A recent subcommittee (National Security, International Development, and Monetary Policy) hearing at the US House Committee on Financial Services heard testimony from the Illicit Trade Director of Global Financial Integrity (GFI), a Washington, DC-based think tank focused on illicit financial flows, corruption, illicit trade and money laundering.
The testimony, which is publicly available as a stand alone document called From Timber to Tungsten highlights the linkage between the exploitation of natural resources and the funding of conflict, violence, transnational criminal organizations (TCOs) and terrorist groups. The scale of this crime was also evidenced as the profit from such crimes against wildlife and the environment (specifically wildlife trafficking, illegal logging, illegal and unreported fishing, illegal mining, and crude oil theft) is estimated to be $275 billion per annum making it one of the most prolific and lucrative financial crimes.
One of the recommendations made during the hearing was that greater AML/CFT (anti-money laundering / combating the financing of terrorism) responsibilities should be introduced for gatekeeper sectors that are currently uncovered or exempted. This is consistent with other jurisdictions who are imposing more and more AML/CFT responsibilities on, for example Designated Non-Financial Businesses and Professions (DNFBPs) - it's likely this trend will continue.
A further related activity that individual companies should be aware of is performing supply chain due diligence so that they are aware of the provenance of the goods being supplied to them. For example, most well-managed companies should want to know if their suppliers are involved in unethical or illicit activities such as wildlife trafficking, abuse of workers rights, human trafficking, slavery and illegal mining, logging, fishing or other environmental crimes. A failure to identify this type of risk is not only bad for the environment but can damage a company's brand and expose them to the risk of legal and regulatory action.
To help manage this risk, the Financial Action Task Force (FATF) earlier in 2021 developed and published a set of environmental crime risk indicators. These were discussed in a recent Clyde & Co article and are a good starting point for companies to help them manage this risk.
If you would like some further help in this area, please contact Neal Ysart, Lead Regulatory & Investigations Advisor at firstname.lastname@example.org / Tel: +971 55 138 9250 or your usual Clyde & Co point of contact.
Natural resources have long been used to finance conflict and violence, perpetrated by state actors as well as non-state actors like transnational criminal organizations (TCOs), terrorist groups, and armed groups