ESG: Green Crimes in Financial Crime

As per FinCEN the Global environmental crimes is now the third largest illicit activity in the world following the trafficking of drugs and counterfeit goods. Environmental crimes, is estimated to generate between $110 and $281 billion annually in criminal proceeds.

The five most prevalent types of activity currently encompassed by environmental crime include:

1. Illegal mining and trade in minerals (such as oil, gold, and diamonds)
2. Illegal logging/deforestation and trade in timber
3. Unreported and unregulated fishing
4. Wildlife crime
5. Pollution crimes (the illegal dumping and trade of chemicals and waste, and the illegal production and trade of ozone-depleting substances)

Environmental crimes frequently involve transnational organized crime, corruption, and are often associated with a variety of other crimes including money laundering, theft, forgery, tax evasion, fraud, human trafficking, and drug trafficking. It is often facilitated by corruption within state offices (high-level and local political officials, police, border and customs control, harbour officials, licensing authorities and regulators) as well as the private sector (shipping companies, freight forwarding companies, brokers, exporters). Olivia Swaak-Goldman, executive director of the Wildlife Justice Commission (WJC), says Environmental crimes wouldn’t be there without corruption, without fraud, without money laundering.

The FATF has recently observed that most countries have not considered the money laundering (ML) risks posed by environmental crimes within their national risk assessments and since the area is considered low risk with a high rate of return for money launderers, therefore, they exploit it without fear of being caught. Environmental crimes are often treated as a low priority by policymakers, governments, and courts, with the result that perpetrators are often not prosecuted. These factors make it highly attractive for organised crime groups and what is also important, there are indications that proceeds from these activities are also used to finance terrorism.

ESG and AFC

ACAMS’ Dr. William Scott Grob makes the case that ESG (Environmental, Social, and, Governance) programs enhance financial institutions’ anti-financial crime (AFC) efforts. When an ESG team flags projects with unsustainable characteristics in a high-risk sector or jurisdiction, an AFC program may benefit from enhanced due diligence to uncover questionable financial flows or corrupt connections with politically exposed parties.

AML’s role within sustainability is undeniable from its inception to the present; however, its inclusion within the broader conversation of sustainability still requires the effort from AML professionals through awareness, collaboration, and initiative.

List of Prohibited activities under the bank’s ESE policy

1. Companies using illegal and/or uncontrolled use of fire for land clearance
2. Illegal wildlife trade e.g. ivory and rhino horn
3. Direct involvement in the practice of shark-finning or trading in shark fin
4. Direct involvement in commercial whaling
5. Testing on Great Apes (Chimpanzees, Bonobos, Gorillas and Orangutans)