FinCEN asks banks to boost scrutiny of environmental crime links

Author(s)

Dan Ennis, Banking Dive

Date Published
The Financial Crimes Enforcement Network (FinCEN) issued its first-ever advisory on environmental crimes Thursday, asking banks to scrutinize transactions that may be linked to illegal logging, fishing and mining and the trafficking of wildlife, waste and hazardous substances.

The push comes as the Biden administration looks to put a deeper emphasis on fighting climate change and its causes. FinCEN, a watchdog within the Treasury Department, said it is highlighting an uptick in environmental crimes because of their close association with corruption and criminal organizations — two sources of money laundering and terrorism financing the agency already monitors.

FinCEN included in its advisory some instructions for banks to use when filing suspicious activity reports related to environmental crimes, which the agency said threatens ecosystems, decreases biodiversity and increases the atmosphere’s quotient of carbon dioxide.

Specifically, FinCEN asks banks to provide details such as names, identifiers and contact information — including Internet Protocol (IP) and email addresses and phone numbers — of buyers or sellers and intermediaries dealing in illicit products, plants, waste or related services. The agency also seeks details on how the illicit goods are solicited, acquired, stored, transported, financed and paid for, and where they begin and end their journeys. FinCEN additionally wants to know of any beneficial owners — shell companies — that may be involved.

The Financial Action Task Force cites environmental crimes as the third-largest subset of illegal activity in the world, after drug trafficking and the counterfeit-goods trade.

Revenue from environmental crimes is growing by 5% year over year, the global police force Interpol estimated, adding that environmental crimes such as the exploitation and theft of oil provide roughly 38% of illicit income to armed groups — a larger proportion than drug trafficking.

FinCEN is looking to boost enforcement over environmental crimes because the demand for such illicit goods is high — as are the rewards for traffickers — but penalties are relatively light and the risk, because enforcement has thus far been scarce, is low.