- A recent report from the FACT Coalition analyzed 230 cases of environmental crime in Amazon countries over the past decade to better understand how crimes are committed and how the associated profits are laundered.
- It found that the U.S. is the most common foreign destination for the products and proceeds of environmental crimes committed in the Amazon region.
- The most popular way to launder money involves the use of shell and front companies, and corruption was the single most prevalent convergent crime mentioned.
- Of the cases analyzed, only one in three appears to have included a parallel financial investigation.
A new report by the FACT Coalition found that many investigations into environmental crimes do not follow the money. Of the 230 cases analyzed, 76% involved the use of front and shell companies, likely due to flaws in the anti-money laundering systems of foreign countries, researchers said.
The environmental crimes analyzed occurred between 2014 and 2024 in Amazon countries, mainly in Colombia, Ecuador and Peru. The aim was to better understand how criminals operate and how the associated profits are laundered.
The report pointed to weaknesses in the way the investigations were carried out — for instance, a lack of financial investigations — as well as the role of convergent crime, which played a role in most cases.
“When it comes to environmental crimes that are committed in countries in the Amazon region, many cases are discovered accidentally,” Julia Yansura, the program director for environmental crime and illicit finance at the FACT Coalition and author of the report, told Mongabay over email. “A police officer happens to stop a vehicle or an airport security officer randomly checks a bag, and they find something. That approach is far from sufficient and often yields minor cases involving low-level criminals.”
One in every three cases appeared to include a parallel financial investigation, the report said. Without financial investigations, it’s hard to find out who is responsible for these crimes and who is benefiting financially, Yansura explained. Criminal groups will most likely move to a different location and continue their crimes.
“We see this frequently with illegal gold mining in South America,” she explained. “When authorities seize the gold and destroy the heavy machinery, criminal groups are back literally the next day, re-establishing operations a few miles away.”
A failure to conduct parallel financial investigations will likely only lead to the arrest and prosecution of low-level individuals who may be victims themselves, while those who are responsible remain free. Research by the World Wildlife Fund (WWF) has shown that as much as 40% of all deforestation worldwide is carried out by victims of modern slavery or forced labor.
When it comes to the laundering of profits from environmental crimes, such as illegal logging, illegal mining and wildlife trafficking, the report found that the most common methods identified in the analysis involved front and shell companies, which are used to mask illegal activity.
According to the report’s findings, 25% of all cases, and 44% of “follow the money” cases, involved at least one foreign jurisdiction. The U.S. was the foreign jurisdiction mentioned most across all cases analyzed, either as a transit or destination point for illegally sourced natural resources, such as gold or timber, or dirty money.
Robert Muggah, co-founder of the Brazilian-based think tank Igarapé Institute, told Mongabay this is because of “the abundance of shell companies, front companies and trade-based fraud that allow criminal actors to wash dirty money” in the country.
“To a large extent, U.S. businesses have not historically been required to identify their true beneficial owners to the Treasury Department,” he explained over email. “In the meantime, owing to uneven regulatory oversight and enforcement, U.S. banks have allowed large sums of cash to be transferred in the financial system by individuals involved in corruption, fraud and sanctions evasion.”
Another reason why the U.S. is central to this network is because real estate is exempt from many rules related to countering money laundering, Muggah explained. “Networks of shell companies and foreign investors often purchase real estate to launder billions of dollars of profits generated by, among other things, environmental crime.”
To address the issue, Yansura said the U.S. should implement the Corporate Transparency Act, which came into effect on Jan. 1, 2024, and is meant to increase transparency in business ownership and entity structures to combat laundering and other criminal activities. By ensuring this mechanism is up and running as soon as possible, “the U.S. could shut down one of the biggest loopholes currently being used by environmental criminals in the Amazon,” Yansura added.
Beyond the U.S., Muggah said national governments should follow the EU’s lead in ensuring that environmental crime is a predicate offense, a component of a more complex crime, often associated with money laundering or organized crime. In addition, anti-money laundering authorities can strengthen partnerships with environmental protection agencies, environmental crime investigators and other research organizations, “to assess the extent of vulnerabilities in financial and nonfinancial sectors to conceal and launder gains from environmental crime,” he said.
Environmental crime was almost always accompanied by other converging crimes, such as corruption and drug trafficking, the FACT Coalition found. Among the 230 environmental crimes analyzed, corruption was by far the most prevalent, followed by terrorism financing and drug trafficking.
According to research carried out by the Financial Action Task Force, wildlife traffickers often exploit weaknesses in the financial and nonfinancial sectors to move, hide and launder their profits. The annual revenue generated by the global illegal wildlife trade has been estimated at $20 billion per year.
Amid conversations at the COP16 biodiversity summit about funding collective efforts to protect biodiversity, Yansura said that by tackling environmental crime, which generates up to $281 billion a year, governments could recover and use the money to help restore damaged ecosystems and safeguard natural resources.
Banner image: Image © Marizilda Cruppe / Greenpeace.
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