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Wildlife traffickers eye money laundering

On Jan. 20, NPR reported that Thai police arrested Boonchai Bach, 40, an accused wildlife black market kingpin. Originally from Vietnam, Bach was being held in connection with trafficking 14 African rhino horns into Thailand, a hub for poached animals destined for China.

According to a Jan. 20 Bangkok Post article, Accused wildlife smuggling kingpin caught, the horns, estimated to be worth $1 million, were only a small part of larger-scale trafficking activity. Bach’s criminal syndicate allegedly smuggled ivory, rhino horn, pangolins, tigers and lions, as well as other rare and endangered species of wildlife.

Wildlife trafficking has been defined as “any environment-related crime that involves the illegal trade, smuggling, poaching, capture or collection of endangered species, protected wildlife (including animals and plants that are subject to harvest quotas and regulated by permits), derivatives, or products thereof.” (See Comparing illicit trades in wildlife and drugs: an exploratory study, by Nigel South and Tanya Wyatt, Deviant Behavior, Vol. 32, 2011.) The Convention on the International Trade in Endangered Species of Wild Flora and Fauna (CITES) bans wildlife trafficking.

Because the trade is illegal, good value estimates are difficult to obtain. However, one estimate puts the value of illegal fisheries at $4.2 to $9.5 billion; illegal trade in timber at nearly $7 billion; and other wildlife trafficking (such as endangered animal species) as high as $10 billion annually, making it the fourth-largest illicit industry behind drugs, counterfeiting and human trafficking. (See Transnational Crime and the Developing World, by Channing May, Global Financial Integrity, 2017.)

Wildlife trafficking is quite diverse. Data from the World Wildlife Seizures (WISE) platform show that of the more than 7,000 species seized from 2005 to 2014, not one represented more than 18 percent of total seizures and no single country represented more than 15 percent of all seizures.

Like most value chains, licit and illicit, actors further up the chain benefit more from wildlife trade than the producers (in this case, poachers). According to a report published by the Royal Institute of International Affairs, value can multiply between 25 and 50 times or more as it travels up the chain. A 2016 report by The Guardian states that one kilo of ivory, for example, sells for $150 in Africa but up to $2,025 in Beijing. A pair of rhino horns goes for $167 in Africa but for $33,000 in Vietnam and twice that in China.

Value-chain actors (producers, traders, processors) have differing motivations for engaging in the trade. Poachers generally act out of financial need while criminal groups use the trade to finance their illegal activities. Trade kingpins are often involved in multiple businesses — both legal and illegal. The infamous Bach brothers in Vietnam and Thailand, for example, have legitimate businesses in wholesale agriculture and forest products, construction materials, electrical equipment, hotels and food services. However, one brother’s also a professional smuggler and purportedly runs a prostitution ring, according to The Guardian.

Wildlife trafficking differs from other illicit value chains — the end product is often fairly innocuous and can’t be immediately identified as illegal. While some are clearly illicit (i.e., elephant tusks, rhino horns and their derivatives), a 2016 report from the United Nations Office on Drugs and Crime lists some of the end products and industries into which this illegal trade feeds. These include meat and seafood production, pet sales, zoos, medicine and tonics, art, décor and jewelry, cosmetics and perfume, clothing and furniture. Because the product origins are in part illegal, the production system relies on the illegal transfer of both goods and money, often through anonymous companies. (Read more from Global Financial Integrity.)

Impacts of illegal wildlife trafficking

Wildlife trafficking has significant consequences for the planet’s biodiversity. According to Transnational Crime in the Developing World, only 500,000 elephants exist today, less than half of the 1.2 million that existed in the 1970s. Meanwhile, tiger populations have fallen a startling 95 percent since 1900 — one species went extinct in 2009. The impact, while global, is disproportionate for certain countries. (Vietnam, for example, has seen the extinction of 12 large animal species.)

It also impacts natural wealth. Much of the world’s most exotic wildlife live in the poorest countries, and ecotourism industries often flourish from their existence. National parks and wildlife reserves in Kenya, Tanzania, Botswana, South Africa, India, Nepal, Uganda and Rwanda are major tourist draws — tourism revenues make up a large portion of the foreign exchange earnings in these countries. Other countries like Indonesia and Brazil have natural wealth tied up in their forests.

Wildlife trafficking is both a symptom and a cause of poverty. Impoverished individuals turn to the illegal trade to make a living, while simultaneously contributing to the cycle that keeps them impoverished.

It's also inextricably linked to corruption in many countries. Weak political systems struggle to establish legal frameworks to limit trafficking in wildlife, while corrupt officials benefit directly from the trade. Political systems therefore create, and then subsequently depend on, the trade’s existence.

Traffickers don’t want money to flow back to its country of origin because they fear these funds will contribute to development and, subsequently, to stronger legal systems that will interfere with their illegal activity. Illegal trafficking primarily impacts wildlife and poor populations in developing countries, however the enablers are typically wealthier — corrupt governments and their officials in developing nations, trafficking “kingpins,” and buyers in other, often developed, countries.

Targeting wildlife trafficking financial flows

Wildlife trafficking previously was a niche concern for environmentalists, but because of its links to other forms of illegal activity, it’s now attracting a wider audience. The Global Financial Integrity group recently cited a report from the UN Environment Programme (UNEP) and Interpol that terrorist groups such as the Somali group al-Shabaab had used funds from wildlife trafficking as a means of financing its activities. The Janjaweed militia in Sudan is involved in elephant poaching in Chad. (See Strategic Report: Environment, Peace and Security a Convergence of Threats, Interpol and UNEP.) Funds obtained from wildlife trafficking, particularly from the sale of ivory, also have supported the Lord’s Resistance Army (LRA) and have been used to finance the genocide in Darfur.

Little is understood about how wildlife trafficking funds are laundered. A 2017 report from the Republic of Namibia Financial Intelligence Center noted that only limited information on illicit financial flows was available and that countries “were primarily focused on the poaching activity as a predicate offense and hardly considered investigating the illicit financial flows related to these crimes.”

A 2016 report by the Eastern & Southern Africa Anti-Money Laundering Group provides evidence reinforcing the idea that money laundering isn’t a primary — or often, even a tangential focus — of wildlife trafficking investigations, pointing out that “the majority of the cases reported indicated that the persons involved were only charged for the offences of trafficking … overlooking the aspect of money laundering,” and “this has created challenges in understanding the flow of funds that fuel wildlife crime activities” in both East Africa and the Asia-Pacific region.

The report attributed this to the lack of financial intelligence units in 11 of the 13 African countries covered. It also states that “financial investigators are never involved in investigations relating to the predicate offences” while adding that “their input and assessment of evidence found at crime scenes could provide important data for forensic audits and investigations.”

What we do know is that most money laundering from wildlife trafficking activities is conducted in cash because of its nearly invisible audit trail. It’s typically transmitted through anonymous shell companies that act as pass-through entities for washing illicit funds, although these companies don’t limit their trafficking activities to only wildlife.

According to a 2011 report by the World Bank Group, the U.S. doesn’t collect meaningful beneficial ownership information from shell companies, making it the preferred location for setting up these vehicles. The Global Financial Integrity group reports that establishing shell companies is easier only in Kenya. Funds from wildlife trafficking activities are laundered through shell companies and will then often finance additional wildlife trafficking activities.

Part of the challenge in combating wildlife trafficking is the risk/reward trade off. According to a December 2012 report by the World Wildlife Fund in conjunction with the Dalberg Global Development Advisors, the value of rhino horn is double that of gold and platinum and more valuable on the black market than diamonds and cocaine. However, penalties are lax. According to the report, under the northwest division of the High Court of South Africa, guilty parties are subject to only a $14,000 fine, compared to five years in jail for trafficking cocaine. The maximum penalty for wildlife trafficking in Thailand (where Boonchai Bach was caught) is just four years in prison and a $1,300 fine.

Even when offenders are caught, enforcement is a challenge. Jay Daoreung Chaimat, an animal dealer linked to the Bach brothers, was ordered to pay an estimated $35.6 million of her proceeds after an investigation by the Thai Anti Money Laundering Organization (AMLO) in 2014, but the order was remanded two years later.

Punishing the traffickers

In 2016, 31 countries agreed to treat wildlife trafficking offenses as money laundering offenses. The U.S. has since taken steps to thwart the illegal wildlife trade. In September 2016 U.S. Congress passed the Eliminate, Neutralize, and Disrupt (END) Wildlife Trafficking Act, which allows prosecutors to use wildlife trafficking as a predicate offense for prosecuting a money laundering offense. The law provides U.S. law enforcement with additional ammunition in the fight against wildlife trafficking.

Penalties associated with money laundering offenses in the U.S. can include a fine of up to $500,000 or twice the value of the laundered money, and up to a 20-year prison sentence. This carries additional weight because money laundering’s considered a racketeering activity under the Racketeering Influenced and Corrupt Organizations (RICO) Act, which allows prosecutors to target kingpins of wildlife trade rather than low-level poachers. Boonchai Bach also might face penalties of up to 10 years if he’s charged with money laundering and customs violations under Thai law.

Confronting wildlife trafficking requires a multipronged approach that includes international cooperation among governments. However, anti-fraud experts, especially those in developing countries, can play a key role in combating the trade. Fraud examiners interested in pursuing an international career can find personal and professional rewards in this niche and ever-evolving field.

David Feige is an independent economic development consultant. His email address is: