Breaking Down Barriers to Combat the Illegal Wildlife Trade

The recently released Financial Action Task Force (FATF) paper entitled, “Money Laundering and the Illegal Wildlife Trade”1 is a call to action for the private and public sectors. The paper reveals that wildlife trafficking2 and environmental crime3 bring in excessive profits and are frequently linked to other forms of organized crime including fraud, corruption and money laundering. Thus, it is time to recognize that illegal exploitation of the world’s wildlife and environmental crime are global threats.

Illegal wildlife trade (IWT) has significant costs on the environment, biodiversity and public health. In particular, the recent high-profile spread of zoonotic diseases4 underlines the importance of ensuring wildlife is traded in a legal, safe and regulated manner and that countries remove the profitability of illegal markets.

Transnational organized criminal networks utilize smuggling and money laundering techniques to traffic drugs, people, weapons and other forms of contraband. When these organized criminal networks also exploit poached or illegally harvested wildlife, that means the illicit funds trail also leads back to the financial industry.5 IWT is perceived by many criminal syndicates as a low-risk, high-profit model. Therefore, anti-money laundering (AML) methods can target these proceeds, identify suspicious transactions in the regulated sector and prevent the smuggling of bulk cash across borders.6 The purpose of this article is to highlight the important role of public-private partnership in tackling IWT in Hong Kong.

Understanding the Nature of the Threat

Research published in 2019 indicates Hong Kong’s IWT is increasing in volume, is underestimated in value and is contributing to the worldwide extinction crisis.7 This reflects global trends as the demand for illegal wildlife products increases in the main demand centers of China and other countries in Asia, such as Thailand and Vietnam. The Chinese government has taken active measures to curb this demand; however, environmental crimes, including IWT, are reported to be rising 5% to 7% annually, which is 2-3 times the growth rate of the global economy.8 According to “A Comparative Evaluation of Hong Kong’s Legislative Powers to Regulate Trade in Endanger Wild Animals,”

“Between 2013 and 2019, customs officers in Hong Kong seized over HK$723 million ($9.3 million) in trafficked wildlife. These confiscations included over 22 metric tons of ivory, 51 metric tons of pangolins (scales and carcasses), 1,380 metric tons of illegal wood and 27 metric tons of other endangered species (mainly reptiles). Those quantities are conservatively estimated to equate to the deaths of over 3,000 elephants, 67 rhinos and 70,000 pangolins. Depending on which pangolin species, as they vary significantly in maximum size, between 345 and 2,777 pangolins must be killed to produce one ton of scales.”9

Unsurprisingly, Hong Kong has become recognized as an international hub for IWT, an unfortunate accolade for Asia’s World City.10

Yet, despite the devastation caused, wildlife and forest crime continue to be viewed as outside mainstream crime by many in the law enforcement community, governments and the public. Cutting-edge investigative techniques often employed in tackling other criminal investigations, such as fraud, human trafficking and drug trafficking, are underutilized for IWT. Using financial and money laundering investigative techniques can substantially enhance wildlife and forest crime investigations.

Unsurprisingly, Hong Kong has become recognized as an international hub for IWT

Following Up on the FATF Report

FATF guidance recommends more significant high-level political commitment; enhanced operational coordination between law enforcement and the AML industry; better risk awareness and mitigation; enhanced cooperation; and improved private-public collaboration.11 AML and counter-terrorist financing professionals will immediately find their activity-based approach relevant for this fight. Nongovernmental organizations and professional bodies in Hong Kong are campaigning to include wildlife crime offenses under Schedule 1 of Cap. 455 (Organized and Serious Crimes Ordinance) to further deter transnational criminal enterprises who use Hong Kong as a major port and transport hub for wildlife smuggling. According to “A Comparative Evaluation of Hong Kong’s Legislative Powers to Regulate Trade in Endanger Wild Animals,” “Without access to the coercive investigative powers available under the Organized and Serious Crimes Ordinance section, the Hong Kong Customs and Excise Department is unlikely to gather sufficient evidence to pursue charges effectively against offenders for dealing with the proceeds of wildlife crimes.”12

Converging Approaches (Private Sector and Law Enforcement)

In 2019, FATF, under President Xiangmin Liu of China, made it a priority to help countries go after the money involved in IWT as well as identify and disrupt large criminal networks that profit from this crime. On November 22, 2019, FATF President Liu hosted one of the first regional meetings on tackling IWT as a financial crime in Beijing, China. It was the first time that public and private sector representatives, including AML experts and wildlife experts, came together to share experiences about detecting and combating the financial flows linked to the IWT.

The FATF German presidency (2020-2022) aims to expand on the work to prevent IWT by focusing on the broader issue of environmental crime and its connections with money laundering and terrorist financing. The work will analyze financial flows linked to environmental crime to raise awareness of pertinent money laundering and terrorist financing risks as well as to inform possible further work on potential policy implications.

The Importance of Public-Private Partnership

As a global financial center, Hong Kong strives to meet international standards for gathering intelligence to detect illicit cross-border fund flows and interdict them. The Hong Kong special administrative region government created the Fraud and Money Laundering Intelligence Taskforce (FMLIT), which is composed of the Commercial Crime Bureau of the Hong Kong Police Force, in collaboration with the Hong Kong Monetary Authority, the Hong Kong Association of Banks and a number of banks. The FMLIT facilitates public-private partnership to enhance the detection, prevention and disruption of serious financial crimes and money laundering activities through effective information and intelligence sharing.

The financial sector plays a crucial role in investigating and identifying suspicious activity. Dialogue between the public and private sector is vital for assisting financial institutions (FIs) and law enforcement agencies in identifying suspicious activity and in maintaining an up-to-date understanding of IWT threats and risks. A critical step is creating public-private partnerships and improving international cooperation to identify and disrupt the illicit proceeds of this devastating criminal activity.

On June 13, 2019, the U.S. Attorney’s Office in the Southern District of New York indicted four individuals charged with participating in a conspiracy to traffic more than $7 million in rhino horns and elephant ivory. In addition, suspects were charged with conspiracy to commit money laundering, and with participating in a conspiracy to distribute and possess with intent to distribute more than 10 kilograms of heroin.13 The case was a model of public-private collaboration across agencies and continents on wildlife trafficking with links to transnational organized crime and money laundering.

4P Model―A Whole System Response to Tackling IWT

Over the last few years, criminal networks have continually adopted sophisticated and agile business models to ensure that they continue to proliferate. It became clear that an innovative approach was needed and that one organization alone could not tackle the threat as it has impacted all sectors and communities. A whole system response was required to have maximum impact on disrupting criminal networks. In the United Kingdom (U.K.), law enforcement agencies endorsed and implemented the following 4P approach for tackling serious and organized crime, including drug trafficking, human trafficking, and child sexual abuse and exploitation online:

  • Pursue: Enhance the intelligence and operational response and pursue criminal networks through prosecution and disruption.
  • Prevent: Identify risk factors in terms of criminality, ability, networks and identity; focus on preventing criminal networks from engaging in criminal activity; and have an effective response through collaboration on prevention strategies with regional and international partners, tackling the threat upstream and at the source.
  • Protect/prepare: Increase protection against serious and organized crime and reduce the impact of this criminality where it takes place.

Given the domestic, regional and global reach of IWT, a similar approach was needed to tackle it. The U.K.’s Serious and Organised Crime Network (SOCnet) Illicit Finance lead with invaluable support from the World Wide Fund for Nature, ACAMS and other key stakeholders produced a high-level 4P model for tackling IWT in Hong Kong that highlighted collaboration across all sectors on key initiatives to combat IWT—a whole system response (see Table 1).

The HK Framework

Building on a pilot project led by Standard Chartered Bank with WWF, the Hong Kong framework creates roundtable forums and working groups composed of banking AML professionals, regulatory and law enforcement representatives, and nonprofit organizations. The objective is to bring together technical expertise to address the challenges. In addition, the initiative targets explicitly raising awareness across knowledge domains and socializing concerns. An imperative is building an educational program along with tools to be leveraged by collaborators.

The Hong Kong framework creates roundtable forums and working groups composed of banking AML professionals, regulatory and law enforcement representatives, and nonprofit organizations

The table below outlines three immediate outcomes. Outcome 1 targets information sharing to improve detection and reporting by harnessing ACAMS chapters and events. In contrast, Outcome 2 develops cross-industry working groups to enhance red flags, alert scenarios and risk assessment indicators that can be ingested into systems. Outcome 3 shapes an intelligence-led and information-sharing approach.

Closing the Circle

If communities have a unified and targeted community approach, then there can be measurable impact on the IWT value and supply chain including improved detection, which would result in increased scrutiny and pressure on suspected brokers, exporters/importers, wholesalers and retailers who exploit the vulnerabilities in the system. We are happy to announce this 4P framework in Hong Kong and encourage ACAMS Chapters to adopt a similar approach.

Compliance officers are uniquely competent in that they can contribute intelligence on illicit money flows and they can examine trade flows resulting in the destruction of protected species, fauna and flora. If COVID-19 has shown anything to the world, it is that everyone must unite to protect what has long been considered the heart of the planet—the environment and the wildlife within it―so future generations have an equal chance to cherish it as well.

Brian V. Gonzales, head of protection of endangered species, WWF, Hong Kong SAR, China, bgonzales@wwf.org.hk

Chinali Patel, consul, international illicit finance policy lead, British Consulate-General, Hong Kong SAR, China

Dr. William Scott Grob, CAMS-FCI, AML director-APAC, Hong Kong SAR, China, wsgrob@acams.org

  1. “Money Laundering and the Illegal Wildlife Trade,” Financial Action Task Force, June 2020, https://www.fatf-gafi.org/media/fatf/documents/Money-laundering-and-illegal-wildlife-trade.pdf
  2. “The Pangolin Reports: Trafficked to Extinction,” ADM Capital Foundation, September 25, 2019, https://www.admcf.org/research-reports/the-pangolin-reports-trafficked-to-extinction/
  3. “Stopping Illegal Logging,” World Wide Fund for Nature, https://www.worldwildlife.org/initiatives/stopping-illegal-logging
  4. Zoonotic diseases are derived from viruses, bacteria and other pathogens that are transmitted between animals and humans. According to the World Health Organization, some 60% of emerging infectious diseases that are reported globally are zoonotic (including SARS, Ebola, COVID-19 and MERs).
  5. “Enhancing the Detection, Investigation, and Disruption of Illicit Financial Flows from Wildlife Crime,” Asia/Pacific Group on Money Laundering and the United Nations Office on Drugs and Crime, 2017, https://globalinitiative.net/wp-content/uploads/2018/01/APG-UNODC-Wildlife-Crime-Report.pdf
  6. “Financial flows from wildlife crime,” United Nations Office on Drugs and Crime, https://www.unodc.org/documents/Wildlife/Financial_Flow_Wildlife_Crime.pdf
  7. Sam Inglis, “Trading in Extinction: The Dark Side of Hong Kong’s Wildlife Trade,” ADM Capital Foundation, January 21, 2019, https://www.admcf.org/2019/01/21/shedding-light-illegal-trade-hong-kong-high-volume-lucrative-black-market-business/
  8. Christian Nellemann et. al, “The Rise of Environmental Crime – A Growing Threat To Natural Resources Peace, Development And Security,” The United Nations Environment Programme and Interpol, https://reliefweb.int/sites/reliefweb.int/files/resources/environmental_crimes.pdf
  9. Amanda Whitfort, Fiona Woodhouse, Shuping Ho Shuping, et al., “A Comparative Evaluation of Hong Kong’s Legislative Powers to Regulate Trade in Endangered Wild Animals,” Faculty of Law, The University of Hong Kong, October 2020, (forthcoming).
  10. Daan P. van Uhm, The Illegal Wildlife Trade: Inside the World of Poachers, Smugglers and Traders, (Springer International Publishing, 2016).
  11. “Money Laundering and the Illegal Wildlife Trade,” Financial Action Task Force, June 2020, https://www.fatf-gafi.org/media/fatf/documents/Money-laundering-and-illegal-wildlife-trade.pdf, 57-59.
  12. Amanda Whitfort, Fiona Woodhouse, Shuping Ho Shuping, et al., “A Comparative Evaluation of Hong Kong’s Legislative Powers to Regulate Trade in Endangered Wild Animals,” Faculty of Law, The University of Hong Kong, October 2020, (forthcoming).
  13. John Cusack, “Wildlife Trafficking Syndicate ensnared by United Forces,” Financial Crime News, June 2019, https://thefinancialcrimenews.com/wildlife-trafficking-syndicate-ensnared-by-united-forces/

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