Competing priorities mean there are many areas jostling for a compliance officer’s attention. But amid the noise, there is one vital subject often inadvertently overlooked: the illegal wildlife trade. We do so at great cost.
The International Compliance Association (ICA) is a professional membership and awarding body. ICA is the leading global provider of professional, certificated qualifications in anti-money laundering; governance, risk, and compliance; and financial crime prevention. ICA members are recognized globally for their commitment to best compliance practice and an enhanced professional reputation. To find out more, visit the ICA website.
It has been described as a low-risk, high-reward crime—a conservative estimate of the illegal wildlife trade’s value is 17 billion pounds (U.S. $22.7 billion) a year. Some suggest it could be double this amount.
At a transnational level, corruption has become a critical enabler of the illegal trade of wildlife.
Most companies aim to conduct business with integrity. Yet, some ambitious business plans—to expand quickly in new jurisdictions, for example, often through use of third-party intermediaries to expedite bureaucratic formalities—can lead to facilitation payments.
The proceeds of wildlife trafficking might be used to bribe politically exposed persons (PEPs) and other lower-ranking public officials to attain a desired business outcome. Bribes might also be paid to obtain safe passage for illicit profits earned.
The supply chain
Developing a reasonable understanding of the supply chain is the first step in ascertaining whether corporate entities might inadvertently participate or facilitate illegal trading in wildlife.
The first link in the supply chain comprises poachers and other people involved in the illegal sourcing of such products. The Financial Action Task Force estimates informal money transfer value systems tend to be used, such as the Chinese value system Daigou, or alternative remittance systems such as Hawala.
Runners or brokers purchase wildlife products directly from poachers and are the next link in the chain. At this stage, cash payments are typically used, making it difficult to monitor the range of transactions.
Intermediaries or dealers usually specialize in transporting and delivering the products to the exporter. It is at this stage that money transfer services and bank accounts are used, with a corresponding high volume of transactions, often international. Fintech and mobile money services can also be exploited by criminals at this stage of the supply chain.
With exporters and importers, the preparation work begins, in terms of obtaining relevant travel documents and potential concealing of products.
Large international money transfers and remittances can be red flags for financial institutions. Companies providing transportation services also need to be cognizant of the risks of being misused by criminals. One of the recommendations of the United Nations Office on Drugs and Crime in a 2016 report was that “profiling and targeting mechanisms for suspicious shipments and persons should be further mobilized to improve risk management systems and promote their active use.”
Wholesale traders may at this point sell the products alongside legitimate products. The size and range of transactions are likely to vary at this stage too, depending on the actual products being trafficked.
Retailers sell the products to customers, from companies operating in a range of legitimate sectors (e.g., fashion and jewelry) to private collectors.
Traditional payment methods can be used at this point, such as invoice payments and card transactions, but often the description of the products is changed to obfuscate their provenance.
Though corporate entities are at different stages in their journey to shape and implement their environmental, social, and governance (ESG) strategies, the U.K. Financial Conduct Authority signaled firms large and small “can use their business decisions, their innovation and creativity, and their voice and influence to encourage positive change.”
Due diligence, including adverse media and PEP screening, is an established defense in preventing the risk of money laundering and disrupting the flow of money relating to the illegal wildlife trade. Transaction monitoring and reporting any suspicions to a relevant financial intelligence unit are also invaluable in providing information, allowing a better understanding of the key typologies and steps that need to be taken.
Better and more frequent information sharing of trends, typologies, and red flags would greatly assist corporate entities in understanding their risk exposure and taking appropriate measures. Cooperation between the public and private sector also remains vital, helping prevent and disrupt the illegal trade in wildlife and aiding corporate entities to deliver their ESG strategies.
This article contains excerpts from the full story for the International Compliance Association. The ICA is a sister company to Compliance Week. Both organizations are under the umbrella of Wilmington plc.
No comments yet