A new report by the Financial Accountability and Corporate Transparency (FACT) Coalition has drawn attention to the United States’ role as a destination for the proceeds of environmental crimes, raising concerns about illicit financial flows and their impact on the climate crisis.
Key Findings from the FACT Report
Published on October 26, the FACT Coalition’s report highlights “critical gaps” in the U.S. anti-money laundering system, which can be exploited by criminal groups involved in environmental crimes, including deforestation in the Amazon rainforest.
FACT, representing over 100 international transparency and conservation groups, points to the prevalence of abuse-prone shell companies and secretive entities that enable wrongdoers to conceal ill-gotten funds in the U.S. and invest in real estate. These entities, providing financial secrecy, create an environment that the report describes as “the perfect playground for criminals looking to stash the illicit proceeds of environmental crimes.”
Environmental Crimes and Climate Risk
Deforestation, particularly the loss of “carbon sinks” that absorb carbon dioxide from the atmosphere, is a significant contributor to climate change. The report underlines that the U.S. has a vital role in denying financial safe havens to criminals involved in degrading the Amazon, which poses a significant climate risk globally.
Call for Comprehensive Reforms
During the report’s launch event in Washington, D.C., Ian Gary, the coalition’s executive director, emphasized the need for comprehensive reforms to prevent the abuse of the U.S. financial system for laundering environmental crime proceeds. He warned that without such reforms, the country would continue to facilitate criminal actors in exploiting its financial system.
Interpol’s Assessment and Link to Corruption
Interpol estimates that illegal proceeds from environmental crimes, including illegal logging and mining, amount to $281 billion annually and are frequently associated with corruption. The FACT report highlights the role of anonymous shell companies in environmental crimes, enabling concealment of payments to criminal organizations, money laundering, evasion of civil accountability, and facilitation of other related crimes like corruption and tax evasion.
Recommendations in the FACT Report
The FACT report offers several recommendations to address these issues, including the implementation of a long-awaited database of company owners and granting foreign law enforcement access to the database for investigating environmental crimes. It also calls for the closure of loopholes that allow professionals creating and administering opaque financial structures to evade accountability.
Case Study: Global Plywood and Lumber Trading LLC
The report provides a case study involving Global Plywood and Lumber Trading LLC, a Nevada company. In 2021, the company pleaded guilty to purchasing over 1,000 cubic meters of illegally harvested wood from the Peruvian Amazon. While under investigation, the company’s owners declared bankruptcy, enabling them to dissolve the company and avoid a likely court-ordered compliance plan.
Challenges with the Lacey Act
Global Plywood was prosecuted under the Lacey Act, which prohibits the trade of illegally harvested fish, wildlife, plants, and plant products, including timber and paper. Critics argue that enforcing the Lacey Act is challenging because U.S. authorities must prove a violation of foreign law.
Impacts on Indigenous Communities
The report includes testimonies from indigenous leaders, such as Julio Cusurichi, who have experienced the negative consequences of unregulated mining. Contamination of rivers by mercury from mining has led to poisoned fish, affecting daily diets and harming local communities. The report underscores the urgent need to address the financial aspects of such environmental crimes.
In conclusion, the FACT report sheds light on the vulnerabilities within the U.S. financial system that enable money laundering related to environmental crimes, emphasizing the importance of reforms to combat these illicit financial flows and their contribution to the climate crisis.
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