Environmental organized crime is a massive global industry, raking in hundreds of billions of dollars each year, and it seems like the U.S. financial system is playing a role in concealing the profits. Interpol estimates that environmental crimes, including poaching and illegal logging, generate up to $281 billion annually, making it the third-most lucrative illegal business worldwide.
Even though these crimes happen across the globe, the U.S. financial system’s loopholes in its anti-money-laundering (AML) infrastructure make it an ideal place to hide and launder profits. Julia Yansura, program director for environmental crime and illicit finance at the Financial Accountability and Corporate Transparency (FACT) Coalition, points out that the U.S.’s weak AML framework contributes to this problem. Environmental crime organizations take advantage of these weaknesses, allowing them to channel illicit gains through shell companies and other opaque entities.
The illicit industries behind environmental crime vary in scale, from smaller networks dealing in illegal wildlife trade to large operations involved in illegal logging and illegal gold mining, which often link to other illicit activities like drug trafficking, terrorism, and political corruption.
Susanne Breitkopf, a deputy director at the Environmental Investigation Agency’s Forest Campaign, highlights a recent case where a couple from Florida smuggled timber from Russia, processed as plywood in China, and imported it into the U.S. through several shell companies. This method obscured the supply chain and avoided tariffs.
The U.S.’s AML system has two major weaknesses. First, registering a company requires surprisingly little information, allowing those involved in environmental crime to create shell companies or fronts with ease. According to research by FACT, many states ask for less information from companies than public libraries do for library cards. This lack of transparency makes it difficult to track who owns these companies.
Yansura also cites a case where Colombia’s second-biggest gold exporter laundered more than $1 billion through shell companies to hide that the gold was illegally mined, mostly sending it to refineries in Miami. Another example involves former Peruvian President Alejandro Toledo, who allegedly accepted more than $1 million in bribes from a Brazilian company engaged in Amazon deforestation and used it to buy real estate in Maryland to hide the money.
The current efforts to combat environmental crime largely rely on the 120-year-old Lacey Act, which prohibits commerce in illegally obtained or transported wildlife and plants. While not a complete solution, it can be used alongside anti-corruption and AML statutes. Breitkopf believes that the key to tackling environmental organized crime is interagency cooperation, given the complex network of activities involved.
One U.S. Treasury Department bureau, the Financial Crimes Enforcement Network (FinCEN), has a mandate to “follow the money” and support agencies like the Department of Fish and Wildlife Services and the Justice Department’s Natural Resources Division. However, FinCEN doesn’t have its own investigative authority, and its budget constraints limit its ability to focus on environmental crime.
Despite these challenges, there are signs of progress. FinCEN’s recent implementation of a registry for “beneficial owners” of companies, requiring information on those who control or own 25% or more of a company, is a step in the right direction. However, Yansura notes that real estate transactions, especially those with cash payments, still pose a risk because they can obscure the parties involved.
Another proposed measure to combat environmental crime would be to add illegal deforestation to the predicate offenses covered by the federal money-laundering statute. This move, supported by the FOREST Act, would provide more tools for authorities to address these crimes. Breitkopf believes that greater financial and supply chain transparency, along with beneficial ownership transparency, is crucial to exposing these crimes and stopping them.
