By Lalitha Kunaratnam

KUALA LUMPUR, Malaysia--In July 2021, the Financial Action Task Force (FATF) published a 66-page paper on Money Laundering from Environmental Crime. The report compiled case studies and best practices submitted by over 40 countries, as well as inputs from international organisations like the International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD) and World Bank Group.


Environmental crimes - such as illegal mining, logging and waste trafficking – are estimated to be among the most profitable crimes in the world, generating up to USD281 billion in criminal gains each year. 

It fuels corruption such as bribery and falsification of concession licenses, and converges with many other serious and organised crimes, such as tax evasion, firearms smuggling and human trafficking. 
Environmental crime, including its links with other forms of crime, poses a serious and growing danger for development, global stability and international security.

According to this report, light sanctions and limited efforts to track profits generated from environmental crime make it a ‘low risk, high reward’ source of income for criminals.


A key challenge in tracing and prosecuting environmental crimes is the act of “co-mingling”, where, for example, illegal logs, precious metals and stones, and waste products are combined with their legal counterparts early in the supply chains. 
Unless there is a serious investigation and cross-border coordination, companies that deal with co-mingled products later in the supply chain would be unaware that some of these products are illegal in nature.

Environmental criminals rely heavily on cash intensive sectors and trade-based fraud to launder proceeds from their illegal acts. 
Hence, the use of complex corporate structures, front organisations, shell companies, politically exposed persons, and intermediaries such as accountants and lawyers to conceal the ultimate criminals benefitting from environmental crime. 
These specialised networks, enabled by corruption and weak regulatory oversight, depend on trade-based money laundering (TBML) to launder ill-gotten gains through the international trade system.

In spite of the momentous proceeds involved, many countries are addressing environmental crime as a conservation issue rather than a serious financial crime. 
This is mainly due to the limited cooperation between anti-money laundering and counter-terrorist financing (AML/CFT) authorities and environmental agencies in most countries.

In many countries, environmental agencies are the leading body responsible for investigating environmental crimes. 
While these bodies have vast know-how in environmental issues, they lack the necessary knowledge and power to identify and dismantle complex organised crime syndicates.

Meanwhile, traditional AML/CFT agencies, such as financial intelligence units and law enforcement agencies, do not place much importance on environmental crimes and tend to work in silos.


The FATF recommendations provide effective tools to go after and disrupt illicit financial flows generated from environmental crime. It identifies as well good practices and risk indicators to help financial and non-financial sectors to detect potential cases.

As a priority, the report says countries should consider the risks of criminals misusing their domestic financial and non-financial sectors to conceal or launder proceeds from environmental crimes.

In order to combat environmental crimes successfully, countries must strengthen inter-agency cooperation between financial institutions and environmental agencies. 
This includes working with foreign counterparts to share information, facilitate prosecutions and asset recovery.

The report highlights the need for beneficial ownership transparency as well as stronger engagement with Designated Non-Financial Businesses and Professions (DNFBPs) to combat money laundering from environmental crimes.

With global environmental crimes generating up to S281 billion per year, FATF hopes to raise awareness of the scale of harm caused by environmental crimes and related money laundering, as well as to enhance international collaboration.

The full report is available here.

*Lalitha Kunaratnam is an anti-corruption activist who believes policymakers need to step up their game and make plans for serious reforms*