Environmental crimes in Pakistan and FATF
Dr. Mehreen Mujtaba
Environmental crimes cover a wide berth of activities that are robbing our planet from the chance of a sustainable future. From illegal extraction of minerals, illegal land clearing and deforestation as well as waste trafficking-- all are parts of an organized crime syndicate involving large multinational companies, individuals and other crime mafias. The perpetrators of these environmental crimes rely heavily on the financial as well as the non-financial sector to launder their proceeds.
Environmental crimes are estimated to be among the most profitable money generating crimes in the world, generating anywhere between $110-281 billion each year. Waste trafficking, forestry crimes and illegal mining account for 66% of this figure. Apart from the detrimental environmental impacts and financial costs, these crimes have devastating repercussions for public health and safety, human security as well as social and economic development.
Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terror financing, financing of proliferation of weapons of mass destruction. The FATF recommendations are recognized as the global anti money laundering (AML) and counter-terrorist-financing (CFT) standard.
According to a recently published FATF report, “Money Laundering from Environmental Crimes” released in July 2021, environmental crimes are a part of a broader criminal enterprise engaged in criminal activities such as human trafficking, drug trafficking, corruption and tax evasion as well as terrorist activities. FATF conducted this study to raise global awareness of the scale and nature of criminal gains and laundering techniques for environmental crimes.
Most countries have not considered money-laundering risks posed by environmental crimes within their national risk assessments. A ‘low risk’, ‘high reward’ nature of environmental crimes makes for a lucrative and safe source of revenue for criminals-- hence they exploit it with impunity. These criminals specialize in one or more environmental crimes, alongside their nefarious activities, and rely on highly specialized networks from cash couriers to offshore shell companies, in order to move products and facilitate financial flows. This is partly due to a regulatory and legal environment that is not always consistent globally and does not fully address the financial and money laundering risks of these crimes. FATF hopes to raise awareness of the scope and scale of harm caused by environmental crimes and related money laundering. It also wants to ensure that every country identifies priority actions at the domestic and international level to combat the unlawful flow of funds generated through environmental crimes.
Pakistan as a member of the Asia Pacific Group is currently working with FATF and APG to address strategic deficiencies in addressing money laundering and terrorist financing spreading like a plague in the country. In view of the recent report on money laundering through select environmental crimes that include illegal logging, illegal land clearing, illegal mining and waste trafficking, there is a dire need to assess the existing regulatory framework and activities in Pakistan with reference to the scope of environmental crimes recognized by the FATF. According to Global Forest Watch, Pakistan lost 9.68 kilometer/hectare per annum of trees from 2001-2020, Khyber Pakhtunkhawa being the most affected by deforestation due to illegal logging and corruption of local officials. Newspaper columns are rife with scandals of illegal waste trafficking with importers faking clearance certificates, which is a major concern for public health and safety.
Government actions to detect and disrupt these financial flows have not been proportionate to the scale of this issue, due to a lack in financial investigations and relevant risk assessments. Legislations are in place to criminalize at least some aspect of environmental crimes, for instance illegal harvesting of timber and logs, illegal exploitation of natural resources, illegal wildlife trade measures. However, the legislations and regulations are narrowly drafted and allow room for malefaction. These legal loopholes are further compounded by a lack of political will alongside bribery, corruption, redundant bureaucratic red-tapism, complex corporate structures, falsification of concession licenses as well as origin certificates.
Another practice commonly seen across the country is trade-based money laundering (TBML). Since environmental crimes deal heavily with raw materials, trade-based fraud conceals the movement of money across borders and essentially cleans the proceeds from the crime by taking the form of false invoicing of the goods, mislabeling hazardous waste, false descriptions for example mislabeling protected wood in order to conceal its real value. This leads to easy passage of the goods through national and international borders, easily deceiving border control and custom authorities.
Pakistan must be cognizant of the fact that it has to introduce laws and regulations in the light of FATF standards, criminalize money laundering for sector specific environmental crimes also recognized by FATF. It is high time guidelines are introduced which will help the concerned departments, law enforcing agencies and environmental protection agencies to identify, detect and mitigate potential risks.
In order to achieve goals, it is important to develop synergies and coordination between various law enforcement agencies within the country. In addition, it is essentially important to engage highly trained and skilled personnel in our law enforcement agencies with modern investigative techniques to identify environmental crimes according to FATF standards.