Article #11

Environmental crime encompasses wide-ranging activities, from illegal extraction and trade of
forestry and minerals to illegal land clearance and waste trafficking. The actors and perpetrators
involved in these crimes vary from large organized crime groups to multinational companies and
individuals. The perpetrators and actors of environmental crime depend on both the financial and
non-financial sector to launder their proceeds as they find it as a safer source as it is impossible to
trace the money trail.

The ‘low risk, high reward’ nature of environmental crime constitutes safer source of revenue for
criminals. This is partly explained as regulatory and legal environment is not always consistent
globally and does not fully address the financial aspects and components of money laundering
(ML) risks of these crimes. Additionally, the environmental crimes are such a complex in nature
within their own niche that the authorities may find it difficult to trace other aspect to the
committed offence or regulatory breach.

The Financial Action Task Force (FATF) is global intergovernmental body that sets standards to
combat money laundering, terrorist financing, and the financing of arms and ammunitions,
essentially acting as a global watchdog against these illegal activities by evaluating countries’
compliance with anti-money laundering measures and promoting effective implementation of
related laws and regulations across the world. The FATF has mandate to cover all aspects to
restraint such criminal proceeds, they do this by developing policies and standards, and by raising
awareness of the financial flows that fuel environmental crime and vice versa.

Environmental crime is approximated to be among the most lucrative proceeds-generating crimes
in the world, generating around USD 110 to 281 billion in criminal gains each year. The three
focus area of this study – forestry crime, illegal mining and waste trafficking- represent 66%, or
two-thirds of this figure. Environmental crime has implications that extent well beyond the cost to
the money itself, including for the environment, public health and safety, human security, and
social and economic development. It also fuels corruption in among the society as whole, while
converging with other serious crimes such as drug trafficking and forced labour. Reduced access
to banking facilities is also a cause of concern that fuels such activities as such criminal networks
do have a valid reason to show cause the Front company troubles to transactions and from behind
the curtain they launder the proceeds. Easing access to banking and other financial services is vital
for any efforts to combat ML. It is widely known fact that several natural resource-rich
jurisdictions face issues of access to banking, including for broad segments of their population.

Some of the objectives of intergovernmental body are intended to

1. Take stock of the current methods that criminals are using to launder gains from
environmental crimes, and the measures that countries are taking to respond.
2. Enhance national authorities and private sector awareness of the scale and nature of ML
risks arising from environmental crimes and good practices that they can introduce to
combat them.
3. Identify priority actions at the national and international level to help combat criminal gains
from environmental crimes, including potential regulatory or policy consideration.

Environmental crimes do not occur in a vacuum and the financial flows it generates can also pave
the wave for other related crimes. Due to the depth and breadth of these issues, it is very necessary
to understand the dots that how even a simple convergence from the path of law could contribute
to the enhancement of such grievous crimes and offences. Till date only one case of wildlife crime
Wildlife Crime Control Bureau Vs Suraj Bhan, 2019 has resulted in successful conviction
under PMLA. In this particular case, the Hon’ble court sentenced 4 year of Rigorous imprisonment
to the accused along with the fine of Rs. 10,000/-. The Hon’ble court also ordered for the
confiscation of Rs. 52.7 lakhs that were attached by the Directorate of Enforcement (ED) during
investigation. India have a very robust mechanism to combat the Financial crime associated with
the wildlife trafficking. ED files ECIR (Enforcement Case Information Report) under PMLA in
many wildlife cases. There are 1 lakh+ wildlife/ environmental crime cases pending in various
courts only few of them are being investigated under PMLA.

The power of attachment and confiscation provisions have also been laid down under PMLA.
Under Section 5(1) of the PMLA empowers the person of the Rank of Deputy Director and above
to attach any property which is proceeds of crime or involved in the commission of the offence of
money laundering.

Certain research indicates that criminals often rely on cash intensive industries (frequently linked
to export sector) and trade-based frauds to launder proceeds from environmental crimes. In the
event of illegal mining and related acts, third party transactions and complicit intermediaries via
Front companies be used to both conceal payments and launder gains. Across many cases reviewed
in studies, criminals used front companies to co-mingle gains from illegal mining and waste
trafficking into their legitimate business accounts. In addition to front companies, cases show that
criminals often rely on shell companies to simulate legitimate services and payment linked to
forestry, mining or waste markets. For Instance – The criminal network establishes the waste
disposal company with no apparent legitimate business activities. They will rely on shell company
located overseas to move funds back and forth under guise of invoices for processing their waste.
The FATF also observed the fact that environmental crime, particularly mining, is a profitable tool
for insurgent groups in conflict with the central government authority and terrorist organizations
operating in resource rich jurisdictions where there is instability. Public reporting by government
and NGOs have noted these groups will undertake environmental crime as a means of raising
revenue or as a direct means of value transfer/payment for goods, for instance arms and drugs. The
precious metals and stones generated through this activity represents a portable, non-cash based
alternate source of funding and the attraction is not surprising given the challenges in moving
money through the formal financial sector and because of these alternates it is very difficult for
the agencies to trace the money trail, and hence there is need to increase the vigilance on the
commodities as to control the prices of the same in the market as well as to stop the degradation
of natural resources of the nation-state.

In conclusion, while some parts of the global network of agencies and law enforcements have
considered environmental crimes as source of ML and other related criminal acts endangering lives
of the people, ruining the global environment and also causing economic damages to the nation
states. These nexus operates to generate illicit profit from such illegal acts and there is a greater
need for greater awareness of exposure to ML arising from environmental crimes across the global
network.