Johannesburg, 31 Oct 2023
Illegal wildlife trade (IWT) is a complex undertaking, one which is highly organised, strongly connected to financial crimes such as money laundering, and shrouded in deceit. But it’s not only happening in the shadows of forests and remote markets – financial institutions are, at times, inadvertently supporting this lucrative practice.
“Wildlife trafficking is a complex and multifaceted issue that involves various actors, methods and contexts,” explains Aneta Klosek, Director of Market Planning and Global Trade at LexisNexis Risk Solutions. From corrupt customs officers to transportation personnel, trafficking networks and illegal wildlife trade hubs, one of the biggest enablers of IWT is not knowing who the players are throughout the journey and whether the declared goods match the type of business, usual business behaviours and business patterns of that business. “And that’s often due to a lack of oversight through the entire life cycle of that trade. With transaction monitoring systems, you need to be aware of your own risks,” says Klosek.
Illicit wildlife products can traverse complex supply chains involving multiple jurisdictions and transit points – a single risk component may not capture the entirety of the supply chain dynamics or reveal the true risk exposure and the various actors involved. “A bank – or any other corporate – needs to be aware of the economic and environmental risks around them and be aware of the supply chain and who they actually interact with.” Klosek explains that if a corporate does a scan or a screen for any sanctions or other risks involved around international regulations, this is something that is done at the beginning, which leads to neglecting the process right after, which in turn enables all these other loopholes throughout the journey. “Corporates are still the weakest link in the supply chain for screening owing to lack of targeted regulations or specific enforcements, leaving the corporates to believe they’re fine.”
Klosek’s recommendation is to take note of the journeys and routes because they often reveal a lot about the relationship of the underlying goods. “The likelihood is that with countries that have weaker jurisdictions, laws and customs regulations, there might be a deliberate reason to look at this a little bit closer,” she says. “Also, collaboration with regulatory authorities is very important in order to maintain open communication.”
The simple fact is that IWT is not as obvious as transportation. It is enabled by a complex spiderweb of loopholes that exploit the weak links in the societal food chain. From those living on the brink of poverty to more powerful entities, the movement of goods is often about relationships, which is why financial institutions are inadvertently supporting this trade. “They are creating the loopholes themselves by not really taking a whole look at the entire transaction and the involved relationships and by only performing crucial checks at a certain point in time, neglecting crucial screenings at later process stages,” says Klosek. “You have to take the geographic and economic landscape into the equation. It’s not just the regulatory factors internationally – banks need to look at the economic developments within the continent or the countries most affected by wildlife trafficking.”
The most recent trade treaty in Africa, as an example, promotes an improved landscape for export and import between countries. Klosek explains that while this does lead to less operational burden (like being able to transport perishables faster), it also means less oversight by the authorities and higher risk: “When you don't have control in a network of countries, you can freely move around without any checkpoints and that increases the chances of criminals falling through the cracks. It promotes faster transport but also offers a greater loophole for illicit wildlife trade.” As the gatekeeper of financial services, Klosek believes it’s now more on the banks to identify and help reduce that risk by preventing them from providing money to support wildlife trade.
Eight steps to detecting and reporting suspicious transactions related to IWT
1. Enhance staff training
Provide comprehensive training to employees, especially those in compliance, anti-money laundering (AML) and risk management roles. They should be educated about the indicators and red flags associated with wildlife trafficking, such as unusual transaction patterns, large cash deposits, high-risk jurisdictions and non-traditional clients.
2. Implement transaction monitoring and screening systems
Utilise advanced transaction monitoring systems that can flag potentially suspicious transactions. These systems can analyse transactional data, identify patterns and generate alerts when activities resembling wildlife trafficking are detected. The systems should be regularly updated to stay current with emerging typologies. It’s also important to look at a transaction as a whole when performing sanction screening, rather than looking at individual entities only. Screening every component of a transaction for enforcements, PEPs and sanctions may reveal several red flags in one single transaction. Continuous screening helps to close those loopholes at later stages of the transaction as trade is never a point in time.
3. Conduct customer due diligence (CDD)
Apply robust customer due diligence processes to assess the risk level of clients. This involves verifying customer identities, understanding the nature of their businesses and continuously monitoring their transactions for anomalies. High-risk clients, such as those involved in the trade of wildlife or operating in regions prone to trafficking, should receive enhanced due diligence.
4. Collaborate with regulatory authorities
Maintain open communication channels with relevant regulatory bodies, such as financial intelligence units and law enforcement agencies. Establish protocols for reporting suspicious transactions related to wildlife trafficking and seek guidance when necessary.
5. Establish internal reporting mechanisms
Create an internal reporting system that encourages employees to report any suspicious transactions they come across. Provide them with a clear process for escalating concerns to the compliance or AML teams, ensuring confidentiality and protection from retaliation.
6. Engage in public-private partnerships
Collaborate with organisations and initiatives focused on combating wildlife trafficking, such as government agencies, NGOs and industry associations. Participate in public-private partnerships to share information, resources and best practices for detecting and preventing illicit financial flows associated with wildlife trafficking.
7. Monitor non-financial channels:
Recognise that wildlife trafficking may involve non-financial channels, such as the use of trade-based money laundering mechanisms (cash-heavy transactions) or informal value transfer systems. Implement mechanisms to monitor these channels, such as collaborating with customs agencies or sharing information with relevant authorities.
8. Submit suspicious activity reports (SARs)
If a financial institution identifies transactions or activities that raise suspicions of wildlife trafficking, it should promptly file suspicious activity reports (SARs) with the appropriate regulatory authorities. SARs provide detailed information about the suspicious transactions, enabling authorities to investigate further.