Wildlife trade risk indicators for financial institutions

Wildlife trade risk indicators specific to financial institutions. Following a report published by the FATF, there are a handful of risk indicators that are relevant to financial institutions. These risk indicators can support financial institutions in identifying potential suspicious transactions and behavioural patterns that may indicate financial crimes, such as money laundering, linked to the illegal wildlife trade.

Wildlife trade risk indicators specifically for financial institutions

The risk indicators listed below have been developed by the FATF and its partners based on countries’ experiences from investigations and cases, open source information and information from the United for Wildlife Financial Taskforce and the Basel Institute.

It should be noted, however, that these intelligence-driven risk indicators highlight potentially useful patterns in client profiles (individuals and firms), transactions, and client account activity, but should not be considered in isolation. A risk indicator shows or suggests the likelihood of suspicious activity occurring. A single risk indicator alone, or without additional information about the client or transaction, is unlikely to be sufficient to suggest illegal activity.

Financial institutions should therefore be careful when implementing risk indicators in their transaction monitoring systems. The introduction of stand-alone, generic indicators can lead to the generation of large numbers of alerts that can ultimately yield false positives.

According to FATF, there are three predominant categories of risk indicators relating to client profiles, transaction and client account activity, as well as other risk indicators. Let us discuss these categories separately.

Customer profiles

Let’s start by exploring risk indicators related to a financial institution’s customer profiles. Financial institutions often have a wealth of knowledge about their customers and customer profile information is often available in the event that a customer’s so-called Know Your Customer profile is complete and up-to-date.

• The first risk indicator related to the customer profile is the involvement of international trading companies, including import-export, freight forwarding, customs clearance, logistics or similar types of companies operating in the following commodities: long high-risk corridors or ports for IWT supply and demand. Relevant products may include raw or square wooden blocks, plastic waste or pellets, frozen food, fish gizzards, various types of beans, stones or quartz blocks.
• The second risk indicator is the use of common containers, consignees, carriers, clearing agents or exporters, as we have seen in other cases where inland waterway transport is suspected;
• The third risk indicator concerns activities involving politically exposed persons and wealthy businessmen, in particular those involved in environmental monitoring, hunting or forestry or in businesses dealing with the environment or nature.
• The next risk indicator, risk indicator number four, concerns the involvement of legal entities that deal with wild animals, such as private zoos, breeders, (exotic) pet shops, safari companies, pharmaceutical companies that make medicines containing wild animals, and collectors or sanctuaries of wild animals.
• Finally, the fifth risk indicator relating to client profile concerns the individual or ultimate owner(s) of a business located in a jurisdiction that is a prominent transit or demand country for illegal wildlife. Ports with reported high volumes of illegal wildlife seizures in recent years include the Port of Dar es Salam, the Port of Manila and the Port of Mombasa.

Transactions and client account activity

Let’s move on and discuss relevant risk indicators related to transactions and client account activities. Financial institutions regularly monitor client transactions and screen their clients’ account activities. This data can be used to detect patterns that may be related to illegal wildlife trade.

Cash payments

First of all, there is a variety of risk indicators related to cash payments. Let’s make 3 examples of cash risk indicators that can be indicative of illegal wildlife trade. These exemplary risk indicators include:

• Large cash deposits by government officials working in nature conservation agencies, border control or customs and tax officials;
• Large deposits of cash or other amounts, transfers, multiple deposits and withdrawals of cash and/or unexplained wealth from government officials working in forestry organisations, nature management agencies, employees of zoos and wildlife parks or CITES management agencies; and
• Large deposits of cash or other funds, multiple deposits and withdrawals of cash and/or unexplained wealth by government officials in environmental or other ministries who have specific powers to manage or oversee government stockpiles of seized ivory, rhino horn, timber or other illegal wildlife products.

Transactions

In addition to cash payments themselves, electronic transactions themselves can also be suspicious and can provide clues to illegal wildlife trade. There are several typologies of suspicious transactions, but let’s talk about the following 7 examples, including:

• Transactions where there are discrepancies between the description or value of the goods in the customs and shipping documents and on the invoice, in relation to the goods actually shipped or the price stated or the actual value of the payments made;
• Transactions for rented vehicles and domestic accommodation of known members of a human trafficking network who are not present in the country or region within a country;
• Transactions between licensed pet shop suppliers/breeders and known poachers and wildlife traders;
• Transactions with recognized pet shop suppliers/breeders that originate from abroad and/or are not in accordance with the stated business activities;
• Large transactions with recognized pet store suppliers/breeders where there are significant differences between the animal/product ordered and the value of the product
• Transactions from known merchants to individuals who then pay for couriers or packages through the mail and
• Transactions between entities operating in different industries.

Reference to species

Another group of risk indicators relates to the mention of specific protection specifications within a transaction or the like, or a clear reference to CITES. Risk factors include:

• Shipments of legal wild animals (fauna and flora) with abnormal, incomplete or otherwise suspect CITES certificates.
• Transactions involving the use of ingredient or product names in traditional medicinal trade that refer to CITIES species.
• Transaction references using specimen names or obfuscated language.

Use of products

In addition, the use of certain products may seem unusual and may indicate illegal wildlife trade. It is especially notable if the product a customer chooses to use is inconsistent with the business purpose. Risk factors include:

• Illogical or anomalous loans between trading or import/export companies in important source or transit countries of inland navigation.
• Escrow-like transactions to/from accounts and companies with the same ultimate beneficiary, particularly for the payment of cross-border and transcontinental shipments.
• Wire transfers/cash deposits made by third parties to known poachers and wildlife traders, or withdrawals made by them.
• International transfers from known wildlife dealers to a family member’s accounts as payment for tuition, pocket money or alimony.
• Large dollar transfers between wildlife farms and companies operating in inconsistent industries. Special attention should be paid to payments with companies that produce goods that can be used as a “front” to hide illegal wildlife products (e.g. manufacturers/traders of coffee, tea, beans, or used clothing).

Additional risk indicators

Finally, there are some additional risk indicators relating to transactions and client account activity, including:

• Swapped bills of lading from traders previously involved in criminal activities involving wildlife trade or trade fraud, and investigations or prosecutions relating thereto.
• Illogical or anomalous purchases, payments or other transactions related to gold trading from client business accounts. Payments for the transportation of wildlife are often masked as payments for gold or to gold trading companies.
• Individuals or companies suspected of being involved in or having ties to IWT networks, and using bank accounts and addresses in different countries.
• Intermediary transactions – large incoming payments followed by smaller outgoing payments; and
• Rental card transactions with two bookings will be closed on time in neighboring countries.

Other risk indicators

Finally, there are other risk indicators, which may not be directly related to client profiles or transaction monitoring, but are equally important. These risk indicators include:

• Unwanted media related to wildlife or environmental crimes identified in public and available sources about individuals and/or entities involved in controlled financial transactions;
• Air passengers travelling on high-risk routes with known illegal wildlife trade, with tickets paid for by a third party or in cash; and
• Payments from companies in sectors that use illegal wildlife products, including traditional medicine manufacturers, leather producers, wildlife product auctioneers and exotic food suppliers, to known wildlife traders or their partners, or other entities listed above that have been identified as involved in the illegal wildlife trade.

Final thoughts

Wildlife crime poses a serious threat to thousands of plant and animal species, some of which are on the brink of extinction. It is a global problem that affects almost every jurisdiction as a source, transit point or destination for illegal wildlife products.

Wildlife crime has emerged in recent years as a major and specialised area of ​​transnational organised crime, fuelled by high demand and facilitated by a lack of effective law enforcement and low priority as a serious crime, weak legislation and ineffective punishments. It is a highly profitable illegal trade, with wildlife products fetching high prices on the black market and global revenues estimated at between US$7 and US$23 billion per year.