Examples of money laundering in connection with illegal wildlife trade

The illegal wildlife trade has certain characteristics that are somewhat unique compared to other forms of transnational crime and money laundering. For example, the means of payment for wildlife or wildlife contraband is usually mobile money.

Money laundering in connection with illegal wildlife trade

Mobile money is a digital payment method that allows money to be transferred between mobile devices. To receive, withdraw and send money, users do not need an internet connection, smartphone or the formal banking system. Mobile money is particularly popular in Sub-Saharan Africa, a region that is not only vulnerable to illegal wildlife trade but also has few banking facilities. In addition, wildlife traders often use cash payments.

According to the Financial Action Task Force, the majority of criminals involved in the illegal wildlife trade have not outsourced their money laundering activities to a professional third party. However, it is possible that some larger and growing criminal groups rely on professional money launderers.

In any case, despite the fact that payments via mobile phones and cash are common, criminals use a wide range of mechanisms in the wildlife trade supply chain to move and launder the proceeds.

Abuse of the formal financial sector

According to the FATF, criminals engaged in the illegal wildlife trade rely on “established” methods to launder their proceeds, including placing and shifting funds through the formal financial sector.

This shows the important role that financial institutions can play in detecting suspicious activity and the risks they face.

Criminals use methods within the formal financial sector including: placing and moving money through cash deposits, for example under the guise of loans or payments; e-banking platforms, including electronic payment services linked to a credit card or bank account, authorised money-value transfer systems; and third-party wire transfers via banks.

To hide the sender and recipient of the money and bypass country-specific reporting thresholds from financial institutions, criminals use money mule accounts and small-value payments.

Front companies and mixing of legal and illegal proceeds

Both small and large criminals involved in the illegal wildlife trade often use shell companies and front companies to hide payments and launder the proceeds of their illegal activities. Criminals primarily use shell companies to facilitate the transfer of value between members of a criminal group, between buyers and sellers, or to hold assets.

At the same time, criminals use front companies, which usually conduct legitimate business alongside illegal activities. They do this to facilitate the movement of wildlife and to mix legal and illegal proceeds, thus disguising the transfer of value.

According to the FATF, wildlife traders often use front companies with ties to import and export companies to justify the flow of goods and payments across borders.

Another common trend is the misuse of front companies associated with the legal wildlife trade, including taxidermists, farms, breeding facilities, pet shops and zoos.

Other industries that may be more vulnerable to abuse include traditional medicine, decoration and jewellery, and fashion. Importantly, criminals set up shell and front companies in both countries – the source or destination countries for the illegal wildlife, but also take advantage of the weak regulations in some financial and establishment centres to set up complex business structures.

Let us discuss a specific example, involving a large-scale case of pangolin trafficking and commingling of proceeds

In 2018, Indonesian authorities uncovered a large-scale syndicate responsible for trading pangolin scales worth approximately $9 million between 2012 and 2017.

The syndicate leaders in this case, Mr S, Mr A, Mr B and Mr C, used a network of intermediary bank accounts under false names to conceal the relevant payments. The vast majority of the intermediary accounts were set up under the pretence of being legitimate suppliers of animals or farms.

Further investigation into the financial transactions of Mr S and Mr A revealed a financial flow of approximately USD 6 million from convicted drug dealers. Indonesian authorities established that Mr A, B and C used the company accounts to commingle income from their legal fishing business with illegal proceeds from pangolin and drug trafficking.

Based on further investigation of the company accounts, the Indonesian authorities established that the company had sent money abroad 129 times to 23 beneficiaries in foreign supplier companies. By using customs data to compare the identified parties, who received money from the company of Mr. A, B and C, with the list of senders or suppliers within the same period, Indonesia was able to identify three suppliers who received money from the company but were not registered as suppliers. The authorities therefore suspected that the imported goods did not match the information in the imported goods document. In fact, the purpose was to trade wildlife and move value through the trading system.

Purchase of real estate and luxury goods

Criminals also purchase valuable goods, such as real estate and luxury items including vehicles, jewelry and artwork, to launder the proceeds of the illegal wildlife trade in the integration phase.

Let us take another example of how two South African and Indonesian wildlife conservation organizations laundered their proceeds through luxury real estate and vehicles.

This case involves a rhino horn syndicate of approximately 12 individuals operating in South Africa. The accused and their accomplices hunted and dehorned rhinos, and sold approximately seven rhinos and 14 horns for profit. The accused were also allegedly involved in robberies, burglaries, corruption, kidnapping and murder. The leader of this syndicate was a former police officer; the alleged corruption involves the bribery of a park official not to arrest members of the syndicate in a National

Park. Members of the syndicate used cash as their primary means of payment. They laundered the proceeds primarily through cash purchases of properties and luxury vehicles worth approximately $1 million. Authorities have charged the accused with illegal trafficking and possession of rhino horn, illegal rhino hunting, corruption, murder, robbery, burglary, theft of rhino horn, harboring illegal immigrants, money laundering and extortion.

Monetary value transfer systems

In addition, criminals also use informal money transfer systems, such as the Hawala system, and other similar services such as “fei chen’” or “hundi” to hide and launder the proceeds of illegal wildlife trade.

As with all forms of informal money transfer systems, these schemes are often community-based and use a network of intermediaries in different countries. This allows international transfers to be made without the money physically crossing a border.

The facilitating role of new technologies

Finally, new technologies play an important role in facilitating communication and non-face-to-face payments between buyers and sellers of illegal wildlife. In particular, encrypted communication platforms and illegal wildlife marketplaces hosted via social media sites, online seller platforms and the darknet increase the ease with which wildlife transactions can take place between buyers and sellers.

While online listings are easily accessible, VPN connections hide the location of wildlife dealers, who often approach potential buyers through private groups or encrypted mobile messaging platforms.

At the same time, the evolving payment infrastructure for online sales and the potential for significant growth also pose potential challenges to the fight against IWT. In Africa, where mobile money systems are widely used, there are examples of such platforms, such as M-Pesa, being abused to transfer payments related to wildlife crime. Similarly, in Asia and Africa, there are examples of criminals abusing prepaid cards, mobile apps or social media-based platforms linked to bank accounts to transfer and launder money derived from illegal wildlife trade.

Final thoughts

After guns, drugs and human trafficking, the illegal wildlife trade is the world’s fourth largest crime, with profits estimated at $7 to $23 billion a year. Iconic species such as elephants, pangolins and tigers continue to be hunted to supply this trade. They are targeted by organised crime groups, who see wildlife crime as a lucrative, low-risk opportunity.

However, criminal gangs must find ways to launder their money and move it through the global financial systems so that their huge profits appear legitimate.