Illegal wildlife trade (IWT) is a multifaceted issue intertwined with financial crimes like money laundering, often hidden in the shadows. This illicit activity isn’t confined to remote locations; it also finds inadvertent support from financial institutions. To combat this issue effectively, it’s crucial for banks and other corporates to comprehend the complexities involved.
Key Insights:
- Complexity of Wildlife Trafficking: Aneta Klosek, Director of Market Planning and Global Trade at LexisNexis Risk Solutions, emphasizes that wildlife trafficking involves various actors, methods, and contexts. The lack of oversight throughout the entire trade lifecycle is a significant issue, resulting in vulnerabilities. Transaction monitoring systems should address these risks comprehensively.
- Involvement of Financial Institutions: Illicit wildlife products often traverse intricate supply chains across multiple jurisdictions. A single risk component may not capture the entire supply chain dynamics, potentially overlooking the true risk exposure and the actors involved. Corporates need to be aware of the economic and environmental risks and maintain vigilance over their supply chain interactions.
- Lack of Targeted Regulations: One challenge is the lack of targeted regulations or specific enforcements in screening processes, leaving some corporates to believe they are compliant. Screening is crucial at every stage of the transaction to identify potential red flags.
- Importance of Collaboration: Collaboration with regulatory authorities is essential to maintain open communication and ensure compliance with international regulations. Corporates should be proactive in engaging with authorities.
- Geographic and Economic Considerations: Geographic and economic landscapes play a pivotal role in understanding risks associated with wildlife trafficking. Corporates should consider these factors when assessing their exposure to this issue.
- Challenges in Operational Burden: Certain trade treaties can reduce operational burdens but may lead to less oversight by authorities, creating higher risks. It’s essential for banks to identify and reduce these risks to prevent unintentional support for wildlife trade.
To address the inadvertent support of wildlife trafficking by financial institutions, several steps can be taken:
Eight Steps to Detecting and Reporting Suspicious Transactions Related to IWT:
- Enhance Staff Training: Train employees, especially those in compliance, anti-money laundering, and risk management roles, about indicators and red flags associated with wildlife trafficking.
- Implement Transaction Monitoring and Screening Systems: Utilize advanced transaction monitoring systems to flag suspicious transactions and continuously update them to detect emerging typologies. Screening should consider the entire transaction, not just individual entities.
- Conduct Customer Due Diligence (CDD): Apply robust customer due diligence processes to assess client risk levels, particularly for those involved in wildlife trade.
- Collaborate with Regulatory Authorities: Maintain communication with regulatory bodies, seeking guidance and establishing protocols for reporting suspicious transactions.
- Establish Internal Reporting Mechanisms: Create an internal reporting system for employees to escalate concerns, ensuring confidentiality and protection from retaliation.
- Engage in Public-Private Partnerships: Collaborate with organizations and initiatives focused on combating wildlife trafficking to share information, resources, and best practices.
- Monitor Non-Financial Channels: Recognize that wildlife trafficking may involve non-financial channels, such as trade-based money laundering or informal value transfer systems. Implement mechanisms to monitor these channels.
- Submit Suspicious Activity Reports (SARs): Promptly file SARs with regulatory authorities when identifying transactions or activities raising suspicions of wildlife trafficking, providing detailed information for further investigation.
Understanding the intricate nature of wildlife trafficking and its financial implications is essential for both financial institutions and corporations to contribute to its prevention effectively.
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