It is an important issue. Financial crime can rob companies of years of hard work spent building wealth and shareholder value, at a stroke. Financial crime can subject individuals and even whole populations to a lifetime of misery and poverty. Financial crime can subvert whole economies. Financial crime can fritter away the finite natural resources of the planet.
Yet there are bigger issues than financial crime facing the planet at present, which are growing in impact and urgency, and which require concerted international action. This comes at a time when the world is becoming increasingly fragmented by nationalistic policies, exacerbated by a global pandemic and the fracturing of international trade and supply chains. So the question is how can we align our global effort on money laundering and financial crime with these more pressing planetary issues?
One approach is to take some of these “new” crimes (such as environmental crime and illegal wildlife trafficking, (increasingly referred to as “green crime”, or “ecocide”)) into the current global AML structure. Another approach is to look at the issue from the other end of the telescope and see
what is destroying the world as we know it (“terracide”), and analyse what bad behaviours we may need to call out, transform, or even criminalise and prosecute.
Here are 10 key planetary issues to address, along with an indication of their financial crime implications. Not all of these have an immediately obvious financial crime angle. Not all bad behaviours (from the perspective of saving the planet) are criminalised, or even where they are, they are often not monitored, or fall between two stools, such as shipping crime committed on the high seas. The crucial message here is that any one of these issues could cause a seriously adverse impact on the world as we know it currently. We could hit the target of 1.5C and still be in a whole world of trouble:
Some of the above have aspects which have been criminalised, such as environmental crime and illegal wildlife trafficking, though enforcement is proving difficult. See for example the large numbers of EU environmental law infringements: https://ec.europa.eu/commission/presscorner/detail/en/inf_21_2743.
In addition to “planetary crimes” there are financial crimes of a more generic overarching nature, such as corruption and money laundering. The Financial Action Task Force could relatively easily extend scope of the Forty Recommendations to align better with planetary issues, and indeed has introduced a focus on illegal wildlife trafficking. Transparency International, and other NGOs, could be more effective in this area too. However, certain behaviours which adversely impact the planet have yet to be criminalised, are difficult to enforce, or do not lend themselves easily to policy change which could result in action to mitigate their effects. Others may be regarded as new forms of crime, such as greenwashing (see the IOSCO consultation). However, it is certainly worth addressing how the anti financial crime community could assist in progress on the above planetary issues, whether through, for example:
We also need to reconsider certain fundamentals, such as:
Financial Crime Implications
Greenwashing fraud, emissions fraud relating to all six key greenhouse gases, ETS market abuse
Key Facts
No G7 stock index is aligned with a 1.5°C or even 2°C pathway. 4 of 7, including FTSE 100 and S&P 500, are on temperature pathways of 3°C or above
Financial Crime Implications
Air, noise, light, plastics and hazardous chemical pollution proceeds, proceeds of environmental law infringements
Key Facts
Plastic is equivalent to the world’s fifth largest climate heating country. Less than 10% is recycled. We each eat a credit card’s worth of microplastics every week. Don’t forget air, light, noise and hazardous chemical pollution
Financial Crime Implications
Impact on human trafficking, illegal migration, child exploitation, KYC databases, impact on all the above
Key Facts
Population growth is about the size of Germany every year. Population has gone from 1 bn in 1800 to 7.9 bn in 2020. Estimates are 8.6 bn mid-2030, 9.8 bn mid-2050 and 11.2 bn by 2100. Population expected to drop dramatically in China, Russia, Spain, etc., but increase dramatically in Africa. Rates of consumption differ, however. Each American consumes 7 times the amount of the average Indian.
Financial Crime Implications
Water diversion, pollution, corruption involving flood relief and sea level rise alleviation funds
Key Facts
Water shortages now affect more than 3 billion. Fresh water available for each person has plunged 20% in 20 years. Over 60% of irrigated cropland is highly water stressed. Rivers, lakes and aquifers are drying up or too polluted for use.
Financial Crime Implications
Illegal fishing proceeds, illegal whaling, marine life destruction and trafficking, proceeds of hazardous waste dumping
Key Facts
70% of the oxygen we breathe comes from the oceans. The number of overfished stocks globally has tripled in 50 years. 1/3 of the world’s assessed fisheries are currently beyond their biological limits.
Financial Crime Implications
Illegal Wildlife Trafficking (now the fourth largest crime worldwide), illegal wildlife destruction and hunting, illegal habitat destruction
Key Facts
One million animal and plant species threatened with extinction. Global populations of mammals, birds, fish, amphibians and reptiles plunged 68% between 1970 and 2016. Illegal wildlife trafficking is 4th largest crime globally
Financial Crime Implications
Illegal use of aquifers, illegal farming, grazing, deforestation, illegal exploitation of grasslands
Key Facts
Over 75% of the earth’s land area is already degraded. An area half of the size of the EU is degraded annually
Financial Crime Implications
Illegal mining proceeds relating to precious and base metals, rare earths and sand. Organised waste crime, illegal waste dumping and disposal. Over consumption and food waste
Key Facts
Illegal mining not monitored globally, but causes huge environmental and social damage in South America, Africa, and South Asia. Organised crime also heavily involved in waste. 40% or 1.3 bn tonnes of food are wasted each year at a cost of USD 1 trn.
Financial Crime Implications
Illegal logging, illegal use of grasslands, draining of wetlands and destruction of mangroves. Criminally started wildfires
Key Facts
Over half of all plant and land animal species live in tropical forests. Forests the size of Belgium, are destroyed every year. 2,400 trees are cut down each minute. Don’t forget grasslands and wetlands
Financial Crime Implications
Proceeds of illegal grazing, water pollution, illegal fertilisers and pesticides, salinisation, deforestation and accumulation of non-biodegradable waste
Key Facts
Our food only contains 5-20% of the nutritional value of 100 years ago. Soil mineral depletion over that time generally ranges from 72% to 85%