illustrates how financial investigations can be used to build a picture of wider transnational networks spanning source, transit and destination countries and to identify individuals and front companies involved.

The seizure occurred when two Malawian brothers, Charles and Patrick Kaunda, were stopped at a mobile customs checkpoint. Beneath sacks of cement, officers discovered 781 ivory tusks weighing 2.6 tonnes.

Follow-up investigations in Malawi and Tanzania led to a large house in Dar es Salaam, where a further 347 tusks were found. Evidence pointed towards a cross-border ivory trafficking network which had built a safe route from Dar es Salaam, home to a major port, via landlocked Malawi and out through the port of Beira in neighbouring Mozambique.

Shipping records showed that Charles Kaunda had previously shipped 14 containers allegedly containing sawn wood or semi-precious stones to Singapore, Malaysia and Indonesia, all of which have featured as transit countries for ivory shipments.

Western Union money transfer records for Charles Kaunda showed payments made to him from individuals in Hong Kong and Malaysia, often coinciding with container movements. One of the people who made transfers to Kaunda was Malaysian national Wang Yong Sai. Wang’s brother, Wang Jun Teng, was listed as the recipient of one of the shipments.

Through analysis of shipping and fund transfer records, what at first appeared to be an opportunistic ivory smuggling attempt at a remote location in northern Malawi can be connected to an Asian-led ivory smuggling ring, active in Malawi for two decades.

The two Kaunda brothers were found guilty on charges of money laundering and possession, but were sentenced to either a paltry fine of Malawi Kwacha five million ($7,000), just 0.17 per cent of the value of the tusks, or five years in jail. Unsurprisingly, they opted for the fine, which was paid in cash.

This case demonstrates that, even on the rare occasions when anti-money laundering charges are deployed against wildlife traffickers, the resulting penalty rarely fits the crime.

Subsequently, the prosecution appealed the case and in July 2019 the Supreme Court sentenced the brothers to eight years in jail. They were not in court to hear the verdict and promptly absconded.

Meanwhile, Wang Yong Sai and his brother Wang Jun Teng, the Malaysian nationals who oversaw the operation, remain free.

Case study: Finances of a global ivory trafficking syndicate revealed

In April 2016, an EIA investigative team travelled to the port of Pemba, Mozambique to assess the scale of ivory trafficking in the area. By chance, they encountered a group of three Chinese men. This meeting led to a series of undercover investigations by EIA, which resulted in the discovery of the global hub of the illegal ivory trade in Shuidong, China.

This in-depth engagement with an active ivory smuggling group yielded fascinating insights into their operating methods, including financial aspects such as profit margins, payments to accomplices and the use of both underground money changers and the formal banking system.

During the investigation period (April 2016 to July 2017), members of the group claimed involvement in illegal shipments of ivory tusks from Africa to China totalling 20.7 tonnes (equivalent to 3,000 dead elephants) with a sales value of $16 million in China.

Our investigation followed the progress of 2.3 tonnes of poached ivory, which were packed in a shipping container and concealed by plastic pellets. The consignment took a circuitous route: Pemba (Mozambique) to Mombasa (Kenya) to Singapore to Busan (South Korea) to Hong Kong. It arrived safely in Shuidong in late September 2016.

Route for ivory trafficked from Mozambique to China

The Route for the ivory trafficked from Mozambique to China (click for larger image)

Although the route did not make commercial sense, it was ideal from a smuggler’s perspective due to the involvement of an accomplice in the freight forwarding business and the use of transit countries to defeat risk-profiling systems used by the customs authorities in China, the final destination. Upon arrival in China, it would appear the shipment came from Korea and not Mozambique.

The two main financial flows associated with the ivory trafficking activities of the Shuidong group are:

  • transfer of funds from China to Africa to fund ivory collection and pay the balance owing once the contraband had been inspected. The group used a network of Chinese informal money changers based in Africa. Money in Chinese renminbi would be paid into a designated Chinese account belonging to the selected money changer. The funds would then be paid out in US dollars cash in Africa and collected by the Shuidong smugglers or their accomplices. The group used trusted money changers based in Dar es Salaam, Tanzania and Lagos, Nigeria;
  • payment for ivory tusks sold within China by the Shuidong group to buyers from Fujian. These transactions were all made in Chinese renminbi, either by bank transfer or sometimes cash. The Shuidong group used a system of joint investments to fund the purchase and transport of ivory from Africa in order to spread the risk in case of seizure. Members of the group also used some of the profits from a successful shipment to source ivory for the next consignment, constantly recycling some of the profits into further consignments.

Before publishing The Shuidong Connection, we shared our findings with Chinese customs authorities. They responded swiftly with a huge operation in Shuidong, comprising about 500 enforcement officers, and arrested 27 suspects, 16 of whom went on to face criminal charges.

Action taken by the China Customs Anti-Smuggling Bureau based on EIA’s intelligence has now led to the dismantling of two ivory trafficking syndicates spanning Guangdong and Fujian provinces in southern China.

Sharing our expertise with banks and enforcement agencies

Financial institutions and government enforcement agencies frequently have little experience of dealing with offences such as wildlife crime. As a charity that specialises in environmental crime, we are able to share much-needed expertise in the illicit wildlife trade. This enables institutions and agencies to uncover illicit flows of money related to this trade and track down the criminals at the head of the trafficking syndicates.

Providing information on the techniques used to launder money

To assist both banks and national enforcement agencies, especially Financial Intelligence Units, to effectively deploy anti-money laundering measures against wildlife criminals, detailed information on how syndicates move the money is vital.

Currently, the lack of case analyses and detailed intelligence is an impediment to detecting and disrupting financial flows linked to the illegal wildlife trade. The development of typologies, detailing the various techniques used to launder money, and red flags, relating to illegal wildlife trade trends such as smuggling routes and methods, are crucial in targeting public and private sector resources.

EIA has developed a series of typologies based on major wildlife trafficking cases, drawn from open source research, investigations and official documents such as court records. These case files have been provided to a range of banks and Financial Intelligence Units to assist in filling the information gap which constrains effective action against money laundering linked to wildlife crime.

The information featured in the report is related to major ivory tusk trafficking cases from eastern Africa to East Asia during the period 2013-18. Bulk trafficking of tusks in multi-tonne consignments offers valuable information for financial investigation due to the amount of money involved and the use of maritime freight for smuggling the contraband, all of which leave a clear money trail. In such cases, while poaching and small-scale dealing at the start of the supply chain usually involve cash, once the tusks are consolidated, the value increases and multi-million dollar transactions occur, which usually involve the formal international bank system.

Contributing to the FATF report on money laundering

In 2020, EIA was one of five non-profits that contributed to a major new report by the Financial Action Task Force (FATF) on Money Laundering and the Illegal Wildlife Trade.

The Financial Action Task Force is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. Its recommendations are recognised as the global standards for anti-money laundering and counter-terrorist financing.

The FATF report contains several case studies by EIA and includes a comprehensive series of recommendations on how to tackle the illegal wildlife trade by cracking down on the financial flows that fuel this billion-dollar business.

Working with partners to use financial intelligence to disrupt criminal networks

We work with like-minded partners all around the world to unite our knowledge in how best to use financial intelligence to crack down on illegal wildlife crime.

Launching new resources with the Royal United Services Institute

The Royal United Services Institute (RUSI) is the world’s oldest independent think tank on international defence and security.

Since 2017,  RUSI and EIA have implemented a joint project to increase awareness and boost the ability of key stakeholders to disrupt criminal networks benefiting from illicit funds earned from wildlife trafficking.

We have recently jointly launched new practical resources covering best-practice in the use of financial intelligence to counter illegal trade, including a series of handbooks on the basic principles of gathering and using financial intelligence and a new 16-minute video module hosted on EIA’s online enforcement platform.

Criminals are attracted to illegal wildlife trade because it is viewed as a high-profit/low-risk crime. By increasing the risk of detection and prosecution, as well as potentially confiscating the profits, financial investigations are one way to reverse this equation.

The RUSI/EIA interactive handbooks highlight best practice in the use of financial intelligence and are available for Kenya, Malawi, Mozambique, Tanzania, Uganda and Zambia.

Our new 16-minute video module is available on a secure online enforcement platform, hosted by EIA. The platform was created by EIA in 2018 and comprises an overview film and 17 video modules of best practice enforcement approaches from around the world, available in nine languages (Cantonese, English, French, Mandarin, Portuguese, Spanish, Swahili, Thai and Vietnamese).

To access these resources, please visit RUSI.

How you can help

Sunda pangolin

The illegal wildlife trade is a multi-billion dollar business run by transnational criminal syndicates that are solely motivated by money. Due to their greed, endangered wildlife around the world, including elephants, pangolins and tigers, are being poached to the edge of extinction.

We have the expertise to track the blood money that flows through global financial systems, target the criminal kingpins who run the illegal wildlife trade and help put them behind bars.

Please support our vital ongoing work to combat this lethal trade. Your donation will help us to identify the criminal syndicates that run wildlife trafficking operations, share our expertise with banks and law enforcement agencies and protect endangered wildlife around the world.

Thank you. We couldn’t do our work without your support.