Report reveals how profits from environmental crime are laundered in the Amazon

A new report from the FACT Coalition concluded that many environmental crime investigations don’t follow the money. Of the 230 cases analyzed, 76% involved the use of shell and shell companies, likely due to deficiencies in other countries’ anti-money laundering systems, researchers said.

The environmental crimes analyzed occurred between 2014 and 2024 in Amazonian 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 highlighted weaknesses in the way the investigations were conducted – such as the lack of financial investigations – as well as the role of convergent crime, which played a role in most of the cases.

“When it comes to environmental crimes committed in countries in the Amazon, many cases are discovered by chance,” Julia Yansura, environmental crime and illicit finance program director at the FACT Coalition and author of the report, told Mongabay by email. “A police officer randomly stops a vehicle or an airport security guard randomly checks a bag and finds something. “This approach is far from sufficient and often leads to petty cases involving low-level criminals.”

In every third case, a parallel financial investigation appears to have taken place, the report says. Without financial investigations, it is difficult to determine who is responsible for these crimes and who benefits financially from them, Yansura explained. Criminal groups will most likely move to another location and continue their crimes.

“We see this a lot with illegal gold mining in South America,” she explained. “When authorities seize the gold and destroy the heavy machinery, criminal groups are literally back the next day and resuming their operations a few miles away.”

Failure to conduct parallel financial investigations is likely to result only in the arrest and prosecution of low-level individuals who may themselves be victims, while those responsible remain free. Research by the World Wildlife Fund (WWF) has shown that up to 40% of global deforestation is caused by victims of modern slavery or forced labor.

When it comes to laundering 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 were front and shell companies. which serve to conceal illegal activities.

According to the report’s findings, 25% of all cases and 44% of Follow the Money cases involved at least one foreign jurisdiction. The United States was the most frequently cited foreign jurisdiction in all cases analyzed, either as a transit or destination for illegally obtained natural resources such as gold or timber or dirty money.

Robert Muggah, co-founder of the Brazil-based think tank Igarapé Institute, told Mongabay this is due to “the abundance of shell companies, shell companies and commercial fraud that allow criminal actors to launder dirty money” in the country.

“Historically, U.S. companies have largely not been required to disclose their true beneficial owners to the Treasury Department,” he said by email. “Meanwhile, due to inconsistent regulatory oversight and enforcement, U.S. banks have allowed individuals involved in corruption, fraud and sanctions evasion to move large sums of money into the financial system.”

Another reason why the US plays a central role in this network is that real estate is exempt from many anti-money laundering rules, Muggah explained. “Networks of shell companies and foreign investors often purchase real estate to launder billions of dollars in profits derived from, among other things, environmental crimes.”

To address the issue, Yansura said the US should implement the Corporate Transparency Act, which came into force on January 1, 2024, and is intended to increase transparency among corporate owners and corporate structures to combat money laundering and other criminal activities. By ensuring this mechanism is operational as quickly as possible, “the US could close one of the largest loopholes currently exploited by environmental criminals in the Amazon,” Yansura added.

Beyond the US, Muggah said national governments should follow the EU’s lead and ensure that environmental crime is a predicate crime, a component of a more complex crime often linked to money laundering or organized crime. In addition, authorities responsible for combating money laundering can strengthen partnerships with environmental protection authorities, environmental crime investigators and other research organizations “to determine the extent of vulnerabilities in the financial and non-financial sectors and to conceal and launder profits from environmental crime,” he said.

The FACT Coalition found that environmental crime was almost always accompanied by other converging crimes such as corruption and drug trafficking. Of the 230 environmental crimes analyzed, corruption was by far the most common, followed by terrorist financing and drug trafficking.

According to research by the Financial Action Task Force, wildlife traffickers often exploit vulnerabilities in the financial and non-financial sectors to shift, hide and launder their profits. Annual revenue from the global illegal wildlife trade is estimated at $20 billion per year.

Speaking at the COP16 biodiversity summit on funding collective efforts to protect biodiversity, Yansura said that by tackling environmental crime, which costs up to $281 billion annually, governments can recoup the money and use it to restore degraded ecosystems and protect natural ones resources could contribute.

Banner image: Image © Marizilda Cruppe / Greenpeace.

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